Resideo
Annual Report 2020

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Plain-text annual report

2020 ANNUAL REPORT AND NOTICE OF 2021 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) (cid:3)(cid:3) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 or (cid:4) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to _____ Commission File Number 001-38635 Resideo Technologies, Inc. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 82-5318796 (I.R.S. Employer Identification No.) 901 E. 6th Street Austin, Texas (Address of principal executive offices) 78702 (Zip Code) Securities registered pursuant to Section 12(b) of the Act: Registrant’s telephone number, including area code: (512) 726-3500 Title of each class: Common Stock, par value $0.001 per share Trading Symbol: REZI Name of each exchange on which registered: New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:3) No (cid:4) Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:4) No (cid:3) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (cid:3) No (cid:4) Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes (cid:3) No (cid:4) Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer Non-accelerated filer (cid:3) (cid:4) Accelerated filer Smaller reporting company Emerging growth company (cid:4) (cid:4) (cid:4) If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:4) Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under section 404(b) of the Sarbanes Oxley Act (15 U.S.C 7262(b)) by the registered public accounting firm that prepared or issued its audit report (cid:3) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:4) No (cid:3) The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the shares of common stock on the New York Stock Exchange as of June 30, 2020, was $1.6 billion. The number of shares outstanding of the registrant’s common stock, par value $0.001 per share as of February 19, 2021 was 143,139,475 shares. Portions of the registrant’s proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the registrant’s 2021 Annual Meeting of Stockholders, which will be filed subsequent to the date hereof, are incorporated by reference into Part III of this Form 10-K. Such proxy statement will be filed with the Securities and Exchange Commission not later than 120 days following the end of the registrant’s fiscal year ended December 31, 2020. DOCUMENTS INCORPORATED BY REFERENCE TABLE OF CONTENTS Item Page Part I. 1. Business .................................................................................................................................. 1A. Risk Factors ........................................................................................................................... 1B. Unresolved Staff Comments ................................................................................................. 2. 3. Properties ............................................................................................................................... Legal Proceedings.................................................................................................................. 4. Mine Safety Disclosures ........................................................................................................ Part II. 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ............................................................................................. 6. Selected Financial Data......................................................................................................... 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations .............................................................................................................................. 7A. Quantitative and Qualitative Disclosures About Market Risk ......................................... 8. 9. Financial Statements and Supplementary Data ................................................................. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ............................................................................................................................... 9A. Controls and Procedures ...................................................................................................... 9B. Other Information ................................................................................................................. Part III.10. Directors, Executive Officers and Corporate Governance................................................ 11. Executive Compensation....................................................................................................... 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.............................................................................................................. 13. Certain Relationships and Related Transactions, and Director Independence .............. 14. Principal Accounting Fees and Services.............................................................................. Part IV. 15. Exhibits, Financial Statement Schedules............................................................................. 16. Form 10-K Summary ............................................................................................................ Signatures............................................................................................................................... 3 8 20 21 21 21 22 23 24 42 42 87 87 88 88 88 88 88 88 89 93 94 2 RESIDEO TECHNOLOGIES, INC. PART I. Item 1. Business In this Annual Report on Form 10-K, unless the context otherwise dictates, references to “Resideo”, “the Company”, “we,” “us” or “our” means Resideo Technologies, Inc. and its consolidated subsidiaries. This Annual Report includes industry and market data that we obtained from various third-party industry and market data sources. While we believe the projections of the industry sources referenced in this Annual Report are reasonable, forecasts based upon such data involve inherent uncertainties, and actual results are subject to change based upon various factors beyond our control. All such industry data is available publicly or for purchase and was not commissioned specifically for us. While we are not aware of any misstatements regarding any market, industry or similar data presented herein, forecasts based upon such data involve inherent uncertainties, and actual results regarding the subject matter of such forecasts are subject to change based upon various factors, including those beyond our control and those discussed under the headings “Risk Factors” and “Cautionary Statement Concerning Forward-Looking Statements” in this Annual Report. On October 29, 2018, we separated from Honeywell International Inc. (“Honeywell”), becoming an independent publicly traded company as a result of a pro rata distribution of our common stock to shareholders of Honeywell (the “Spin-Off”). The Spin-Off is further described in Note 1. Organization, Operations and Basis of Presentation of Notes to the Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data of this Form 10-K. 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, residential thermal and security solutions to over 150 million homes globally. We are also the leading wholesale distributor of low-voltage security products including intrusion, access control and video products and participates significantly in the broader related markets of smart home, fire, power, audio, ProAV, networking, communications, wire and cable, enterprise connectivity, and structured wiring products. We have a global footprint serving commercial and residential end markets. Our primary focus is on the professional channel where we are a trusted partner to over 110,000 professional installers. Our global scale, breadth of product offerings, innovation heritage, and differentiated service and support has enabled our trusted relationship with professional installers and has been a key driver of our success. Leveraging our underlying strengths, we are transforming our business with a strategy that includes operational improvements, product innovation, and investments to drive future growth and value creation. We believe our large 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 operate in large markets that sit at the intersection of multiple secular growth trends. We believe the increased desire for critical comfort, residential thermal and security solutions in the home, combined with the long- term impacts of working from home, are driving investment in the home both in terms of time and dollars. We believe our total addressable market represents approximately a $114 billion inclusive of $27 billion for our comfort, residential thermal solutions and security, and $88 billion for distribution of low-voltage security products and additional adjacent products, including intrusion and smart home, fire, video surveillance, access control, power, audio and video, ProAV, networking, communications, wire and cable, enterprise connectivity and structured wiring. At the same time, the ability to better understand the functioning of a home through sensors, controls and connectivity has created a large and fast-growing connected home market. According to Statista, the global connected home market is expected to grow at a 16% compounded annual growth rate from $80 billion in 2019 to $195 billion in 2025. 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. Given this complexity, we believe a significant opportunity exists to provide products, solutions and services to consumers and professional installers that integrate the disparate sensors, systems and controls inside the home, and enable differentiated insight. Our meaningful presence in the home derived from our broad portfolio of products and our focus on the professional installer, combined with our service-focused global distribution footprint, positions us well to take advantage of this significant market opportunity. We deliver value to our professional customers via two business 3 RESIDEO TECHNOLOGIES, INC. segments, Products & Solutions and ADI Global Distribution, which respectively contributed 41.8% and 58.2% of our net revenue for the year ended December 31, 2020. Products & Solutions: Our comfort, security and energy products and solutions have a presence in over 150 million homes globally and benefit from the trusted, well-established Honeywell Home brand as well as key branded offerings such as Resideo, Braukmann, and others. Our offerings include temperature and humidity control, thermal water and air solutions, as well as security panels, sensors, peripherals, wire and cable, communications devices, video cameras, awareness solutions, cloud infrastructure, installation and maintenance tools, and related software. We are a leading player across the majority of our product categories with 15 million systems installed annually. Through our whole home presence on the wall and behind the wall, we are an enabler of home connectivity with approximately 6.7 million connected customers via our software solutions. Our connected solutions harness this data to provide control, visibility, insights, and alerts to the end user. Our comprehensive product suite has also allowed us to develop and sustain a long-standing partnership with professional installers who have relied on our selection and availability of products and configured solutions to help them succeed for over 100 years. Our broad portfolio of innovative products is delivered through a comprehensive network of over 110,000 professional contractors, more than 3,000 distributors and over 1,200 original equipment manufacturers (“OEMs”), as well as major retailers and online merchants. ADI Global Distribution: Our ADI Global Distribution segment is the leading wholesale distributor of low- voltage security products including intrusion, access control and video products, and participates significantly in the broader related markets of smart home, fire, access control, power, audio, ProAV, networking, communications, wire and cable, enterprise connectivity, and structured wiring products. Through nearly 200 stocking locations in 17 countries, ADI Global Distribution distributes more than 350,000 products from over 1,000 manufacturers to a customer base of over 100,000 contractors and is independently recognized for superior customer service. We believe this global footprint gives us distinct scale and network advantages in our core products over our competitors. Further, we believe our customers derive great value from the advice and recommendations of our knowledgeable design specialists, allowing our customers to better meet the technical and systems integration expertise requirements to install and service professional security systems. We continue to be a leader in the industry with 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. Our industries and markets are highly competitive in both our Products & Solutions and ADI Global Distribution segments, where we compete with global, national, regional and local providers for our products, services and solutions, including manufacturers, distributors, service providers, retailers and online commerce providers, as well as newer entrants to the market with non-traditional business and customer service models or disruptive technologies and products, including cable, telecommunications, and large technology companies competing in the connected home space. 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. Our management team has significant experience and a track record of leading tech-enabled businesses, developing best-in-class products, and executing organizational change. This team is focused on ingraining a culture of continuous improvement into our organization with the goal of lowering costs, increasing margins and positioning the Company for growth. Leveraging the Company’s presence in the home and its relationship with professional installers, management has reorganized the Products & Solutions business to enhance focus and collaboration across business lines and segments. With this ongoing transformation underway, we believe we are well-positioned to execute on our growth strategy across both of our segments. Our strategy in Products & Solutions is focused on accelerating our product innovation, expanding our presence in the home and buildings, and over time, enabling connected ecosystems grounded in relationships with professional installers. Our ADI Global Distribution growth strategy is focused on increasing our omni-channel presence to grow our customer base, expanding into adjacent growth markets, and continuing to enhance our value-add services to support our professional installers’ efficiency and profitability. 4 RESIDEO TECHNOLOGIES, INC. Materials and Suppliers Purchased materials in our manufacture of products include copper, steel, aluminum, plastics, printed circuit boards, semiconductors and passive electronics. Purchased materials cover a wide range of supplier value- add, from raw materials and single components to subassemblies and complete finished goods, and there are considerable expenditures on both commercial off-the-shelf and make-to-print items. Although execution of material substitutions or supplier changes may be resource intensive, alternatives usually exist in the event that a supplier becomes unable to provide material. Unforeseen shortages and supply disruptions occur from time to time but are typically manageable such that adverse impact to customers can be avoided. Raw material price fluctuations, the ability of key suppliers to meet quality and delivery requirements, and catastrophic events can increase the cost of our products and services, and impact our ability to meet commitments to customers. 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, consumer protection, licensing, working conditions for and compensation of our employees and others. The Company’s businesses may also be affected by changes in governmental regulation of energy efficiency and conservation standards, product safety regulations, and consumer privacy and protection regulations. These and other laws and regulations impact the manner in which the Company conducts its business, and changes in legislation or government policies can affect the Company’s worldwide operations, both favorably and unfavorably. For a more detailed description of the various laws and regulations that affect the Company’s business, see Item 1A. Risk Factors. The Company’s efforts to comply with numerous federal, state, and local laws and regulations applicable to its business and products often results in capital expenditures. As of December 31, 2020, we have recorded a liability for environmental investigation and remediation of approximately $22 million related to sites owned and operated by Resideo. The Company makes capital expenditures to design and upgrade its products to comply with or exceed standards applicable to the industries in which it competes. The Company’s ongoing environmental compliance programs also results in capital expenditures. Regulatory and environmental considerations are a part of all significant capital expenditure decisions; however, expenditures in 2020 related solely to regulatory compliance were not material. It is management’s opinion that the amount of any future capital expenditures related to compliance with any individual regulation or grouping of related regulations will not have a material adverse effect on the Company’s financial results or competitive position in any one year. See Note 19. Commitments and Contingencies of Notes to Consolidated and Combined Financial Statements for further discussion of environmental matters. Human Capital As of December 31, 2020, we employed approximately 14,700 employees in 32 countries. Approximately 3,100 employees were located in the United States, and the remaining 11,600 employees were located primarily in Mexico, the Czech Republic and the United Kingdom. Approximately 160 employees in the U.S. were subject to collective bargaining with approximately 1,270 employees outside of the U.S. subject to collective bargaining. We believe overall our relations with our workforce are good. Health and Safety: The Company’s commitment to providing a safe and healthy workplace for all employees continued throughout 2020 and was further heightened by the challenges created by the COVID-19 pandemic. In response to the pandemic, we took numerous actions to protect the health and safety of our employees, visitors and customers. These actions included formation of a response team, contact tracing and tracking of exposure and positive cases, enhanced cleaning protocols, moving to work from home where possible, suspension of most business travel and in-person meetings, the purchase of face coverings, gloves, hand sanitizer, and hand held scanning devices, installation of thermal scanners at our manufacturing sites, installation of floor demarcations and plastic shields in our ADI Global Distribution branches and on manufacturing lines, weekly internal audits, external audits of select sites, leasing of additional vans to permit distancing where we provide transportation to employees, 5 RESIDEO TECHNOLOGIES, INC. daily symptom self-assessments, curbside and contactless pickup in many locations, enhanced employee benefits, COVID-19 testing, and policies requiring face coverings and physical distancing. At the end of 2020, our global Total Case Incident Rate (“TCIR”) (the number of occupational injuries and illnesses per 100 employees) was 0.28, significantly lower than the North American Industry Classification System injury rate for Automatic Environmental Controls of 1.7 (as reported by the U.S. Bureau of Labor Statistics). We monitor our safety through a balanced scorecard of key performance indicators. In addition to reactive incident management investigation and root cause analysis indicators, we measure and analyze the data generated from our hazard observation, designated Health, Safety, and Environment Internal Department (“HSE”) inspections by line managers and internal audit programs by accredited HSE lead auditors to provide insights and intelligence that help us proactively mitigate issues before they result in incidents. Total Rewards: Our primary reward strategy is ensuring “pay-for-performance” on an annual basis, as well as over the long term, which drives a mindset of accountability and productivity. Our compensation guiding principles are to structure compensation that is simple, aligned and balanced. We structure and administer our Rewards programs in a manner consistent with good governance practices. We believe that the interests of employees must be aligned with our shareholders. To that end, in 2020 we launched an employee stock purchase plan and expanded the use of stock-based incentives to encourage managers to think like owners of Resideo. We provide comprehensive, competitive and contemporary benefits that recognize the diversity of our workforce and are designed to meet the varying needs of our employees and promote choice. Our package includes generous paid time off, flexible work schedules, education assistance programs and more. We believe the combination of our competitive pay-for-performance compensation programs and our comprehensive benefit programs demonstrate our commitment to a compelling total rewards value proposition for our employees. In April 2020, we took the necessary steps to weather the COVID-19 crisis with several cost saving programs including temporary payroll savings, furloughs, and reduced work schedules. Where employee agreement was necessary, an overwhelming majority of employees joined their worldwide colleagues in supporting this effort to help the Company preserve business continuity. In December 2020, we announced a special year-end bonus payable to current employees who had been directly impacted by COVID-19 cost saving actions, in an amount generally comparable to the financial impact of the cost savings actions. Diversity, Equity and Inclusion: In 2020, we adopted a revised Diversity, Equity, and Inclusion statement, through which we aspire to be a company where employees are empowered to bring their whole, authentic selves to work each day. We work to advance this mission by actively reaching out to people of diverse backgrounds and experiences to join our teams and nurturing an inclusive culture. We maintain employee resource groups across six categories: Women, LGBTQIA+, Black, Latino, Veterans, and People with Differing Abilities. Each group is sponsored and supported by a senior leader of the company. We encourage our hiring managers and recruiters to build a network of diverse talent. Our diversity outreach includes reaching out to all categories of diversity job boards, including Historically Black Colleges and Universities (“HBCUs”). Diversity 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. Our corporate functions and business units continue to track and report on progress with respect to our diversity and inclusion initiatives. Talent Acquisition, Management and Development: We have a robust recruiting model to attract all levels of talent across the regions where we operate. In 2020, our average time to fill open roles was 35 days, and we hired 6,700 employees, of which approximately 5,600 were production workers. We expanded our virtual interviewing platforms and onboarding experience to mitigate COVID-19 risk. Internally, strategic talent reviews and succession planning occur on an annual basis, globally and across all business areas. We strongly value feedback from our employees and launched a revised Employee Voice Survey in 2020. This survey allows each function in our company to see its ratings across three levers: Motivation, Ability, and Knowledge of Expectations. Our score for the first cycle was 7.8 on a 10-point scale, with an Employee Net Promoter score of 25 on a scale ranging from -100 to +100 (based on industry standards for Employee Net Promoter score, any score above 10 is considered good). While we are pleased with these results, there is still room for improvement, and each sub-organization has been tasked with creating an action plan based on feedback received. 6 RESIDEO TECHNOLOGIES, INC. We recognize that a key facet of an effective and high performing team is the quality of the people manager. This year we introduced a new initiative, the People Manager Certification, to equip managers with an understanding of Resideo’s expectations for managers. The certification includes trainings in the skills required to be a successful manager at Resideo as well as a toolkit for managers to put learnings in action. We also encourage employees to take responsibility for their own development and provide an extensive learning library in order to ensure our people have what they need to succeed, both professionally and personally. In response to the COVID-19 pandemic, we provided training to our employees on working successfully from home and developing resiliency during this stressful time. Managers and their team members participate in quarterly “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. In supporting our employees’ development, we refined our global mentorship program, which supports employees across all levels and functions. The program allows for multiple forms of interaction, including one-on-one relationships and "fireside chats," which improve knowledge transfer and skill development throughout the organization. Seasonality Our Products & Solutions business experiences a moderate level of seasonality. Sales activity is generally highest in the fall and early winter months, with the highest sales at the end of the third quarter and throughout the fourth quarter in the majority of our geographical markets. Research and Development and Intellectual Property We have software centers of excellence in Austin, Texas; Bengaluru, India; and Melville, New York, along with major product design centers in the U.S., Europe, Asia, and Latin America. In addition, our laboratories are certified to meet various industry standards, such as FCC and UL, enabling us to test and certify products internally. 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, 2020, we employed over 850 engineers. 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 2,300 worldwide active patents and pending patent applications to protect our research and development investments in new products and services. We have and will continue to protect our products and technology by asserting our intellectual property rights against third-party infringers. See Note 19. Commitments and Contingencies of Notes to Consolidated and Combined Financial Statements for more information. We also have a significant trademark license with Honeywell in connection with our use of the Honeywell Home trademark as well as certain intellectual property licensed by Honeywell to us in connection with the Spin-Off. For a more detailed description of the various intellectual property rights and relationships that affect the Company’s business, see Item 1A. Risk Factors. 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. 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 2021 Annual Meeting of Stockholders, which will also be available free of charge on our website. Information contained on, or connected to, our website does not and will not constitute part of this Form 10-K. We are a Delaware corporation incorporated on April 24, 2018. Our principal executive offices are located at 901 E. 6th Street, Austin, Texas 78702. Our telephone number is (512) 726-3500. Our website address is www.resideo.com. We disclose public information to investors, the media and others interested in our Company through a variety of means, including our investor relations website (https://investor.resideo.com), press releases, SEC filings, blogs, public conference calls and presentations, webcasts and social media, in order to achieve broad, non- 7 RESIDEO TECHNOLOGIES, INC. exclusionary distribution of information to the public. We use these channels to communicate with our stockholders and the public about our Company, 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 encourage investors, the media and others interested in our Company to review the information we post on our website and the social media channels listed below. The list of social media channels we use may be updated from time to time on our investor relations website. 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. Item 1A. Risk Factors You should carefully consider all of the information in this Form 10-K and each of the risks described below, which we believe are the material risks that we face. 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. The following risk factors are not necessarily presented in order of relative importance and should not be considered to represent a complete set of all potential risks that could affect us. Risks Relating to Our Business We operate in highly competitive markets. We operate in highly competitive markets in both our Products & Solutions and ADI Global Distribution segments and compete directly with global, national, regional, and local providers of our products, services and solutions including manufacturers, distributors, service and software providers, retailers, and online commerce providers. The most significant competitive factors we face are product and service innovation, reputation of our Company and brands, sales and marketing programs, product performance, warranty, quality of product training and events, product availability, speed and accuracy of delivery, price, customer and technical support, and furnishing of customer credit, with the relative importance of these factors varying among our segments and their respective products and services. In addition to current competitive factors, there have been, and in the future, there may be new market entrants with non-traditional business, new business and customer service models or disruptive technologies and products, resulting in increased competition and changing business dynamics. Examples of these include cable, telecommunications and large technology companies competing in the connected home and home security spaces, utilities expanding their role in the provision of home energy services, OEMs vertically integrating, and the expansion of direct-to-consumer, retail and e-tail distribution in competition with our ADI Global Distribution business. Existing or future competitors may seek to gain or retain market share by reducing prices, or shifting business models to a software based model, and we may be required to lower prices or may lose business, which could adversely affect our business, financial condition, results of operations and cash flows. Also, to the extent that we do not meet changing customer preferences or demands or other market changes, or if one or more of our competitors introduces new products or services, becomes more successful with private label products, online offerings or establishes exclusive supply relationships, our ability to attract and retain customers could be adversely affected. To remain competitive, we will need to invest continually in product and services development, marketing, customer service and support, manufacturing and our distribution networks. 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 8 RESIDEO TECHNOLOGIES, INC. 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 services and in new geographic regions. It is possible that competitive pressures resulting from consolidation, including customers taking manufacturing or distribution in house, purchasing directly from a manufacturer instead of from ADI Global Distribution, moving to a competitor, partnering with third parties and consolidation amongst our customers, could affect our growth and profit margins. Existing or future competitors also may seek to compete with us for acquisitions, which could have the effect of increasing the price for, and reducing the number of, suitable acquisition targets. We may not be successful in effectively identifying all risks of an acquired business, integrating the acquired business, product or technology into our existing business and operations or realizing the benefits expected at acquisition. Our due diligence may fail to identify all of the problems, liabilities or other shortcomings or challenges of an acquired business, product or technology, including issues related to intellectual property, product quality or product architecture, regulatory compliance practices, revenue recognition or other accounting practices or employee or customer issues. Some of our competitors may also be able to deliver their service solutions more quickly to market than we can by capitalizing on technology developed in connection with their substantial existing service models. 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. 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. Our Products & Solutions business' offerings are primarily sold through a network of professional contractors, distributors, OEMs, retailers and online merchants. Growth of the retail markets and greater e-tail 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. 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. Technology in our markets is changing rapidly and our future results and growth are largely dependent upon our ability to develop and successfully market new technologies and products and develop and protect the intellectual property related thereto as well as defend against the intellectual property threats of others. Technology in our markets changes constantly, as new technologies and enhancements to existing technologies continue to be introduced both in our traditional and connected product markets. Our future results depend upon a number of factors, including our ability to (i) identify emerging technological trends, (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 inability to predict the growth of and respond in a timely way to customer preferences and other developments could have an adverse effect on our business, financial condition, results of operations and cash flows. 9 RESIDEO TECHNOLOGIES, INC. We rely on a combination of patents, copyrights, trademarks, trade names, trade secrets and other proprietary rights, as well as contractual arrangements, including licenses, to establish, maintain and protect our intellectual property rights. Our intellectual property rights may not be sufficient to permit us to take advantage of some business opportunities. As a result, we may be required to change our plans or acquire necessary intellectual property rights, which could be costly. Furthermore, our ability to enforce our intellectual property rights in emerging markets may be limited by legal or practical considerations that have not historically affected our business in markets with more established intellectual property protection systems. Our industry experiences significant intellectual property litigation and we could become involved in costly and lengthy litigation involving patents or other intellectual property rights which could adversely affect our business. We have received allegations of patent infringement from third parties, including non-practicing entity patent holders, as well as communications from customers requesting indemnification for allegations brought by third parties. These have resulted and may continue to result in litigation. These proceedings could subject us to significant liability, harm our ability to compete, and can divert our management’s time and attention. Often, we receive offers to license patents for our use. Such offers typically relate to various technologies including electronics, the “internet of things”, “connected homes”, power systems, controls, and software, as well as, the use of certain wireless networking methods, and the design of specific products. We believe that we will be able to access any necessary rights through licensing, cross-licensing, or other mutually beneficial arrangements, although to the extent we are required but unable to enter into such arrangements on acceptable economic terms, it could adversely impact us, requiring us to take specific actions including ceasing using, selling or manufacturing certain products, services or processes or incurring significant costs and time delays to develop alternative technologies or re-design products. Our operations depend upon third-party technologies, software, and intellectual property. Failure to renew contracts with existing providers or licensors of technology, software, intellectual property or connectivity solutions, or to contract with other providers or licensors on commercially acceptable terms or at all, as well as any failure by such third-party provider to provide such technology solutions may adversely impact our business, financial condition, results of operations and cash flows. 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 licensor is typically obligated to indemnify us if the licensed technology infringes on another party’s intellectual property rights, such indemnification is typically limited in amount and may be worthless if the licensor becomes insolvent. Market and economic conditions may adversely affect the economic conditions of our customers, demand for our products and services and our results of operations. As a global provider of Comfort, RTS and Security products, services and technologies for the home, as well as a worldwide wholesale distributor of low-voltage electronics products, as well as smart home, fire, 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. 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 confidence, 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. Our sales are also affected by fluctuations in demand for Internet-connected devices. If the market for connected home solutions grows more slowly than anticipated, we may not be able to increase our revenue and earnings. 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. Consolidation or change of control, 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. We generally have to qualify, and are required to maintain our status, as a supplier for each of our OEM customers. 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 10 RESIDEO TECHNOLOGIES, INC. operations. By virtue of certain customers’ size and the significant portion of revenue that we derive from them, they are able to exert significant influence in the negotiation of our commercial agreements and the conduct of our business with them. If we are unable to retain and expand our business with these customers on favorable terms, our business, financial condition, results of operations and cash flows will be adversely affected. 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. Both of our business segments depend on third parties for the supply of certain materials and components for products we manufacture and those manufactured on our behalf, or sold through our ADI Global Distribution business, some of which are supplied by single or limited source suppliers/manufacturers. Our business, results of operations, financial condition and cash flows could be adversely affected by disruptions in supply from our third- party suppliers and manufacturers, whether due to work stoppages, 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. For example, there is currently a global semiconductor supply shortage. While our supply chain team has been diligently working to help ensure surety of supple, if our third-party suppliers and manufacturers fail to deliver materials, products, parts and components on time and at reasonable prices, we could have difficulties fulfilling our orders or stocking our distribution centers on similar terms or at all, sales and profits could decline, and our commercial reputation could be damaged. Our ability to manage inventory and meet delivery requirements may 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 obligations which could, in turn, result in reduced sales and profits, contract penalties or terminations, and damage to customer relationships. In particular, 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 our ADI Global Distribution’s operating margins, net revenue or the level of capital required to fund operations. 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. This could result in more intense competition as distributors strive to secure distribution rights with these manufacturers, which could have an adverse impact on our ADI Global Distribution business, financial condition, results of operations and cash flows. In addition, our ADI Global Distribution business may not be able to acquire from manufacturers certain product lines that we are interested in adding to our distribution business, and if even we are able to add products, they may not result in sales as expected and may not be profitable to the overall business. 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. If our offerings do not meet applicable 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. 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. 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 assurance that we will have adequate reserves to cover any recalls, repair and replacement costs. 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. 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 RESIDEO TECHNOLOGIES, INC. Our business, results of operations, financial condition, cash flows and stock price may be materially adversely impacted by pandemics, epidemics or other public health emergencies, such as the coronavirus (COVID-19) outbreak. Our business, results of operations, financial condition, cash flows, and stock price may be adversely affected by pandemics, epidemics or other public health emergencies, such as the COVID-19 (including newly discovered variants) virus pandemic as described in this Annual Report, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. This outbreak has negatively impacted and could continue to negatively impact the global economy. While we continue to comply with all applicable health and sanitation and legal requirements, we cannot ensure uninterrupted operations in geographical areas impacted by COVID-19. Deterioration in economic conditions could reduce our sales and profitability. Any financial distress of our customers due to deterioration in economic conditions or lack of continued governmental funding and support of our customers could result in reduced sales and decreased collectability of accounts receivable which could negatively impact our results of operations. The COVID-19 outbreak has had, and could continue to 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, and disruptions to other aspects of our business. We depend greatly on our suppliers for items that are essential to the manufacturing of our products. 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. While we believe that we are considered as an essential product and service provider pursuant to laws, rules and regulations in the majority of regions in which we operate, which has generally provided us with the ability to continue to operate during the COVID-19 pandemic, we may be subject to changing laws, rules and regulations, and limitations on the scope of essential businesses, which may impact our ability to operate in such regions. In addition, we have in the past and may continue in the future during the pendency of the corona virus pandemic, be subject to government inspections of our manufacturing facilities to confirm compliance with government regulations related to employee health and safety at our sites. To the extent the COVID-19 outbreak adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section. 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. 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. 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. Repeated or prolonged interruptions of service, due to 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. Our business, results of operations, financial condition and cash flows may be adversely affected if our information systems fail or do not allow us to transmit accurate information. Failure to properly or adequately address these issues, including the failure to fund 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. Our ability to keep our business operating is highly dependent on the proper and efficient operation of our network operations centers and data backup systems. In addition, many of our employees are and have been engaged in remote work from their homes during COVID-19; this further exposes our information technology systems to potential cyber interference and disruption of work activities based on availability of Wi-Fi in the regions in which our employees reside. 12 RESIDEO TECHNOLOGIES, INC. Our information technology (“IT”) and engineering systems may involve 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. As a result, we are subject to systems interruption 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. There is no assurance that the comprehensive security measures we have put in place to protect our information systems and products against unauthorized access and disclosure of personal information or confidential or trade secret information will be effective in every case. We have experienced, and expect to continue to experience, cybersecurity threats and incidents, none of which, to our knowledge, have been material to date. The potential consequences of a material cyber or other security incident include financial loss, reputational and brand impact, negative media coverage, loss of customers, litigation with third parties, including class-action litigation, regulatory investigations or 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. 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. We are subject to the economic, political, health, epidemic, regulatory, foreign exchange and other risks of international operations. Our international revenues represented approximately 30% of our net revenue for the year ended December 31, 2020. Our international geographic footprint subjects us to many risks including: exchange control regulations(cid:14) wage and price controls(cid:14) antitrust/competition and environmental regulations(cid:14) employment regulations(cid:14) foreign investment laws(cid:14) monetary and fiscal policies and protectionist measures that may prohibit acquisitions or joint ventures, establish local content requirements, or impact trade volumes(cid:14) import, export and other trade restrictions (such as embargoes)(cid:14) violations by our employees of anti-corruption laws (despite our efforts to mitigate these risks)(cid:14) changes in regulations regarding transactions with state-owned enterprises(cid:14) nationalization of private enterprises(cid:14) natural and man-made disasters, hazards and losses(cid:14) backlash from foreign labor organizations related to our restructuring actions(cid:14) violence, civil and labor unrest(cid:14) acts of terrorism(cid:14) health epidemics; and our ability to hire and maintain qualified staff and maintain the safety of our employees in these regions. Additionally, certain of the markets in which we operate have adopted increasingly strict data privacy and data protection requirements or may require local storage and processing of data or similar requirements Instabilities and uncertainties arising from the global geopolitical environment can negatively impact our business. The implementation of more restrictive trade policies or the renegotiation of existing trade agreements in the U.S. or other countries where we sell 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. For example, a government’s adoption of “buy national” policies or retaliation by another government against such policies, such as tariffs or quotas, could have a negative impact on our results of operations. 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. Instabilities and uncertainties arising from the global geopolitical environment, along with the cost of compliance with increasingly complex regulations worldwide, can impair our flexibility in modifying product, marketing, pricing or other strategies for growing our businesses, as well as our ability to improve productivity and maintain acceptable operating margins. As a result of our global presence, a portion of our net revenue are denominated in currencies other than the U.S. Dollar, whereas a significant amount of our payment obligations, including pursuant to the Reimbursement Agreement and Tax Matters Agreement are denominated in U.S. Dollars, which exposes us to foreign exchange risk. We monitor and may seek to reduce such risk through hedging activities(cid:14) however, foreign exchange hedging activities bear a financial cost and may not always be available to us or be successful in eliminating such volatility. 13 RESIDEO TECHNOLOGIES, INC. Finally, we generate significant amounts of cash outside of the United States that is invested with financial and non- financial counterparties. While we employ comprehensive controls regarding global cash management to guard against cash or investment loss and to ensure our ability to fund our operations and commitments, a material disruption to the counterparties with whom we transact business could expose us to financial loss. We operate in many high-growth 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. 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. In addition, we seek productivity and cost savings benefits through transformation and other programs, such as consolidation and outsourcing of manufacturing operations or facilities, transitions to cost-competitive regions, workforce reductions, product line rationalizations and other cost-saving initiatives. 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, and adverse effects on employee morale leading to reduced production and unanticipated departures. 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 workforce stoppage could have an adverse effect on our business, reputation, financial condition, results of operations, and cash flows. Regulations and societal actions to respond to global climate change could negatively affect our business. Responses to climate change may cause a shift away from fossil fuels to alternative power sources such as electricity or alternative fuels such as natural gas/hydrogen mixtures. Many of our thermal solutions are designed for application with oil and gas systems. A shift away from fossil fuels could affect our OEM customers’ business and result in a loss of business for them and for us. If we fail to adapt our solutions to alternative power sources, it could have an adverse effect on our business, financial condition, results of operations, and cash flows. Similarly, regulations to drive higher fuel efficiency and requirements to support varying fuel mix could shift business away from us if we fail to adapt our solutions to address these needs in a timely manner. We are subject to risks associated with the Reimbursement Agreement, pursuant to which we are required to make substantial cash payments to Honeywell, measured in substantial part by reference to estimates by Honeywell of certain of its liabilities. In connection with the Spin-Off, we entered into the Reimbursement Agreement, described in Note 19. Commitments and Contingencies of Notes to Consolidated and Combined Financial Statements. In each calendar quarter, our ability to pay dividends and repurchase capital stock, or take other material corporate actions, in such calendar quarter will be restricted until any amounts payable under the Reimbursement Agreement in such quarter are paid to Honeywell and we will be required to use available restricted payment capacity under our debt agreements to make payments in respect of any such amounts. 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. All amounts payable under the Reimbursement Agreement are guaranteed by certain of our subsidiaries that act as guarantors under our principal credit agreement, subject to certain exceptions. Under the Reimbursement Agreement, we are subject to certain of the affirmative and negative covenants that are substantially similar to those presently included in our principal credit agreement. Further, pursuant to the Reimbursement Agreement, our ability to (i) amend or enter into waivers under our principal credit agreement or our indenture, (ii) enter into another credit agreement or our indenture or make amendments or waivers thereto, or (iii) enter into or amend or waive any provisions under other agreements, in each case, in a manner that would adversely affect the rights of Honeywell under the Reimbursement Agreement, may be subject to Honeywell’s prior written consent. The covenants contained in the Reimbursement Agreement and/or the consent right described in the preceding sentence may significantly limit our ability to engage in many types of significant transactions on favorable terms (or at all), including, but not limited to, equity and debt financings, liability management transactions, refinancing transactions, mergers, acquisitions, joint ventures, and other strategic 14 RESIDEO TECHNOLOGIES, INC. transactions. The Reimbursement Agreement may have material adverse effects on our liquidity and cash flows and on our results of operations, regardless of whether we experience a decline in net revenue. The Reimbursement Agreement may also require us to accrue significant long-term liabilities on our consolidated balance sheet, the amounts of which will be dependent on factors outside our control, including Honeywell’s responsibility to manage and determine the outcomes of claims underlying the liabilities. This may have a significant negative impact on the calculation of key financial ratios and other metrics that are important to investors, rating agencies and securities analysts in evaluating our creditworthiness, and the value of our securities. Although we will have access to information regarding these liabilities as we may reasonably request for certain purposes, as well as the ability to participate in periodic standing meetings with Honeywell’s remediation management team responsible for management of the underlying claims, the payment obligations under the Reimbursement Agreement relate to legal proceedings, costs and remediation efforts that we will not control, and we accordingly do not expect to be able to make definitive decisions regarding settlements or other outcomes that could influence our potential related exposure. If our goodwill, other intangible assets and long-lived assets become impaired, we may be required to record a significant charge to earnings. We test, at least annually, the carrying value of goodwill for impairment, as discussed in Note 2. Summary of Significant Accounting Policies of Notes to the Consolidated and Combined Financial Statements included in this Annual Report. 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. The estimates and assumptions about future results of operations and cash flows made in connection with the impairment testing could differ from future actual results of operations and cash flows. If the assumptions used in our analysis are not realized or if there was an adverse change in facts and circumstances, it is possible that an impairment charge may need to be recorded in the future. If the fair value of the Company’s reporting units falls below its carrying amount because of reduced operating performance, market declines, changes in the discount rate, or other conditions, charges for impairment may be necessary. Any such charges may have a material negative impact on our results of operations. There were no impairment charges taken during the years ended December 31, 2020, 2019 and 2018. Risks Relating to Legal and Regulatory Matters Failure to comply with the broad range of standards, laws and regulations in the jurisdictions in which we operate may result in exposure to substantial disruptions, costs and liabilities. The laws and regulations impacting us impose complex, stringent and costly compliance activities, including but not limited 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, consumer protection and working conditions for and compensation of our employees. We may also be affected by future standards, laws or regulations, including those imposed in response to energy, climate change, product functionality, geopolitical, corporate social responsibility, privacy or similar concerns. We expect that the growth of our business may depend on our development of new technologies in response to legislation and regulation related to efficiency standards, safety, privacy and security, and environmental concerns. These standards, laws, or regulations may further impact our costs of operation, the sourcing of raw materials, and the manufacture and distribution of our products and place restrictions and other requirements or impediments on the products and solutions we can sell in certain geographical locations. The net revenue and margins of our business are directly impacted by government regulations, including safety, performance and product certification regulations, particularly those driven by customer demands and national approvals, as well as changes in trade agreements, tariffs, and environmental and energy efficiency standards. We may develop unexpected legal contingencies or matters that exceed, or are excluded from, insurance coverage. We are subject to and in the future may be subject to various claims, including legal claims arising in the normal course of business. Such claims may include without limitation employment claims, product recall, personal injury, network security, data privacy, or property damage claims resulting from the use of our products, services, or solutions, as well as exposure to hazardous materials, contract disputes, or intellectual property disputes. The actual costs of resolving legal claims may be substantially higher or lower than the level of insurance coverage we hold and/or the amounts accrued for 15 RESIDEO TECHNOLOGIES, INC. such claims or may be excluded from coverage. In the event of unexpected future developments, it is possible that the ultimate resolutions of such matters could be unfavorable. Various laws and regulations apply to the collection, processing, transfer, disposal, disclosure and security of personal data. The interpretation and application of many privacy and data protection laws and regulations around the world may be interpreted in a manner that is inconsistent with our existing data management practices or the features of our products and services. Any such new laws or regulations, any changes to existing laws and regulations and any such interpretation may affect demand for our products and services, impact our ability to effectively transfer data across borders in support of our business operations, or increase the cost of providing our products and services. Additionally, any actual or perceived breach of such laws or regulations may subject us to claims and may lead to administrative, civil or criminal liability, as well as reputational harm. We could also be required to fundamentally change our business activities and practices, or modify our products and services, which could have an adverse effect on our business, financial condition, results of operations, and cash flows. Privacy- related claims or lawsuits initiated by governmental bodies, customers or other third parties, whether meritorious or not, could be time consuming, result in costly regulatory proceedings, litigation, penalties and fines, or require us to change our business practices, sometimes in expensive ways, or other potential liabilities. Unfavorable publicity regarding our privacy practices could injure our reputation, harm our ability to keep existing customers or attract new customers or otherwise adversely affect our business, assets, revenue, brands, and reputation. Changes in laws, regulations or government enforcement of policies concerning the environment, the discovery of previously unknown contamination or new technology or information related to individual contaminated sites owned or operated by Resideo, the establishment of stricter state or federal toxicity standards with respect to certain contaminants, or the imposition of new clean-up requirements or remedial techniques, could require us to incur additional currently unanticipated costs in the future that would have a negative effect on our business, financial condition, results of operations, and cash flows. We are currently subject to laws and regulations regarding labor and employment matters, including consultation requirements, and may be subject in the future to government investigations and/or employment claims, allegations and/or work stoppages that may have a negative effect on our business operations and/or financial results. We cannot predict with certainty the outcome of litigation matters, government proceedings, and other contingencies and uncertainties. In the ordinary course of business, we may make certain commitments, including representations, warranties and indemnities relating to current and past operations, and issue guarantees of third-party obligations. We are also subject to various lawsuits, investigations and disputes arising out of the conduct of our business, including matters relating to public disclosure and reporting, commercial transactions, government contracts, product liability, prior acquisitions and divestitures, labor and employment matters, employee benefit plans, intellectual property, and environmental, health and safety matters. We are unable to predict how long such proceedings, in particular, the class action and derivative lawsuits described in Note 19. Commitments and Contingencies of Notes to Consolidated and Combined Financial Statements, will continue, but we anticipate that we may incur significant costs in connection with some or all of these matters and that these proceedings and any related matters may result in a substantial distraction of management’s time. In addition, we are currently subject to investigations and inquiries by governmental agencies (including the SEC) relating to these matters, which may result in fine or penalties which may not be covered by insurance. We may face future governmental inquiries and investigations on these and other issues. Our potential liabilities are subject to change over time due to new developments, changes in settlement strategy or the impact of evidentiary requirements, and we may become subject to or be required to pay damage awards or settlements that could have an adverse effect on our business, financial condition, results of operations and cash flows. If we were required to make payments, such payments could be significant and could exceed the amounts we have accrued with respect thereto, adversely affecting our business, financial condition, results of operations, and cash flows. While we maintain or may otherwise have access to insurance for certain risks, certain risks may be excluded and the amount of our insurance coverage may not be adequate to cover the total amount of all insured claims, legal fees, costs and liabilities and we may have to satisfy high insurance retentions. The 16 RESIDEO TECHNOLOGIES, INC. incurrence of significant liabilities for which there is no or insufficient insurance coverage (or where there is available insurance but high retention levels) could adversely affect our liquidity and financial condition, results of operations and cash flows. As described in Note 19. Commitments and Contingencies of Notes to Consolidated and Combined Financial Statements, we are subject to potentially material liabilities related to the investigation and cleanup of environmental hazards and to claims of personal injuries or property damages that may arise from hazardous substance releases and exposures. These liabilities arise out of our current and past operations and the operations and properties of predecessor companies (including off site waste disposal). We are also subject to potentially material liabilities related to the compliance of sites owned or operated by Resideo with the requirements of various federal, state, local, and foreign governments that regulate the discharge of materials into the environment and the generation, handling, storage, treatment, and disposal of and exposure to hazardous substances. If we are found to be in violation of these laws and regulations, we may be subject to substantial fines, criminal sanctions, trade restrictions, product recalls, public exposure and be required to install costly equipment or make operational changes to achieve compliance with such laws and regulations. Risks related to the Spin-Off and our relationships with Honeywell The Spin-Off was generally intended to be a tax-free transaction for our shareholders, but any failure to comply with the relevant tax requirements could result in certain of our shareholders incurring substantial tax liabilities. In addition, we may have material payment obligations to Honeywell under the Tax Matters Agreement, including upon the resolution of pending or future disputes with Honeywell regarding the appropriate allocation of tax liabilities incurred in connection with the Spin-Off. Completion of the Spin-Off was conditioned on Honeywell’s receipt of separate written opinions from Cleary Gottlieb Steen & Hamilton and KPMG to the effect that the Spin-Off should qualify for non-recognition of gain and loss under Section 355 and related provisions of the Internal Revenue Code of 1986, as amended (the “Code”). The opinions assume that the Spin-Off was completed according to the terms of the Separation and Distribution Agreement. If the distribution made in connection with the Spin-Off were determined not to qualify for non-recognition of gain or loss under Section 355 and related provisions of the Code, then a U.S. Holder who received our common stock in the Spin-Off generally would be treated as receiving a distribution in an amount equal to the fair market value of our common stock received. In connection with the Spin-Off, we entered into the Tax Matters Agreement with Honeywell described in Note 19. Commitments and Contingencies of Notes to Consolidated and Combined Financial Statements. We presently have, and in the future may have, disputes with Honeywell regarding the allocation of tax related liabilities between us and Honeywell under the Tax Matters Agreement. While we maintain reserves for potential liabilities arising under the Tax Matters Agreement, to the extent we are obligated to indemnify Honeywell for tax related liabilities in respect of matters that are not reserved or in excess of reserved amounts, including upon resolution of any dispute with Honeywell, such payments could have a material adverse effect on our business, financial condition and cash flows. We have certain business conflicts of interest with Honeywell with respect to our past and ongoing relationships. In addition, the agreements that we entered into with Honeywell in connection with the Spin-Off impose significant restrictions on us and our subsidiaries and limit our ability to engage in actions that may be in our long-term best interests, and we may from time to time have disputes with Honeywell under such agreements that could have a material impact on our business and operations. Conflicts of interest may or have arisen with Honeywell in a number of areas relating to our past and ongoing relationships, including: • • • • labor, tax, employee benefit, indemnification and other matters arising from our separation from Honeywell(cid:14) intellectual property matters(cid:14) employee recruiting and retention(cid:14) interpretations of contractual arrangements; and 17 RESIDEO TECHNOLOGIES, INC. • business combinations involving our Company. We may not be able to resolve any potential conflicts, and, even if we do so, the resolution may be less favorable to us than if we were dealing with a party other than our former parent company. The agreements that we entered into with Honeywell in connection with the Spin-Off may impose significant restrictions on us and our subsidiaries and limit our ability to engage in actions that may be in our long- term best interests. As described in more detail in Note 19. Commitments and Contingencies of Notes to Consolidated and Combined Financial Statements, the Reimbursement Agreement imposes material restrictions on our business and operations, including limitations or impediments on our ability to separate or otherwise divest businesses and modify or waive the terms of certain agreements in a manner that would adversely affect the rights of Honeywell under the Reimbursement Agreement. In addition, the Trademark Agreement is terminable by Honeywell under certain circumstances, including if we fail to comply with all material obligations, including the payment obligations, set forth in the Reimbursement Agreement. The Trademark Agreement also automatically terminates upon the occurrence of a change of control of Resideo that is not approved by Honeywell, and automatically terminates as to any subsidiary of Resideo upon it ceasing to be a wholly-owned subsidiary of Resideo. Any termination of the Trademark Agreement could have a material adverse effect on our business, financial condition, cash flows, and reputation. In addition, the provisions of the Trademark Agreement in respect of a change of control of Resideo or the sale of any interests in any subsidiary of Resideo may impact our ability to enter into transactions that are otherwise in the best interests of our stockholders. We and Honeywell also have had and may in the future have disputes under the agreements and related exhibits entered into in connection with the Spin-Off. In addition, because of their former positions with Honeywell, certain of our executive officers and directors, including the chairman of the Board, own equity interests in Honeywell. Continuing ownership of Honeywell shares and equity awards could appear to create, potential conflicts of interest if our Company and Honeywell face decisions that could have implications for both our Company and Honeywell. The terms of our debt documents may impose restrictions on our business and our operations require substantial capital and we may not be able to obtain additional capital that we need in the future on favorable terms or at all. The terms of our varied indebtedness include a number of restrictive covenants that impose significant operating and financial restrictions on us and limit our ability to engage in actions that may be in our long-term best interests, including actions such as incurring additional indebtedness, paying dividends, making investments or acquisitions, selling or transferring certain assets and other corporate actions. If market changes, economic downturns, or other negative events occur, our ability to comply with these covenants may be impaired and waivers from our lenders may not be provided. A breach of any of these covenants could result in an event of default under the terms of our indebtedness giving lenders the right to accelerate the repayment of such debt, which could adversely affect our business, financial condition, results of operations, and cash flows. Additionally, we might not have, or be able to obtain, sufficient funds to make these accelerated payments, and lenders could then proceed against any collateral. Any subsequent replacement of the agreements governing such indebtedness, or any new indebtedness could have similar or greater restrictions. As a result of these restrictions, we may be limited in how we conduct our business and pursue our strategy, unable to raise additional debt financing to operate during general economic or business downturns or unable to compete effectively or to take advantage of new business opportunities. Notwithstanding that we recently completed a follow-on equity offering and a refinance of certain of our debt obligations, we may require additional capital in the future to finance our growth and development, upgrade and improve our manufacturing capabilities, implement further marketing and sales activities, fund ongoing research and development activities, satisfy regulatory and environmental compliance obligations and national approvals requirements, satisfy obligations under the Reimbursement Agreement, fund acquisitions and meet general working capital needs. If our access to capital were to become constrained significantly, or if costs of capital increased significantly, due to lowered credit ratings, increased interest rates, prevailing business conditions, financial leverage, the volatility of the capital markets, decreased investor interest or other factors, our business, financial condition, results of operations and cash flows could be adversely affected and our ability to fund future development and acquisition activities could be impacted. 18 RESIDEO TECHNOLOGIES, INC. We believe that we have adequate capital resources to meet our projected operating needs, capital expenditures and other cash requirements, including payments to Honeywell under the Reimbursement Agreement. However, we may need additional capital resources in the future and if we are unable to obtain sufficient resources for our operating needs, capital expenditures and other cash requirements for any reason, our business, financial condition and results of operations could be adversely affected. Risks Relating to Our Common Stock and the Securities Market Our stock price has been volatile; stockholder’s percentage ownership in our Company may be diluted in the future. Our stock price may be volatile. The market price of our common stock has been volatile in the past and may be volatile in the future. The market price of our common stock may be significantly affected by the following factors: actual or anticipated fluctuations in our operating results; changes in financial estimates by securities analysts or our failure to perform in line with such estimates; announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments; the loss of, or decrease in sales to, one or more key customers; and departures of key personnel. A stockholder’s percentage ownership in our Company may be diluted in the future because of common stock-based equity awards that we have granted and expect to grant in the future in accordance with our 2018 Stock Incentive Plan for the benefit of certain employees and other service providers, as well as our equity plan for our non-employee directors. In addition, we may issue additional equity as necessary to finance our ongoing operations. In addition, our Amended and Restated Certificate of Incorporation (our “Certificate”) authorizes us to issue, without the approval of our stockholders, one or more classes or series of preferred stock, which may have preferences over our common stock with respect to dividends and distributions, as our Board may determine. The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the value of our common stock. Similarly, the repurchase or redemption rights or liquidation preferences that we could assign to holders of preferred stock could affect the residual value of our common stock. In addition, we may pursue acquisition opportunities for which the consideration thereof may consist partially or entirely of newly issued shares of our common stock and such transactions would dilute the voting power and/or reduce the value of our common stock. Certain provisions in our governing documents may discourage takeovers. Several provisions of our Charter Documents and Delaware law may discourage, delay or prevent a merger or acquisition. These include, among others, our staggered board that remains in effect until our 2022 annual meeting of stockholders; our stockholders are not permitted to act by written consent; we have established advance notice requirements for stockholder nominations and proposals; we limit the persons who may call special meetings of stockholders and we have limitations on our ability to enter into business combinations transactions. These and other provisions of our Charter Documents and Delaware law may discourage, delay or prevent certain types of transactions involving an actual or a threatened acquisition or change in control of our Company, including unsolicited takeover attempts, even though the transaction may offer our stockholders the opportunity to sell their shares of our common stock at a price above the prevailing market price. We may be required to make significant cash contributions to our defined benefit pension plans. We sponsor defined benefit pension plans under which certain eligible Company employees will earn pension benefits. We have plans in several countries including the U.S., the terms of which require that such qualified defined benefit pension plans maintain certain capitalization levels. Changes in discount rates and actual asset returns different than our anticipated asset returns can result in significant non-cash actuarial gains or losses. With regard to cash pension contributions, funding requirements for our pension plans are largely dependent upon interest rates, actual investment returns on pension assets and the impact of legislative or regulatory changes related to pension funding obligations. Our pension plan contributions may be material and could adversely impact our 19 RESIDEO TECHNOLOGIES, INC. financial condition, cash flow, and results of operations. We may need to make pension plan contributions in future periods sufficient to satisfy funding requirements. General Risk Factors We depend on the recruitment and retention of qualified personnel, and our failure to attract and retain such personnel could adversely affect our business, financial condition, results of operations, and cash flows. Due to the complex nature of our business, our future performance is highly dependent upon the continued services of our employees and management who have significant industry expertise, including our engineering and design personnel and trained sales force. Our performance is also dependent on the development of additional personnel and the hiring of new qualified engineering, design, manufacturing, marketing, sales and management personnel for our operations. Competition for qualified personnel in our markets is intense, and we may not be successful in attracting or retaining qualified personnel. The loss of key employees, our inability to attract new qualified employees or adequately train employees, or the delay in hiring key personnel could negatively affect our business, financial condition, results of operations and cash flows. Our effective tax rate will be affected by factors including changes in tax rules, and in the interpretation and application of those rules, in the countries in which we operate. Our future results of operations could be adversely affected by changes in the effective tax rate as a result of a change in the mix of earnings in countries with differing statutory tax rates, changes in tax laws, including any changes that may be enacted by the Biden administration to laws or regulations (such as changes to US tax reform regulations enacted during the Trump administration), regulations and judicial rulings (or changes in the interpretation thereof), changes in generally accepted accounting principles, changes in the valuation of deferred tax assets and liabilities, changes in the amount of earnings permanently reinvested offshore, the results of audits and examinations of previously filed tax returns and continuing assessments of our tax exposures, and various other governmental enforcement initiatives. Our tax expense includes estimates of tax reserves and reflects other estimates and assumptions, including assessments of our future earnings which could impact the valuation of our deferred tax assets. Changes in tax laws or regulations, including multi-jurisdictional changes enacted in response to the guidelines provided by the Organization for Economic Co-operation and Development to address base erosion and profit shifting will increase tax uncertainty and may adversely impact our provision for income taxes. If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired and investors’ views of us could be harmed. The Sarbanes-Oxley Act requires that we maintain effective internal control over financial reporting and disclosure controls and procedures. If we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of shares of common stock could decline and we could be subject to sanctions or investigations by SEC or other regulatory authorities, which would require additional financial and management resources. Even if we were to conclude, and our auditors were to concur, that our internal controls over financial reporting provided reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, because of its inherent limitations, internal control over financial reporting might not prevent or detect fraud or misstatements. This, in turn, could have an adverse impact on trading prices for our shares of common stock, and could adversely affect our ability to access the capital markets. Item 1B. Unresolved Staff Comments None. 20 RESIDEO TECHNOLOGIES, INC. Item 2. Properties Our corporate headquarters is located in Austin, Texas. The Products & Solutions segment owns or leases 16 manufacturing sites. ADI Global Distribution owns or leases 195 stocking locations. There are also 5 warehouses shared by both segments and 55 other sites owned or leased, including offices shared by both segments and engineering and lab sites used by the Products & Solutions segment. The following table shows the regional distribution of these sites: Sites...................................................................................... 145 Americas Asia Pacific EMEA 104 6 India 16 We also sublease 1 lab site and 6 other sites that include office and engineering space from Honeywell. 29 warehouses are operated by third parties. In addition, Honeywell leases or subleases 3 manufacturing sites and 6 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 3. Legal Proceedings We are subject to various lawsuits, investigations and disputes arising out of the conduct of our business, including matters relating to commercial transactions, government contracts, product liability, prior acquisitions and divestitures, employee matters, intellectual property, and environmental, health and safety matters. We recognize a liability for any contingency that is probable of occurrence and reasonably estimable. We continually assess the likelihood of adverse judgments of outcomes in these matters, as well as potential ranges of possible losses (taking into consideration any insurance recoveries), based on a careful analysis of each matter with the assistance of outside legal counsel and, if applicable, other experts. We do not currently believe that such matters are material to our results of operations. For further information on our legal proceedings see Note 19. Commitments and Contingencies of Notes to Consolidated and Combined Financial Statements. Item 4. Mine Safety Disclosures Not applicable. 21 RESIDEO TECHNOLOGIES, INC. PART II. Item 5. 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 19, 2021, there were 37,987 holders of record of our common stock and the closing price of our common stock on the New York Stock Exchange was $27.89 per share. As of February 19, 2021, 143,139,475 shares of our Common Stock and 0 shares of our preferred stock were outstanding. As described in Item 1. Business of this Form 10-K, on October 29, 2018, Honeywell completed the separation of Resideo Technologies, Inc. Following the Spin-Off, our authorized capital stock consisted of 700,000,000 shares of common stock, par value $0.001 per share, and 100,000,000 shares of preferred stock, par value $0.001 per share. The Spin-Off is further described in Note 1. Organization, Operations and Basis of Presentation of Notes to the Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data of this Form 10-K. 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. The Board’s decision regarding any future payment of dividends will depend on the consideration of many factors, including our financial condition, earnings, sufficiency of distributable reserves, opportunities to retain future earnings for use in the operation of our business and to fund future growth, capital requirements, debt service obligations, obligations under the Reimbursement Agreement, legal requirements, regulatory constraints, and other factors that the Board deems relevant. Additionally, the terms of the indebtedness we incurred in connection with the Spin-Off, obligations under the Reimbursement Agreement and other amounts owed to Honeywell under the Tax Matters, Trademark License and Patent Cross-License Agreements, will limit our ability to pay cash dividends. Stock Performance Information relating to cumulative total returns of our common stock will be included in our Proxy Statement to be filed pursuant to Regulation 14A within 120 days after our year ended December 31, 2020 in connection with our 2021 Annual Meeting of Stockholders, or the 2021 Proxy Statement, and is incorporated by reference. 22 RESIDEO TECHNOLOGIES, INC. Item 6. Selected Financial Data Selected Historical Consolidated and Combined Financial Data The following tables present certain selected historical consolidated and combined financial information as of and for each of the years in the five-year period ended December 31, 2020. For periods prior to October 29, 2018, the Company’s historical financial statements were prepared on a stand-alone combined basis and were derived from the consolidated financial statements and accounting records of Honeywell. Accordingly, for periods prior to October 29, 2018, these financial statements are presented on a combined basis and for periods subsequent to October 29, 2018 are presented on a consolidated basis (collectively, the historical financial data for all periods presented are referred to as “Consolidated and Combined Financial Data”). The selected historical Consolidated and Combined Financial Data presented below should be read in conjunction with Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and our historical Consolidated and Combined Financial Statements and the accompanying notes thereto included elsewhere in this Annual Report on Form 10-K. In addition, for periods prior to our Spin-Off, our historical consolidated and combined financial information does not reflect changes that we have experienced as a result of our separation from Honeywell, including changes in the financing, operations, cost structure and personnel needs of our business. The financial information included herein may not necessarily reflect our financial position, results of operations and cash flows in the future or what our financial position, results of operations and cash flows would have been had we been an independent, publicly traded company during the periods presented. Further, the historical consolidated and combined financial information includes allocations of certain Honeywell corporate expenses, as described in Note 5. Related Party Transactions with Honeywell of Notes to Consolidated and Combined Financial Statements. We believe the assumptions and methodologies underlying the allocation of these expenses are reasonable. However, such expenses may not be indicative of the actual level of expenses that we would have incurred if we had operated as an independent, publicly traded company or of the costs expected to be incurred in the future. 2020 Years Ended December 31, 2017 2018 2019 (In millions except share and per share data) 2016 Selected Statements of Operations Information: Net revenue................................................................ $ Operating profit ......................................................... Net income (loss) (1) ............................................. Selected Balance Sheets Information at Year- End: Total assets ................................................................ $ Long-term obligations ............................................... Total liabilities........................................................... Total equity................................................................ Earnings (Loss) Per Common Share: (1) Basic .......................................................................... $ Diluted ....................................................................... Weighted Average Common Shares (in thousands): (2) 5,071 $ 311 37 4,988 $ 258 36 4,827 493 405 5,610 $ 2,079 3,617 1,993 5,128 $ 2,032 3,526 1,602 4,972 1,950 3,439 1,533 $ $ $ 4,519 445 (394) 4,455 495 177 $ 4,473 723 1,870 2,603 4,294 338 1,420 2,874 0.30 $ 0.29 0.29 $ 0.29 $ 3.31 3.30 (3.22) $ (3.22) 1.44 1.44 Basic .......................................................................... 125,348 122,722 122,499 Diluted ....................................................................... 126,324 122,238 122,624 122,499 122,499 122,499 122,499 1) Net income (loss) attributable to Resideo and Earnings (Loss) Per Common Share for 2018 and 2017 were impacted by U.S. Tax Reform. See Note 9. Income Taxes of Notes to Consolidated and Combined Financial Statements for further details regarding the 2018 impact. In 2017, the Company reasonably estimated certain effects of the U.S. Tax Reform and, therefore, recorded provisional amounts, including the deemed repatriation transition tax and withholding taxes on undistributed earnings. 2) On October 29, 2018, the date of consummation of the Spin-Off, 122,499 shares of our Common Stock were distributed to Honeywell stockholders of record as of October 16, 2018. Basic and Diluted Earnings (Loss) Per Common Share for all periods prior to the Spin-Off reflect the number of distributed shares, or 122,499 shares. For the 2018, 2017 and 2016 year to date calculations, these shares are treated as issued and outstanding from January 1, 2016 for purposes of calculating historical basic earnings per share. No dividends have been paid from October 29, 2018 through December 31, 2020. 23 RESIDEO TECHNOLOGIES, INC. Item 7. 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 operations and financial condition of Resideo Technologies, Inc. and its consolidated subsidiaries (“Resideo” or “the Company”, “we”, “us” or “our”) for the three years ended December 31, 2020 and should be read in conjunction with the Consolidated and Combined Financial Statements and the notes thereto contained elsewhere in this Form 10-K. 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. We are a leader in the home heating, ventilation and air conditioning controls and security markets. We have a global footprint serving commercial and residential end-markets. We manage our business operations through two segments, Products & Solutions and ADI Global Distribution. Our Products & Solutions segment consists of comfort, security, residential thermal (“RTS”) products and solutions. Our offerings include temperature and humidity control, thermal and combustion solutions, water and air solutions, as well as security panels, sensors, peripherals, wire and cable, communications devices, video cameras, awareness solutions, cloud infrastructure, installation and maintenance tools and related software. Our ADI Global Distribution business is the leading wholesale distributor of low-voltage security products including intrusion, access control and video products and participates significantly in the broader related markets of smart home, fire, power, audio, ProAV, networking, communications, wire and cable, enterprise connectivity, and structured wiring products. The Products & Solutions segment, consistent with our industry, has a higher gross and operating profit margin profile in comparison to the ADI Global Distribution segment. During the fourth quarter of 2020, we made a change to our reportable segments. Previously we allocated corporate costs to the Products & Solutions segment as well as the ADI Global Distribution segment. We now report corporate costs separately, as Corporate, from the two operating segments. In addition, during the fourth quarter of 2020, our Chief Operating Decision Maker moved towards making financial decisions and allocating resources based on Operating profit, rather than Segment Adjusted EBITDA. These changes were designed to better align accountability and authority, give a clearer view into the operational performance of the two segments and increase accountability for management of corporate spending. Our financial performance is influenced by several macro factors such as repair and remodeling activity, residential and non-residential construction, employment rates, and overall macro environment. The global outbreak of a novel coronavirus disease (“COVID-19”) created economic disruption. Starting at the end of the first quarter and throughout the second quarter, we experienced constrained supply and slowed customer demand, as well as temporary closures of several of our ADI Global Distribution branches, that adversely impacted business, results of operations, and overall financial performance. Although there remains uncertainty as to the continuing implications of COVID-19, during the second half of the year customer demand improved and ongoing cost actions and transformation efforts contributed to the improvements in the Company’s operations and overall financial performance. During 2020, the Products & Solutions segment revenue declined 2% compared to 2019, driven by softness in Comfort and RTS product lines offset by strength in the Security business. Operating profit was positively impacted by cost savings from transformation programs, sourcing productivity, lower charges related to obsolete and surplus inventory, and other cost reduction efforts, offset by lower revenue volumes, unfavorable sales mix, investments to support new product launches, and labor and material inflation. Our ADI Global Distribution business revenue increased 5% compared to 2019. Throughout 2020, the business continued its strong performance, achieving solid growth in US, including the impact from the 2020 Herman ProAV acquisition, as well as EMEA, and expansion in top product lines. ADI Global Distribution accelerated the adoption of digital tools, which is reflected in strong e-commerce growth. Operating profit was negatively impacted by unfavorable sales mix, commercial investments, acquisition related costs, and other cost inflation of $34 million, partially offset by transformation program cost savings, other expense productivity and cost reduction programs totaling $18 million. 24 RESIDEO TECHNOLOGIES, INC. Current Period Highlights Net revenues increased $83 million in 2020 compared to 2019, primarily due to increased pricing on certain products and acquisitions, partially offset by volume. Gross profit as a percent of net revenues was consistent at 26%. The primary drivers to the flat gross profit percentage were a 100 basis point (“bps”) negative impact from unfavorable sales mix changes offset by 100 bps positive impact from transformation program cost savings. Net income for 2020 was $37 million compared to $36 million for 2019. Selling, general and administrative expenses decreased by $17 million in 2020 compared to 2019. The decrease was driven by transformation program cost savings, decrease in Spin-Off related expenses, and other cost reductions totaling $150 million. These decreases were partially offset by transformation program expenses and related restructuring expenses, labor and other cost inflation, commercial investments, investments to support new product launches, the expense impact of acquisitions, and labor and other expense inflation totaling $133 million. We ended 2020 with $517 million in cash and cash equivalents. Net cash provided by operating activities was $244 million for the year. At December 31, 2020, accounts receivable were $863 million and inventories were $672 million. Recent Developments COVID-19 Pandemic The World Health Organization (“WHO”) declared COVID-19 a pandemic in March 2020. The broader implications of COVID-19 on our results of operations and overall financial performance remain uncertain. Starting at the end of the first quarter of 2020 and throughout the second quarter, we experienced constrained supply and slowed customer demand, as well as temporary closures of several of our ADI Global Distribution branches, that adversely impacted business, results of operations and overall financial performance. During the second half of 2020 customer demand improved and on-going cost actions and transformation efforts contributed to improvements in the Company’s results of operations and overall financial performance. As there remains uncertainty around the impacts of the COVID-19 pandemic, the Company addresses and evaluates the impacts frequently. See “Item 1A. Risk Factors” of this Form 10-K for further discussion of the possible impact of the COVID-19 pandemic on our business. lockdown mandates or recommendations, under which we have U.S. and international government responses to the COVID-19 outbreak have included “shelter in place,” “stay at home” and similar types of orders. These orders exempt certain products and services needed to maintain continuity of operations of critical infrastructure sectors as determined by the U.S. federal government and certain other countries globally. Although certain of the Company’s operations are currently considered essential and exempt in the United States, Canada and certain other countries globally, there remain certain jurisdictions where there have been and may continue to be restrictions on manufacturing or operations or other temporarily closed certain government manufacturing and sales facilities, and restricted operations in others, including manufacturing in Mexico and restricted operations in certain ADI sales branches, although these facilities have since reopened or remained opened with restricted sales activities. If any of the applicable exemptions are curtailed or revoked in the future, that could adversely impact our business, operating results and financial condition. Furthermore, to the extent these exemptions do not extend to our key suppliers and customers, this could also adversely impact our business, operating results and financial condition. We have also implemented work-from-home policies for a significant percentage of our employees, which could negatively impact productivity, disrupt conduct of our business in the ordinary course and delay our production timelines. Due to the significant remote workforce populations, we may also face informational technology infrastructure and connectivity issues from the vendors that we rely on for certain information technologies to administer, store and support the Company’s multiple business activities. Finally, we are incurring increased costs associated with cleaning and other employee safety measures. Our visibility toward future performance is more limited than is typical due to the uncertainty surrounding the duration and ultimate impact of COVID-19 and the mitigation measures that are implemented by governmental authorities. We also expect business conditions to remain challenging. In response to these challenges, we will continue to focus on those factors that we can control: closely managing and controlling our expenses; 25 RESIDEO TECHNOLOGIES, INC. aligning our production schedules with demand in a proactive manner as there are changes in market conditions to minimize our cash operating costs; and pursuing further improvements in the productivity and effectiveness of our manufacturing, selling and administrative activities. 2020 Public Offering of Common Stock On November 17, 2020, we entered into an underwriting agreement (the “Underwriting Agreement”) which provided for the offer and sale of 17,000,000 shares of common stock at the public offering price of $15.00 per share (the “Offering”). The Offering closed on November 20, 2020. On December 14, 2020 the closing of the exercise of the underwriters’ option to purchase an additional 2,550,000 shares of common stock of the Offering price of $15.00 per share as allowed in the Underwriting Agreement. Net proceeds received were approximately $279 million. Amended and Restated Credit Facilities On February 12, 2021, we entered into an amended and restated credit agreement (the “A&R Credit Agreement”). The A&R Credit Agreement provides for (i) a seven-year senior secured term B loan facility in an aggregate principal amount of $950 million (the “A&R Term B Facility”) and (ii) a five-year senior secured revolving credit facility in an aggregate principal amount of $500 million (the “A&R Revolving Credit Facility” and, together with the Term Loan Facilities, the “A&R Senior Credit Facilities”). Basis of Presentation Prior to becoming an independent publicly traded company (the “Spin-Off”) on October 29, 2018, our historical financial statements were prepared on a stand-alone combined basis and were derived from the consolidated financial statements and accounting records of Honeywell International Inc. (“Honeywell”). Accordingly, for periods prior to October 29, 2018, our financial statements are presented on a combined basis and for the periods subsequent to October 29, 2018 are presented on a consolidated basis (collectively, the historical financial statements for all periods presented are referred to as “Consolidated and Combined Financial Statements”). The Consolidated and Combined Financial Statements have been prepared in accordance with U.S. GAAP. The historical combined financial information prior to the Spin-Off may not be indicative of our future performance and does not necessarily reflect what our consolidated and combined results of operations, financial condition and cash flows would have been had we operated as a separate, publicly traded company during the periods presented, particularly because of changes that we experienced as a result of our separation from Honeywell, including changes in the financing, cash management, operations, cost structure, and personnel needs of our Company. The combined financial statements prior to the Spin-Off include certain assets and liabilities that were held at the Honeywell corporate level but were specifically identifiable or otherwise attributable to us. Additionally, Honeywell historically provided certain services, such as legal, accounting, information technology, human resources and other infrastructure support, on our behalf. The costs of these services were allocated to us on the basis of the proportion of net revenue. Actual costs that would have been incurred if we had been a stand-alone company for the entire period being presented would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. Both we and Honeywell consider the basis on which the expenses were allocated during the period before the Spin-Off to be a reasonable reflection of the utilization of services provided to or the benefits received by us during the periods presented. Since the completion of the Spin-Off, we have incurred expenditures consisting of employee-related costs, costs to start up certain stand-alone functions and information technology systems and other one-time transaction related costs. Recurring stand-alone costs include establishing the internal audit, treasury, investor relations, tax and corporate secretary functions as well as the annual expenses associated with running an independent publicly traded company including listing fees, compensation of non-employee directors, related board of director fees and other fees and expenses related to insurance, legal and external audit. Prior to Spin-Off, our environmental expenses for specified Honeywell properties contaminated through historical business operations (“Honeywell Sites”), now subject to the Reimbursement Agreement, were reported within other expense, net in our Consolidated and Combined Statements of Operations, which reflect an estimated liability for resolution of pending and future environmental-related liabilities. Prior to the Spin-Off, this estimated 26 RESIDEO TECHNOLOGIES, INC. liability was calculated as if we were responsible for 100% of the environmental-liability payments associated with certain sites. See Environmental Matters and Reimbursement Agreement sections of Note 19. Commitments and Contingencies of Notes to Consolidated and Combined Financial Statements for additional information. Reclassification On January 1, 2020, we changed our classification of research and development expenses from Cost of goods sold to Selling, general and administrative expenses, such that research and development expenses are excluded from the calculation of Gross profit. This change had no impact on Net income (loss) and earnings (loss) per share or the Consolidated Balance Sheet, Consolidated and Combined Statements of Cash Flow or Equity. The Company determined the impact on previously issued consolidated and combined annual and interim financial statements was not material. The impact for the years ended December 31, 2019 and 2018, was a decrease in Cost of goods sold and an increase in Gross profit and in Selling, general and administrative expenses of $87 million and $59 million, respectively. The impact of the reclassification for the year ended December 31, 2019 is also reflected in Note 7. Restructuring Charges of Notes to Consolidated and Combined Financial Statements. In addition, the prior year segment information was recast to present Corporate separately as well as present Operating profit which replaces Segment Adjusted EBITDA. See Note 21. Segment Financial Data of Notes to Consolidated and Combined Financial Statements for additional information. Certain reclassifications have been made to prior period financial statements to conform to the classification adopted in the current period. Components of Operating Results Net Revenue We manage our global business operations through two reportable segments, Products & Solutions and ADI Global Distribution: Products & Solutions: We generate the majority of our Products & Solutions net revenue primarily from residential end-markets. Our Products & Solutions segment includes traditional products, as well as connected products, which we define as any device with the capability to be monitored or controlled from a remote location by an end-user or service provider. Our products are sold through a network of HVAC, plumbing, security, and electrical distributors including our ADI Global Distribution business, OEMs, and service providers such as HVAC contractors, security dealers and plumbers. We also sell some products via retail and online channels. ADI Global Distribution: We generate revenue through the distribution of low-voltage electronic and security products, as well as smart home, fire, power, audio and ProAV, networking, communications, wire and cable, enterprise connectivity, and structured wiring products that are delivered through a comprehensive network of professional contractors, distributors and OEMs, as well as major retailers and online merchants. In addition to our own security products, ADI Global Distribution distributes products from industry-leading manufacturers, and also carries a line of private label products. We sell these products to contractors that service non-residential and residential end-users. 14% of ADI Global Distribution’s net revenue is supplied by our Products & Solutions Segment. Management estimates that in 2020 approximately two-thirds of ADI Global Distribution’s net revenue was attributed to non-residential end markets and one-third to residential end markets. Cost of Goods Sold Products & Solutions: Cost of goods sold includes costs associated with raw materials, assembly, shipping and handling of those products, costs of personnel-related expenses, including pension benefits, and equipment associated with manufacturing support, logistics and quality assurance, non-research and development engineering costs, and costs of certain intangible assets. ADI Global Distribution: Cost of goods sold consists primarily of inventory-related costs and includes labor and personnel-related expenses. 27 RESIDEO TECHNOLOGIES, INC. Selling, General and Administrative Expense Selling, general and administrative expense includes trademark royalty expenses, sales incentives and commissions, professional fees, legal fees, promotional and advertising expenses, personnel-related expenses, including stock compensation expense and pension benefits, and research and development expenses. In addition, prior to the Spin-Off, our selling, general and administrative expense included an allocated portion of general corporate expenses. Other Expense, Net Other expense, net consists primarily of Reimbursement Agreement expenses (gains) for certain environmental claims related to approximately 230 sites or groups of sites that are undergoing environmental remediation under U.S. federal or state law and agency oversight for contamination associated with Honeywell historical business operations. Prior to the Spin-Off, other expense, net included the environmental expenses related to these same sites. For further information see Note 19. Commitments and Contingencies of Notes to Consolidated and Combined Financial Statements for discussion of environmental and the Reimbursement Agreement. Other expense, net also includes foreign exchange gains and losses. Interest Expense Interest expense consists of interest on our short and long-term obligations, including our senior notes, term credit facility, and revolving credit facility. Interest expense on our obligations includes contractual interest, amortization of the debt discount and amortization of deferred financing costs. Tax Expense (Benefit) Provision for income taxes includes both domestic and foreign income taxes at the applicable statutory tax rates adjusted for U.S. taxation of foreign earnings, non-deductible expenses and other permanent differences. 28 RESIDEO TECHNOLOGIES, INC. Results of Operations for the Years Ended December 31, 2020, 2019 and 2018 The following table sets forth our Consolidated and Combined Statements of Operations for the periods presented: Consolidated and Combined Statements of Operations (In millions except share and per share data) Years Ended December 31, 2019 2018 2020 Net revenue....................................................................................... $ Cost of goods sold ............................................................................ Gross profit ....................................................................................... Selling, general and administrative expenses ................................... Operating profit ................................................................................ Other expense, net ............................................................................ Interest expense ................................................................................ Income before taxes.......................................................................... Tax expense (benefit) ....................................................................... Net income........................................................................................ $ Weighted Average Number of Common Shares Outstanding (in thousands) Basic ................................................................................................. Diluted .............................................................................................. Earnings Per Share Basic ................................................................................................. $ Diluted .............................................................................................. $ Net Revenue 5,071 $ 3,758 1,313 1,002 311 147 63 101 64 37 $ 4,988 $ 3,711 1,277 1,019 258 118 69 71 35 36 $ 4,827 3,402 1,425 932 493 369 20 104 (301) 405 125,348 126,324 122,722 123,238 122,499 122,624 0.30 $ 0.29 $ 0.29 $ 0.29 $ 3.31 3.30 Years Ended December 31, 2019 2018 2020 Net revenue ....................................................................................... $ % change compared with prior period .............................................. 5,071 $ 2% 4,988 $ 3% 4,827 Net revenue increased 2% in 2020 compared to 2019, primarily due to increase in pricing on certain products and acquisitions, partially offset by reduced volume. Net revenue increased 3% in 2019 compared to 2018, primarily due to an increase in volume and pricing on certain products, partially offset by foreign exchange translation. Further discussion of net revenue by segment can be found in the Review of Business Segments section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations. Cost of Goods Sold Years Ended December 31, 2019 2018 2020 Cost of goods sold ............................................................................ $ % change compared with prior period.............................................. Gross profit percentage..................................................................... 3,758 $ 1% 26% 3,711 $ 9% 26% 3,402 30% 29 RESIDEO TECHNOLOGIES, INC. 2020 compared with 2019 Cost of goods sold for 2020 was $3,758 million, an increase of $47 million, or 1%, from $3,711 million in 2019. This $47 million increase in cost of goods sold was primarily driven by impact of product expenses related to revenue that was attributable to the operations of the 2020 Herman ProAV acquisition, unfavorable changes in sales mix, and material and labor inflation totaling $137 million. The increased costs were partially offset by the favorable impact of sourcing productivity, transformation programs cost savings, lower charges related to obsolete and surplus inventory, lower spin-related costs, and other cost reductions totaling $90 million. The primary drivers of flat gross profit percentage were a 100 bps negative impact from changes in sales mix, offset by 100 bps favorable impact of transformation programs cost savings. 2019 compared with 2018 Cost of goods sold for 2019 was $3,711 million, an increase of $309 million, or 9%, from $3,402 million in 2018. This $309 million increase in cost of goods sold was primarily driven by higher revenue in the ADI Global Distribution segment, material and labor inflation and increased production costs including charges related to obsolete and surplus inventory, changes in sales mix, increased headquarter allocations in the period prior to the Spin-Off, expenses related to transformation programs and related restructuring costs, and Spin-Off related costs totaling $435 million. The increased costs were partially offset by sourcing productivity, foreign currency translation, lower environmental expense, and savings in other miscellaneous costs of goods sold totaling $126 million. The primary drivers to the decrease in gross profit percentage were a 200 bps impact from changes in sales mix, 100 bps impact from material and labor inflation and fixed production costs, and 100 bps impact from headquarter allocations previously classified in selling, general and administrative expense in the period prior to the Spin-Off. Selling, General and Administrative Expense Years Ended December 31, 2019 2018 2020 Selling, general and administrative expense..................................... $ % of revenue ..................................................................................... 1,002 $ 20% 1,019 $ 20% 932 19% 2020 compared with 2019 Selling, general and administrative expense for 2020 was $1,002 million, a decrease of $17 million, from $1,019 million in 2019. The decrease was driven by transformation programs cost savings, decrease in Spin-Off related expenses, and other cost reductions totaling $150 million. These decreases were partially offset by transformation program expenses and related restructuring costs, commercial investments, investments to support new product launches, and the expense impact of acquisitions totaling $133 million. 2019 compared with 2018 Selling, general and administrative expense for 2019 was $1,019 million, an increase of $87 million from $932 million in 2018. The increase was driven by greater Spin-Off related costs, increased research and development spend, increased royalty fees associated with the Trademark License Agreement, transformation program expenses and related restructuring costs, higher legal expenses, the expense impact of acquisitions, and labor and other expense inflation totaling $175 million. These increases were partially offset by reduced headquarter cost allocations, transformation programs cost savings, foreign currency translation, and miscellaneous cost reductions totaling $88 million. 30 RESIDEO TECHNOLOGIES, INC. Other Expense, Net Years Ended December 31, 2019 2018 2020 Other expense, net ............................................................................. $ 147 $ 118 $ 369 2020 compared with 2019 Other expense, net for 2020 was $147 million, an increase of $29 million from $118 million in 2019. The increase is mainly due to a $38 million increase in expense from the Reimbursement Agreement, and $4 million of increased expense relating to foreign exchange. These increases were offset by $13 million decrease in non- operating pension related expense. 2019 compared with 2018 Other expense, net for 2019 was $118 million, a decrease of $251 million from $369 million in 2018. The decrease is mainly due to lower environmental remediation expense, now subject to and presented as Reimbursement Agreement expense subsequent to the Spin-Off. Tax Expense (Benefit) Tax expense (benefit)........................................................................ $ Effective tax rate ............................................................................... 64 $ 64% $ 35 49% (301) (289)% Years Ended December 31, 2019 2018 2020 2020 compared with 2019 The effective tax rate increase in 2020 compared to 2019 was primarily attributable to the mix of earnings across the jurisdictions in which we operate, changes in estimates related to prior years, and non-deductible expenses. A significant driver of the high tax rate in both 2020 and 2019 is that the Reimbursement Agreement is generally non-deductible for U.S. federal income tax purposes. 2019 compared with 2018 The effective tax rate increase in 2019 compared to 2018 was primarily attributable to tax benefits generated in 2018 related to the internal restructuring of Resideo’s business in advance of the Spin-Off, currency impacts on withholding taxes on undistributed foreign earnings, and adjustments to the provisional tax amount related to U.S. Tax Reform, partially offset by decreases in tax expense related to Global Intangible Low Taxed Income (“GILTI”) and non-deductible expenses. A significant driver of the high tax rate in 2019 is that the Reimbursement Agreement is generally non-deductible for U.S. federal income tax purposes. Review of Business Segments Products & Solutions Total revenue ............................................................. $ Less: Intersegment revenue ....................................... External revenue........................................................ Operating profit ......................................................... $ 2,488 $ 367 2,121 407 $ 2,487 312 2,175 327 $ (2)% 24% $ 2,474 305 2,169 591 0% (45)% 2020 2019 % Change 2018 % Change 31 RESIDEO TECHNOLOGIES, INC. 2020 compared with 2019 Products & Solutions revenue declined 2% in 2020 compared to 2019, driven by softness in Comfort and RTS product lines offset by strength in the Security business. Operating profit increased from $327 million in 2019 to $407 million in 2020, or 24%. Operating profit was positively impacted by cost savings from transformation programs, sourcing productivity, lower charges related to obsolete and surplus inventory and other cost reduction efforts totaling $210 million. These cost reductions offset lower revenue volumes, unfavorable sales mix, investments to support new product launches, and labor and material inflation totaling $130 million. 2019 compared with 2018 Products & Solutions revenue remained flat in 2019 compared to 2018, driven primarily by strength in the Security business, offset by softness in Comfort and RTS product lines. Operating profit declined from $591 million in 2018 to $327 million in 2019, or 45%. Operating profit was negatively impacted by unfavorable sales mix, increased costs related to transformation program expenses and related restructuring expenses and Spin-Off, increased functional expenses previously captured in corporate costs prior to Spin-Off, increased charges related to obsolete and surplus inventory, increased royalty fee paid to Honeywell associated with the Trademark License Agreement, investments to support new product launches, and labor and material inflation totaling $356 million. Negative impacts were partially offset by increased selling prices, sourcing productivity, lower environmental expense, savings from transformation programs, and miscellaneous cost reductions totaling $92 million. ADI Global Distribution External revenue........................................................ $ Operating profit ......................................................... $ 2,950 $ 194 $ 2,813 210 5% $ (8)% $ 2,658 205 6% 2% 2020 2019 % Change 2018 % Change 2020 compared with 2019 ADI Global Distribution revenue increased 5% in 2020 compared to 2019, highlighted by strong growth in the U.S., including the impact from the 2020 Herman ProAV acquisition, as well as EMEA. Operating profit decreased from $210 million in 2019 to $194 million in 2020, or 8%. Operating profit was negatively impacted by commercial investments, unfavorable sales mix, acquisition related costs, and other cost inflation totaling $34 million. Negative impacts were partially offset by transformation program cost savings, other expense productivity and cost reduction programs totaling $18 million. 2019 compared with 2018 ADI Global Distribution revenue increased 6% in 2019 compared to 2018, driven by increased sales volume growth across all regions. Operating profit increased from $205 million in 2018 to $210 million in 2019, or 2%. Operating profit was positively impacted by increased volume, transformation program cost savings, and other expense productivity and cost reduction programs totaling $38 million. Positive impacts were partially offset by increased functional expenses previously captured in corporate costs prior to Spin-Off, commercial investments, increased expenses related to transformation programs, unfavorable changes in foreign exchange rates, and other cost inflation totaling $33 million. Corporate Corporate costs ......................................................... $ (290) $ (279) 4% $ (303) (8)% 2020 2019 % Change 2018 % Change 2020 compared with 2019 Corporate costs for 2020 were $290 million, an increase of $11 million, from $279 million in 2019, or 4%, and were negatively impacted by costs related to transformation programs and related restructuring expenses, 32 RESIDEO TECHNOLOGIES, INC. increased bonus payouts from improved performance of the business, increase in service cost related to pension, and labor and other inflation totaling $59 million. Negative impacts were partially offset by transformation program cost savings, reduced Spin-Off related costs, other expense productivity and cost reduction programs totaling $48 million. 2019 compared with 2018 Corporate costs for 2019 were $279 million, a decrease of $24 million, from $303 million in 2018, or 8%, and were positively impacted by reduced functional expenses previously captured in corporate costs prior to Spin- Off, transformation program cost savings, decreased bonus payouts related to business performance, and other expense productivity and cost reduction programs totaling $74 million. Positive impacts were partially offset by increased Spin-Off related costs, higher legal expenses, increased costs related to transformation programs and related restructuring expenses, increase in service cost related to pension, and labor and other inflation totaling $50 million. Restructuring Charges During 2019, we retained industry-recognized experts in supply chain optimization and organizational excellence to assist in a comprehensive financial and operational review which was focused on product cost and gross margin improvement, and general and administrative expenses simplification. Certain restructuring actions have been implemented under this program as well as previous programs. These restructuring actions generated incremental (net) pre-tax savings of $53 million in 2020. Cash spending related to our restructuring actions was $35 million for the year ended December 31, 2020 and was funded through operating cash flows. Net restructuring and related expenses were $40 million, $37 million and $5 million for December 31, 2020, 2019 and 2018, respectively, primarily related to severance. For further discussion of restructuring activities, refer to Note 7. Restructuring Charges of Notes to Consolidated and Combined Financial Statements. Capital Resources and Liquidity Our liquidity is primarily dependent on our ability to continue to generate positive cash flows from operations. Additional liquidity may also be provided through access to the financial capital markets and a committed global credit facility. The following is a summary of our liquidity position: • As of December 31, 2020, total cash and cash equivalents were $517 million, of which 22% were held by foreign subsidiaries. At December 31, 2020, there were no borrowings and no letters of credit issued under our $350 million Revolving Credit Facility. • Historically, we have delivered positive cash flows from operations. Operating cash flows from continuing operations were $244 million, $23 million and $462 million for the three years ended December 31, 2020, 2019 and 2018, respectively. Liquidity Our future capital requirements will depend on many factors, including the rate of sales growth, market acceptance of our products, the timing and extent of research and development projects, potential acquisitions of companies or technologies and the expansion of our sales and marketing activities. We believe our existing cash, cash equivalents and availability under our credit facilities are sufficient to meet our capital requirements through at least the next 12 months, although we could be required, or could elect, to seek additional funding prior to that time. We may enter into acquisitions or strategic arrangements in the future which also could require us to seek additional equity or debt financing. Credit Agreement On October 25, 2018, we entered into a credit agreement (the “Credit Agreement”), which was subsequently amended on November 26, 2019 (the “Credit Agreement First Amendment”) and on November 16, 2020 (the “Credit Agreement Second Amendment”). The Credit Agreement provides for (i) a seven-year senior 33 RESIDEO TECHNOLOGIES, INC. secured first-lien term B loan facility in an aggregate principal amount of $475 million (the “Term B Facility”)(cid:14) (ii) a five-year senior secured first-lien term A loan facility in an aggregate principal amount of $350 million (the “Term A Facility” and, together with the Term B Facility, the “Term Loans or “Term Loan Facilities”)(cid:14) and (iii) a five-year senior secured first-lien revolving credit facility in an aggregate principal amount of $350 million (the “Revolving Credit Facility” and, together with the Term Loan Facilities, the “Senior Credit Facilities”). As of December 31, 2020, there were no borrowings and no Letters of Credit outstanding under the Revolving Credit Facility. The Senior Credit Facilities were subject to an interest rate and interest period which we will elect. As amended, the margin was 2.25% per annum (for LIBOR loans) and 1.25% per annum (for alternate base rate “ABR” loans) in respect of the Term B Loan Facility, and based on our leverage ratio, from 2.25% per annum to 1.75% per annum (for LIBOR loans) and 1.25% to 0.75% per annum (for ABR loans) for the Term A Loan Facility and the Revolving Credit Facility. The Credit Agreement contains certain affirmative and negative covenants customary for financings of this type that, among other things, limit our and our subsidiaries’ ability to incur additional indebtedness or liens, to dispose of assets, to make certain fundamental changes, enter into restrictive agreements, to make certain investments, loans, advances, guarantees and acquisitions, to prepay certain indebtedness and to pay dividends, to make other distributions or redemptions/repurchases, in respect of our and our subsidiaries’ equity interests, to engage in transactions with affiliates or amend certain material documents. In addition, the Credit Agreement also contains financial maintenance and coverage covenants. The Credit Agreement contains customary events of default, including with respect to a failure to make payments under the Senior Credit Facilities, cross-default, certain bankruptcy and insolvency events and customary change of control events. All obligations under the Senior Credit Facilities are or will be unconditionally guaranteed jointly and severally, by: (a) our Company and (b) substantially all of the direct and indirect wholly owned subsidiaries of our Company that are organized under the laws of the United States, any state thereof or the District of Columbia (collectively, the “Guarantors”). Subject to certain limitations, the Senior Credit Facilities are or will be secured on a first priority basis by: (x) a perfected security interest in the equity interests of each direct subsidiary of the Company and each Guarantor under the Senior Credit Facilities (subject to certain customary exceptions) and (y) perfected, security interests in, and mortgages on, substantially all tangible and intangible personal property and material real property of the Company and each of the Guarantors under the Senior Credit Facilities, subject, in each case, to certain exceptions. On February 12, 2021, we entered into an amended and restated credit agreement (the “A&R Credit Agreement”) which replaced the Senior Secured Credit Facilities and refinanced all amounts that were outstanding under these facilities. Amended and Restated Credit Agreement On February 12, 2021, we entered into an amended and restated credit agreement (the “A&R Credit Agreement”). The A&R Credit Agreement provides for (i) a seven-year senior secured term B loan facility in an aggregate principal amount of $950 million (the “A&R Term B Facility”) and (ii) a five-year senior secured revolving credit facility in an aggregate principal amount of $500 million (the “A&R Revolving Credit Facility” and, together with the Term Loan Facilities, the “A&R Senior Credit Facilities”). We are obligated to make quarterly principal payments of approximately $2.4 million throughout the term of the A&R Term B Facility according to the amortization provisions in the A&R Credit Agreement. In addition to paying interest on outstanding borrowings under the A&R Revolving Credit Facility, we are required to pay a quarterly commitment fee based on the unused portion of the A&R Revolving Credit Facility. Borrowings under the A&R Credit Agreement can be prepaid at our option without premium or penalty other than a 1.00% prepayment premium that may be payable in connection with certain repricing transactions within a certain period of time after the closing date. Up to $75 million may be utilized under the A&R Revolving Credit Facility for the issuance of letters of credit to the Company or any of our subsidiaries. Letters of credit are available for issuance under the A&R Credit Agreement on terms and conditions customary for financings of this kind, which issuances will reduce the available funds under the A&R Revolving Credit Facility. 34 RESIDEO TECHNOLOGIES, INC. The A&R Senior Credit Facilities are subject to an interest rate and interest period which we will elect. If we choose to make a base rate borrowing on an overnight basis, the interest rate will be based on the highest of (1) the rate of interest last quoted by The Wall Street Journal as the “prime rate” in the United States, (2) the greater of the federal funds effective rate and the overnight bank funding rate, plus 0.5% and (3) the one month adjusted LIBOR rate, plus 1.00% per annum. For the A&R Term Loan B, the applicable LIBOR rate will not be less than 0.50% per annum. The applicable margin for the A&R Term B Facility is 2.25% per annum (for LIBOR loans) and 1.25% per annum (for base rate loans). The applicable margin for the A&R Revolving Credit Facility varies from 2.25% per annum to 1.75% per annum (for LIBOR loans) and 1.25% to 0.75% per annum (for base rate loans) based on our leverage ratio. Accordingly, the interest rates for the A&R Senior Credit Facilities will fluctuate during the term of the A&R Credit Agreement based on changes in the base rate, LIBOR rate or future changes in our leverage ratio. Interest payments with respect to the borrowings are required either on a quarterly basis (for base rate loans) or at the end of each interest period (for LIBOR loans) or, if the duration of the applicable interest period exceeds three months, then every three months. The A&R Credit Agreement contains certain affirmative and negative covenants customary for financings of this type that, among other things, limit our and our subsidiaries’ ability to incur additional indebtedness or liens, to dispose of assets, to make certain fundamental changes, enter into restrictive agreements, to make certain investments, loans, advances, guarantees and acquisitions, to prepay certain indebtedness and to pay dividends, to make other distributions or redemptions/repurchases, in respect of our and our subsidiaries’ equity interests, to engage in transactions with affiliates or amend certain material documents. In addition, the A&R Revolving Credit Facility also contains certain financial maintenance covenants. The A&R Credit Agreement contains customary events of default, including with respect to a failure to make payments under the A&R Senior Credit Facilities, cross-default, certain bankruptcy and insolvency events and customary change of control events. All obligations under the A&R Senior Credit Facilities are or will be unconditionally guaranteed jointly and severally, by: (a) our Company and (b) substantially all of the direct and indirect wholly owned subsidiaries of our Company that are organized under the laws of the United States, any state thereof or the District of Columbia (collectively, the “Guarantors”). The Guarantors entered into a guarantee under the A&R Credit Agreement concurrently with the effectiveness of the A&R Credit Agreement. Subject to certain limitations, the A&R Senior Credit Facilities are or will be secured on a first priority basis by: (x) a perfected security interest in the equity interests of each direct subsidiary of the Company and each Guarantor under the A&R Senior Credit Facilities (subject to certain customary exceptions) and (y) perfected, security interests in, and mortgages on, substantially all tangible and intangible personal property and material real property of the Company and each of the Guarantors under the A&R Senior Credit Facilities, subject, in each case, to certain exceptions. The Company and the Guarantors entered into security documents concurrently with effectiveness of the A&R Credit Agreement. Senior Notes In October of 2018, we issued $400 million in principal amount of 6.125% senior unsecured notes due in 2026 (the “Senior Notes”). The Senior Notes guarantees are unsecured senior debt obligations of the Senior Notes guarantors. The net proceeds from the borrowings under the Senior Credit Facilities and the offering of the Senior Notes were used as part of financing the Spin-Off. Interest expense presented in the Statements of Operations is from the Senior Notes and Senior Credit Facilities, which includes the amortization of debt issuance cost and debt discounts. On February 16, 2021 we redeemed $140 million in principal amount of the Senior Notes at a redemption price of 106.125% of par plus accrued interest. Reimbursement Agreement In connection with the Spin-Off, we entered into the Reimbursement Agreement, pursuant to which we have an obligation to make cash payments to Honeywell in amounts equal to 90% of payments for certain Honeywell environmental-liability payments, which include amounts billed, less 90% of Honeywell’s net insurance receipts relating to such liabilities, and less 90% of the net proceeds received by Honeywell in connection with (i) affirmative claims relating to such liabilities, (ii) contributions by other parties relating to such liabilities and (iii) certain property sales. The amount payable by us in respect of such liabilities arising in any given year is subject to a 35 RESIDEO TECHNOLOGIES, INC. cap of $140 million. During 2020, we entered into three amendments with Honeywell. See Note 19. Commitments and Contingencies of Notes to Consolidated and Combined Financial Statements of this Form 10-K for a further discussion of the Reimbursement Agreement and amendments. The amount paid during the year ended December 31, 2020 was $140 million. On February 12, 2021, we entered into a fourth amendment with Honeywell. See Note 24. Subsequent events of Notes to Consolidated and Combined Financial Statements of this Form 10-K for a further discussion of this amendment. In addition to the sites under the Reimbursement Agreement, we have environmental expense related to sites owned and operated by Resideo (“Resideo Sites”). Prior to the Spin-Off, both of these expenses were combined and were presented as environmental expense. Expenses for environmental matters deemed probable and reasonably estimable were $323 million for the period from January 1, 2018 through October 29, 2018. Subsequent to the Spin-Off, environmental expense was $1 million for 2020, $2 million for 2019, and $17 million for the period October 30, 2018 through December 31, 2018 and Reimbursement Agreement expense was $108 million for 2019 and $49 million for the period October 30, 2018 through December 31, 2018. See Note 19. Commitments and Contingencies of Notes to Consolidated and Combined Financial Statements for further discussion. Cash Flow Summary for the Years Ended December 31, 2020, 2019 and 2018 Our cash flows from operating, investing and financing activities for the years ended December 31, 2020, 2019 and 2018, as reflected in the audited Consolidated and Combined Financial Statements are summarized as follows: Years Ended December 31, 2019 2018 2020 Cash provided by (used for): Operating activities ...................................................................... $ Investing activities ....................................................................... Financing activities ...................................................................... Effect of exchange rate changes on cash ..................................... Net increase (decrease) in cash and cash equivalents ....................... $ 244 $ (103) 253 1 395 $ 23 $ (112) (53) (1) (143) $ 462 (74) (167) (12) 209 2020 compared with 2019 Cash provided by operating activities for 2020 increased by $221 million, due to higher operating profit and lower cash taxes paid. Cash used for investing activities for 2020 decreased by $9 million, primarily due to a decrease of $25 million cash paid for capital expenditures, partially offset by an increase of $18 million cash paid for acquisitions and miscellaneous other items. Cash provided by financing activities for 2020 increased by $306 million. The increase was primarily due to $279 million of net proceeds from the issuance of common stock, a decrease in cash used of $22 million from non-operating obligations with Honeywell and other miscellaneous items. A detailed discussion of the prior year 2019 to 2018 year-over-year changes are not included herein and can be found in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section in the 2019 Annual Report on Form 10-K filed February 27, 2020. 36 RESIDEO TECHNOLOGIES, INC. Contractual Obligations and Probable Liability Payments Following is a summary of our significant contractual obligations and probable liability payments at December 31, 2020: Total (1) Long-term debt (2) ................................................. $ Interest payments on long-term debt (3).................... Reimbursement Agreement payments (4) ................. Estimated environmental liability payments (5)......... Minimum operating lease payments .......................... Purchase obligations (6).......................................... $ 1,180 $ 221 591 22 165 254 2,433 $ 2021 Payments by Period 2022- 2023 (In millions) 289 $ 83 280 3 65 26 746 $ 40 $ 44 140 2 40 225 491 $ 2024- 2025 Thereafter 451 $ 70 171 3 30 3 728 $ 400 24 - 14 30 - 468 1) The table excludes tax liability payments, including those for unrecognized tax benefits. See Note 9. Income Taxes of Notes to Consolidated and Combined Financial Statements. 3) 4) 2) Assumes all long-term debt is outstanding until scheduled maturity. Subsequent to December 31, 2020, the Company entered into the A&R Credit Agreement which modified the contractual obligations related to the Company’s long-term debt as described the Amended and Restated Credit Agreement section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations. Interest payments are estimated based on the interest rate applicable as of December 31, 2020. In connection with the Spin-Off, we entered into the Reimbursement Agreement with Honeywell. As of December 31, 2020, $591 million was deemed probable and reasonably estimable, however, it is possible we could pay $140 million per year (exclusive of any late payment fees up to 5% per annum) until the earlier of: (1) December 31, 2043; or (2) December 31 of the third consecutive year during which the annual reimbursement obligation (including in respect of deferred payment amounts) has been less than $25 million. For further discussion on the Reimbursement Agreement refer to Note 19. Commitments and Contingencies of Notes to Consolidated and Combined Financial Statements. 5) Represents estimated environmental liability payments deemed probable and reasonably estimable for sites which we own and are directly responsible for. 6) Purchase obligations are entered into with various vendors in the normal course of business and are consistent with our expected requirements. Capital Expenditures We believe our capital spending in recent years has been sufficient to maintain efficient production capacity, to implement important product and process redesigns and to expand capacity to meet increased demand. Productivity projects have freed up capacity in our manufacturing facilities and are expected to continue to do so. We expect to continue investing to expand and modernize our existing facilities and to create capacity for new product development. Off-Balance Sheet Arrangements We do not engage in any off-balance sheet financial arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, net revenue or expenses, results of operations, liquidity, capital expenditures or capital resources. 37 RESIDEO TECHNOLOGIES, INC. Critical Accounting Policies The preparation of our Consolidated and Combined Financial Statements in accordance with accounting principles generally accepted in the United States of America is based on the selection and application of accounting policies that require us to make significant estimates and assumptions about the effects of matters that are inherently uncertain. We consider the accounting policies discussed below to be critical to the understanding of our Consolidated and Combined Financial Statements. Actual results could differ from our estimates and assumptions, and any such differences could be material to our Consolidated and Combined Financial Statements. As there remains uncertainty around the impacts of the COVID-19 pandemic, we intend to address and evaluate the impacts frequently. See Note 2. Summary of Significant Accounting Policies of Notes to Consolidated and Combined Financial Statements of this Form 10-K for a discussion of the accounting policies most likely affected by the COVID-19 pandemic. Revenue — Product and service revenues are recognized when or as the Company transfers control of the promised products or services to the customer, in an amount the Company expects to receive in exchange for transferring goods or providing services. Each distinct performance obligation within a contract is identified, and a contract’s transaction price is then allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. In the sale of products, the terms of a contract or the historical business practice can give rise to variable consideration due to, but not limited to, discounts, rebates, and the right of return. The Company estimates variable consideration at the most likely amount that will be received from customers and reduces revenues recognized accordingly. The Company includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to the Company. Reimbursement Agreement — In connection with the Spin-Off, we entered into the Reimbursement Agreement further described in the Capital Resources and Liquidity section. Through the Reimbursement Agreement, we are subject to a number of environmental claims, remediation and, to the extent arising after the Spin-Off, hazardous exposure or toxic tort claims. We continually assess the likelihood of any adverse judgments or outcomes related to the Reimbursement Agreement, as well as potential amounts or ranges of probable losses, and recognize a liability, if any, for these contingencies based on a thorough analysis of each matter with the assistance of outside legal counsel and Honeywell, and, if applicable, other experts. Such analysis includes making judgments concerning matters such as the costs associated with environmental matters, the outcome of negotiations, the number and cost of pending and future claims related to the sites covered by the Reimbursement Agreement, and the impact of evidentiary requirements. Because most contingencies are resolved over long periods of time, we do not currently possess sufficient information to reasonably estimate the amounts of the Reimbursement Agreement liabilities to be recorded upon future completion of studies, litigations or settlements, and neither the timing nor the amount of the ultimate costs associated with environmental matters can be determined. Expenses related to the indemnification are presented within Other expense, net in the Consolidated and Combined Statements of Operations. See Note 19. Commitments and Contingencies of Notes to Consolidated and Combined Financial Statements for a discussion of management’s judgment applied in the recognition and measurement of our environmental liabilities. Goodwill — We perform goodwill impairment testing annually on the first day of the fourth quarter of each year or more frequently if indicators of potential impairment exist. The goodwill impairment test is performed at the reporting unit level. We have two reporting units, Products & Solutions and ADI Global Distribution. In determining if goodwill is impaired, we compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value provided the loss recognized does not exceed the total amount of goodwill allocated to that reporting unit. For the 2020 annual impairment test, we determined the fair value of each reporting unit using a weighting of fair values derived from the income approach and the market approach. Under the income approach, we calculate the fair value of a reporting unit based on the present value of estimated future cash flows. Cash flow projections are based on management’s estimates of operating results, taking into consideration industry and market conditions. The 38 RESIDEO TECHNOLOGIES, INC. discount rate used is based on the weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the business’s ability to execute on the projected cash flows. The terminal value is estimated using a constant growth method which requires an assumption about the expected long-term growth rate. The estimates are based on historical data and experience, industry projections, economic conditions, and management’s expectations. Under the market approach, we estimate the fair value based on market multiples of cash flow and earnings derived from comparable publicly traded companies with similar operating and investment characteristics as the reporting unit and considering a reasonable control premium. Due to the inherent uncertainty involved in making these estimates, actual results could differ from those estimates. We believe the estimates and assumptions used in the calculations are reasonable. In addition, the extent to which COVID-19 may adversely impact our business depends on future developments, which are uncertain and unpredictable, depending upon the severity and duration of the outbreak, and the effectiveness of actions taken globally to contain or mitigate its effects. Any resulting financial impact cannot be reasonably estimated at this time but may adversely affect our business and financial results. It is likely that into 2021, macroeconomic conditions may have unexpected impacts on our business. If there was an adverse change in facts and circumstances, then an impairment charge may be necessary in the future. Should the fair value of the Company’s reporting units fall below its carrying amount because of reduced operating performance, market declines, changes in the discount rate, or other conditions, charges for impairment may be necessary. The Company monitors its reporting units to determine if there is an indicator of potential impairment. Income Taxes — Our provision for income tax expense is based on our income, the statutory tax rates and other provisions of the tax laws applicable to us in each of the various jurisdictions in which we conduct business. These laws are complex, and their application to our facts is at times open to interpretation. The process of determining our consolidated and combined income tax expense includes significant judgments and estimates, including judgments regarding the interpretation of those laws. Our provision for income taxes and our deferred tax assets and liabilities incorporate those judgments and estimates and reflect management’s best estimate of current and future income taxes to be paid. Deferred tax assets and liabilities relate to temporary differences between the financial reporting and income tax bases of our assets and liabilities, as well as the impact of tax loss carryforwards or carrybacks. Deferred income tax expense or benefit represents the expected increase or decrease to future tax payments as these temporary differences reverse over time. Deferred tax assets are specific to the jurisdiction in which they arise and are recognized subject to management’s judgment that realization of those assets is “more likely than not.” In making decisions regarding our ability to realize tax assets, we evaluate all positive and negative evidence, including projected future taxable income, taxable income in carryback periods, expected reversal of deferred tax liabilities, and the implementation of available tax planning strategies. Significant judgment is required in evaluating tax positions. We establish additional reserves for income taxes when, despite the belief that tax positions are fully supportable, there remain certain positions that do not meet the minimum recognition threshold. The approach for evaluating certain and uncertain tax positions is defined by the authoritative guidance which determines when a tax position is more likely than not to be sustained upon examination by the applicable taxing authority. In the normal course of business, we are examined by various federal, state and foreign tax authorities. We regularly assess the potential outcomes of these examinations and any future examinations for the current or prior years in determining the adequacy of our provision for income taxes. We continually assess the likelihood and amount of potential adjustments and adjust the income tax provision, the current tax liability and deferred taxes in the period in which the facts that give rise to a change in estimate become known. 39 RESIDEO TECHNOLOGIES, INC. Pension — We have defined benefit plans covering certain employees. The benefits are accrued over the employees’ service periods. We use actuarial methods and assumptions in the valuation of defined benefit obligations and the determination of net periodic pension income or expense. Differences between actual and expected results or changes in the value of defined benefit obligations and plan assets, if any, are not recognized in earnings as they occur but rather systematically over subsequent periods when net actuarial gains or losses are in excess of 10% of the greater of the fair value of plan assets or the plan’s projected benefit obligation. A 25 basis point increase in the discount rate would result in a decrease of approximately $5.8 million to the net periodic benefit cost for 2020, while a 25 basis point decrease in the discount rate would result in an increase of approximately $12.7 million. The resulting impact on the pension benefit obligation would be a decrease of $21.6 million and an increase of $23.9 million, respectively. Other Matters Litigation, Environmental Matters and the Reimbursement Agreement See Note 19. Commitments and Contingencies of Notes to Consolidated and Combined Financial Statements for a discussion of environmental and other litigation matters. Recent Accounting Pronouncements See Note 2. Summary of Significant Accounting Policies of Notes to Consolidated and Combined Financial Statements for a discussion of recent accounting pronouncements. Cautionary Statement Concerning Forward-Looking Statements This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts, but rather are based on current expectations, estimates, assumptions and projections about our industries and our business and financial results. Forward-looking statements often include words such as “anticipates,” “estimates,” “expects,” “projects,” “forecasts,” “intends,” “plans,” “continues,” “believes,” “may,” “will,” “goals” and words and terms of similar substance in connection with discussions of future operating or financial performance. As with any projection or forecast, forward-looking statements are inherently susceptible to uncertainty and changes in circumstances. Our actual results may vary materially from those expressed or implied in our forward-looking statements. Accordingly, undue reliance should not be placed on any forward-looking statement made by us or on our behalf. Although we believe that the forward-looking statements contained in this Form 10-K are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those in such forward-looking statements, including but not limited to: • • • • • • • • • • • • competition from other companies in our markets and segments, as well as in new markets and emerging markets; our ability to successfully develop new technologies and products and develop and protect the intellectual property related to the same and to defend against IP threats of others; our inability to maintain intellectual property agreements necessary to our business; our ability to recruit and retain qualified personnel(cid:14) our ability to retain or expand relationships with significant customers; changes in prevailing global and regional economic conditions(cid:14) the impact of pandemics, epidemics, natural disasters and other public health emergencies, such as COVID- 19; fluctuation in financial results due to the seasonal nature of portions of our business; failure to achieve and maintain a high level of product and service quality(cid:14) inability to obtain necessary product components, production equipment or replacement parts; dependence upon information technology infrastructure having adequate cyber-security functionality(cid:14) labor disputes, work stoppages, other disruptions, or the need to relocate any of our facilities(cid:14) 40 RESIDEO TECHNOLOGIES, INC. • • • • • • • • • • • • • economic, political, regulatory, foreign exchange and other risks of international operations, including the impact of tariffs; changes in legislation or government regulations or policies(cid:14) the significant failure or inability to comply with the specifications and manufacturing requirements of our original equipment manufacturers (“OEMs”) customers; the failure to increase productivity through sustainable operational improvements(cid:14) the operational constraints and financial distress of third parties(cid:14) our ability to borrow funds and access capital markets(cid:14) the amount of our obligations and nature of our contractual restrictions pursuant to, and disputes that have or may hereafter arise under, the Reimbursement Agreement and the other agreements we entered into with Honeywell in connection with the Spin-Off; our reliance on Honeywell for the Honeywell Home trademark; potential material environmental liabilities(cid:14) potential material costs as a result of warranty claims, including product recalls, and product liability actions that may be brought against us(cid:14) potential material litigation matters; including the shareholder litigation described in this Form 10-K(cid:14) unforeseen U.S. federal income tax and foreign tax liabilities(cid:14) and certain factors discussed elsewhere in this Form 10-K. Any forward-looking statements made by us in this Form 10-K speak only as of the date on which they are made. We are under no obligation to and expressly disclaim any obligation to, update or alter our forward-looking statements, whether as a result of new information, subsequent events or otherwise. 41 RESIDEO TECHNOLOGIES, INC. Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risk from foreign currency exchange rates and interest rates, which could affect operating results, financial position and cash flows. 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, 2020, $780 million of our total debt of $1,180 million carried variable interest rates, including the effect of pay variable interest rate swaps, if any. The fair market values of our fixed-rate financial instruments are sensitive to changes in interest rates. At December 31, 2020, an increase or decrease of 100 basis points on our Term Loans would have approximately an $10 million impact on our annual interest expense on long-term debt. Foreign Currency Exchange Rate Risk We are exposed to market risks from changes in currency exchange rates. While we primarily transact with customers in the U.S. Dollar, we also transact in foreign currencies, primarily including the Euro, British Pound, Indian Rupee, Canadian Dollar and Mexican Peso. These exposures may impact total assets, liabilities, future earnings and/or operating cash flows. Our exposure to market risk for changes in foreign currency exchange rates arises from transactions arising from international trade, foreign currency denominated monetary assets and liabilities, and international financing activities between subsidiaries. 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, 2020, we have no outstanding hedging arrangements. 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. Item 8. Financial Statements and Supplementary Data 42 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Resideo Technologies, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Resideo Technologies, Inc. and subsidiaries (the “Company”) as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated and combined financial statements as of and for the year ended December 31, 2020, of the Company and our report dated February 25, 2021, expressed an unqualified opinion on those consolidated and combined financial statements and included explanatory paragraphs relating to expense allocations for certain corporate functions historically provided by Honeywell International, Inc. and the Company’s adoption of Accounting Standards Update No. 2016-02, Leases (Topic 842). Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP Dallas, Texas February 25, 2021 43 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Resideo Technologies, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Resideo Technologies, Inc. (the “Company”) as of December 31, 2020 and 2019, the related consolidated and combined statements of operations, comprehensive income, cash flow, and equity, for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2021, expressed an unqualified opinion on the Company’s internal control over financial reporting. Emphasis of Matter As described in Note 1 to the financial statements, prior to the Spin-Off, the accompanying financial statements were derived from the separate records maintained by Honeywell International, Inc. (“Honeywell”). The financial statements also include expense allocations for certain corporate functions historically provided by Honeywell. These allocations may not be reflective of the actual expense that would have been incurred had the Company operated as a separate entity apart from Honeywell. A summary of transactions with related parties is included in Note 5 to the financial statements. Change in Accounting Principle As discussed in Note 2 to the financial statements, the Company adopted Accounting Standard Update No. 2016-02, Leases (Topic 842), effective January 1, 2019, and applied the changes prospectively as of the adoption date. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion 44 on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Honeywell Reimbursement Agreement—Refer to Note 19 to the financial statements Critical Audit Matter Description In connection with the Spin-Off, the Company entered into the Honeywell Reimbursement Agreement (the “Reimbursement Agreement”), pursuant to which the Company has an obligation to make cash payments to Honeywell with respect to certain environmental claims associated with specified properties contaminated through historical business operations. The Company’s obligation is equal to 90% of payments for certain Honeywell environmental liability payments, less 90% of Honeywell’s net insurance receipts, plus certain other recoveries relating to such liabilities, as defined by the Reimbursement Agreement. The amount payable by the Company under this agreement is subject to an annual limit of $140 million. The Company records its obligation under the Reimbursement Agreement based on the underlying environmental remediation liabilities of Honeywell which are recorded when a remediation liability is determined to be probable and the related costs can be reasonably estimated. The determination of the amount of future costs associated with environmental remediation requires judgments and estimates by management. Furthermore, information the Company uses to evaluate the estimates is obtained from Honeywell under the terms of the Reimbursement Agreement. Given the subjectivity in estimating the remediation costs for environmental matters and judgments made by management related to those estimates, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions requires a high degree of auditor judgment. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the Company’s obligation under the Reimbursement Agreement and evaluation of the Company’s evidence supporting its estimates included the following, among others: • We tested the effectiveness of controls related to remediation costs for environmental matters, including management’s controls over the recording of and changes to the liability for the Company’s obligations under the Reimbursement Agreement. • We read the Reimbursement Agreement and evaluated the Company’s compliance with it to the extent it has the potential to affect the Company’s related liability. • We performed searches of third-party sources to identify potential liabilities related to the specified sites that may not have been included in the estimates. • We tested the completeness and accuracy of the recognition of the Company’s liability for obligations under the Reimbursement Agreement through the following procedures: – For a selection of incremental charges to the Honeywell Environmental liability (increases), obtained supporting documentation related to the valuation of the liability from management, including, but not limited to, regulatory records of decision, feasibility studies, and third-party engineering estimates. – For a selection of payments related to the Honeywell Environmental liability (decreases), obtained supporting documentation related to the original invoice and proof of payment. – Made inquiries of internal and external legal counsel regarding environmental matters. – Performed searches of public domain sources to identify new remediation sites attributable to the Company or any additional remediation activities required by federal, state, or international authorities that may not have been included in the estimates. /s/ Deloitte & Touche LLP Dallas, Texas February 25, 2021 We have served as the Company’s auditor since 2018. 45 RESIDEO TECHNOLOGIES, INC. CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS (In millions except share and per share data) Years Ended December 31, 2019 2018 2020 Net revenue ....................................................................................... $ Cost of goods sold............................................................................. Gross profit ....................................................................................... Selling, general and administrative expenses ................................... Operating profit................................................................................. Other expense, net............................................................................. Interest expense................................................................................. Income before taxes .......................................................................... Tax expense (benefit)........................................................................ Net income ........................................................................................ $ Weighted Average Number of Common Shares Outstanding (in thousands) Basic.................................................................................................. Diluted............................................................................................... Earnings Per Share Basic.................................................................................................. $ Diluted............................................................................................... $ 5,071 $ 3,758 1,313 1,002 311 147 63 101 64 37 $ 4,988 $ 3,711 1,277 1,019 258 118 69 71 35 36 $ 4,827 3,402 1,425 932 493 369 20 104 (301) 405 125,348 126,324 122,722 123,238 122,499 122,624 0.30 $ 0.29 $ 0.29 $ 0.29 $ 3.31 3.30 The Notes to Consolidated and Combined Financial Statements are an integral part of these statements. 46 RESIDEO TECHNOLOGIES, INC. CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE INCOME (In millions) Years Ended December 31, 2019 2018 2020 Net income ........................................................................................ $ Other comprehensive income (loss), net of tax Foreign exchange translation adjustment .................................... Pension actuarial loss................................................................... Total other comprehensive income (loss), net of tax................... Comprehensive income..................................................................... $ 37 $ 63 (15) 48 85 $ 36 $ (2) (3) (5) $ 31 405 (77) (7) (84) 321 The Notes to Consolidated and Combined Financial Statements are an integral part of these statements. 47 RESIDEO TECHNOLOGIES, INC. CONSOLIDATED BALANCE SHEETS (In millions, except number of shares which are reflected in thousands and par value) December 31, 2020 2019 ASSETS Current assets: Cash and cash equivalents......................................................................... $ Accounts receivable – net ......................................................................... Inventories – net ........................................................................................ Other current assets ................................................................................... Total current assets .............................................................................. Property, plant and equipment – net ............................................................... Goodwill ......................................................................................................... Other assets..................................................................................................... Total assets........................................................................................... $ LIABILITIES Current liabilities: Accounts payable ...................................................................................... $ Current maturities of debt ......................................................................... Accrued liabilities ..................................................................................... Total current liabilities......................................................................... Long-term debt ............................................................................................... Obligations payable under Indemnification Agreements ............................... Other liabilities ............................................................................................... COMMITMENTS AND CONTINGENCIES (Note 19) EQUITY Common stock, $0.001 par value, 700,000 shares authorized, 143,959 and 143,059 shares issued and outstanding as of December 31, 2020, 123,488 and 122,873 shares issued and outstanding as of December 31, 2019, respectively ..................................................................................................... Additional paid-in capital ............................................................................... Treasury stock, at cost .................................................................................... Retained earnings............................................................................................ Accumulated other comprehensive loss ......................................................... Total equity .......................................................................................... Total liabilities and equity ................................................................... $ 517 $ 863 672 173 2,225 318 2,691 376 5,610 $ 936 $ 7 595 1,538 1,155 590 334 - 2,070 (6) 75 (146) 1,993 5,610 $ 122 817 671 175 1,785 316 2,642 385 5,128 920 22 552 1,494 1,158 594 280 - 1,761 (3) 38 (194) 1,602 5,128 The Notes to Consolidated and Combined Financial Statements are an integral part of these statements. 48 RESIDEO TECHNOLOGIES, INC. CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOW (In millions) Cash flows provided by (used for) operating activities: Net income ........................................................................... $ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ....................................... Stock compensation expense.......................................... Deferred income taxes.................................................... Other............................................................................... Changes in assets and liabilities, net of acquired companies: Accounts receivable ....................................................... Inventories – net ............................................................. Other current assets ........................................................ Other assets .................................................................... Accounts payable ........................................................... Accrued liabilities .......................................................... Obligations payable under Indemnification Agreements .................................................................... Other liabilities............................................................... Net cash provided by operating activities .................................. Cash flows (used for) provided by for investing activities: Expenditures for property, plant, equipment and other intangibles ............................................................................ Cash paid for acquisitions, net of cash acquired .................. Other..................................................................................... Net cash used for investing activities ......................................... Cash flows provided by (used for) financing activities: Issuance of common stock through public offering, net of issuance cost......................................................................... Proceeds from long-term debt .............................................. Payment of debt facility issuance and modification costs.... Repayment of long-term debt............................................... Distribution to Honeywell in connection with Spin-Off...... Net increase in invested equity............................................. Non-operating obligations from Honeywell, net.................. Other..................................................................................... Net cash provided by (used for) financing activities.................. Effect of foreign exchange rate changes on cash and cash equivalents.................................................................................. Net increase (decrease) in cash and cash equivalents ................ Cash and cash equivalents at beginning of period ..................... Cash and cash equivalents at end of period................................ $ Supplemental Cash Flow Information: Interest paid ................................................................................ $ Income taxes paid (net of refunds) ............................................. $ 2020 Years Ended December 31, 2019 2018 37 $ 36 $ 405 86 29 22 21 (27) 19 5 - (1) 31 (4) 26 244 (70) (35) 2 (103) 279 - - (22) - - (2) (2) 253 80 25 (25) 18 7 (44) (53) (15) (38) 28 (35) 39 23 (95) (17) - (112) - - (4) (22) - - (24) (3) (53) 1 395 122 517 $ 57 $ 32 $ (1) (143) 265 122 72 86 $ $ $ 66 20 (323) 22 (62) (172) (27) (4) 231 61 24 221 462 (81) - 7 (74) - 1,225 (29) - (1,415) 39 26 (13) (167) (12) 209 56 265 - 28 The Notes to Consolidated and Combined Financial Statements are an integral part of these statements. 49 d e t s e v n I y t i u q E d e n i a t e R s g n i n r a E l a n o i t i d d A - d i a P l a t i p a C n I y r u s a e r T k c o t S n o m m o C k c o t S y r u s a e r T s e r a h S n o m m o C s e r a h S . C N I , S E I G O L O N H C E T O E D I S E R Y T I U Q E F O S T N E M E T A T S D E N I B M O C D N A D E T A D I L O S N O C ) s d n a s u o h t n i s e r a h s , s n o i l l i m n I ( l a t o T y t i u q E d e t a l u m u c c A r e h t O e v i s n e h e r p m o C s s o L 3 0 6 , 2 $ ) 0 0 1 ( $ ) 4 8 ( 5 0 4 ) 8 9 3 , 1 ( - 4 3 3 3 5 , 1 ) 5 ( 6 3 ) 3 ( 5 2 6 1 7 3 8 4 2 0 6 , 1 ) 2 ( 9 2 9 7 2 3 9 9 , 1 - ) 4 8 ( - ) 5 ( - - - ) 5 ( ) 9 8 1 ( - - - ) 4 9 1 ( - 8 4 - - - $ ) 6 4 1 ( $ - - - - - - - - - - - - - - - $ 5 7 $ $ ) 6 ( $ . s t n e m e t a t s e s e h t f o t r a p l a r g e t n i n a e r a s t n e m e t a t S l a i c n a n i F d e n i b m o C d n a d e t a d i l o s n o C o t s e t o N e h T - 3 0 4 3 0 7 , 2 ) 8 9 3 , 1 ( ) 8 0 7 , 1 ( $ $ - - - - $ - 2 - - - - - 2 6 3 - - - - 8 3 7 3 - - - - 4 3 3 1 7 , 1 0 2 7 , 1 - - - 5 2 6 1 1 6 7 , 1 - - 1 9 2 9 7 2 0 7 0 , 2 - - - - - - - - - - ) 3 ( - - ) 3 ( - - ) 3 ( - - $ - - - - - - - - - - - - - - - - - - - - $ - - - - - - 8 6 4 8 6 4 - - - - 7 4 1 5 1 6 - - 5 8 2 - - $ 0 0 9 - - - - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e m o c n i t e N . . . . . . . . . . . . . . . . . . . . . . . . . x a t f o t e n , ) s s o l ( e v i s n e h e r p m o c r e h t O . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . y t i u q e d e t s e v n i n i e g n a h C f o n o i t a c i f i s s a l c e r d n a k c o t s n o m m o c f o e c n a u s s I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1 0 2 , 1 y r a u n a J t a e c n a l a B 9 9 4 , 2 2 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . y t i u q e d e t s e v n i - - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . n o i t a s n e p m o c d e s a b - k c o t S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . r e h t O 9 9 4 , 2 2 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1 0 2 , 1 3 r e b m e c e D t a e c n a l a B - - - - 4 7 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e m o c n i t e N . . . . . . . . . . . . . . . . . . . . . . . . . x a t f o t e n , ) s s o l ( e v i s n e h e r p m o c r e h t O . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s e x a t e e y o l p m e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . n o i t a s n e p m o c d e s a b - k c o t S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . f f O - n i p S o t e u d s t n e m t s u j d A r o f d l e h h t i w s e r a h s f o t e n , s n a l p n o i t a s n e p m o c d e s a b - k c o t s r e d n u k c o t s n o m m o c f o e c n a u s s I 3 7 8 , 2 2 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1 0 2 , 1 3 r e b m e c e D t a e c n a l a B - - - 6 3 6 0 5 5 , 9 1 9 5 0 , 3 4 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e m o c n i t e N . . . . . . . . . . . . . . . . . . . . . . x a t f o t e n , e m o c n i e v i s n e h e r p m o c r e h t O . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s e x a t e e y o l p m e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . n o i t a s n e p m o c d e s a b - k c o t S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s t s o c e c n a u s s i f o t e n , g n i r e f f o c i l b u p h g u o r h t k c o t s n o m m o c f o e c n a u s s I r o f d l e h h t i w s e r a h s f o t e n , s n a l p n o i t a s n e p m o c d e s a b - k c o t s r e d n u k c o t s n o m m o c f o e c n a u s s I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 2 0 2 , 1 3 r e b m e c e D t a e c n a l a B 50 RESIDEO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (In millions, unless otherwise noted) Note 1. Organization, Operations and Basis of Presentation Business Description Resideo Technologies, Inc. (“Resideo” or “the Company”), is a leading manufacturer and distributor of technology-driven products that provide critical comfort, residential thermal and security solutions to homes globally. The Company is also the leading wholesale distributor of low-voltage security products including intrusion, access control and video products and participates significantly in the broader related markets of smart home, fire, power, audio, ProAV, networking, communications, wire and cable, enterprise connectivity, and structured wiring products. The Company has a global footprint serving commercial and residential end markets. Separation from Honeywell The Company was incorporated in Delaware on April 24, 2018. On October 29, 2018, the Company separated from Honeywell International Inc. (“Honeywell”) becoming an independent publicly traded company as a result of a pro rata distribution of the Company’s common stock to shareholders of Honeywell (the “Spin-Off”). The Company began trading “regular way” under the ticker symbol “REZI” on the New York Stock Exchange on October 29, 2018. In connection with the separation, Resideo and Honeywell entered into a Reimbursement Agreement (as defined in Note 2. Summary of Significant Accounting Policies), a Separation and Distribution Agreement, an Employee Matters Agreement, a Tax Matters Agreement, a Transition Services Agreement, a Trademark License Agreement and a Patent Cross-License Agreement. The agreements govern the relationship between Resideo and Honeywell following the separation and provide for the allocation of various assets, liabilities, rights, and obligations. These agreements also include arrangements for transition services provided by Honeywell to Resideo and by Resideo to Honeywell. Basis of Presentation Prior to the Spin-Off, the Company’s historical financial statements were prepared on a stand-alone combined basis and were derived from the consolidated financial statements and accounting records of Honeywell. Accordingly, for periods prior to October 29, 2018, these financial statements are presented on a combined basis and for the periods subsequent to October 29, 2018 are presented on a consolidated basis (collectively, the historical financial statements for all periods presented are referred to as “Consolidated and Combined Financial Statements”). The Consolidated and Combined Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All intracompany transactions have been eliminated for all periods presented. As described in Note 5. Related Party Transactions with Honeywell, all significant transactions between the Company and Honeywell occurring prior to the Spin-Off have been included in these Consolidated and Combined Financial Statements. 51 RESIDEO TECHNOLOGIES, INC. While the Company was owned by Honeywell, a centralized approach to cash management and financing was used. Prior to the consummation of the Spin-Off, the majority of the Company’s cash was transferred to Honeywell daily and Honeywell funded the Company’s operating and investing activities as needed. The combined financial statements prior to the Spin-Off include certain assets and liabilities that have historically been held at Honeywell corporate level but were specifically identifiable or otherwise attributable to the Company. The cash and cash equivalents held by Honeywell at the corporate level were not specifically identifiable to the Company and therefore were not attributed. Honeywell third-party debt and the related interest expense were not allocated as Honeywell’s borrowings were not directly attributable to the company. In periods subsequent to the Spin-Off, the Company made adjustments to balances transferred at the Spin-Off, including adjustments to the classification of assets or liabilities transferred. Any such adjustments are recorded directly to equity in Adjustments due to the Spin-Off and are considered immaterial. Prior to the Spin-Off, Honeywell provided certain services, such as legal, accounting, information technology, human resources and other infrastructure support, on behalf of the Company. The cost of these services has been allocated to the Company on the basis of the proportion of net revenue. The Company and Honeywell consider these allocations to be a reasonable reflection of the benefits received by the Company. However, the financial information presented in these Consolidated and Combined Financial Statements may not reflect the consolidated and combined financial position, operating results and cash flows of the Company had the Company been a separate stand-alone entity during the periods presented. Actual costs that would have been incurred if the Company had been a stand-alone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. Both Resideo and Honeywell consider the basis on which the expenses have been allocated to be a reasonable reflection of the utilization of services provided to or the benefits received by the Company during the periods presented. After the Spin-Off, a number of the above services have continued under a Transition Service Agreement with Honeywell, which the Company expenses as incurred based on the contractual pricing terms. The Company reports financial information on a fiscal quarter basis using a “modified” 4-4-5 calendar (modified in that the fiscal year always begins on January 1 and ends on December 31) that requires its businesses to close their first, second and third quarter books on a Saturday in order to minimize the potentially disruptive effects of quarterly closing on business processes. The effects of this practice are generally not significant to reported results for any quarter and only exist within a reporting year. 52 RESIDEO TECHNOLOGIES, INC. Reclassification On January 1, 2020, the Company changed its classification of research and development expenses in the Consolidated and Combined Statements of Operations from Cost of goods sold to Selling, general and administrative expenses, such that research and development expenses are excluded from the calculation of Gross profit. This change had no impact on Net income and earnings per share or the Consolidated Balance Sheet, Consolidated and Combined Statements of Cash Flow or Equity. The Company determined the impact on previously issued consolidated and combined annual and interim financial statements was not material. The impact for the years ended December 31, 2019 and 2018 was a decrease in Cost of goods sold, an increase in Gross profit and in Selling, general and administrative expenses of $87 million and $59 million, respectively. The impact of the reclassification for the year ended December 31, 2019 is also reflected in Note 7. Restructuring Charges and Note 23. Unaudited Quarterly Financial Information. In addition, the prior year segment information was recast to present Corporate separately. See Note 21. Segment Financial Data for additional information. Certain reclassifications have been made to the prior period financial statements to conform to the classification adopted in the current period. Issuance of Common Stock through Public Offering On November 17, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) which provided for the offer and sale by the Company of 17,000,000 shares of common stock of the Company at the public offering price of $15.00 per share (the “Offering”). The Offering closed on November 20, 2020. On December 14, 2020, the Company completed the closing of the exercise of the underwriters’ option to purchase an additional 2,550,000 shares of common stock of the Offering price of $15.00 per share as allowed in the Underwriting Agreement. The Company received net proceeds of approximately $279 million, after deducting underwriting discounts of $13 million and offering expenses payable by the Company of $1 million. Note 2. Summary of Significant Accounting Policies The World Health Organization (“WHO”) declared the novel coronavirus disease ("COVID-19") a pandemic in March 2020. Starting at the end of the first quarter and throughout the second quarter, the Company experienced constrained supply and slowed customer demand that adversely impacted the Company’s business, results of operations and overall financial performance. Although there remains uncertainty as to the continuing implications of COVID-19, during the second half of 2020 customer demand improved and on-going cost actions and transformation efforts contributed to improvements in the Company’s results of operations and overall financial performance. As there remains uncertainty around the impacts of the COVID-19 pandemic, the Company addresses and evaluates the impacts frequently. At December 31, 2020, the Company believes that the accounting policies most likely affected by the COVID-19 pandemic are the use of estimates and goodwill policies. Accounting Principles—The financial statements and accompanying notes are prepared in accordance with U.S. GAAP. The following is a description of Resideo’s significant accounting policies. Principles of Consolidation—The Consolidated and Combined Financial Statements include the accounts of Resideo Technologies, Inc. and all of its subsidiaries in which a controlling interest is maintained. All intercompany transactions and balances are eliminated in consolidation. Cash and Cash Equivalents—Cash and cash equivalents include cash on hand and highly liquid investments having an original maturity of three months or less. Accounts Receivables and Allowance for Doubtful Accounts—Trade accounts receivable are recorded at the invoiced amount as a result of transactions with customers. The Company maintains allowances for doubtful accounts for estimated losses as a result of customers’ inability to make required payments. The Company estimates anticipated losses from doubtful accounts based on days past due as measured from the contractual due date and historical collection history. The Company also takes into consideration changes in economic conditions that may not be reflected in historical trends, for example customers in bankruptcy, liquidation or reorganization. Receivables are written-off against the allowance for doubtful accounts when they are determined to be uncollectible. Such determination includes analysis and consideration of the particular conditions of the account, including time 53 RESIDEO TECHNOLOGIES, INC. intervals since last collection, customer performance against agreed upon payment plans, solvency of customer and any bankruptcy proceedings. Inventories—Inventories in the Products & Solutions business are stated at the lower of cost or net realizable value, determined on a first-in, first-out basis, including direct material costs and direct and indirect manufacturing costs, or net realizable value. Inventories in the ADI Global Distribution business are stated at average cost. Reserves are maintained for obsolete and surplus items. Property, Plant and Equipment—Property, plant and equipment are recorded at cost, less accumulated depreciation. For financial reporting, the straight-line method of depreciation is used over the estimated useful lives of 10 to 50 years for buildings and improvements, 3 to 16 years for machinery and equipment and 3 to 10 years for tooling equipment. Goodwill—The Company performs goodwill impairment testing annually, on the first day of the fourth quarter each year or more frequently if indicators of potential impairment exist. The goodwill impairment test is performed at the reporting unit level. The Company has two reporting units, Products & Solutions and ADI Global Distribution. The Company performs its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value provided the loss recognized does not exceed the total amount of goodwill allocated to that reporting unit. Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. For the 2020 annual impairment test, the Company used a weighting of fair values derived from the income approach and market approach. Under the income approach, the Company calculates the fair value of a reporting unit based on the present value of estimated future cash flows. The income approach requires the exercise of significant judgment, including judgment about the amount and timing of expected future cash flows, assumed terminal value, and appropriate discount rates. Under the market approach, the Company utilizes the public company guideline method. The Company believes the estimates and assumptions used in the calculations are reasonable. In addition, the extent to which COVID-19 may adversely impact the Company’s business depends on future developments, which are uncertain and unpredictable, depending upon severity and duration of the outbreak, and the effectiveness of actions taken globally to contain or mitigate its effects. Any resulting financial impact cannot be estimated reasonably at this time but may adversely affect the Company’s business and financial results. It is likely that into 2021, macroeconomic conditions may have unexpected impacts on the Company’s business. If there were an adverse change in facts and circumstances, then an impairment charge may be necessary in the future. Should the fair value of the Company’s reporting units fall below its carrying amount because of reduced operating performance, market declines, changes in the discount rate, or other conditions, charges for impairment may be necessary. The Company monitors its reporting units to determine if there is an indicator of potential impairment. Other Intangible Assets and Long-lived Assets—Other intangible assets with determinable lives consist of customer lists, technology, patents and trademarks and software intangibles and are amortized over their estimated useful lives, ranging from 3 to 15 years. They are reviewed for impairment whenever events or circumstances indicate that the carrying amount of the assets may not be recoverable. Recoverability of long-lived assets are measured by comparison of the carrying amount of the asset to the future undiscounted cash flows the asset is expected to generate. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. Warranties and Guarantees—Expected warranty costs for products sold are recognized based on an estimate of the amount that eventually will be required to settle such obligations. These accruals are based on factors such as past experience, length of the warranty and various other considerations. Costs of product recalls, which may include the cost of the product being replaced as well as the customer’s cost of the recall, including labor to remove and replace the recalled part, are accrued as part of the warranty accrual at the time an obligation becomes probable and can be reasonably estimated. These estimates are adjusted from time to time based on facts and circumstances that impact the status of existing claims. 54 RESIDEO TECHNOLOGIES, INC. Leases—Effective January 1, 2019, arrangements containing leases are evaluated as an operating or finance lease at lease inception. For operating leases, the Company recognizes an operating right-of-use asset and operating lease liability at lease commencement based on the present value of lease payments over the lease term. Since an implicit rate of return is not readily determinable for the Company’s leases, an incremental borrowing rate is used in determining the present value of lease payments and is calculated based on information available at the lease commencement date. The incremental borrowing rate is determined using a portfolio approach based on the rate of interest the Company would have to pay to borrow funds on a collateralized basis over a similar term. The Company references a market yield curve consistent with the Company’s credit rating which is risk- adjusted to approximate a collateralized rate in the currency of the lease. These rates are updated on a quarterly basis for measurement of new lease obligations. Most leases include renewal options; however, generally it is not reasonably certain that these options will be exercised at lease commencement. Lease expense is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recognized on the Company’s balance sheet. The Company does not separate lease and non-lease components for its real estate and automobile leases. Revenue Recognition—Product and service revenues are recognized when or as the Company transfers control of the promised products or services to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. In the sale of products, the terms of a contract or the historical business practice can give rise to variable consideration due to, but not limited to, discounts and rebates. The Company estimates variable consideration at the most likely amount that will be received from customers and reduces revenues recognized accordingly. The Company includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of the Company’s anticipated performance and all information (historical, current and forecasted) that is reasonably available to the Company. Sales, use and value added taxes collected by the Company and remitted to various government authorities were not recognized as revenues and are reported on a net basis. Shipping and handling fees billed to customers were included in Cost of goods sold. Royalty—In connection with the Spin-Off, the Company and Honeywell entered into a 40-year Trademark License Agreement (“the Trademark Agreement”) that authorizes the Company’s use of certain licensed trademarks in the operation of Resideo’s business for the advertising, sale and distribution of certain licensed products. In exchange, the Company pays a royalty fee of 1.5% of net revenue of the licensed products to Honeywell which is recorded in Selling, general and administrative expense on the Consolidated and Combined Statements of Operations. the Spin-Off the Company entered Reimbursement Agreement—In connection with into an Indemnification and Reimbursement Agreement with Honeywell (the “Reimbursement Agreement”) on October 14, 2018, pursuant to which it has an obligation to make cash payments to Honeywell in amounts equal to 90% of payments, which include amounts billed, with respect to certain environmental claims, remediation and, to the extent arising after the Spin-Off, hazardous exposure or toxic tort claims, in each case, including consequential damages (the “liabilities”) in respect of specified Honeywell properties contaminated through historical business operations prior to the Spin-Off (“Honeywell Sites”), including the legal and other costs of defending and resolving such liabilities, less 90% of Honeywell’s net insurance receipts relating to such liabilities, and less 90% of the net proceeds received by Honeywell in connection with (i) affirmative claims relating to such liabilities, (ii) contributions by other parties relating to such liabilities and (iii) certain property sales. 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 and Combined Statements of Operations and within Accrued liabilities and Obligations payable under Indemnification Agreements in the Consolidated Balance Sheets. For additional information, see Note 19. Commitments and Contingencies. 55 RESIDEO TECHNOLOGIES, INC. Environmental—The Company accrues costs related to environmental matters when it is probable that it has incurred a liability related to a contaminated site and the amount can be reasonably estimated. Environmental costs for the Company’s owned sites are presented within Cost of goods sold for operating sites. Prior to the Spin- off, sites now under the Reimbursement Agreement were presented within Other expense, net in the Consolidated and Combined Statements of Operations. For additional information, see Note 19. Commitments and Contingencies. Tax Indemnification Agreement—The Tax Matters Agreement provides that Resideo is required to indemnify Honeywell for any taxes (and reasonable expenses) resulting from the failure of the Spin-Off and related internal transactions to qualify for their intended tax treatment under U.S. federal, state and local income tax law, as well as foreign tax law, where such taxes result from (a) breaches of covenants and representations the Company makes and agrees to in connection with the Spin-Off, (b) the application of certain provisions of U.S. federal income tax law to these transactions or (c) any other action taken or omission made (other than actions expressly required or permitted by the Separation and Distribution Agreement, the Tax Matters Agreement or other ancillary agreements) after the consummation of the Spin-Off that gives rise to these taxes. As of December 31, 2020 and 2019, the Company had an indemnity outstanding to Honeywell of $139 million and $149 million, respectively. See Note 19. Commitments and Contingencies. Research and Development—The Company conducts research and development activities, which consist primarily of the development of new products as well as enhancements and improvements to existing products that substantially change the product. Research and development costs primarily relate to employee compensation and consulting fees which are charged to expense as incurred. Such costs are included in Selling, general and administrative expenses and amount to $77 million, $87 million and $59 million for the years ended December 31, 2020, 2019 and 2018, respectively. Advertising Costs—The Company expenses advertising costs as incurred. Advertising costs totaled $25 million and $46 million for the years ended December 31, 2020 and 2019, respectively. Prior to the Spin-Off, advertising costs were allocated from Honeywell as described in Note 5. Related Party Transactions with Honeywell. Advertising costs are included within Selling, general and administrative expense. Defined Contribution Plans—The Company sponsors various defined contribution plans with varying terms depending on the country of employment. The Company recognized compensation expense of $18 million for both years ended December 31, 2020 and 2019 related to employer contributions to these plans. Prior to the Spin- Off, costs were allocated from Honeywell as described in Note 5. Related Party Transactions with Honeywell. Stock-Based Compensation Plans—The principal awards issued under Resideo’s stock-based compensation plans, which are described in Note 18. Stock-Based Compensation Plans, are restricted stock units. The cost for such awards is measured at the grant date based on the fair value of the award. Some awards are issued with a market condition which are valued on the grant date utilizing a Monte Carlo simulation model. Stock options are also issued under Resideo’s stock-based compensation plans and are valued on the grant date using the Black- Scholes option pricing model. The Black-Scholes option pricing model and the Monte Carlo simulation model require estimates of future stock price volatility, expected term, risk-free interest rate and forfeitures. For all stock-based compensation, the fair value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods (generally the vesting period of the equity award) and is included in Selling, general and administrative expenses in the Consolidated and Combined Statements of Operations. Forfeitures are estimated at the time of grant to recognize expense for those awards that are expected to vest and are based on historical forfeiture rates. Pension—The Company disaggregates the service cost component of net benefit costs and reports those costs in the same line item or items in the Consolidated and Combined Statements of Operations as other compensation costs arising from services rendered by the pertinent employees during the period. The other non- service components of net benefit costs are required to be presented separately from the service cost component and outside of income from operations. 56 RESIDEO TECHNOLOGIES, INC. The Company has recorded the service cost component of pension expense in Costs of goods sold and Selling, general and administrative expenses based on the classification of the employees it relates to. The remaining components of net benefit costs within pension expense, primarily interest costs and expected return on plan assets, are recorded in Other expense, net. The Company recognizes net actuarial gains or losses in excess of 10% of the greater of the fair value of plan assets or the plans’ projected benefit obligation (the corridor) annually in the fourth quarter each year. This adjustment known as the mark to market adjustment is reported in Other expense, net. Foreign Currency Translation—Assets and liabilities of operations outside the United States with a functional currency other than U.S. Dollars are translated into U.S. Dollars using year-end exchange rates. Revenue, costs and expenses are translated at the average exchange rates in effect during the year. Foreign currency translation gains and losses are included as a component of Accumulated other comprehensive loss. Income Taxes—Significant judgment is required in evaluating tax positions. The Company establishes additional reserves for income taxes when, despite the belief that tax positions are fully supportable, there remain certain positions that do not meet the minimum recognition threshold. The approach for evaluating certain and uncertain tax positions is defined by the authoritative guidance which determines when a tax position is more likely than not to be sustained upon examination by the applicable taxing authority. In the normal course of business, the Company and its subsidiaries are examined by various federal, state and foreign tax authorities. The Company regularly assesses the potential outcomes of these examinations and any future examinations for the current or prior years in determining the adequacy of its provision for income taxes. The Company continually assesses the likelihood and amount of potential adjustments and adjusts the income tax provision, the current tax liability and deferred taxes in the period in which the facts that give rise to a change in estimate become known. Earnings Per Share—Basic earnings per share is based on the weighted average number of common shares outstanding. Diluted earnings per share is based on the weighted average number of common shares outstanding and all dilutive potential common shares outstanding. For additional information, see Note 3. Earnings Per Share. Use of Estimates—The preparation of the Company’s Consolidated and Combined Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the Consolidated and Combined Financial Statements and related disclosures in the accompanying notes. Actual results could differ from those estimates. Estimates and assumptions are periodically reviewed, and the effects of changes are reflected in the Consolidated and Combined Financial Statements in the period they are determined to be necessary. Estimates are used when accounting for stock-based compensation, pension benefits, indemnification liabilities, goodwill and intangible assets, and valuation allowances for accounts receivable, inventory, deferred tax assets, and the amounts of revenue and expenses reported during the period. The Company has used information available to identify potential impacts cause by the COVID-19 pandemic at December 31, 2020 in these estimates. Recent Accounting Pronouncements—The Company considers the applicability and impact of all recent accounting standards updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”). ASUs not listed below were assessed and determined to be either not applicable or are expected to have an immaterial impact on the Company’s consolidated and combined financial position or results of operations. The Company adopted ASU No. 2016-02, Leases (Topic 842), effective January 1, 2019, and applied the changes prospectively as of the adoption date. As permitted by the new guidance, the Company elected the package of practical expedients, which, among other things, allowed historical lease classification to be carried forward. Upon adoption of ASU No. 2016-02, the Company recognized an aggregate lease liability of $115 million, calculated based on the present value of the remaining minimum lease payments for qualifying leases as of January 1, 2019, with a corresponding right-of-use asset of $112 million. The cumulative-effect adjustment recognized to opening retained earnings was not material. The adoption of the new guidance did not impact the Company’s Consolidated and Combined Statements of Operations or Cash Flows. In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows for an entity to elect to reclassify, to retained earnings, the 57 RESIDEO TECHNOLOGIES, INC. one-time income tax effects stranded in accumulated other comprehensive income (AOCI) resulting from the U.S. Tax Cuts and Jobs Act (“U.S. Tax Reform”). An entity that elects to make this reclassification must consider all items in AOCI that have tax effects stranded as a result of the tax rate change and must disclose the reclassification of these tax effects as well as the entity’s policy for releasing income tax effects from AOCI. The ASU may be applied either retrospectively or as of the beginning of the period of adoption. The Company adopted the standard on January 1, 2019 using the aggregate portfolio accounting policy for recognizing the disproportionate income tax effects in AOCI and has elected not to reclassify the stranded income tax effects of U.S. Tax Reform from AOCI to retained earnings. In August 2018, the FASB issued ASU No. 2018-14, Compensation — Retirement Benefits — Defined Benefit Plans — General (Topic 715-20): Disclosure Framework — Changes to the Disclosure Requirements for Defined Benefit Plans, which amends the current disclosure requirements regarding defined benefit pensions and other post retirement plans and allows for the removal of certain disclosures, while adding certain new disclosure requirements. The Company adopted the standard effective January 1, 2020 and the adoption did not have a material financial statement impact. In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). This ASU simplifies the accounting for income taxes by, among other things, eliminating certain existing exceptions related to the general approach in ASC 740 relating to franchise taxes, reducing complexity in the interim-period accounting for year-to-date loss limitations and changes in tax laws, and clarifying the accounting for transactions outside of business combinations that result in a step-up in the tax basis of goodwill. The Company early adopted the provisions of this guidance on January 1, 2020. Adoption of this guidance did not have a material financial statement impact. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which is optional guidance related to reference rate reform that provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. This guidance is applicable for the Company’s Term Loans and Revolving Credit Facility, which use LIBOR as a reference rate, and is effective immediately, but is only available through December 31, 2022. Refer to Note 15. Long-term Debt and Credit Agreement for further details on the Company’s Term Loans and Revolving Credit Facility. The Company is currently evaluating the potential impact of this standard on its consolidated financial statements. Note 3. Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share (in millions except shares in thousands and per share data): Years Ended December 31, 2019 2018 2020 Net income ........................................................................................ $ 37 $ 36 $ 405 Shares used in computing basic earnings per share .......................... 125,348 122,722 122,499 Effect of dilutive securities: Dilutive effect of common stock equivalents ................................... Shares used in computing diluted earnings per share ....................... 976 126,324 516 123,238 125 122,624 Earnings per share: Basic.................................................................................................. $ Diluted............................................................................................... $ 0.30 0.29 $ $ 0.29 0.29 $ $ 3.31 3.30 58 RESIDEO TECHNOLOGIES, INC. On October 29, 2018, the date of consummation of the Spin-Off, 122,499 shares of the Company’s Common Stock, par value $0.001 per share, were distributed to Honeywell shareholders of record as of October 16, 2018. For the 2018 year to date calculation, these shares are treated as issued and outstanding from January 1, 2018 for purposes of calculating historical basic earnings per share. For December 31, 2020 and 2019, this calculation excludes 900 and 615 treasury shares, respectively. Diluted Earnings Per Share is computed based upon the weighted average number of common shares outstanding for the year plus the dilutive effect of common stock equivalents using the treasury stock method and the average market price of the Company’s common stock for the period. For the year ended December 31, 2018, the average market price of the Company’s common stock was calculated from the Spin-Off date to December 31, 2018. In periods where the Company has a net loss, no dilutive common shares are included in the calculation for diluted shares as they are considered anti-dilutive. For the year ended December 31, 2020, average options and other rights to purchase approximately 2.5 million shares of common stock were outstanding, all of which were anti- dilutive during the year ended December 31, 2020, and therefore excluded from the computation of diluted earnings per common share. Additionally, an average of approximately 0.5 million shares of performance-based unit awards are excluded from the computation of diluted earnings per common share for the year ended December 31, 2020 as the contingency has not been satisfied at December 31, 2020. For the year ended December 31, 2019, average option and other rights to purchase approximately 2.8 million shares of common stock were outstanding, all of which were anti-dilutive during the year ended December 31, 2019, and therefore excluded from the computation of diluted earnings per common share. Additionally, an average of approximately 0.2 million shares of performance-based unit awards are excluded from the computation of diluted earnings per common share for the year ended December 31, 2019 as the contingency has not been satisfied at December 31, 2019. Note 4. Acquisitions During the year ended December 31, 2020, the Company completed one acquisition which has been integrated into the ADI Global Distribution segment. On February 10, 2020, the Company completed the acquisition of privately held Herman ProAV, a leading provider and distributer of professional audio-visual products, procurement services and labor resources to systems integrators in the commercial audio-visual industry. The purchase price paid for this acquisition was approximately $36 million. In connection with this acquisition, the Company recognized goodwill and intangible assets of $4 million and $18 million, respectively. This acquisition was integrated into and builds upon ADI Global Distribution’s product portfolio and expands its presence in the pro- AV market. The Herman ProAV acquisition agreements include deferred payments for certain individuals that are contingent upon employment as well as financial performance. The Company determined that these deferred payments are accounted for as compensation expense over the requisite service period. During the year ended December 31, 2019, the Company completed three acquisitions which have been integrated into the Products & Solutions segment. On March 28, 2019, the Company acquired all of the capital stock of Buoy Labs primarily to obtain the technology assets. Buoy provides innovative Wi-Fi enabled solutions that track the amount of water used in a home, integrating smart software and hardware that can help consumers identify potential leaks and allow consumers to act to prevent them through its subscription-based app services. On May 21, 2019, the Company acquired certain assets relating to innovative energy efficiency from Whisker Labs. The acquired technology creates a thermodynamic model of a home to accurately predict home heating and air conditioning run time and energy use to enable a homeowner to use less energy while maintaining comfort. On June 27, 2019, the Company acquired all of the membership interests of LifeWhere. LifeWhere uses machine learning and analytics to predict potential failure on critical home appliances, such as water heaters, furnaces, and air conditioners. This service provides the detailed analytics required for professional contractors to dispatch technicians with the right skills to quickly repair the appliance before it causes catastrophic failure. The aggregate purchase price paid for these acquisitions was $17 million. In connection with these acquisitions, the Company recognized goodwill and intangible assets of $10 million and $7 million, respectively. These acquisitions have an immaterial financial statement impact on both an individual basis and when considered in the aggregate. Pro-forma disclosures are not provided as the acquisitions have an immaterial financial statement impact. 59 RESIDEO TECHNOLOGIES, INC. Note 5. Related Party Transactions with Honeywell Prior to the Spin-Off, the Consolidated and Combined Financial Statements were derived from the unaudited Consolidated Financial Statements and accounting records of Honeywell. Prior to the Spin-Off, Honeywell was a related party that provided certain services, such as legal, accounting, information technology, human resources and other infrastructure support, on behalf of the Company. The costs of these services were allocated to the Company on the basis of the proportion of net revenue. The Company and Honeywell consider the allocations to be a reasonable reflection of the benefits received by the Company. During the period from January 1, 2018 until October 29, 2018, the Company was allocated $228 million of general corporate expenses incurred by Honeywell and such amounts are included within Selling, general and administrative expenses in the Consolidated and Combined Statements of Operations. As certain expenses reflected in the Consolidated and Combined Financial Statements include allocations of corporate expenses from Honeywell, these statements could differ from those that would have been prepared had the Company operated on a stand-alone basis. All significant intercompany transactions between the Company and Honeywell have been included in these Consolidated and Combined Financial Statements. During the period from January 1, 2018 until October 29, 2018, sales to Honeywell, Cost of goods sold to Honeywell, and purchases from Honeywell were $24 million, $19 million, and $212 million, respectively. The total net effect of the settlement of these intercompany transactions is reflected in the Consolidated and Combined Statements of Cash Flows as a financing activity. Prior to the consummation of the Spin-Off, Honeywell managed the Company’s hedging activity which included centrally hedging its exposure to changes in foreign exchange rates principally with forward contracts. Certain contracts were specifically designated to and entered on behalf of the Company with Honeywell as a counterparty and were used to hedge known or probable anticipated foreign currency sales and purchases. The Company designated these hedges as cash flow hedges and the impact to the financial statements for 2018 was not material. While the Company was owned by Honeywell, a centralized approach to cash management and financing of operations was used. Prior to consummation of the Spin-Off, the Company’s cash was transferred to Honeywell daily and Honeywell funded the Company’s operating and investing activities as needed. Net transfers to and from Honeywell are included within Invested equity on the Consolidated and Combined Statements of Equity. The components of the net transfers to and from Honeywell as of December 31, 2018 are as follows: General financing activities ......................................................................................................... $ Distribution to Honeywell in connection with Spin-Off.............................................................. Net contribution of assets and liabilities upon Spin-Off.............................................................. Unbilled corporate allocations ..................................................................................................... Purchases from Honeywell .......................................................................................................... Mandatory transition tax .............................................................................................................. Other ............................................................................................................................................ Net decrease in invested equity.................................................................................................... $ December 31, 2018 (383) (1,415) 81 228 161 (85) 15 (1,398) Subsequent to the Spin-Off on October 29, 2018, transactions with Honeywell were not considered related party transactions. 60 RESIDEO TECHNOLOGIES, INC. Note 6. Revenue Recognition Disaggregated Revenue Revenues by channel are as follows for the years ended December 31: Comfort ................................................................................................ $ Security................................................................................................. Residential Thermal Solutions ............................................................. Products & Solutions ...................................................................... U.S. and Canada ................................................................................... EMEA (1) ..................................................................................... APAC (2) ..................................................................................... ADI Global Distribution ................................................................. Net revenue .......................................................................................... $ (1) EMEA represents Europe, the Middle East and Africa. (2) APAC represents Asia and Pacific countries. Years Ended December 31, 2020 2019 2018 1,079 538 504 2,121 2,427 480 43 2,950 5,071 $ $ 1,103 520 552 2,175 2,294 459 60 2,813 4,988 $ $ 1,114 479 576 2,169 2,147 456 55 2,658 4,827 A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For product sales, typically each product sold to a customer represents a distinct performance obligation. The Company recognizes the majority of its revenue from performance obligations outlined in contracts with its customers that are satisfied at a point in time. Approximately 3% of the Company’s revenue is satisfied over time. As of December 31, 2020 and December 31, 2019, contract assets and liabilities were not material. The timing of satisfaction of the Company’s performance obligations does not significantly vary from the typical timing of payment. For some contracts, the Company may be entitled to receive an advance payment. The Company has applied the practical expedient to not disclose the value of remaining performance obligations for (i) contracts with an original expected term of one year or less or (ii) contracts for which it recognizes revenue in proportion to the amount it has the right to invoice for services performed. Note 7. Restructuring Charges During 2019, the Company retained industry-recognized experts in supply chain optimization and organizational excellence to assist in a comprehensive financial and operational review which was focused on product cost and gross margin improvement, and general and administrative expenses simplification. Certain restructuring actions have been implemented under this program as well as previous programs. Product & Solutions segment restructuring expenses for the years ended December 31, 2020, 2019, and 2018 were $19 million, $26 million, and $5 million, respectively. ADI Global Distribution segment restructuring expenses for the years ended December 31, 2020, 2019, and 2018 were $6 million, $4 million, and $0 million, respectively. Corporate restructuring expenses for the years ended December 31, 2020, 2019 and 2018 were $15 million, $7 million, and $0 million, respectively. Restructuring expenses for all periods are primarily related to severance. The Company’s restructuring expenses for the years ended December 31, 2020, 2019 and 2018 are as follows: Years Ended December 31, 2019 2018 2020 Cost of goods sold............................................................................. $ Selling, general and administrative expenses ................................... $ 9 $ 31 40 $ 13 $ 24 37 $ 4 1 5 61 RESIDEO TECHNOLOGIES, INC. The following table summarizes the status of total restructuring reserves related to severance cost included in Accrued liabilities in the Consolidated Balance Sheets: Years Ended December 31, 2019 2018 2020 Beginning of year.............................................................................. $ Charges ........................................................................................ Usage ........................................................................................... Other ............................................................................................ End of year ........................................................................................ $ 19 $ 40 (35) - 24 $ 13 $ 38 (31) (1) 19 $ Note 8. Other Expense, Net Environmental expense ..................................................................... $ Reimbursement Agreement expense................................................. Other, net........................................................................................... $ - $ 146 1 147 $ - $ 108 10 118 $ Years Ended December 31, 2019 2018 2020 22 5 (9) (5) 13 323 49 (3) 369 Refer to Note 19. Commitments and Contingencies for further details on environmental and Reimbursement Agreement expense. Note 9. Income Taxes Prior to the consummation of the Spin-Off, Resideo’s operating results were included in Honeywell’s various consolidated U.S. federal and state income tax returns, as well as non-U.S. filings. For the purposes of the Company’s Consolidated and Combined Financial Statements for periods prior to the Spin-Off, Income tax expense and deferred tax balances have been recorded as if the Company filed tax returns on a standalone basis separate from Honeywell. The Separate Return Method applies the accounting guidance for income taxes to the standalone financial statements as if the Company was a separate taxpayer and a standalone enterprise prior to the separation from Honeywell. Income before taxes U.S. ................................................................................................ $ Non-U.S......................................................................................... $ (93) 194 101 $ $ (83) 154 71 $ $ (169) 273 104 Years Ended December 31, 2019 2018 2020 62 RESIDEO TECHNOLOGIES, INC. Income tax expense (benefit) Tax expense (benefit) consists of: Current: U.S............................................................................................ $ Non-U.S. .................................................................................. $ Deferred: U.S............................................................................................ $ Non-U.S. .................................................................................. $ The U.S. federal statutory income tax rate is reconciled to the Company’s effective income tax rate as follows: U.S. federal statutory income tax rate.................................... Impact of foreign operations .................................................. U.S. state income taxes .......................................................... U.S. Tax Reform and related items........................................ Non-deductible indemnification costs ................................... Executive compensation over $1 million............................... Other non-deductible expenses .............................................. U.S. taxation of foreign earnings ........................................... Tax credits.............................................................................. Change in tax rates................................................................. All other items – net............................................................... Years Ended December 31, 2019 2018 2020 21 21 42 11 11 22 64 $ $ $ $ 23 37 60 (11) (14) (25) 35 $ $ $ $ (26) 48 22 (15) (308) (323) (301) Years Ended December 31, 2019 2018 2020 21.0 % (5.4) 6.4 - 29.0 2.5 3.7 3.5 (0.2) 1.3 1.8 63.6 % 21.0 % (10.2) 6.6 - 28.0 0.6 2.9 5.3 (2.6) 1.7 (4.7) 48.6 % 21.0 % (11.6) 6.4 (385.1) 75.4 - - 6.0 (2.1) - 0.6 (289.4) % 63 RESIDEO TECHNOLOGIES, INC. Deferred tax assets (liabilities) The tax effects of temporary differences and tax carryforwards which give rise to future income tax benefits and payables are as follows: Deferred tax assets: Pension........................................................................................................ $ Other asset basis differences....................................................................... Operating lease liabilities............................................................................ Accruals and reserves ................................................................................. Net operating and capital losses.................................................................. Other ........................................................................................................... Gross deferred tax assets .................................................................................. Valuation allowance ......................................................................................... Total deferred tax assets ................................................................................... $ Deferred tax liabilities: Other intangible assets ................................................................................ $ Property, plant and equipment .................................................................... Operating lease assets ................................................................................. Other ........................................................................................................... Total deferred tax liabilities ............................................................................. Net deferred tax asset ...................................................................................... $ Deferred tax assets: Years Ended December 31, 2020 2019 37 70 34 61 47 - 249 (60) 189 (44) (25) (32) (13) (114) 75 $ $ $ $ 27 70 33 61 32 6 229 (32) 197 (42) (22) (32) (12) (108) 89 The Company maintains a valuation allowance of $60 million against a portion of the non-U.S. gross deferred tax assets. Valuation allowances principally relate to foreign net operating loss carryforwards where the future potential benefits do not meet the more-likely-than-not realization test. Changes in valuation allowance positions related to historic losses resulted in increases of $20 million and $3 million to tax expense in 2020 and 2019, respectively. The remaining changes in valuation allowances relate primarily to current year net operating losses on entities from which the company already maintains valuation allowances and does not expect to receive tax benefits. In the event the Company determines that it will not be able to realize its net deferred tax assets in the future, it will reduce such amounts through an increase to tax expense in the period such determination is made. Conversely, if the Company determines that it will be able to realize net deferred tax assets in excess of the carrying amounts, it will decrease the recorded valuation allowance through a reduction to tax expense in the period that such determination is made. The Company has not provided deferred taxes on unremitted earnings of its foreign affiliates that exist at December 31, 2020 as the earnings are considered permanently reinvested. Accordingly, no deferred taxes have been provided for withholding taxes or other taxes that would result upon repatriation of the Company’s approximately $1.6 billion of undistributed earnings from foreign subsidiaries to the United States. It is impracticable to calculate the tax cost of repatriating the Company’s unremitted earnings which are considered indefinitely reinvested. As of December 31, 2020, the Company has federal tax credit carryforwards of $1 million, federal net operating loss carryforwards of $2 million, and foreign net operating loss carryforwards of $196 million. The federal tax credit carryforwards expire in 2029. The federal net operating loss carryforwards expire in 2027. $178 million of foreign net operating losses can be carried forward indefinitely with the remainder expiring between 2021 and 2030. Many jurisdictions impose limitations on the timing and utilization of net operating loss carryforwards. In those instances where the net operating loss or tax credit carryforward will not be utilized in the carryforward period due to the limitation, the deferred tax asset and amount of the carryforward have been reduced. 64 RESIDEO TECHNOLOGIES, INC. As of December 31, 2020, 2019, and 2018 there were $10 million, $6 million, and $2 million of unrecognized tax benefits, respectively, that if recognized would be recorded as a component of Income tax expense. The change in unrecognized tax benefits resulted in increases (decreases) of $4 million, $4 million, and ($18) million to tax expense in 2020, 2019, and 2018, respectively. The decrease in 2018 was primarily driven by the reclassification of unrecognized tax benefits attributable to periods prior to the consummation of the Spin-Off to the indemnity payable to Honeywell under the terms of the Tax Matters Agreement. As of December 31, 2020, 2019 and 2018 there were no unrecognized tax benefits related to examinations in progress. An immaterial amount of estimated interest and penalties related to the underpayment of income taxes is included in the liability for unrecognized tax benefits, both of which are included as a component of Income tax expense in the Consolidated and Combined Statements of Operations. The Company does not anticipate significant changes in total unrecognized tax benefits during the next twelve months. The Company files income tax returns in the United States federal jurisdiction, all states, and various local and foreign jurisdictions. The Company’s US federal returns are no longer subject to income tax examinations for taxable years before 2016. With limited exception, state, local, and foreign income tax returns for taxable years before 2015 are no longer subject to examination. On December 22, 2017, the U.S. government enacted U.S. Tax Reform, which included changes to the taxation of foreign earnings by implementing a dividend exemption system, expansion of the current anti-deferral rules, a minimum tax on low-taxed foreign earnings and new measures to deter base erosion. The U.S. Tax Reform also included a permanent reduction in the corporate tax rate, repeal of the corporate alternative minimum tax, expensing of capital investment, and limitation of the deduction for interest expense. Furthermore, as part of the transition to the new tax system, a one-time transition tax was imposed on a U.S. shareholder’s historical undistributed earnings of foreign affiliates. As described in the Combined Financial Statements for the year ended December 31, 2017, the Company reasonably estimated certain effects of U.S. Tax Reform and, therefore, recorded provisional amounts, including the deemed repatriation transition tax and withholding taxes on undistributed earnings. For the year ended December 31, 2018, the Company recorded an adjustment to the provisional tax amount related to the deemed repatriation transition tax and taxes on undistributed earnings of $(85.4) million and $(234.7) million, respectively. This adjustment resulted in a decrease to the effective tax rate for the year ended December 31, 2018 of 307.8%. The adjustment reflects the revised determination of the fair value of assets and liabilities of legal entities included in the Company’s business. The accounting for the income tax effects of the U.S. Tax Reform was complete as of December 31, 2018. Note 10. Accounts Receivable — Net December 31, 2020 2019 Accounts receivable ............................................................................................ $ Allowance for doubtful accounts ........................................................................ $ 875 $ (12) 863 $ Note 11. Inventories — Net Raw materials...................................................................................................... $ Work in process .................................................................................................. Finished products ................................................................................................ $ 127 $ 19 526 672 $ December 31, 2020 2019 834 (17) 817 121 17 533 671 The expense related to inventory was $31 million, $56 million and $10 million for the years ended December 31, 2020, 2019 and 2018, respectively. 65 RESIDEO TECHNOLOGIES, INC. Note 12. Property, Plant and Equipment — Net Machinery and equipment................................................................................... $ Buildings and improvements .............................................................................. Construction in progress ..................................................................................... Others .................................................................................................................. Accumulated depreciation................................................................................... $ December 31, 2020 2019 598 $ 289 46 14 947 (629) 318 $ 562 260 57 16 895 (579) 316 Depreciation expense was $56 million, $50 million and $45 million in 2020, 2019 and 2018, respectively. Note 13. Goodwill and Other Intangible Assets — Net Goodwill as of December 31, 2020 and 2019 for Products & Solutions was $2,037 million and $2,004 million, respectively. The increase relates to foreign currency translation adjustments. Goodwill as of December 31, 2020 and 2019 for ADI Global Distribution was $654 million and $639 million, respectively. The carrying value of goodwill increased by $4 million due to an acquisition during the year. The remainder of the increase relates to foreign currency translation adjustments. Other intangible assets with finite lives are comprised of: December 31, 2020 December 31, 2019 Patents and technology................ $ Customer relationships................ Trademarks.................................. Software ...................................... $ Gross Carrying Amount 37 $ 192 15 146 390 $ Accumulated Amortization (23) $ (122) (8) (102) (255) $ Net Carrying Amount 14 $ 70 7 44 135 $ Gross Carrying Amount 35 $ 170 9 139 353 $ Accumulated Amortization (19) $ (106) (7) (94) (226) $ Net Carrying Amount 16 64 2 45 127 Other intangible assets amortization expense was $31 million, $30 million and $21 million in 2020, 2019 and 2018, respectively. Estimated intangible asset amortization expense for each of the next five years approximates $28 million in 2021, $22 million in 2022, $19 million in 2023, $17 million in 2024 and $16 million in 2025. Note 14. Accrued Liabilities December 31, 2020 2019 Obligations payable under Indemnification Agreements.................................... $ Taxes payable...................................................................................................... Compensation, benefit and other employee-related............................................ Customer rebate reserve...................................................................................... Other.................................................................................................................... $ 140 $ 62 105 91 197 595 $ 140 66 66 78 202 552 Refer to Note 19. Commitments and Contingencies for further details on Obligations payable under Indemnification Agreements. 66 RESIDEO TECHNOLOGIES, INC. Note 15. Long-term Debt and Credit Agreement The Company’s debt at December 31, 2020 and December 31, 2019 consisted of the following: December 31, 2020 2019 6.125% notes due 2026 ....................................................................................... $ Five-year variable rate term loan A due 2023..................................................... Seven-year variable rate term loan B due 2025 .................................................. Unamortized deferred financing costs ................................................................ Total outstanding indebtedness ........................................................................... Less: Amounts expected to be paid within one year........................................... Total long-term debt due after one year.............................................................. $ 400 315 465 (18) 1,162 7 1,155 $ $ 400 333 470 (23) 1,180 22 1,158 Scheduled principal repayments under the Senior Credit Facilities (defined below) and Senior Notes (defined below) subsequent to December 31, 2020 are as follows: 2021.............................................................................................................................................. $ 2022.............................................................................................................................................. 2023.............................................................................................................................................. 2024.............................................................................................................................................. 2025.............................................................................................................................................. Thereafter..................................................................................................................................... Amounts expected to be paid within one year ............................................................................. $ December 31, 2020 40 57 232 5 446 400 1,180 7 1,173 Subsequent to December 31, 2020, the Company entered into a refinancing agreement which modified the scheduled principal repayments related to the Company’s long-term debt as described in Note 24. Subsequent Events. Among other changes, the refinancing agreement resulted in a reduction of principal repayments to be made in 2021 to $7 million which represents the Current maturities of debt in the Consolidated Balance Sheet as of December 31, 2020. At December 31, 2020 and 2019, the interest rate for the Term Loans (defined below) was 2.51% and 4.36%, respectively. At December 31, 2020, there were no borrowings and no letters of credit issued under the $350 million Revolving Credit Facility (defined below). Interest expense presented in the Statements of Operations is from the Senior Notes and Senior Credit Facilities, which includes the amortization of debt issuance cost and debt discounts. Senior Notes In October of 2018, the Company issued $400 million in principal amount of 6.125% senior unsecured notes due in 2026 (the "Senior Notes"). The Senior Notes are senior unsecured and unsubordinated obligations of Resideo and rank equally with all of Resideo’s existing and future senior unsecured debt and senior to all of Resideo’s subordinated debt. Resideo may, at its option, redeem the Senior Notes in whole or part prior to November 1, 2021, at a redemption price equal to 100% of the principal amount of the Senior Notes redeemed, plus accrued and unpaid interest, if any, plus a “make-whole” premium. On or after November 1, 2021 Resideo may, at its option, redeem the Senior Notes in whole or in part plus accrued and unpaid interest, plus a fixed redemption percentage on the principal amount of the Senior Notes redeemed of (i) 104.594% if redeemed during the twelve-month period beginning on November 1, 2021 (ii) 103.063% if redeemed during the twelve-month period beginning on November 67 RESIDEO TECHNOLOGIES, INC. 1, 2022, (iii) 101.531% if redeemed during the twelve-month period beginning on November 1, 2023, or (iv) 100% if redeemed on or after November 1, 2024. Credit Agreement On October 25, 2018, in connection with the consummation of the Spin-Off, the Company as the borrower, entered into a credit agreement with JP Morgan Chase Bank N.A. as administrative agent (the “Credit Agreement”), which was subsequently amended on November 26, 2019 (the “Credit Agreement First Amendment”) and on November 16, 2020 (the “Credit Agreement Second Amendment”). The Credit Agreement provides for a seven-year LIBOR plus 2.25% senior secured first-lien term B loan facility in an aggregate principal amount of $475 million (the "Term B Facility") and a five-year LIBOR plus 2.25% senior secured first-lien term A loan facility in an aggregate principal amount of $350 (the "Term A Facility" and, together with the Term B Facility, the “Term Loans” or "Term Loan Facilities”). The Company is obligated to make quarterly principal payments throughout the term of the Term Loan Facilities according to the amortization provisions in the Credit Agreement. Borrowings under the Credit Agreement are able to be prepaid at the Company’s option without premium or penalty other than a 1.00% prepayment premium that may be payable in connection with certain repricing transactions within a certain period of time after the closing date. Amounts repaid or prepaid in respect of Term Loan Facilities may not be re-borrowed. The Credit Agreement also established a five-year senior secured first-lien revolving credit facility to be used for the Company’s working capital and other cash needs from time to time in an aggregate principal amount of $350 million (the "Revolving Credit Facility" and, together with the Term Loan Facilities, the "Senior Credit Facilities"). The interest rate on the Revolving Credit Facility borrowings are based on, at the option of the Company, either, (i) the rate of interest last quoted by The Wall Street Journal as the “prime rate” in the United States, (ii) the greater of the federal funds effective rate and the overnight bank funding rate, plus 0.75% and (iii) the one month adjusted LIBOR rate, plus 1.25% per annum. If the Company chooses to make a LIBOR borrowing on a one, two, three or six-month basis, the interest rate will be based on an adjusted LIBOR rate (which shall not be less than zero) based on the interest period for the borrowing. The applicable margin for the Term B Facility is (i) on or prior to the Credit Agreement First Amendment 2.00% per annum (for Libor loans) and 1.00% per annum (for base rate loans) and (ii) after the Credit Agreement First Amendment 2.25% per annum (for LIBOR loans) and 1.25% per annum (for base rate loans). The applicable margin for each of the Term A Facility and the Revolving Credit Facility varies (i) on or prior to the Credit Agreement First Amendment from 2.00% per annum to 1.50% per annum (for Libor loans) and 1.00% to 0.50% per annum (for base rate loans) and (ii) after the credit Agreement First Amendment from 2.25% per annum to 1.75% per annum (for LIBOR loans) and 1.25% to 0.75% per annum (for base rate loans) based on the Company’s leverage ratio. Accordingly, the interest rates for the Senior Credit Facilities will fluctuate during the term of the Credit Agreement based on changes in the base rate, LIBOR or future changes in the Company’s leverage ratio. Interest payments with respect to the borrowings are required either on a quarterly basis (for base rate loans) or at the end of each interest period (for LIBOR loans) or, if the duration of the applicable interest period exceeds three months, then every three months. The Revolving Credit Facility has a quarterly commitment fee based on the unused portion, which is determined by the Company’s leverage ratio and ranges from 0.25% to 0.35% per annum. The net proceeds from the borrowings under the Credit Agreement and the offering of the Senior Notes were used as part of the financing for the Spin-Off. For the year ended December 31, 2018, the Company incurred approximately $16 million in debt issuance costs related to the Term Loans, $5 million in costs related to the Revolving Credit Facility and $8 million in costs related to the Senior Notes. The debt issuance costs associated with the Term Loans and Senior Notes were recorded as a reduction of the principal balance of the debt, and the Revolving Credit Facility costs were capitalized in Other assets. The issuance costs are being amortized through Interest expense for the duration of each respective debt facility. 68 RESIDEO TECHNOLOGIES, INC. The Credit Agreement and Senior Notes contain customary covenants limiting the ability of the Company and its subsidiaries to, among other things, pay cash dividends, incur debt or liens, redeem or repurchase stock of the Company, enter into transactions with affiliates, make investments, make capital expenditures, merge or consolidate with others or dispose of assets. The Credit Agreement First Amendment amended the Credit Agreement to: (i) increase the levels of the maximum consolidated total leverage ratio under the Credit Agreement, to not greater than 5.25 to 1.00 for the quarter ended December 31, 2019, with step-downs to 4.75 to 1.00 starting in the quarter ending December 31, 2020, 4.25 to 1.00 starting in the quarter ending December 31, 2021, and 3.75 to 1.00 starting in the quarter ending December 31, 2022; (ii) increase each applicable interest rate margin on loans outstanding after the first amendment effective date by 25 basis points per annum, 2.25% per annum (for LIBOR loans) and 1.25% per annum (for ABR loans) in respect of the Term B Loan Facility, and based on the Company’s leverage ratio, from 2.25% per annum to 1.75% per annum (for LIBOR loans) and 1.25% to 0.75% per annum (for ABR loans) for the Term A Loan Facility and the Revolving Credit Facility; and (iii) modify the defined terms “Consolidated EBITDA” and “Pro Forma Basis” set forth in the Credit Agreement. In connection with the Credit Agreement First Amendment, the Company incurred costs of approximately $4 million. The Term Loan costs were recorded as a reduction of the principal balance of the debt and the Revolving Credit Facility costs were capitalized in Other assets. The Credit Agreement Second Amendment amended the Credit agreement to permit the sale and leaseback transactions in an aggregate amount not to exceed $150 million for all such sale and leaseback transactions, provided that (x) each sale and leaseback transactions is undertaken on arm’s length commercial terms and (y) no Event of Default (as defined in the Credit Agreement) has occurred and is continuing or would result therefrom. As of December 31, 2020, the Company was in compliance with all covenants related to the Credit Agreement and Senior Notes. Note 16. Leases As discussed in Note 2, the Company adopted ASU No. 2016-02, Leases (Topic 842), effective January 1, 2019. The Company is party to operating leases for the majority of its manufacturing sites, offices, engineering and lab sites, stocking locations, warehouses, automobiles, and certain equipment. Certain of the Company’s real estate leases include variable rental payments which adjust periodically based on inflation, and certain automobile lease agreements include rental payments which fluctuate based on mileage. Generally, the Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company’s operating lease costs for the years ended December 31, 2020 and 2019 consisted of the following: Years Ended December 31, 2020 2019 Selling, general and administrative expenses ................................................. $ Cost of goods sold .......................................................................................... Total operating lease costs.............................................................................. $ 44 $ 17 61 $ 37 16 53 Total operating lease costs include variable lease costs of $16 million and $11 million for the years ended December 31, 2020 and 2019, respectively. Total operating lease costs also include offsetting sub-lease income which is immaterial for the years ended December 31, 2020 and 2019. 69 RESIDEO TECHNOLOGIES, INC. The Company recognized the following related to its operating leases: Financial Statement Line Item Operating right-of-use assets........................................................ Other assets Operating lease liabilities - current .............................................. Accrued liabilities Operating lease liabilities - non-current ....................................... Other liabilities At December 31, 2020 At December 31, 2019 $133 $33 $107 $137 $31 $111 Maturities of the Company’s operating lease liabilities were as follows: At December 31, 2020 2021.......................................................................................................................................... $ 2022.......................................................................................................................................... 2023.......................................................................................................................................... 2024.......................................................................................................................................... 2025.......................................................................................................................................... Thereafter ................................................................................................................................. Total lease payments ................................................................................................................ Less: Imputed interest .............................................................................................................. Present value of operating lease liabilities ............................................................................... $ Weighted-average remaining lease term (years) ...................................................................... Weighted-average incremental borrowing rate ........................................................................ 40 36 29 18 12 30 165 25 140 5.43 5.88% Supplemental cash flow information related to the Company’s operating leases was as follows: Years Ended December 31, 2020 2019 Operating cash outflows ................................................................................ $ Operating right-of-use assets obtained in exchange for operating lease liabilities ........................................................................................................ $ 30 26 $ $ 35 60 As of December 31, 2020, the Company has additional operating leases that have not yet commenced. Obligations under these leases are not material. Additionally, as a lessor, the Company leases all or a portion of certain owned properties. Rental income for the years ended December 31, 2020 and 2019 was not material. Note 17. Financial Instruments and Fair Value Measures Credit and Market Risk—The Company continually monitors the creditworthiness of its customers to which it grants credit terms in the normal course of business. The terms and conditions of credit sales are designed to mitigate or eliminate concentrations of credit risk with any single customer. Foreign Currency Risk Management—The Company conducts its business on a multinational basis in a wide variety of foreign currencies. It is exposed to market risks from changes in currency exchange rates. These exposures may impact future earnings and/or operating cash flows. The exposure to market risk for changes in foreign currency exchange rates arises from transactions arising from international trade, foreign currency denominated monetary assets and liabilities, and international financing activities between subsidiaries. The Company relies primarily on natural offsets to address the exposures and may supplement this approach from time to time by entering into forward and option hedging contracts. As of December 31, 2020 and 2019, the Company had no forward or hedging contracts. 70 RESIDEO TECHNOLOGIES, INC. Senior Notes and Credit Agreement—As of December 31, 2020, the Company assessed the amount recorded under the Term Loans, the Senior Notes, and the Revolving Credit Facility. The Term A Loan Facility, Term B Loan Facility and the Senior Notes’ fair values are approximately $305 million, $461 million and $422 million, respectively. The Company determined that the Revolving Credit Facility approximated fair value. The fair values of the debt are based on the quoted inactive prices and are therefore classified as Level 2 within the valuation hierarchy. The carrying value of cash and cash equivalents, accounts receivables - net, and accounts payables contained in the Consolidated Balance Sheets approximates fair value. Fair Value of Financial Instruments—The FASB’s accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The FASB’s guidance classifies the inputs used to measure fair value into the following hierarchy: Level 1 Quoted prices in active markets for identical assets or liabilities; Level 2 Observable inputs other than the quoted prices in active markets for identical assets and liabilities; and Level 3 Unobservable inputs for which there is little or no market data, which require the Company to develop assumptions of what market participants would use in pricing the asset or liability. Financial and non-financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Note 18. Stock-Based Compensation Plans On October 29, 2018, the Board adopted, and Honeywell, as the Company’s sole shareholder, approved, the 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates and the 2018 Stock Incentive Plan for Non-Employee Directors of Resideo Technologies, Inc. as may be amended from time to time (together, the “Stock Incentive Plan”). On or about December 21, 2018, the Board adopted the Amended and Restated 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates. The Stock Incentive Plan provides for the grant of stock options, stock appreciation rights, restricted stock units, restricted stock, other stock-based awards and cash- based awards. The maximum aggregate number of shares of the Company’s common stock that may be issued under awards granted under the Stock Incentive Plan is 16 million. As of December 31, 2020, 7,664,452 shares of the Company’s common stock were available to be granted under the Stock Incentive Plan. Summary of Restricted Stock Unit Activity Restricted stock unit (“RSU”) awards entitle the holder to receive one share of common stock for each unit when the units vest. RSUs are issued to certain key employees and to non-employee directors. RSUs typically become fully vested over periods ranging from one to seven years and are payable in Resideo common stock upon vesting. Since the Spin-Off on October 29, 2018 through December 31, 2018, the Company granted the following awards: • 1,809,644 RSUs were granted to employees of Resideo with four-year vesting periods in accordance with the Stock Incentive Plan • Honeywell stock options, RSUs, and performance-based awards held by certain of the key employees who would otherwise forfeit prior Honeywell awards as a result of the Spin-Off were issued replacement grants in the amount of 1,411,395 RSUs with substantially the same vesting schedule as the forfeited awards. Compensation expense for these awards will continue to be recognized ratably over the remaining term of the unvested awards, which ranged from one to four years as of the date of the Spin-Off. 117,145 RSUs were granted to members of the Board of Directors for annual director compensation with one to four-year vesting periods in accordance with the Stock Incentive Plan • 71 RESIDEO TECHNOLOGIES, INC. The following table summarizes RSU activity related to the Stock Incentive Plan during the years ended December 31, 2020 and 2019: RSUs Weighted Average Grant Date Fair Value Per Share Number of Restricted Stock Units Non-vested as of January 1, 2019........................................................... Granted .............................................................................................. Vested................................................................................................ Forfeited ............................................................................................ Non-vested as of December 31, 2019..................................................... Granted .............................................................................................. Vested................................................................................................ Forfeited ............................................................................................ Non-vested as of December 31, 2020..................................................... 3,338,184 $ 1,607,204 (509,366) (641,491) 3,794,531 3,057,775 (921,060) (731,482) 5,199,764 $ 24.05 21.83 23.78 24.07 23.14 9.45 21.07 18.57 16.10 As of December 31, 2020, there was approximately $22 million of total unrecognized compensation cost related to non-vested RSUs granted under the Stock Incentive Plan, which is expected to be recognized over a weighted-average period of 1.6 years. The fair value of RSUs that vested during the year ended December 31, 2020 is $9 million. Included in the outstanding RSUs are 867,732 performance-based RSU's as of December 31, 2020 and the related expense was $2 million during the year ended December 31, 2020. Summary of Stock Option Activity Stock option awards entitle the holder to purchase shares of common stock at a specific price when the options vest. Stock options typically vest over three years from the date of grant and expire seven years from the grant date. The fair value of stock options was calculated using the following assumptions in the Black-Scholes model: Expected stock price volatility................................................................ Expected term of options ........................................................................ Expected dividend yield ......................................................................... Risk-free interest rate.............................................................................. December 31, 2020 31% - 37% 4.5 years — 0.25% - 1.41% 2019 30% - 32% 4.5 years — 2.22% - 2.47% The aggregate intrinsic value disclosed below represents the total intrinsic value (the difference between the fair market value of the Company’s common stock as of December 31, 2020, and the exercise price, multiplied by the number of in-the-money service-based stock options) that would have been received by the option holders had all option holders exercised their options on December 31, 2020. This amount is subject to change based on changes to the fair market value of the Company’s common stock. 72 RESIDEO TECHNOLOGIES, INC. The following table summarizes stock option activity related to the Stock Incentive Plan during the year ended December 31, 2020: Stock Options Weighted Average Exercise Price Weighted Average Contractual Life (years) Aggregate Intrinsic Value Number of Stock Options Stock Options outstanding as of January 1, 2019 .... Granted................................................................ Forfeited.............................................................. - $ 1,155,566 (165,312) Stock Options outstanding as of December 31, 2019.......................................................................... Granted................................................................ Forfeited.............................................................. Stock Options outstanding as of December 31, 2020.......................................................................... Vested and expected to vest at December 31, 2020.......................................................................... Exercisable at December 31, 2020 ........................... - 24.37 24.39 24.36 9.17 18.39 - $ 6.0 990,254 1,083,665 (348,696) 1,725,223 15.98 4.9 1,446,606 442,013 $ 16.97 23.13 4.7 2.3 $ - - 12 9 - Stock options granted during the year ended December 31, 2020 had a weighted average grant date fair value per share of $2.61. As of December 31, 2020, there was approximately $1 million of total unrecognized compensation cost related to non-vested stock options granted under the Stock Incentive Plan, which is expected to be recognized over a weighted-average period of 1.5 years. No stock options were exercised during the year ended December 31, 2020. Summary of Stock-Based Compensation The following table summarizes stock-based compensation expense and the related tax benefits under the Company’s plans: Years Ended December 31, 2019 2020 2018 Stock-based compensation expense before income taxes .... $ Less: Income tax expense (benefit) ...................................... Stock-based compensation expense, net of income taxes .... $ 29 $ 1 30 $ 25 $ (1) 24 $ 20 (5) 15 Certain share-based compensation expense relates to stock-based awards awarded to key employees of the Company as part of Honeywell’s incentive compensation plans prior to the Spin-Off. Such share-based compensation expense was $16 million for the period from January 1, 2018 until October 29, 2018. Note 19. Commitments and Contingencies Environmental Matters The Company is subject to various federal, state, local, and foreign government requirements relating to the protection of the environment. It believes that, as a general matter, its policies, practices and procedures are properly designed to prevent unreasonable risk of environmental damage and personal injury and that its handling, manufacture, use and disposal of hazardous substances are in accordance with environmental and safety laws and regulations. The Company has incurred remedial response and voluntary cleanup costs for site contamination and is a party to claims associated with environmental and safety matters, including products containing hazardous substances. Additional claims and costs involving environmental matters are likely to continue to arise in the future. 73 RESIDEO TECHNOLOGIES, INC. With respect to environmental matters involving site contamination, the Company continually conducts studies, individually or jointly with other potentially responsible parties, to determine the feasibility of various remedial techniques. It is its policy to record appropriate liabilities for environmental matters when remedial efforts or damage claim payments are probable and the costs can be reasonably estimated. Such liabilities are based on the best estimate of the undiscounted future costs required to complete the remedial work. The recorded liabilities are adjusted periodically as remediation efforts progress or as additional technical, regulatory or legal information becomes available. Given the uncertainties regarding the status of laws, regulations, enforcement policies, the impact of other potentially responsible parties, technology and information related to individual sites, the Company does not believe it is possible to develop an estimate of the range of reasonably possible environmental loss in excess of the Company’s recorded liabilities. The Company expects to fund expenditures for these matters from operating cash flow. The timing of cash expenditures depends on a number of factors, including the timing of remedial investigations and feasibility studies, the timing of litigation and settlements of remediation liability, personal injury and property damage claims, regulatory approval of cleanup projects, remedial techniques to be utilized, and agreements with other parties. The Company accrues costs related to environmental matters when it is probable that it has incurred a liability related to a contaminated site and the amount can be reasonably estimated. Environmental-related expenses for sites owned and operated by Resideo are presented within Cost of goods sold in the Consolidated and Combined Statements of Operations. Prior to the Spin-Off, expenses related to Honeywell Sites now under the Reimbursement Agreement were presented within Other expense, net in the Consolidated and Combined Statements of Operations. The following table summarizes information concerning the recorded liabilities for environmental costs for the year ended December 31, 2020, 2019 and 2018. On October 29, 2018, upon the consummation of the Spin-Off, certain environmental liabilities became subject to the Reimbursement Agreement and were reclassified to Obligations payable under Indemnification Agreements. For additional information, see Reimbursement Agreement below. Years Ended December 31, 2019 2018 2020 Beginning balance............................................................................. Accruals for environmental matters deemed probable and reasonably estimable ......................................................................... Less: Environmental liability payments............................................ Less: Change due to the Reimbursement Agreement payments....... Less: Liabilities subject to the Reimbursement Agreement payments ........................................................................................... Ending balance .................................................................................. $ 22 $ 20 $ 1 (1) - - 22 $ 2 - - - 22 $ $ 537 340 (179) (86) (592) 20 The $86 million change for the year ended December 31, 2018 due to the Reimbursement Agreement represents a reduction in the estimated liability driven by the terms of Reimbursement Agreement at October 29, 2018. Pursuant to the Reimbursement Agreement, the Company is responsible to indemnify Honeywell in amounts equal to 90% of the environmental-liability payments of certain sites, less 90% of Honeywell’s net insurance receipts relating to such liabilities, and less 90% of the net proceeds received by Honeywell in connection with (i) affirmative claims relating to such liabilities, (ii) contributions by other parties relating to such liabilities and (iii) certain property sales. Prior to the Spin-Off, the Company’s estimated liability for resolution of the same pending and future environmental-related liabilities was calculated as if it was responsible for 100% of the environmental- liability payments. In addition, prior to the Spin-Off, these costs were calculated on the gross basis, excluding any insurance receipts or proceeds received by Honeywell. The Company does not currently possess sufficient information to reasonably estimate the amounts of environmental liabilities to be recorded upon future completion of studies, litigation or settlements, and neither the timing nor the amount of the ultimate costs associated with environmental matters can be determined although they could be material to the Company’s consolidated and combined results of operations and operating cash flows in the periods recognized or paid. 74 RESIDEO TECHNOLOGIES, INC. Obligations Payable Under Indemnification Agreements In connection with the Spin-Off, the Company entered into a Reimbursement Agreement and a tax matters agreement (the “Tax Matters Agreement”) (collectively, the “Indemnification Agreements”) which are further described below. Reimbursement Agreement On October 29, 2018, in connection with the Spin-Off, the Company entered into the Reimbursement Agreement pursuant to which the Company has an obligation to make cash payments to Honeywell in amounts equal to 90% of payments for certain Honeywell environmental-liability payments, which include amounts billed (“payments”), less 90% of Honeywell’s net insurance receipts relating to such liabilities, and less 90% of the net proceeds received by Honeywell in connection with (i) affirmative claims relating to such liabilities, (ii) contributions by other parties relating to such liabilities and (iii) certain property sales (the “recoveries”). The amount payable by the Company in respect of such liabilities arising in respect of any given year is subject to a cap of $140 million. Payments in respect of the liabilities arising in a given year will be made quarterly throughout such year on the basis of an estimate of the liabilities and recoveries provided by Honeywell. Following the end of any such year, Honeywell will provide the Company with a calculation of the amount of payments and the recoveries actually received. Payment amounts under the Reimbursement Agreement will be deferred to the extent that a specified event of default has occurred and is continuing under certain indebtedness, including under the Credit Agreement, or the payment thereof causes the Company to not be compliant with certain financial covenants in certain indebtedness, including the Company’s Credit Agreement on a pro forma basis, including the maximum total leverage ratio (ratio of consolidated debt to consolidated EBITDA, which excludes any amounts owed to Honeywell under the Reimbursement Agreement), and the minimum interest coverage ratio. The obligations under the Reimbursement Agreement will continue until the earlier of: (1) December 31, 2043; or (2) December 31 of the third consecutive year during which the annual reimbursement obligation (including in respect of deferred payment amounts) has been less than $25 million. During the year, the Company and Honeywell entered into several amendments to the Reimbursement Agreement. These amendments included modifications of certain covenants in Exhibit G to conform to the amended covenants included in the Credit Agreement First Amendment, deferment of certain payments under the Reimbursement Agreement to later in the year, and amendment of Exhibit G to, among other things, permit sale and leaseback transaction. An aggregate amount of up to $150 million would be permitted thereunder so long as the same conditions that are applicable under the Credit Agreement are satisfied. On February 12, 2021, the Company entered into another amendment with Honeywell. See Note 24. Subsequent Events for a further discussion of this amendment. The following table summarizes information concerning the Company’s Reimbursement Agreement liabilities: Years Ended December 31, 2019 2018 2020 Beginning balance............................................................................. Liabilities subject to the Reimbursement Agreement payments....... Accruals for indemnification liabilities deemed probable and reasonably estimable ......................................................................... Reduction (1) ............................................................................. Indemnification payment .................................................................. Ending balance(2)....................................................................... $ $ 585 $ - 146 - (140) 591 $ 616 $ - 179 (71) (139) 585 $ - 592 49 - (25) 616 75 RESIDEO TECHNOLOGIES, INC. (1) Reduction in indemnification liabilities relates to a provision in the Reimbursement Agreement that reduces the obligation due to Honeywell for any proceeds received by Honeywell from a property sale of a site under the agreement. (2) Reimbursement Agreement liabilities deemed probable and reasonably estimable, however, it is possible the Company could pay $140 million per year (exclusive of any late payment fees up to 5% per annum) until the earlier of (1) December 31, 2043; or (2) December 31 of the third consecutive year during which the annual reimbursement obligation (including in respect of deferred payment amounts) has been less than $25 million. Reimbursement Agreement liabilities are included in the following balance sheet accounts: Accrued liabilities ............................................................................................... Obligations payable under Indemnification Agreements.................................... Years Ended December 31, 2020 2019 $ $ 140 $ 451 591 $ 140 445 585 The Company does not currently possess sufficient information to reasonably estimate the amounts of indemnification liabilities to be recorded upon future completion of studies, litigation or settlements, and neither the timing nor the amount of the ultimate costs associated with environmental matters can be determined although they could be material to the Company’s consolidated and combined results of operations and operating cash flows in the periods recognized or paid. Independent of the Company’s payments under the Reimbursement Agreement, the Company will have ongoing liability for certain environmental claims which are part of the Company’s going forward business. Tax Matters Agreement In connection with the Spin-Off, the Company entered into the Tax Matters Agreement with Honeywell pursuant to which it is responsible and will indemnify Honeywell for all taxes, including income taxes, sales taxes, VAT and payroll taxes, relating to the business for all periods, including periods prior to the consummation of the Spin-Off. In addition, the Tax Matters Agreement addresses the allocation of liability for taxes that are incurred as a result of restructuring activities undertaken to effectuate the Spin-Off. In addition, the Tax Matters Agreement provides that the Company is required to indemnify Honeywell for any taxes (and reasonable expenses) resulting from the failure of the Spin-Off and related internal transactions to qualify for their intended tax treatment under U.S. federal, state and local income tax law, as well as foreign tax law, where such taxes result from (a) breaches of covenants and representations it makes and agrees to in connection with the Spin-Off, (b) the application of certain provisions of U.S. federal income tax law to these transactions or (c) any other action or omission (other than actions expressly required or permitted by the Separation and Distribution Agreement, the Tax Matters Agreement or other ancillary agreements) the Company takes after the consummation of the Spin-Off that gives rise to these taxes. As of December 31, 2020, and 2019, the Company had an indemnity outstanding to Honeywell for future tax payments of $139 million and $149 million, which is included in Obligations payable under Indemnification Agreements. Trademark Agreement The Company and Honeywell entered into a 40-year Trademark License Agreement (the “Trademark Agreement”) that authorizes the Company’s use of certain licensed trademarks in the operation of Resideo’s business for the advertising, sale and distribution of certain licensed products. In exchange, the Company will pay a royalty fee of 1.5% on net revenue to Honeywell related to such licensed products which is recorded in Selling, general and administrative expense on the Consolidated and Combined Statements of Operations. For the years ended December 31, 2020, 2019, and 2018, royalty fees were $26 million, $27 million, and $4 million, net of a one- time credit of $2 million received in December 31, 2018 for inventory on hand as of the Spin-Off, respectively. 76 RESIDEO TECHNOLOGIES, INC. Other Matters The Company is subject to lawsuits, investigations and disputes arising out of the conduct of its business, including matters relating to commercial transactions, government contracts, product liability, prior acquisitions and divestitures, employee matters, intellectual property, and environmental, health and safety matters. The Company recognizes a liability for any contingency that is probable of occurrence and reasonably estimable. The Company continually assesses the likelihood of adverse judgments for outcomes in these matters, as well as potential ranges of possible losses (taking into consideration any insurance recoveries), based on a careful analysis of each matter with the assistance of outside legal counsel and, if applicable, other experts. No such matters are material to the Company’s unaudited financial statements. The Company, the Company’s former CEO Michael Nefkens, the Company’s former CFO Joseph Ragan, and the Company’s former CIO Niccolo de Masi are named defendants of a class action securities suit in the U.S. District Court for the District of Minnesota styled In re Resideo Technologies, Inc. Securities Litigation, 19-cv- 02863 (the “Securities Litigation”). The Securities Litigation is a class action securities suit with the class defined as all persons or entities who purchased or otherwise acquired common stock of Resideo during the class period of October 29, 2018 to November 6, 2019. The complaint asserts claims under Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934, broadly alleging, among other things, that the defendants (or some of them) made false and misleading statements regarding, among other things, Resideo’s business, performance, the efficiency of its supply chain, operational and administrative issues resulting from the spin-off from Honeywell, certain business initiatives, and financial guidance in 2019. The defendants filed a motion to dismiss the complaint on July 10, 2020. The motion to dismiss has been fully briefed and a hearing was held on the motion on December 1, 2020. The court has not yet issued its decision regarding the motion to dismiss. The Company and the plaintiffs are scheduled to participate in a mediation on February 25, 2021, in an effort to settle the Securities Litigation. There can be no assurance that a settlement will be reached. If a settlement cannot be reached, the Company intends to vigorously defend against the allegations in the Securities Litigation. However, there can be no assurance that the defense will be successful. On July 7, 2020, Jawad A. Ayaz as Trustee of the Shiv Venkatasetty 2016 Trust (“Derivative Plaintiff”) filed a shareholder derivative complaint (the “Derivative Complaint”) against certain current or former directors and officers of the Company (“Derivative Defendants”) in the District Court for the District of Delaware, captioned Ayaz v. Nefkens, 20-cv-00915. Derivative Plaintiff alleges generally that Derivative Defendants breached fiduciary duties owed to the Company by allegedly causing or allowing the Company to make materially false and misleading statements to the public regarding the Company’s business operations and financial prospects. Derivative Plaintiff also alleges that the Company’s 2019 proxy statement was materially false and misleading, in violation of Section 14(a) of the Securities Exchange Act of 1934, and asserts claims of corporate waste and unjust enrichment, among other allegations, and relies on a similar set of facts as alleged in the Securities Litigation. The Derivative Complaint seeks declaratory relief and unspecified money damages on behalf of the Company. On July 28, 2020, certain of the Derivative Defendants filed a stipulation to stay the proceedings pending the resolution of the motion to dismiss in the Securities Litigation. An additional shareholder derivative complaint was filed on August 12, 2020, by Plaintiff Daniel Sanclemente (the “Sanclemente Action”) on behalf of the Company in the District Court for the District of Delaware, captioned Sanclemente v. Nefkens, 20-cv-1062, alleging substantially the same facts and making substantially the same claims against the same defendants as in the Derivative Complaint. The District Court has consolidated the Derivative Complaint and the Sanclemente Action. The consolidated action is styled In re Resideo Technologies, Inc. Derivative Litigation, 20-cv-00915 (the “Derivative Action”), and lead counsel has been appointed. Additionally, the court has granted a stipulation to stay the consolidated action pending the resolution of the motion to dismiss in the Securities Litigation. On August 28, 2020, Riviera Beach Police Pension Fund (“Riviera Beach”) filed a motion to intervene in the Derivative Action. On September 18, 2020, Riviera Beach and the existing plaintiffs reached an agreement regarding the leadership structure of the Derivative Action in the event that Riviera Beach files its own complaint in the future, and in connection therewith, Riviera Beach withdrew its motion to intervene. The Company intends to defend this action vigorously, but there can be no assurance that the defense will be successful. 77 RESIDEO TECHNOLOGIES, INC. Warranties and Guarantees In the normal course of business, the Company issues product warranties and product performance guarantees. It accrues for the estimated cost of product warranties and product performance guarantees based on contract terms and historical experience at the time of sale. Adjustments to initial obligations for warranties and guarantees are made as changes to the obligations become reasonably estimable. Product warranties and product performance guarantees are included in Accrued liabilities. The following table summarizes information concerning recorded obligations for product warranties and product performance guarantees. Years Ended December 31, 2019 2018 2020 Beginning balance............................................................................. Accruals for warranties/guarantees issued during the year ......... Adjustment of pre-existing warranties/guarantees ...................... Settlement of warranty/guarantee claims .......................................... Ending balance .................................................................................. $ $ $ 25 21 (7) (17) $ 22 $ 26 15 - (16) $ 25 17 17 (1) (7) 26 Purchase Commitments The Company’s unconditional purchase obligations include purchase commitments with suppliers and other obligations entered in to during the normal course of business regarding the purchase of goods and services. As of December 31, 2020, the Company’s estimated minimum obligations associated with unconditional purchase obligations, which are not recognized in the Company’s Consolidated Balance Sheet, were $16 million in 2021, $17 million in 2022, $9 million in 2023 and $3 million in 2024. For the years ended December 31, 2020 and 2019, purchases related to these obligations were $15 million and $26 million, respectively. Purchases under these obligations were not material for the year ended December 31, 2018. Note 20. Pension Prior to the Spin-Off, certain of Resideo’s employees participated in multiple U.S. and non-U.S. defined benefit pension plans (the “Shared Plans”) sponsored by Honeywell, which includes participants from other Honeywell subsidiaries and operations. The Company accounted for participation in the Shared Plans as if the Shared Plans were a multiemployer benefit plan. Accordingly, it did not record an asset or liability to recognize the funded status of the Shared Plans. The related pension expense was allocated based on annual service cost of active participants and reported within Costs of goods sold and Selling, general and administrative expenses in the Consolidated and Combined Statements of Operations. The pension expense related to participation in the Shared Plans for the period from January 1, 2018 until October 29, 2018 and the year ended December 31, 2018 was $11 million and $16 million, respectively. As of the date of separation from Honeywell, these employees’ and certain former Honeywell employees’ entitlement to benefits in Honeywell’s plans were transferred to Resideo sponsored plans. The Resideo defined benefit pension plans have substantially similar benefit formulas as the Honeywell defined benefit pension plans. Moreover, vesting service, benefit accrual service and compensation credited under the Honeywell defined benefit pension plans apply to the determination of pension benefits under the Resideo defined benefit pension plan. The Company sponsors multiple funded and unfunded U.S. and non-U.S. defined benefit pension plans. Pension benefits for many of its U.S. employees are provided through non-contributory, qualified and non-qualified defined benefit plans. It also sponsors defined benefit pension plans which cover non-U.S. employees who are not U.S. citizens, in certain jurisdictions, principally Germany, Austria, Belgium, France, India, Switzerland, and the Netherlands. 78 RESIDEO TECHNOLOGIES, INC. The following tables summarize the balance sheet impact, including the benefit obligations, assets and funded status associated with the pension plans. U.S. Plans Non-U.S. Plans 2020 2019 2018 2020 2019 2018 Change in benefit obligation: Benefit obligation at beginning of year (1) ................................................... $ Service cost........................................... Interest cost........................................... Actuarial losses (gains) ........................ Net benefits paid................................... Settlements ........................................... Other ..................................................... Exchange rate adjustments ................... Benefit obligation at end of year .......... Change in plan assets: Fair value of plan assets at beginning of year (1)............................................... Actual return (loss) on plan assets........ Contributions ........................................ Net benefits paid................................... Settlements ........................................... Other ..................................................... Exchange rate adjustments ................... Fair value of plan assets at end of year ....................................................... Funded status of plans (non-current) ......... $ 344 $ 7 11 38 (4) (22) - - 374 331 35 1 (4) (22) (1) - $ 286 5 13 51 (13) - 2 - 344 274 70 - (13) - - - $ 279 1 2 5 (1) - - - 286 279 (4) - (1) - - - 137 $ 7 1 6 - (6) 2 14 161 27 - 2 - (6) 3 2 $ 93 5 2 27 - (3) 13 - 137 20 2 2 1 (3) 5 - 95 1 - (3) - - - - 93 20 - - - - - - 340 (34) $ 331 (13) $ 274 (12) $ 28 (133) $ 27 (110) $ 20 (73) (1) 2018 "Beginning of year" is the Spin-Off date, October 29, 2018. The benefit obligation generated a global net actuarial loss of $44 million for the year ended December 31, 2020. A global decrease in discount rates over the course of the year was the main driver, generating a total loss of $50 million across all plans, partially offset by gains on inflation related assumptions of approximately $5 million (driven primarily by inflation/pension increase assumption in the Germany, which resulted in a gain of $5 million), and by gains on demographic assumptions of approximately $2 million (driven primarily by change in mortality assumption in the U.S., which resulted in a gain of $2 million). Experience losses added $1 million of net actuarial loss globally, while losses from other assumption changes were not significant. Actual return on plan assets for the year ended December 31, 2020 was higher than expected due to equity and bonds performance being above expectations leading to an additional asset gain of $17 million globally, for a total asset return of $35 million globally. Amounts recognized in Accumulated other comprehensive (loss) associated with pension plans at December 31, 2020 and 2019 are as follows: Prior service credit........................................................... $ Net actuarial loss ............................................................. Net amount recognized.................................................... $ (2) $ 30 28 $ (3) $ 12 9 $ - $ 14 14 $ - 13 13 U.S. Plans 2020 2019 Non-U.S. Plans 2020 2019 79 RESIDEO TECHNOLOGIES, INC. The components of net periodic benefit cost and other amounts recognized in Comprehensive income for pension plans include the following components: U.S. Plans 2020 2019 2018 (1) 2020 Non-U.S. Plans 2019 2018 (1) Net Periodic Benefit Cost Service cost ................................................... $ Interest cost ................................................... Expected return on plan assets ...................... Amortization of prior service credit.............. Mark to market adjustment ........................... Other.............................................................. Net periodic benefit cost ............................... $ $ 7 11 (17) (1) - 3 3 $ 5 $ 13 (16) (1) 1 - 2 $ 1 $ 2 (3) - - - - $ $ 7 1 (1) - 6 - 13 $ 5 $ 2 (1) - 16 2 24 $ 1 - - - - - 1 (1) 2018 begins at the Spin-Off date, October 29, 2018. Activity before the Spin-Off date was recognized under the Shared Plans. The components of net periodic benefit cost other than the service cost are included in Other expense, net in the Consolidated and Combined Statements of Operations for the years ended December 31, 2020, 2019 and 2018. U.S. Plans 2020 2019 2018 (1) 2020 Non-U.S. Plans 2019 2018 (1) Other Changes in Plan Assets and Benefits Obligations Recognized in Other Comprehensive Loss (Income) Actuarial losses (gains) .............................. $ Excess return on plan assets(2).................... Actuarial gains recognized during the year............................................................. Other .......................................................... Total recognized in other comprehensive loss (income).............................................. $ Total recognized in net periodic benefit cost and other comprehensive loss (income) ..................................................... $ 38 $ (17) 51 $ (54) 12 $ - (2) - - - - - $ 6 - (6) 1 26 $ (1) (17) - (3) - - - 19 $ (3) $ 12 $ 1 $ 8 $ (3) 22 $ (1) $ 12 $ 14 $ 32 $ (2) (1) 2018 begins at the Spin-Off date, October 29, 2018. Activity before the Spin-Off date was recognized under the Shared Plans. (2) Represents actual return on plan assets in excess of the expected return. 80 RESIDEO TECHNOLOGIES, INC. Significant actuarial assumptions used in determining the benefit obligations and net periodic benefit (income) cost for benefit plans are presented in the following table as weighted averages. 2020 U.S. Plans 2019 2018 2020 Non-U.S. Plans 2019 2018 Actuarial assumptions used to determine benefit obligations as of December 31: Discount rate ........................................ Interest crediting rate ........................... Expected annual rate of compensation increase................................................. Actuarial assumptions used to determine net periodic benefit cost for the twelve months ended December 31: Discount rate - benefit obligation......... Interest crediting rate ........................... Expected rate of return on plan assets .................................................... Expected annual rate of compensation increase................................................. 2.7% 6.0% 3.3% 6.0% 4.5% 6.0% 0.7% 1.5% 1.1% 1.5% 1.9% 1.5% 3.5% 3.4% 3.4% 2.4% 2.4% 2.3% 3.3% 6.0% 5.4% 3.4% 4.5% 6.0% 5.7% 3.4% 4.5% 6.0% 5.7% 3.4% 1.1% 1.5% 2.7% 2.4% 2.0% 1.5% 2.8% 2.4% 1.9% 1.5% 3.3% 2.3% The discount rate for the U.S. pension plans reflects the current rate at which the associated liabilities could be settled at the measurement date of December 31. To determine discount rates for the U.S. pension plans, the Company uses a modeling process that involves matching the expected cash outflows of its benefit plans to a yield curve constructed from a portfolio of high-quality, fixed income debt instruments. The Company uses the single weighted-average yield of this hypothetical portfolio as a discount rate benchmark. The expected rate of return on U.S. plan assets of 5.4% is a long-term rate based on historical plan asset returns over varying long-term periods combined with current market conditions and broad asset mix considerations. The Company reviews the expected rate of return on an annual basis and revises it as appropriate. For non-U.S. benefit plans, actuarial assumptions reflect economic and market factors relevant to each country. The following amounts relate to pension plans with accumulated benefit obligations exceeding the fair value of plan assets. December 31, U.S. Plans 2020 2019 Non-U.S. Plans 2020 2019 Projected benefit obligation ................................................. $ Accumulated benefit obligation........................................... $ Fair value of plan assets....................................................... $ 374 $ 358 $ 340 $ 344 $ $ 332 $ 331 161 $ 139 $ 28 $ 137 116 27 The Company utilized a third-party investment management firm to serve as its Outsourced Chief Investment Officer; however, the Company has appointed an internal fiduciary committee that monitors adherence to the investment guidelines the firm will follow. The Company employs an investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk. Risk tolerance is established through careful consideration of plan liabilities and plan funded status. The investment portfolio contains a diversified blend of equity and fixed income investments. Furthermore, equity investments are diversified across U.S. and non-U.S. stocks, as well as growth, value and small and large capitalizations. Other assets such as real estate and hedge funds may be used to improve portfolio diversification. 81 RESIDEO TECHNOLOGIES, INC. The non-U.S. investment policies are different for each country as local regulations, funding requirements, and financial and tax considerations are part of the funding and investment allocation process in each country. A majority of the U.S. pension plan assets as of December 31, 2020 do not have published pricing and are valued using Net Asset Value (“NAV”) which approximates fair value. NAV by asset category and fair value by asset category are as follows for December 31, 2020 and 2019: U.S. Plans December 31, 2020 Level 1 Level 2 Level 3 December 31, 2019 Level 1 Level 2 Level 3 Total Cash................................................ $ 6 Equity............................................. 105 Investment funds............................ 14 U.S. treasury obligations................ 16 Government bonds ......................... 41 Corporate bonds ............................. 126 Real estate / property ..................... 32 Total assets at fair value................. $ 340 NAV 1 $ 105 14 16 41 126 32 $ 335 $ $ 5 - - - - - - 5 $ $ - - - - - - - - $ $ $ Total 4 - 100 - 15 - 132 - 32 - 16 - 32 - $ 331 - NAV - $ 100 15 132 32 16 32 $ 327 $ $ 4 - - - - - - 4 $ $ - - - - - - - - $ $ - - - - - - - - The fair values of the non-U.S. pension plan assets as by asset category are as follows: Non-U.S. Plans Equity....................................................... $ Government bonds................................... Corporate bonds....................................... Insurance contracts .................................. Other ........................................................ Total assets at fair value........................... $ 5 Total Level 1 December 31, 2020 Level 2 - 1 - - - 1 1 $ - - - - 1 $ 1 $ 1 - 10 16 28 $ $ Level 3 Total - $ - - 10 16 26 $ $ 1 $ 1 1 8 16 27 $ Level 1 December 31, 2019 Level 2 - 1 1 - - 2 1 $ - - - - 1 $ Level 3 - $ - - 8 16 24 $ The following table summarizes changes in the fair value of Level 3 assets for Non-U.S. plans: Balance at October 29, 2018 .................................................................................................... Return on plan assets................................................................................................................ Purchases, sales and settlements, net ....................................................................................... Balance at December 31, 2018................................................................................................. Return on plan assets................................................................................................................ Purchases, sales and settlements, net ....................................................................................... Other......................................................................................................................................... Balance at December 31, 2019................................................................................................. Return on plan assets................................................................................................................ Purchases, sales and settlements, net ....................................................................................... Other......................................................................................................................................... Balance at December 31, 2020................................................................................................. $ $ Non-U.S. Plans 5 1 - 6 2 15 1 24 - (1) 3 26 82 RESIDEO TECHNOLOGIES, INC. Corporate Bonds and Government Bonds held as of December 31, 2020 and 2019 are valued either by using pricing models, bids provided by brokers or dealers, quoted prices of securities with similar characteristics or discounted cash flows and as such include adjustments for certain risks that may not be observable such as credit and liquidity risks. Other investments as of December 31, 2020 and 2019 and Insurance Contracts are classified as Level 3 as there are neither quoted prices nor other observable inputs for pricing. Insurance Contracts are issued by insurance companies and are valued at cash surrender value, which approximates the contract fair value. Other investments consist of a collective pension foundation that is valued and allocated by the plan administrator. The Company utilizes the services of retirement and investment consultants to actively manage the assets of the Company’s pension plans. The Company has established asset allocation targets and investment guidelines based on the guidance of the consultants. The Company’s target allocations are 51% fixed income investments, 29% global equity investments, 10% global real estate investments and 10% cash and other investments. The Company’s general funding policy for qualified defined benefit pension plans is to contribute amounts at least sufficient to satisfy regulatory funding standards. In 2020, it was not required to make contributions to the U.S. pension plans, however $1 million of contributions were made. There is no requirement to make any contributions to the U.S. pension plans in 2021. In 2020, contributions of $2 million were made to the non-U.S. pension plans to satisfy regulatory funding requirements. In 2021, the Company expects to make contributions of cash and/or marketable securities of approximately $2 million to the non-U.S. pension plans to satisfy regulatory funding standards. Contributions for both the U.S. and non-U.S. pension plans do not reflect benefits paid directly from Company assets. Benefit payments, including amounts to be paid from Company assets, and reflecting expected future service, as appropriate, are expected to be paid as follows: 2021.............................................................................................................. $ 2022.............................................................................................................. $ 2023.............................................................................................................. $ 2024.............................................................................................................. $ 2025.............................................................................................................. $ 2026-2030..................................................................................................... $ Note 21. Segment Financial Data U.S. Plans Non-U.S. Plans 2 2 2 3 3 21 19 $ 20 $ 21 $ 23 $ 23 $ 114 $ In May 2020, the Board appointed Jay Geldmacher as President and CEO of the Company. As part of this transition, during the fourth quarter of 2020, the format of the Chief Operating Decision Maker's reporting package was modified which resulted in changes to how business operations are presented. The Company continues to monitor its business operations through two operating segments, Products & Solutions and ADI Global Distribution. The Company now reports Corporate separately from the two operating segments. The reporting package also includes segment Operating profit, which replaces Segment Adjusted EBITDA as a performance metric. These changes were designed to better align accountability and authority, give a clearer view into the operational performance of the two segments and increase accountability for management of corporate spending. As a result, the Company recast prior periods to conform with the new fourth quarter 2020 presentation. Products & Solutions—The Products & Solutions business is a leading global provider of products, software solutions and technologies that help homeowners stay connected and in control of their comfort, security and energy use. ADI Global Distribution—The ADI Global Distribution business is the leading wholesale distributor of low-voltage security products including intrusion, access control and video products and participates significantly in 83 RESIDEO TECHNOLOGIES, INC. the broader related markets of smart home, fire, access control, power, audio, ProAV, networking, communications, wire and cable, enterprise connectivity, and structured wiring products. Corporate—Corporate includes headquarter type expenses associated with legal, finance, information technology, human resources, strategy and communications related to the Corporate office as well as supporting the operating segments, but do not relate directly to revenue-generating activities. Segment information is consistent with how management reviews the businesses, makes investing and resource allocation decisions and assesses operating performance. Years Ended December 31, 2019 2018 2020 Revenue Total Products & Solutions revenue............................................ $ Less: Intersegment revenue ......................................................... External Products & Solutions revenue ................................. External ADI Global Distribution revenue ............................ Total revenue .................................................................... $ 2,488 367 2,121 2,950 5,071 $ $ 2,487 312 2,175 2,813 4,988 $ $ 2,474 305 2,169 2,658 4,827 Years Ended December 31, 2019 2018 2020 Operating profit Products & Solutions ................................................................... $ ADI Global Distribution.............................................................. Corporate ..................................................................................... Total ....................................................................................... $ $ 407 194 (290) $ 311 $ 327 210 (279) $ 258 591 205 (303) 493 Years Ended December 31, 2019 2018 2020 Depreciation and amortization Products & Solutions ................................................................... $ ADI Global Distribution.............................................................. Corporate ..................................................................................... Total ....................................................................................... $ 63 12 11 86 $ $ 62 10 8 80 $ $ Capital expenditures Products & Solutions ................................................................... $ ADI Global Distribution.............................................................. Corporate ..................................................................................... Total ....................................................................................... $ 41 15 14 70 $ $ 71 5 19 95 $ $ Years Ended December 31, 2019 2018 2020 48 10 8 66 61 5 15 81 The Company’s CODM does not use segment assets information to allocate resources or to assess performance of the segments and therefore, total segment assets have not been disclosed. 84 RESIDEO TECHNOLOGIES, INC. Note 22. Geographic Areas—Financial Data Net Revenue (1) Years Ended December 31, 2020 2019 2018 2020 Long-lived Assets (2) December 31, United States ..................................................... $ 3,543 $ 3,423 1,117 Europe ............................................................... 448 Other International ............................................ $ 5,071 $ 4,988 1,121 407 $ 3,289 1,138 400 $ 4,827 $ $ 260 $ 144 47 451 $ 2019 2018 184 $ 91 25 300 272 136 45 453 $ (1) Revenue between geographic areas approximate market and is not significant. Net revenue is classified according to their country of origin. Included in United States net revenue are export sales of $21 million, $27 million and $31 million in 2020, 2019 and 2018, respectively. (2) Long-lived assets are comprised of Property, plant and equipment – net and lease right-of-use assets. The Company has restated long-lived assets as of December 31, 2019 to include lease right-of-use assets, resulting in an increase in long-lived assets of $86 million in the United states, $33 million in Europe and $18 million in Other International. Note 23. Unaudited Quarterly Financial Information The following tables show selected unaudited quarterly results of operations for 2020 and 2019. The quarterly data have been prepared on the same basis as the audited annual financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the results of operations for these periods. Q1 Q2 2020 Q3 Q4 Net revenue............................................ $ Gross profit............................................ Net (loss) income................................... Earnings (loss) per share -basic............. Earnings (loss) per share - diluted ......... 1,179 $ 284 (21) (0.17) (0.17) 1,029 $ 236 (76) (0.62) (0.62) 1,362 $ 370 75 0.61 0.60 Q1 Q2 2019 Q3 Q4 Net revenue............................................ $ Gross profit............................................ Net income (loss)................................... Earnings (loss) per share - basic............ Earnings (loss) per share - diluted ......... 1,216 $ 332 48 0.39 0.39 1,242 $ 323 (11) (0.09) (0.09) 1,226 $ 309 8 0.07 0.06 Note 24. Subsequent Events Amended and Restated Credit Agreement Year Ended December 31, 5,071 1,313 37 0.30 0.29 1,501 $ 423 59 0.45 0.44 Year Ended December 31, 4,988 1,277 36 0.29 0.29 1,304 $ 313 (9) (0.07) (0.07) On February 12, 2021, the Company entered into an amended and restated credit agreement (the “A&R Credit Agreement”). The A&R Credit Agreement provides for (i) a seven-year senior secured term B loan facility in an aggregate principal amount of $950 million (the “A&R Term B Facility”) and (ii) a five-year senior secured revolving credit facility in an aggregate principal amount of $500 million (the “A&R Revolving Credit Facility” and, together with the Term Loan Facilities, the “A&R Senior Credit Facilities”). The Company is obligated to make quarterly principal payments of approximately $2.4 million throughout the term of the A&R Term B Facility according to the amortization provisions in the A&R Credit Agreement. In addition to paying interest on outstanding borrowings under the A&R Revolving Credit Facility, the Company is 85 RESIDEO TECHNOLOGIES, INC. required to pay a quarterly commitment fee based on the unused portion of the A&R Revolving Credit Facility. Borrowings under the A&R Credit Agreement can be prepaid at the Company’s option without premium or penalty other than a 1.00% prepayment premium that may be payable in connection with certain repricing transactions within a certain period of time after the closing date. Up to $75 million may be utilized under the A&R Revolving Credit Facility for the issuance of letters of credit to the Company or any of the Company’s subsidiaries. Letters of credit are available for issuance under the A&R Credit Agreement on terms and conditions customary for financings of this kind, which issuances will reduce the available funds under the A&R Revolving Credit Facility. The A&R Senior Credit Facilities are subject to an interest rate and interest period which the Company will elect. If the Company chooses to make a base rate borrowing on an overnight basis, the interest rate will be based on the highest of (1) the rate of interest last quoted by The Wall Street Journal as the “prime rate” in the United States, (2) the greater of the federal funds effective rate and the overnight bank funding rate, plus 0.5% and (3) the one month adjusted LIBOR rate, plus 1.00% per annum. For the A&R Term Loan B, the applicable LIBOR rate will not be less than 0.50% per annum. The applicable margin for the A&R Term B Facility is 2.25% per annum (for LIBOR loans) and 1.25% per annum (for base rate loans). The applicable margin for the A&R Revolving Credit Facility varies from 2.25% per annum to 1.75% per annum (for LIBOR loans) and 1.25% to 0.75% per annum (for base rate loans) based on the Company’s leverage ratio. Accordingly, the interest rates for A&R the Senior Credit Facilities will fluctuate during the term of the A&R Credit Agreement based on changes in the base rate, LIBOR rate or future changes in the Company’s leverage ratio. Interest payments with respect to the borrowings are required either on a quarterly basis (for base rate loans) or at the end of each interest period (for LIBOR loans) or, if the duration of the applicable interest period exceeds three months, then every three months. The A&R Credit Agreement contains certain affirmative and negative covenants customary for financings of this type that, among other things, limit the Company and the Company’s subsidiaries’ ability to incur additional indebtedness or liens, to dispose of assets, to make certain fundamental changes, enter into restrictive agreements, to make certain investments, loans, advances, guarantees and acquisitions, to prepay certain indebtedness and to pay dividends, to make other distributions or redemptions/repurchases, in respect of the Company and the Company’s subsidiaries’ equity interests, to engage in transactions with affiliates or amend certain material documents. In addition, financial maintenance covenants. The A&R Credit Agreement contains customary events of default, including with respect to a failure to make payments under the A&R Senior Credit Facilities, cross-default, certain bankruptcy and insolvency events and customary change of control events. the A&R Revolving Credit contains Facility certain also All obligations under the A&R Senior Credit Facilities are or will be unconditionally guaranteed jointly and severally, by: (a) the Company and (b) substantially all of the direct and indirect wholly owned subsidiaries of the Company that are organized under the laws of the United States, any state thereof or the District of Columbia (collectively, the “Guarantors”). The Guarantors entered into a guarantee under the A&R Credit Agreement concurrently with the effectiveness of the A&R Credit Agreement. Subject to certain limitations, the A&R Senior Credit Facilities are or will be secured on a first priority basis by: (x) a perfected security interest in the equity interests of each direct subsidiary of the Company and each Guarantor under the A&R Senior Credit Facilities (subject to certain customary exceptions) and (y) perfected, security interests in, and mortgages on, substantially all tangible and intangible personal property and material real property of the Company and each of the Guarantors under the A&R Senior Credit Facilities, subject, in each case, to certain exceptions. The Company and the Guarantors entered into security documents concurrently with effectiveness of the A&R Credit Agreement. Senior Notes On February 16, 2021 the Company redeemed $140 million in principal amount of the Senior Notes at a redemption price of 106.125% of par plus accrued interest. Amendment to Reimbursement Agreement On February 12, 2021, in connection with entering into the A&R Credit Agreement, the Company entered into a Fourth Amendment to the Reimbursement Agreement. The covenants in Exhibit G of the Reimbursement Agreement were amended and restated in their entirety to substantially conform to the affirmative and negative covenants contained in the A&R Credit Agreement. 86 RESIDEO TECHNOLOGIES, INC. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not Applicable. Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures We maintain a system of disclosure controls and procedures designed to give reasonable assurance that information required to be disclosed in the Company’s reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to management to allow timely decisions regarding required disclosures. Management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. Because there are inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud have been or will be detected. Our Chief Executive Officer and Chief Financial Officer, with the assistance of other members of our management including our Chief Accounting Officer, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective at a reasonable assurance level as of the end of the period covered by this Annual Report on Form 10-K. Management’s Report on Internal Control over Financial Reporting The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013). Based on this assessment, management determined that the Company maintained effective internal control over financial reporting as of December 31, 2020. The effectiveness of the Company’s internal control over financial reporting as of December 31, 2020 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included in Item 8. Financial Statements and Supplementary Data of this Form 10-K. Changes in Internal Control Over Financial Reporting There was no change in our internal control over financial reporting that occurred during the quarter ended December 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 87 RESIDEO TECHNOLOGIES, INC. Item 9B. Other Information None. Item 10. Directors, Executive Officers and Corporate Governance PART III. The information required by this item will be included in our Proxy Statement to be filed pursuant to Regulation 14A within 120 days after our year ended December 31, 2020 in connection with our 2021 Annual Meeting of Stockholders, or the 2021 Proxy Statement, and is incorporated herein by reference. Item 11. Executive Compensation Information relating to executive compensation is contained in the 2021 Proxy Statement referred to above in Item 10. Directors, Executive Officers and Corporate Governance, and such information is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information relating to certain beneficial ownership of certain stockholders and management, as well as certain other information required by this Item 12, will be contained in the 2021 Proxy Statement referred to above in Item 10. Directors, Executive Officers and Corporate Governance, and such information is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence Information relating to certain relationships and related transactions, as required by this Item 13, will be contained in the 2021 Proxy Statement referred to above in Item 10. Directors, Executive Officers and Corporate Governance, and such information is incorporated herein by reference. Item 14. Principal Accounting Fees and Services Information relating to fees paid to and services performed by Deloitte & Touche LLP and our Audit Committee’s pre-approval policies and procedures with respect to non-audit services are contained in the 2021 Proxy Statement referred to above in Item 10. Directors, Executive Officers and Corporate Governance, and such information is incorporated herein by reference. 88 RESIDEO TECHNOLOGIES, INC. PART IV. Item 15. Exhibits, Financial Statement Schedules (a)(1) Financial Statements The Consolidated and Combined Financial Statements and related notes, together with the report of Deloitte & Touche LLP, Independent Registered Public Accounting Firm, appear in Part II Item 8. Financial Statements and Supplementary Data of this Form 10-K. (a)(2) Financial Statements Schedules All schedules have been omitted because they are not required or because the required information is given in the Consolidated and Combined Financial Statements or Notes thereto. (a)(3) Exhibits The Exhibits listed below on the Exhibit Index are filed or incorporated by reference as part of this Form 10-K. Exhibit Number 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 EXHIBIT INDEX Exhibit Description Indemnification and Reimbursement Agreement, dated October 14, 2018, between New HAPI Inc. and Honeywell International Inc. (this Agreement has been updated to include exhibits thereto) (filed herewith) Separation and Distribution Agreement, dated October 19, 2018, between Honeywell International Inc. and Resideo Technologies, Inc.* (incorporated by reference to Exhibit 2.1 to Resideo’s Form 8-K filed on October 19, 2018, File No. 001-38635) Transition Services Agreement, dated October 19, 2018, between Honeywell International Inc. and Ademco Inc., a subsidiary of Resideo Technologies, Inc.* (incorporated by reference to Exhibit 2.2 to Resideo’s Form 8-K filed on October 19, 2018, File No. 001-38635) Tax Matters Agreement, dated October 19, 2018, between Honeywell International Inc. and Resideo Technologies, Inc.* (incorporated by reference to Exhibit 2.3 to Resideo’s Form 8-K filed on October 19, 2018, File No. 001-38635) Employee Matters Agreement, dated October 19, 2018, between Honeywell International Inc. and Resideo Technologies, Inc.* (incorporated by reference to Exhibit 2.4 to Resideo’s Form 8-K filed on October 19, 2018, File No. 001-38635) Patent Cross-License Agreement, dated October 19, 2018, between Honeywell International Inc. and Resideo Technologies, Inc.* (incorporated by reference to Exhibit 2.5 to Resideo’s Form 8-K filed on October 19, 2018, File No. 001-38635) Trademark License Agreement, dated October 19, 2018, between Honeywell International Inc. and Resideo Technologies, Inc.* (incorporated by reference to Exhibit 2.6 to Resideo’s Form 8-K filed on October 19, 2018, File No. 001-38635) First Amendment to Indemnification and Reimbursement Agreement, dated as of April 21, 2020, between Resideo Intermediate Holding Inc. and Honeywell International Inc. (incorporated by reference to Exhibit 2.1 to Resideo’s Form 8-K filed on April 23, 2020, File No. 001-38635) 89 RESIDEO TECHNOLOGIES, INC. Exhibit Number 2.9 2.10 2.11 2.12 3.1 3.2 4.1 4.2 First Amendment to Trademark License Agreement, dated as of April 21, 2020, between Resideo Technologies, Inc. and Honeywell International Inc. (incorporated by reference to Exhibit 2.7 to Resideo’s Form 8-K filed on April 23, 2020, File No. 001-38635) Exhibit Description Second Amendment to Indemnification and Reimbursement Agreement, dated as of July 28, 2020, between Resideo Intermediate Holding Inc. and Honeywell International Inc. (incorporated by reference to Exhibit 2.1 to Resideo’s Form 8-K filed on July 31, 2020, File No. 001-38635) Second Amendment to Trademark License Agreement, dated as of September 23, 2020, between Resideo Technologies, Inc. and Honeywell International Inc. (filed herewith) Third Amendment to Indemnification and Reimbursement Agreement, dated as of November 16, 2020, between Resideo Intermediate Holding Inc. and Honeywell International Inc.* (incorporated by reference to Exhibit 2.1 to Resideo’s Form 8-K filed on November 20, 2020, File No. 001-38635) Amended and Restated Certificate of Incorporation of Resideo Technologies, Inc. (incorporated by reference to Exhibit 3.1 to Resideo’s Form 8-K filed on October 29, 2018, File No. 001-38635) Amended and Restated By-laws of Resideo Technologies, Inc. (incorporated by reference to Exhibit 3.1 to Resideo’s Form 8-K filed on February 19, 2021, File No. 001-38635) Description of Securities of Registrant (filed herewith) Indenture, dated as of October 19, 2018, among Resideo Funding Inc., Resideo Technologies, Inc., the other guarantors named therein, and Deutsche Bank Trust Company Americas, as trustee. (incorporated by reference to Exhibit 4.1 to Resideo’s Form 8-K filed on October 19, 2018, File No. 001-38635) 4.3 Form of Resideo Technologies, Inc.’s 6.125% Notes due 2026 (included in Exhibit 4.2) 10.01 10.02 10.03 10.04 10.05 10.06 Offer Letter of Michael G. Nefkens ‡ (incorporated by reference to Exhibit 10.01 to Resideo’s Form 10 filed on August 23, 2018, File No. 001-38635) Form of Internal Hire Offer Letter ‡ (incorporated by reference to Exhibit 10.03 to Resideo’s Form 10 filed on August 23, 2018, File No. 001-38635) Resideo Technologies Supplemental Savings Plan ‡ (incorporated by reference to Exhibit 10.05 to Resideo’s Form 10-K filed on March 18, 2019, File No. 001-38635) Resideo Technologies, Inc. Severance Plan For Designated Officers as amended on November 15, 2018 ‡ (incorporated by reference to Exhibit 10.07 to Resideo’s Form 10-K filed on March 18, 2019, File No. 001-38635) Credit Agreement, dated as of October 25, 2018, by and among Resideo Technologies, Inc. Resideo Holding Inc., Resideo Intermediate Holding Inc., Resideo Funding Inc., the Lenders and Issuing Banks party thereto, and JPMorgan Chase Bank, N.A., as administrative agent. (incorporated by reference to Exhibit 10.1 to Resideo’s Form 8-K/A filed on October 29, 2018, File No. 001-38635) First Amendment to Credit Agreement dated as of November 26, 2019, by and among the Company Resideo Holding Inc., a Delaware corporation, Resideo Intermediate Holding Inc., a Delaware corporation, Resideo Funding Inc., a Delaware corporation, the lenders and issuing banks party thereto, and JPMorgan Chase Bank, N.A., as administrative agent. (incorporated by reference to Exhibit 10.1 to Resideo’s Form 8-K filed on November 27, 2019. File No. 001-38635) 10.07 Resideo Amended and Restated 2018 Stock Incentive Plan ‡ (incorporated by reference to Exhibit 10.1 to Resideo’s Form 10-Q filed on August 7, 2019, File No. 001-38635) 90 RESIDEO TECHNOLOGIES, INC. Exhibit Number 10.08 10.09 10.10 10.11 10.12 10.13 10.14 10.15 10.16 10.17 10.18 10.19 10.20 10.21 10.22 2018 Stock Plan for Non-Employee Directors of Resideo Technologies, Inc. ‡ (incorporated by reference to Exhibit 4.4 to Resideo’s Form S-8 filed on December 6, 2018, File No. 333-228687) Exhibit Description 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates Form of Stock Option Award Agreement. ‡ (incorporated by reference to Exhibit 4.5 to Resideo’s Form S-8 filed on December 6, 2018, File No. 333-228687) 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates Form of Restricted Stock Unit Agreement. ‡ (incorporated by reference to Exhibit 4.6 to Resideo’s Form S-8 filed on December 6, 2018, File No. 333-228687) 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates Form of Restricted Stock Unit Agreement (for replacement awards). ‡ (incorporated by reference to Exhibit 4.7 to Resideo’s Form S-8 filed on December 6, 2018, File No. 333-228687) 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates Form of Performance Stock Unit Agreement. ‡ (incorporated by reference to Exhibit 4.8 to Resideo’s Form S-8 filed on December 6, 2018, File No. 333-228687) 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates Form of Performance Unit Agreement. ‡ (incorporated by reference to Exhibit 4.9 to Resideo’s Form S-8 filed on December 6, 2018, File No. 333-228687) 2018 Stock Plan for Non-Employee Directors of Resideo Technologies, Inc. Form of Stock Option Award Agreement. ‡ (incorporated by reference to Exhibit 4.10 to Resideo’s Form S-8 filed on December 6, 2018, File No. 333-228687) 2018 Stock Plan for Non-Employee Directors of Resideo Technologies, Inc. Form of Restricted Stock Unit Agreement. ‡ (incorporated by reference to Exhibit 4.11 to Resideo’s Form S-8 filed on December 6, 2018, File No. 333-228687) Resideo Technologies UK Sharebuilder Plan. ‡ (incorporated by reference to Exhibit 4.12 to Resideo’s Form S-8 filed on December 6, 2018, File No. 333-228687) Amended and Restated 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates Form of Stock Option Award Agreement. ‡ (incorporated by reference to Exhibit 10.20 to Resideo’s Form 10-K filed on March 18, 2019, File No. 001-38635) Amended and Restated 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates Form of Restricted Stock Unit Agreement. ‡ (incorporated by reference to Exhibit 10.21 to Resideo’s Form 10-K filed on March 18, 2019, File No. 001-38635) Amended and Restated 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates Form of Performance Stock Unit Agreement. ‡ (incorporated by reference to Exhibit 10.22 to Resideo’s Form 10-K filed on March 18, 2019, File No. 001-38635) Amended and Restated 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates Form of Performance Unit Agreement. ‡ (incorporated by reference to Exhibit 10.23 to Resideo’s Form 10-K filed on March 18, 2019, File No. 001-38635) Resideo Supplemental Pension Plan ‡ (incorporated by reference to Exhibit 10.24 to Resideo’s Form 10-K filed on March 18, 2019, File No. 001-38635) Bonus Plan of Resideo Technologies, Inc. ‡ (incorporated by reference to Exhibit 10.1 to Resideo’s Form 8-K filed on February 14, 2019, File No. 001-38635) 91 RESIDEO TECHNOLOGIES, INC. Exhibit Number 10.23 10.24 10.25 10.26 10.27 10.28 10.29 10.30 10.31 10.32 21.1 23.1 24.1 31.1 31.2 32.1 32.2 Employment Separation Agreement and Release with Mike Nefkens dated January 22, 2020 ‡ (incorporated by reference to Exhibit 10.29 to Resideo’s Form 10-K filed on February 27, 2020, File No. 001-38635) Exhibit Description Employment Offer letter agreement with Michael Flink executed January 17, 2020‡ (incorporated by reference to Exhibit 10.4 to Resideo’s Form 10-Q filed on May 7, 2020, File No. 001-38635) Amended and Restated 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates Form of Stock Option Award Agreement (adopted 2020). ‡ (incorporated by reference to Exhibit 10.5 to Resideo’s Form 10-Q filed on May 7, 2020, File No. 001-38635) Amended and Restated 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates Form of Restricted Stock Unit Agreement (adopted 2020). ‡ (incorporated by reference to Exhibit 10.6 to Resideo’s Form 10-Q filed on May 7, 2020, File No. 001-38635) Amended and Restated 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates Form of Performance Stock Unit Agreement (adopted 2020). ‡ (incorporated by reference to Exhibit 10.7 to Resideo’s Form 10-Q filed on May 7, 2020, File No. 001-38635) Restricted Stock Unit Agreement with Michael Nefkens dated February 20, 2020. ‡ (incorporated by reference to Exhibit 10.8 to Resideo’s Form 10-Q filed on May 7, 2020, File No. 001-38635) Restricted Stock Unit Agreement with Andrew Teich dated December 2, 2019. ‡ (incorporated by reference to Exhibit 10.9 to Resideo’s Form 10-Q filed on May 7, 2020, File No. 001-38635) Employment Agreement Letter with Jay Geldmacher dated May 18, 2020. ‡ (incorporated by reference to Exhibit 10.1 to Resideo’s Form 8-K filed on May 19, 2020, File No. 001-38635) Offer Letter of Anthony L. Trunzo. ‡ (incorporated by reference to Exhibit 10.1 to Resideo’s Form 8- K filed on May 29, 2020, File No. 001-38635) Second Amendment to Credit Agreement dated as of November 16, 2020, by and among the Company, Resideo Holding Inc., a Delaware corporation, Resideo Intermediate Holding Inc., a Delaware corporation, Resideo Funding Inc., a Delaware corporation, the lenders and issuing banks party thereto, and JPMorgan Chase Bank, N.A., as administrative agent. (incorporated by reference to Exhibit 10.1 to Resideo’s Form 8-K filed on November 20, 2020. File No. 001-38635) List of subsidiaries of the registrant (filed herewith) Consent of Deloitte & Touche LLP, independent registered public accounting firm (filed herewith) Powers of Attorney ‡ (filed herewith) Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) 101.INS Inline XBRL Instance Document (filed herewith) 101.SCH Inline XBRL Taxonomy Extension Schema (filed herewith) 92 RESIDEO TECHNOLOGIES, INC. Exhibit Number 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase (filed herewith) Exhibit Description 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase (filed herewith) 101.LAB Inline XBRL Taxonomy Extension Label Linkbase (filed herewith) 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase (filed herewith) 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Certain schedules and similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby undertakes to furnish copies of any of the omitted schedules and similar attachments upon request by the U.S. Securities and Exchange Commission. Indicates management contracts or compensatory plans or arrangements. ‡ Item 16. Form 10-K Summary The Company has elected not to include a Form 10-K summary under this Item 16. 93 RESIDEO TECHNOLOGIES, INC. Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: February 25, 2021 Resideo Technologies, Inc. By:/s/ Anthony L. Trunzo Anthony L. Trunzo Executive Vice President and Chief Financial Officer (on behalf of the Registrant and as the Registrant’s Principal Financial Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated: Name /s/ Jay Geldmacher Jay Geldmacher /s/ AnnMarie Geddes AnnMarie Geddes * Roger B. Fradin * Paul F. Deninger * Cynthia Hostetler * Brian G. Kushner * Jack R. Lazar * Nina L. Richardson * Andrew C. Teich * Sharon Wienbar Title President, Chief Executive Officer and Director (Principal Executive Officer) Date February 25, 2021 Vice President, Controller and Chief Accounting Officer (Principal Accounting Officer) February 25, 2021 Chairman of the Board February 25, 2021 Director Director Director Director Director Director Director February 25, 2021 February 25, 2021 February 25, 2021 February 25, 2021 February 25, 2021 February 25, 2021 February 25, 2021 *By: /s/ Jeannine J. Lane (Jeannine J. Lane, Attorney-in-Fact) February 25, 2021 94 April 23, 2021 Dear Resideo Shareholders: It is my pleasure to invite you to attend the 2021 Annual Meeting of Shareholders of Resideo Technologies, Inc. (“Resideo” or the “Company”), which will be held via a live virtual meeting on Wednesday, June 9, 2021, at 1:00 p.m. Eastern Daylight Time. As it did for all companies, the COVID-19 pandemic had a profound impact on Resideo and our employees in 2020. Wherever the pandemic emerged, we immediately responded with aggressive actions to ensure the safety of our employees. Where feasible, we have had employees globally working from home since early in the pandemic. When functions required people to be physically on-site, we implemented strict safety protocols, including social distancing, protective equipment, and enhanced cleaning regimens. We will continue these protocols until we are certain the work environment is safe for our employees. Our Company’s financial and business performance was also affected by COVID-19. Our manufacturing and branch operations were deemed essential in most cases, but we saw a significant reduction in demand in the second quarter as lockdowns and shutdowns impacted the markets we serve and certain parts of our operations. However, as we entered the summer, we experienced a steady increase in sales as people adapted to new ways of operating and investment in the home increased. Improving demand trends and the focused efforts of the entire Resideo organization led to a second half of 2020 that was our strongest performance since our spinoff in late 2018. I made the decision to join Resideo in the midst of these unprecedented times, because I strongly believe in this Company, its purpose and in the opportunity that exists to strengthen and grow our powerful franchise for the benefit of our employees, customers, shareholders, and all of the stakeholders we serve. We made significant progress on several fronts in 2020 and continuing into 2021, including: • Rebuilt, strengthened and deepened our leadership team with the addition of several highly experienced executives. These new leaders have brought operational focus, discipline and a track record of driving growth through innovation to Resideo. • Reorganized the business to break down internal silos, improve efficiency and build a more innovative, agile organization. • Created an executive level innovation team and reorganized global engineering and product management to elevate our focus on new technology development and new product introduction performance. • Reduced our cost base and instituted transformational change as a fundamental aspect of our operations. This will allow us to pursue growth, while focusing on scalable efficient business processes. • Improved our financial position through a significant improvement in operating cash flow, the issuance of common stock for net proceeds of approximately $279 million and restructuring of our debt to enhance our financial flexibility. On behalf of the Board, I also welcome Kareem Yusuf who joined the Board in March 2021. Kareem brings to the Board deep experience with critical technologies and more than 17 years of leadership experience across a variety of disciplines, including product management, software development, mergers and acquisitions and technical sales and customer support. I want to thank our more than 14,000 employees for their unwavering dedication and commitment to Resideo in the face of many changes and challenges in 2020. It is a privilege to work with you all, and I believe that for Resideo, the best is yet to come. Thank you for your investment in Resideo, and for the confidence you place in us as we work to ensure that Resideo achieves its full potential. Sincerely, Jay Geldmacher President and Chief Executive Officer 901 E. 6th Street, Austin, TX 78702 2021 PROXY STATEMENT Notice of 2021 Annual Meeting of Shareholders DATE Wednesday, June 9, 2021 TIME PLACE 1:00 p.m. Eastern Daylight Time Via the internet at www.virtualshareholdermeeting.com/ REZI2021 Our 2021 annual meeting will be a live virtual meeting. There will be no physical location for the annual meeting. You will be able to participate in the annual meeting, vote your shares electronically and submit your questions during the live virtual meeting by visiting www.virtualshareholdermeeting.com/REZI2021 and entering the 16-digit control number provided in your proxy materials. You may also submit questions in advance of the meeting by visiting www.proxyvote.com. For more information on accessing the virtual annual meeting, see Question 5 in the section entitled “Questions and Answers About the Annual Meeting and Voting” on page 80. Agenda: Election of Class III Directors Advisory vote to approve executive compensation Ratification of the appointment of independent registered public accounting firm Act on a shareholder proposal described in this Proxy Statement, if properly presented Transact such other business as may properly come before the meeting How to Vote: Your vote is important to us. Unless you vote live at the virtual annual meeting, the deadline for receiving your vote is 11:59 p.m. Eastern Daylight Time, on June 8, 2021. VIA INTERNET BY PHONE BY MAIL VIA VIRTUAL MEETING Visit www.proxyvote.com to vote your shares via the internet. You will need the 16-digit control number provided in your proxy materials when you access the web page. If your shares are held in the name of a bank, brokerage firm or similar organization, follow the telephone voting instructions, if any, provided on your voting instruction card. If your shares are registered in your name, call 1-800-690-6903. You will need the 16-digit control number provided in your proxy materials when you call. Complete and sign the proxy card or voting instruction form and return it in the enclosed postage pre-paid envelope. You may vote your shares live at the virtual annual meeting by visiting www.virtualshareholdermeeting.com/ REZI2021. You will need to enter the 16-digit control number provided in your proxy materials to vote your shares at the virtual annual meeting. This Notice of 2021 Annual Meeting of Shareholders and related proxy materials are being distributed or made available to shareholders beginning on April 23, 2021. On behalf of Resideo’s Board of Directors, JEANNINE LANE EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL, CORPORATE SECRETARY AND CHIEF COMPLIANCE OFFICER Important Notice Regarding the Availability of Proxy Materials for the 2021 Annual Meeting of Shareholders to be held on Wednesday, June 9, 2021: our Proxy Statement and 2020 Annual Report are available free of charge on our Investor Relations website at investor.resideo.com. 2021 PROXY STATEMENT Table of Contents Proxy Statement Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proposal 1: Election of Class III Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Majority Voting For Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Director Nominees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Director Qualifications and Skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Director Biographies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 6 6 7 9 Our Governance Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Our Board and Culture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Corporate Governance Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Board Leadership Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Director Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Committees of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 The Board’s Role in Risk Oversight Enterprise Risk Management Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Nominating Board Candidates – Procedures and Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Board Meetings and Attendance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Board and Committee Evaluations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Non-Employee Director Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Other Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Our Planet, Our People, Our Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Certain Transactions with Related Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Review, Approval and Ratification of Transactions with Related Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Beneficial Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Delinquent Section 16(a) Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Stock Ownership of Certain Beneficial Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Stock Ownership of Directors and Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Proposal 2: Advisory Vote to Approve Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Compensation Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Compensation and Human Capital Management Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Summary Compensation Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Grants of Plan-Based Awards – Fiscal Year 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Outstanding Equity Awards at 2020 Fiscal Year-End . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Option Exercises and Stock Vested – Fiscal Year 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Pension Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Nonqualified Deferred Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Compensatory Arrangements with NEOs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Potential Payments Upon Termination or Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 CEO Pay Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Equity Compensation Plan Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Proposal 3: Ratification of the Appointment of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . 73 Report of the Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Proposal 4: Shareholder Proposal Requesting Shareholders’ Right to Act by Written Consent . . . . . . . . . . . . . . . . . . 76 Stock Performance Graph . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Questions and Answers About the Annual Meeting and Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 2021 PROXY STATEMENT Proxy Statement Summary Below are highlights of certain information in this Proxy Statement. As it is only a summary, it may not contain all of the information that is important to you. For more complete information, please refer to the complete Proxy Statement and Resideo’s 2020 Annual Report before you vote. References to “Resideo,” the “Company,” “we,” “us” or “our” refer to Resideo Technologies, Inc. 2021 Annual Meeting of Shareholders Date and Time: June 9, 2021, 1:00 p.m. EDT Place: Via the internet at www.virtualshareholdermeeting.com/ REZI2021 Record Date: April 14, 2021 Voting: Admission: Shareholders as of the record date are entitled to vote. Each share of common stock is entitled to one vote for each director nominee and one vote for each of the other proposals to be voted on. To enter Resideo’s virtual annual meeting via www.virtualshareholdermeeting.com/REZI2021, you will need the 16-digit control number provided in your proxy materials. How to Cast Your Vote Your vote is important! Please cast your vote and play a part in the future of Resideo. Shareholders of record on the Record Date can vote through any of the following ways: INTERNET PHONE MAIL VIRTUAL MEETING Visit www.proxyvote.com Call 1-800-690-6903 toll-free from the U.S. or Canada Return the signed proxy card Vote your shares live at the virtual annual meeting 2021 PROXY STATEMENT | 1 The deadline for voting via the internet or by telephone is 11:59 p.m. EDT on June 8, 2021. If you vote by mail, your proxy card must be received before the virtual annual meeting. Beneficial owners who own shares through a bank, brokerage firm or similar organization can vote by returning the voting instruction form, or by following the instructions for voting via the internet or by telephone, as provided by the bank, brokerage firm or similar organization. If you own shares in different accounts or in more than one name, you may receive different voting instructions for each type of ownership. Please vote all of your shares. If you are a shareholder of record or a beneficial owner, you may choose to vote at the virtual annual meeting. Even if you plan to attend our virtual annual meeting, please cast your vote as soon as possible. For more information on voting your shares, please see “Questions and Answers About the Annual Meeting and Voting” beginning on page 80. About Resideo and the Spin-Off Resideo is a leading global manufacturer and developer of technology-driven products and solutions that provide comfort, security, energy efficiency and control to over 150 million homes globally. We are also the leading wholesale distributor of low-voltage security products with a global footprint serving commercial and residential end markets. Our primary focus is on the professional channel where we are a trusted partner to over 110,000 professional installers. Our global scale, breadth of product offerings, innovation heritage, and differentiated service and support has enabled our trusted relationship with professional installers and has been a key driver of our success. Leveraging our underlying strengths, we are transforming our business with a strategy that includes operational improvements, product innovation, and investments to drive future growth and value creation. We were incorporated in Delaware on April 24, 2018. We separated from Honeywell International Inc. (“Honeywell”) on October 29, 2018, becoming an independent publicly traded company as a result of a pro rata distribution of our common stock to shareholders of Honeywell (the “Spin-Off”). Voting Matters and Board Recommendations VOTING MATTERS BOARD RECOMMENDATIONS PAGE REFERENCE (FOR MORE DETAIL) Proposal 1. Election of Class III Directors FOR Each Nominee Proposal 2. Advisory Vote to Approve Executive Compensation Proposal 3. Ratification of the Appointment of Independent Registered Public Accounting Firm Proposal 4. Shareholder Proposal Regarding Shareholder Right to Act by Written Consent FOR FOR AGAINST 6 39 73 76 2 | 2021 PROXY STATEMENT Director Dashboard Director Independence Board Diversity (Gender, Race/Ethnicity) Tenure (Year Elected) Age 2 80% 8 Independent Not Independent 40% 6 3 3 1 Gender diverse Racially/ ethnically diverse Not diverse 1 2 1 6 2021 2020 2019 2018 (Spin-Off) 1 Avg. 60 3 6 40’s 50’s 60’s Our Board of Directors Name Roger Fradin (Chairman) Jay Geldmacher (President & CEO) Paul Deninger Cynthia Hostetler Brian Kushner Jack Lazar Nina Richardson Andrew Teich (Lead Independent Director) Sharon Wienbar Kareem Yusuf Age Independent Board Committee Memberships 67 65 62 58 62 55 62 60 59 49 No No Yes Yes Yes Yes Yes Yes Yes Yes Finance Innovation and Technology None Audit Finance (Chair) Innovation and Technology Finance Nominating and Corporate Governance Audit Finance Innovation and Technology Audit (Chair) Innovation and Technology Compensation and Human Capital Management Nominating and Governance (Chair) Compensation and Human Capital Management Innovation and Technology (Chair) Nominating and Governance Compensation and Human Capital Management (Chair) Nominating and Governance Innovation and Technology Other Public Company Board Service Juniper Industrial Holdings, Inc. L3Harris Technologies, Inc. Vertiv Holdings Co Seagate Technology plc Epiphany Technology Acquisition Corp. EverQuote Iron Mountain Inc. Vulcan Materials Company Cumulus Media Inc. Mudrick Capital Acquisition Corporation II Box, Inc. Casper Sleep Inc. Silicon Laboratories, Inc. ThredUp Inc. Silicon Laboratories, Inc. Cohu, Inc. Eargo, Inc. Sensata Technologies Holding PLC Colfax Corporation Covetrus, Inc Corporate Governance Highlights We are committed to strong corporate governance practices and policies, as described below, that support effective Board leadership and prudent management practices. Annual election of all directors commencing next year in 2022, following an initial three-year phase-out of our classified board Majority voting for directors in uncontested elections Lead Independent Director with specified duties and responsibilities Robust risk oversight by full Board and Committees Annual review of Committee charters and Corporate Governance Guidelines Independent Audit, Compensation and Human Capital Management and Nominating and Governance Committees 2021 PROXY STATEMENT | 3 Finance Committee that reviews and oversees Resideo’s capital structure and opportunities for maximizing shareholder value Innovation and Technology Committee that oversees Resideo’s overall strategic direction and investment in technology initiatives Rigorous risk oversight of Technology Committees “product” cybersecurity programs by the Audit and Innovation and Annual Board and Committee evaluations Proposed annual advisory vote to approve executive compensation Meaningful stock ownership guidelines for directors and executives Adoption of proxy access Limits on memberships on other boards A Board that is actively engaged in recruiting qualified, diverse director candidates Commitment to health, safety and environmental sustainability Oversight of human capital management, including diversity, equity and inclusion, by Compensation and Human Capital Management Committee Oversight of our code of business conduct and our role as a responsible corporate citizen, including our environmental, social and governance (ESG) programs, by the Nominating and Governance Committee Policies prohibiting short sales, hedging, margin accounts and pledging Executive Compensation Preview The Compensation Discussion and Analysis section of this Proxy Statement provides a focused discussion of our executive compensation philosophy and the pay programs applicable to our named executive officers. Our compensation program design directly links compensation to the performance of our business and rewards fiscal year results through our annual incentive plan and long-term performance with equity awards. Our Named Executive Officers As described in more detail elsewhere in this Proxy Statement, during fiscal 2020, the Board appointed a new CEO and effected other executive leadership transitions. Accordingly, our leadership team during fiscal 2020 included the following Named Executive Officers (“NEOs”): NAME POSITION Jay Geldmacher Anthony L. Trunzo Robert Aarnes Stephen Kelly Jeannine Lane Michael Nefkens Robert Ryder Michael Flink Sachin Sankpal President and Chief Executive Officer Executive Vice President, Chief Financial Officer President, ADI Global Distribution Executive Vice President, Chief Human Resources Officer Executive Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer Former President and Chief Executive Officer Former Interim Chief Financial Officer Former Executive Vice President, Transformation Former President, Products & Solutions 4 | 2021 PROXY STATEMENT Forward-Looking Statements This Proxy Statement and the cover letter contain “forward-looking statements” regarding expectations about future business and financial results, which speak only as of the date of this Proxy Statement. Although we believe that the forward-looking statements contained in this Proxy Statement are based upon reasonable assumptions, such statements involve known and unknown risks, uncertainties, and other factors, which may cause the actual results or performance of the Company to be materially different from any future results or performance expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not those described under the headings “Risk Factors” and “Cautionary Statement Concerning Forward-Looking Statements” in our Annual Reports on Form 10-K for the year ended December 31, 2020. You are cautioned not to place undue reliance on these forward-looking statements, which are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by our forward-looking statements. Except as required by law, we undertake no obligation to update such statements to reflect events or circumstances arising after the date of this presentation, and we caution investors not to place undue reliance on any such forward-looking statements. limited to, 2021 PROXY STATEMENT | 5 Proposal 1: Election of Class III Directors Our Board currently consists of ten directors, and the Board has set the size of the Board as of this year’s Annual Meeting at ten. Our Board is divided into three classes with each class consisting, as nearly as may be possible, of one-third of the total number of directors. The directors designated as Class III directors have terms expiring at this year’s Annual Meeting of Shareholders. After this year, all directors will stand for election each year for annual terms, and our Board will therefore no longer be divided into three classes. Our Board has nominated the Class III director nominees for re-election to the Board. We do not know of any reason why any nominee would be unable to serve as a director. If any nominee should become unavailable to serve prior to the Annual Meeting, the shares represented by proxy will be voted for the election of such other person as may be designated by the Board. The Board may also determine to leave the vacancy temporarily unfilled or reduce the authorized number of directors in accordance with the By-Laws. Resideo’s By-Laws provide that in any uncontested election of directors (an election in which the number of nominees does not exceed the number of directors to be elected), any nominee who receives a greater number of votes cast “FOR” his or her election than votes cast “AGAINST” his or her election will be elected to the Board. Majority Voting for Directors Resideo’s By-Laws provide a majority voting standard for election of directors in uncontested elections. Each director will be elected by the affirmative vote of a majority of the votes cast, meaning that the number of votes cast “FOR” a director nominee exceeds fifty percent (50%) of the number of votes cast with respect to that director’s election. No incumbent director nominee shall qualify for service as a director unless he or she agrees to submit upon re-nomination to the Board an irrevocable resignation effective upon such director nominee’s failure to receive a majority of the votes cast in an uncontested election. The Nominating and Governance Committee (excluding the nominee, if applicable) will make a recommendation to the Board as to whether to accept or reject the resignation, or whether other action should be taken. The Board, excluding the nominee, will act on the resignation and publicly disclose its decision in accordance with the By-Laws. An election of directors is considered to be contested if there are more nominees for election than positions on the Board to be filled by election at the meeting of shareholders. In a contested election, the required vote would be a plurality of votes cast. Director Nominees The Board has affirmatively determined that each of the nominees qualifies for election under the Company’s criteria for evaluation of directors. See “Nominating Board Candidates – Procedures and Qualifications” on page 23 for more information on qualifications for director nominees. The Nominating and Governance Committee is responsible for nominating a slate of director nominees who collectively have the complementary experience, qualifications, skills and attributes to guide the Company and function effectively as a Board. The committee believes that each of the nominees has key personal attributes that are important to an effective board, including integrity, industry background, contribution to the composition, diversity and culture of the Board, educational background, the ability and willingness to constructively challenge management and the ability and commitment to devote sufficient time to Board duties. Set forth below is biographical information about the director nominees and their specific experience, qualifications and skills that have led the Board and the Nominating and Governance Committee to conclude that they should continue to serve as directors of Resideo. In addition, the Board has determined that each non-employee director nominee qualifies as an independent director under NYSE corporate governance listing standards and the Company’s director independence standards as further described under “Director Independence” on page 18. In addition, the biographical information about the other members of the Board and their specific experience, qualifications and skills are included. 6 | 2021 PROXY STATEMENT The Board has established a director retirement policy whereby, unless the Board otherwise determines, non-employee directors shall serve only until the Annual Meeting of Shareholders immediately following their 75th birthday. Director Qualifications and Skills Our directors have a broad range of experience that spans different industries and encompasses the relevant business and technology sectors. Directors bring a variety of qualifications, skills and viewpoints to our Board that both strengthen their ability to carry out their oversight responsibilities on behalf of our shareholders and bring richness to Board deliberations. As described above and in the director biographies, our directors have key experiences, qualifications and skills that are relevant and important in light of our business, structure and growth strategy and include the following: DIRECTOR QUALIFICATIONS AND SKILLS CRITERIA Senior Leadership Experience Experience serving as CEO or a senior executive that provides a practical understanding of how complex organizations function and ability to support our commercial strategy, growth and performance Consumer Products Experience with the retail consumer industry, e-commerce, customer service and consumer dynamics that aligns with our business strategies and opportunities Manufacturing Experience with the operations of manufacturing facilities that provide critical perspectives in understanding and evaluating operational planning, management and risk mitigation of our business Technology Experience developing and adopting new technologies as well as leading innovation initiatives that support the execution of our vision in the smart home market Global Relations International business strategy, operations and substantive expertise in international matters relevant to our global business Finance Experience with finance and financial reporting processes, including monitoring and assessing a company’s operating performance to ensure accurate financial reporting and robust controls Public Company Board Service Service on the boards and board committees of public companies that provides an understanding of corporate governance practices and risk management oversight as well as insights into board management and relations between the board, the CEO and senior management that will support our commitment to maintain a strong governance framework as an independent public company Marketing Expertise in brand development, marketing and sales in local markets on a global scale relevant to our global business Operations Managing the operations of a business and possessing a deep understanding of the end-markets we serve Strategy Practical understanding of the development and implementation of strategic priorities and of the risks and opportunities that can impact a company’s operations and strategies which will serve to drive our long-term growth Mergers & Acquisitions Experience in business development and mergers and acquisitions to support our initiatives to identify and execute on tuck-in acquisitions and investments 2021 PROXY STATEMENT | 7 The table below is a summary of the range of qualifications and skills that each director brings to the Board. The table does not include all of the qualifications that each director offers, and the fact that a particular experience, skill, or qualification is not checked for a specific director does not mean that the director does not possess it. I I E C N E R E P X E P H S R E D A E L R O N E S I S T C U D O R P R E M U S N O C I G N R U T C A F U N A M Y G O L O N H C E T I S N O T A L E R L A B O L G Y N A P M O C C I L B U P E C N A N F I I G N T E K R A M I S N O T A R E P O Y G E T A R T S A & M NAME Roger Fradin (Chairman) Jay Geldmacher (President & CEO) Paul Deninger Cynthia Hostetler Brian Kushner Jack Lazar Nina Richardson Andrew Teich (Lead Independent Director) Sharon Wienbar Kareem Yusuf 8 | 2021 PROXY STATEMENT Director Biographies The Board of Directors unanimously recommends a vote “FOR” Proposal 1 to elect each of the following Class III director nominees. Nominees for Election (Class III Directors) Included in each biography are the key qualifications that led to the conclusion that such directors should serve on our Board. ROGER FRADIN, Age 67 Key Qualifications: • Extensive experience as an executive at Honeywell • In-depth knowledge of the fire and security solutions and automation and control solutions industries • Significant operational and product development experience • Financial expertise and experience in capital markets • Broad experience in marketing, including international markets Non-Executive Chairman of the Board Director since 2018 Other Current Public Company Directorships: • Juniper Industrial Holdings, Inc. • L3Harris Technologies, Inc. (formerly Harris Corporation) • Vertiv Holdings Co (formerly GS Acquisition Holdings) Committee Memberships: • Finance • Innovation and Technology Background Mr. Fradin joined Honeywell in 2000 when Honeywell acquired Pittway Corporation, where he served as president and chief executive officer of the Security and Fire Solutions segment. Mr. Fradin served as president and chief executive officer of Honeywell’s Automation and Control Solutions business from January 2004 to April 2014 and served as vice chairman of Honeywell from April 2014 to February 2017. Mr. Fradin served as an independent contractor to Honeywell from March 2018 to September 2018. Mr. Fradin currently serves as executive chairman of Victory Innovation, a Carlyle company. He has also served an advisor to Seal Rock Partners since 2014 and as a consultant of The Carlyle Group, which he served as an operating executive from 2016 to 2019. Mr. Fradin received his M.B.A. and B.S. degrees from The Wharton School at the University of Pennsylvania. While a student at Wharton, Mr. Fradin also served as a member of its faculty. He previously served as a director of MSC Industrial Direct (1998-2019) and currently serves as an advisor to the board of MSC Industrial Direct, and previously served as a director of Goldman Sachs Acquisition Holdings (2018-2020) and Pitney Bowes (2012-2019). Mr. Fradin also currently serves as a director of Juniper II Corp., a special purpose acquisition company that has filed a registration statement with the SEC to become a public company. 2021 PROXY STATEMENT | 9 NINA RICHARDSON, Age 62 Key Qualifications: • Extensive global operational and leadership experience in the technology sector • Experience ranging from start-up environmental to multi-billion dollar corporations • In-depth knowledge of human resources Other Current Public Company Directorships: • Silicon Laboratories, Inc. • Cohu, Inc. • Eargo, Inc. Background Ms. Richardson served as chief operating officer of GoPro, Inc. from February 2013 to February 2015. Prior to that, she held several executive positions of increasing responsibility at Flextronics, Inc., a global electronics and manufacturing service provider. Currently, she serves as managing director of Three Rivers Energy, Inc., a company she co-founded in 2004, and she has been an independent consultant since March 2015. Ms. Richardson received her B.S. degree in industrial engineering from Purdue University and an executive M.B.A. from Pepperdine University. She previously served as a director at Zayo Group Holdings, (2017-2018) and Silicon Graphics Inc. International Corp. (2016). (2015-2018), Callidus Software, Inc. ANDREW TEICH, Age 60 Key Qualifications: • Seasoned executive with experience in acquisitions and operational integration • Extensive product/technology and sales/marketing skills • Expertise in artificial intelligence technology Other Current Public Company Directorships: • Sensata Technologies Holding PLC Background Mr. Teich has been a private technology consultant since June 2017. From May 2013 until June 2017, he served as the chief executive officer and president of FLIR Systems, Inc., a public multinational imaging and sensing company, and a director from July 2013 to June 2017. Mr. Teich joined FLIR Systems, Inc. in 1999 and held various positions of increasing the Commercial Systems, responsibility within the company including president of Commercial Vision Systems and Thermography divisions throughout his tenure. Mr. Teich received his B.S. degree in marketing from Arizona State University and is an alumnus of the Harvard Business School Advanced Management Program. Mr. Teich has also agreed to serve as a director of Juniper II Corp., a special purpose acquisition company that has filed a registration statement with the SEC to become a public company. Independent Director Director since 2018 Committee Memberships: • Compensation and Human Capital Management • Nominating and Governance (Chair) Lead Independent Director Director since 2018 Committee Memberships: • Compensation and Human Capital Management • Innovation and Technology (Chair) • Nominating and Governance 10 | 2021 PROXY STATEMENT KAREEM YUSUF, Age 49 Key Qualifications: • Extensive experience with critical technologies, including artificial intelligence, the internet-of-things, hybrid cloud and blockchain • Leadership of management and growth of market-leading brands and applications • Extensive experience managing large, cross-functional organizations and providing strategic direction Other Current Public Company Directorships: Independent Director Director since 2021 • None Background Committee Memberships: • Innovation and Technology Dr. Yusuf is a general manager, AI Applications & Blockchain, of International Business Machines Corporation (IBM), a provider of integrated technology solutions and products, a position he has held since 2018. Prior to his current position, Dr. Yusuf was the chief product officer and chief technology officer for product direction and technology infrastructure of a business unit of IBM from 2016 to 2018. Dr. Yusuf joined IBM in 1998 and has held positions of increasing responsibility in technical sales and support, product management, mergers and acquisitions strategy and software development. Dr. Yusuf received his bachelor’s degree in civil engineering from the University of Berlin, his master’s of science degree in structural engineering from the University of Manchester and his Ph.D. in civil engineering from the University of Leeds. Continuing Directors Class I Directors (with terms expiring at the 2022 Annual Meeting of Shareholders) PAUL DENINGER, Age 62 Key Qualifications: • Extensive senior management experience in operations and strategy • Extensive experience in banking, capital markets and merger and acquisition strategies • Deep knowledge of the technology sector Other Current Public Company Directorships: • Epiphany Technology Acquisition Corp. • EverQuote • Iron Mountain Inc. Background Mr. Deninger is a senior managing director of Davis Partners Group, a c-suite advisory firm. He is also vice chairman of the board of Epiphany Technology Acquisition Corp., having previously served as a senior advisor to Evercore Inc., a publicly held investment banking advisory firm, from June 2016 to February 2020. Mr. Deninger served as a senior managing director with Evercore from February 2011 to June 2016. From December 2003 until October 2010, Mr. Deninger served as a vice chairman at Jefferies Group LLC, a wholly-owned subsidiary of Jefferies Financial Group Inc., a diversified financial services company. Prior to that, he served as chairman and chief executive officer of Broadview International LLC, a mergers and acquisitions advisory firm focused on the technology industry. Mr. Deninger received his B.S. from Boston College and his M.B.A. from Harvard Business School. Independent Director Director since 2018 Committee Memberships: • Audit • Finance (Chair) • Innovation and Technology 2021 PROXY STATEMENT | 11 JAY GELDMACHER, Age 65 Key Qualifications: • Extensive experience leading a complex industrial and technology spinout • Expert on both public and private equity backed companies • Extensive background in the technology sector Other Current Public Company Directorships: • Seagate Technology plc Background Prior to joining Resideo, Mr. Geldmacher served as president and CEO of Electro Rent, a leader in testing and technology solutions and a Platinum Equity portfolio company since September 2019. From November 2013 to August 2019, Mr. Geldmacher served as president and CEO of Artesyn Embedded Technologies, a joint venture between Emerson Electric Company and Platinum Equity. Between 2007 and 2013, Mr. Geldmacher served as Executive Vice President of Emerson Electric Company and President of Emerson Network Power’s Embedded Computing & Power Group, which designed, manufactured and distributed embedded computing and power products, systems and solutions. From 1996 to 2007, he served in a variety of roles of progressive responsibility at Emerson Electric. Mr. Geldmacher received his bachelor’s degree in marketing from the University of Arizona and an executive MBA degree from the University of Chicago. Mr. Geldmacher previously served on the board of directors of Verra Mobility Corporation (2018-2020) and Owens- Illinois, Inc. (2008-2015). SHARON WIENBAR, Age 59 Key Qualifications: • Extensive experience as an operating executive and strategist in the software and technology sectors • Leadership in technology investments and partnerships • Expertise in start-up operations and venture capital investing Other Current Public Company Directorships: • Colfax Corporation • Covetrus, Inc. Background Ms. Wienbar was chief executive officer of Hackbright Academy, a technology training firm, from 2015 to 2016. From 2001 to 2015, she served as a partner at Scale Venture Partners (known as BA Venture Partners prior to 2007), a technology and healthcare venture capital firm. Prior to her venture capital career, Ms. Wienbar was an executive in several software companies, including Adobe Systems, and a consultant at Bain & Company. Ms. Wienbar received her S.B. and S.M. degrees in engineering from Harvard University and her M.B.A. from Stanford University. She previously served on Microsoft Inc.’s venture advisory committee and as a director at Everyday Health, Inc. (2014-2016) and Glu Mobile, Inc. (2007- 2008). President, Chief Executive Officer and Director Director since 2020 Committee Memberships: • None Independent Director Director since 2018 Committee Memberships: • Compensation and Human Capital Management (Chair) • Nominating and Governance 12 | 2021 PROXY STATEMENT Class II Directors (with terms expiring at the 2022 Annual Meeting of Shareholders) Independent Director Director since 2020 Committee Memberships: • Finance • Nominating and Governance Independent Director Director since 2019 Committee Memberships: • Audit • Finance • Innovation and Technology CYNTHIA HOSTETLER, Age 58 Key Qualifications: • Broad investment, financial and risk management skills • Experienced public and investment company board member • Significant experience with investment management, including ESG and investor relations issues Other Current Public Company Directorships: • Vulcan Materials Company Background Ms. Hostetler is a professional director of public companies and investment funds in the United States, and serves on several mutual fund boards, including as Trustee of Invesco Funds, Atlanta, Georgia (global mutual funds) since 2017; Director of TriLinc Global Impact Fund, LLC, Los Angeles, California (international investment fund) since 2013; Board member of Investment Company Institute since 2018; Trustee of Aberdeen International Funds, New York, New York (global mutual funds) from 2013 to 2017; Director of Artio Global Funds, New York, New York (global mutual funds) from 2010 to 2013; Director of Genesee & Wyoming, Inc. (short line railroads) from 2018 to 2019; and Director of Edgen Group Inc., Baton Rouge, Louisiana (energy infrastructure) from 2013 to 2014. Ms. Hostetler served as the Head of Private Equity and Investment Funds of Overseas Private Investment Corporation from 2001 to 2009 and as a board member and President of First Manhattan Bancorporation from 1991 to 2006. Ms. Hostetler began her career as a corporate lawyer with Simpson Thacher & Bartlett in New York. Ms. Hostetler earned her bachelor’s degree from Southern Methodist University and holds a Juris Doctor from the University of Virginia School of Law. BRIAN KUSHNER, Age 62 Key Qualifications: • Decades of experience leading corporate transformation efforts • Proven expertise in corporate performance, including financial expertise • Served in roles that include chairman, director, chief executive officer and chief restructuring officer at more than 30 public and private companies Other Current Public Company Directorships: • Cumulus Media Inc. • Mudrick Capital Acquisition Corporation II Background Mr. Kushner has served as a senior managing director at FTI Consulting, Inc., a global business advisory firm, since 2009, where he serves as leader of the Private Capital Advisory Services practice and as the co-leader of the Technology practice, the Aerospace, Defense and Government Contracting practice and the Activism and M&A Solutions practice. Prior to joining FTI, Mr. Kushner was the co-founder of CXO, L.L.C., a boutique interim and turnaround management consulting firm that was acquired by FTI at the end of 2008. Over the past three decades, Mr. Kushner has served as a director, chief executive officer (“CEO”) or chief restructuring officer (“CRO”) of over 30 public and private technology, manufacturing, telecom and defense companies, during which time he worked on the acquisition or disposition of more than 20 companies. Mr. Kushner has also periodically served as the CEO, interim CEO, or the CRO of companies that elected to utilize bankruptcy proceedings as part of their financial restructuring process and, as such, he served as an executive officer of various companies that filed bankruptcy petitions under federal law, including, most recently, Relativity Media LLC and its affiliates in 2015. Mr. Kushner received his B.S. degree in Applied and Engineering Physics from Cornell University, his M.S. degree in Applied and Engineering Physics from Cornell University and a Ph.D. in Applied Physics with a minor in Electrical Engineering, also from Cornell University. He previously served as a director at Thryv, Inc. (2016-2020), Hycroft Mining Corp. (formerly Mudrick Capital Acquisition Corporation) (2018-2020), Luxfer Holdings PLC (2016-2018) and EveryWare Global, Inc. (2015-2016). 2021 PROXY STATEMENT | 13 Independent Director Director since 2018 Committee Memberships: • Audit (Chair) • Innovation and Technology JACK LAZAR, Age 55 Key Qualifications: • Strong financial, technological and operational expertise • Experienced technology company executive and consultant • Expertise in best practices for a public company on a global scale Other Current Public Company Directorships: • Box, Inc. • Casper Sleep Inc. • Silicon Laboratories Inc. • ThredUp Inc. Background Mr. Lazar has been an independent business consultant since March 2016. From January 2014 to March 2016, he served as the chief financial officer of GoPro, Inc., a provider of wearable and mountable capture devices. From January 2013 to January 2014, he was an independent business consultant. From May 2011 to January 2013, Mr. Lazar served as senior vice president, corporate development and general manager of Qualcomm Atheros, Inc., a developer of communications semiconductor solutions. From September 2004 to May 2011, Mr. Lazar served in a variety of roles at Atheros Communications, most recently as Atheros’ chief financial officer and senior vice president of corporate development. Mr. Lazar is a certified public accountant (inactive) and received his B.S. degree in commerce with an emphasis in accounting from Santa Clara University. He previously served as a director at Mellanox Technologies, Ltd (2018-2020), Quantenna Communications (2016-2019) and TubeMogul, Inc. (2013-2016). 14 | 2021 PROXY STATEMENT Our Governance Framework Our corporate governance framework is a set of principles, guidelines and practices that support strong performance and long-term value creation for our shareholders. Our commitment to good corporate governance is integral to our business and reflects not only regulatory requirements, NYSE listing standards and broadly recognized governance practices, but also effective leadership by our senior management team and oversight by our Board. Our Board is committed to maintaining the highest standards of corporate governance. Our Board is guided by our Corporate Governance Guidelines, which address director responsibilities, director skills and characteristics, memberships on other boards, director access to management and other employees, director orientation and continuing education, director retirement and the annual performance evaluations of the Board and Committees. Because corporate governance practices evolve over time, our Board will review and approve our Corporate Governance Guidelines, Committee charters and other governance policies at least once a year and update them as necessary and appropriate. Our Board and Culture Our Board is deeply engaged, provides informed and meaningful guidance and feedback, and maintains an open dialogue with management based on a clear understanding of our strategic plans. At each Board meeting, we review components of our long-term strategy with our directors and engage in constructive dialogue which our leadership team embraces. Our directors have full and free access to our officers and employees to address questions, comments or concerns. Additionally, the Board and Committees have the power to hire independent legal, financial or other advisors without approval from, or consultation with, Resideo management. Our Board also takes an active role in ensuring we embrace “best practices” in corporate governance. The partnership and oversight of a strong and multi-faceted Board with diverse perspectives rooted in deep experience in global business, finance, technology and strategy are essential to creating long-term shareholder value. Corporate Governance Overview Presented below are some highlights of our corporate governance program. You can find details about these and other corporate governance policies and practices within this Proxy Statement. KEY GOVERNANCE PRACTICES CORPORATE GOVERNANCE GUIDELINES • Our Corporate Governance Guidelines have been designed to assist the Board in the exercise of its duties and responsibilities to our Company. They reflect the Board’s commitment the Board and management levels with a view to achieving our strategic objectives. the effectiveness of decision-making at to monitor • The guidelines are reviewed annually and subject to modification by the Board at any time. INDEPENDENT BOARD • 8 of our 10 directors are independent as defined by the listing standards of the NYSE. • Mr. Fradin is a former employee of Honeywell. Mr. Geldmacher is a management director. BOARD COMPOSITION • Currently, the Board has fixed the number of directors at 10. • The Board will regularly assess its performance and can adjust the number of directors according to the needs of the Board and the Company. • As shown under “Director Qualifications and Skills” beginning on page 7 and in the biographies of the directors beginning on page 8, our Board has a diverse mix of skills, experience and backgrounds that support our growth and commercial strategy. 2021 PROXY STATEMENT | 15 KEY GOVERNANCE PRACTICES LEAD INDEPENDENT DIRECTOR • The Board has appointed Mr. Teich as Lead Independent Director. Mr. Teich possesses the attributes that the Board believes will ensure independent oversight of management. See “Board Leadership Structure” on page 16 for additional information. • The Board consists of five standing committees: • Audit, • Compensation and Human Capital Management, • Nominating and Governance, • Finance, and • Innovation and Technology. BOARD COMMITTEES MEMBERSHIPS ON OTHER BOARDS the Board formed a special committee, the Strategic & Operational • In late 2019, Committee, including our operational and financial review and the CEO transition. Effective December 3, 2020, the committee was dissolved following completion of its work. transformation efforts, to oversee our • Each of the Audit, Compensation and Human Capital Management, and Nominating and Governance Committees is composed entirely of independent directors. • Each Board Committee has a written charter that will be reviewed and re-assessed annually. • Each Committee charter is posted and available on our Investor Relations website at investor.resideo.com. • Under our Corporate Governance Guidelines, directors who serve as chief executive officers of public companies should not serve on more than three public company boards (including their own); provided, however, to the Company’s CEO, such CEO may not sit on more than two public company boards (including service on the Company’s Board). that solely with respect • Other directors should not serve on more than five public company boards (including service on our Board). BOARD DIVERSITY • Three of our 10 Board members are women and one of our Board members is racially/ ethnically diverse. The Nominating and Governance Committee actively considers diversity when evaluating new candidates. ROBUST RISK OVERSIGHT • Our full Board is responsible for risk oversight, and has designated committees to have particular oversight of certain key risks. Our Board oversees management as it fulfills its responsibilities for the assessment and mitigation of risks and for taking appropriate risks. BOARD AND COMMITTEE SELF-EVALUATION • The Board conducts an annual self-evaluation led by the Nominating and Governance Committee to determine whether it and its committees are functioning effectively and to solicit feedback from directors as to whether the Board is continuing to evolve and be refreshed in a manner that serves the needs of the Company. MAJORITY VOTING OF DIRECTORS • Our By-Laws provide for majority voting in uncontested elections of directors. Any directors standing for re-nomination to the Board shall agree to submit an irrevocable resignation effective upon that director’s failure to receive a majority vote and the acceptance of the resignation by the Board. INTEGRITY & COMPLIANCE PROGRAM • The Audit Committee regularly reviews the Company’s integrity and compliance program and scorecard, and the Nominating & Governance Committee provides oversight of the Company’s policies related to its Code of Conduct. • The Company provides several mechanisms for employees and third parties to report concerns (including anonymously), enforces a strict non-retaliation policy, and ensures prompt, thorough and objective investigations. • All employees are required to complete integrity and compliance training, and the Company provides comprehensive training on additional key compliance topics, available in over 15 languages. • Regional integrity & compliance councils meet quarterly to discuss key compliance topics and to provide feedback to the integrity & compliance program. 16 | 2021 PROXY STATEMENT OVERSIGHT OF ESG AND HUMAN CAPITAL MANAGEMENT BOARD OVERSIGHT OF POLITICAL CONTRIBUTIONS PROXY ACCESS KEY GOVERNANCE PRACTICES • Our Nominating and Governance Committee oversees our role as a responsible corporate citizen, including key aspects of our ESG programs. • Our Compensation and Human Capital Management Committee oversees our human capital management, including diversity, equity and inclusion. Management regularly reports to the committee regarding diversity, equity and inclusion initiatives and our total rewards philosophy, and going forward the committee will further oversee our plans, policies and programs related to hiring, development and retention. • The Nominating and Governance Committee oversees our policies and practices relating to political contributions. • Subject to certain terms and conditions, our By-Laws provide that shareholders who have maintained continuous qualifying ownership of at least 3% of our outstanding common stock for at least three years may use our annual meeting proxy statement to nominate a number of director candidates not to exceed the greater of two candidates or 20% of the number of directors then in office. SUCCESSION PLANNING • Our Board oversees and annually reviews leadership development and assessment initiatives, as well as short- and long-term succession plans for the CEO and other senior management. HEDGING AND PLEDGING PROHIBITIONS • All of our directors, officers and employees are prohibited from engaging in short sales of Resideo securities and selling or purchasing puts or calls or otherwise trading in or writing options on Resideo securities and using certain financial instruments (including forward sale contracts, equity swaps, collars and exchange funds), holding securities in margin accounts or pledging Resideo securities as collateral, in each case, that are designed to hedge or offset any decrease in the market value of Resideo securities. STOCK OWNERSHIP GUIDELINES • We have meaningful stock ownership guidelines: • CEO: 6x base salary • Other Executive Officers: 3x base salary • Non-employee directors: 5x annual cash retainer • Five-year period from appointment or election to meet the ownership requirement Our Certificate of Incorporation, By-Laws, Committee Charters, Corporate Governance Guidelines and Code of Business Conduct are available on our Investor Relations website at investor.resideo.com. Paper copies of these documents can be obtained by writing to Resideo Technologies, Inc., 901 E. 6th Street, Austin, TX 78702, Attention: Corporate Secretary. Board Leadership Structure The Company’s current Board leadership structure consists of a non-executive Chairman of the Board, and, because the Chairman is not independent due to his prior employment with Honeywell, a Lead Independent Director who was appointed by the independent directors of the Board. The Board believes the current structure of separating the roles of Chairman and CEO, as well as having a Lead Independent Director, allows for alignment of corporate governance with the interests of shareholders. The Board believes that this structure allows our CEO to focus on operating and managing the Company, leverages our Chairman’s experience in guidance and oversight, and ensures overall independence of the Board through clearly defined roles and responsibilities of the Lead Independent Director. While the Board believes that this structure currently is in the best interests of Resideo and its shareholders, it does not have a policy with respect to separating the roles of Chairman and CEO and appointing a Lead Independent Director if the Chairman is independent and could adjust the structure in the future as it deems appropriate. 2021 PROXY STATEMENT | 17 Lead Independent Director The Board has determined that Mr. Fradin, a former employee of Honeywell, may not currently be independent and has appointed Mr. Teich as the Lead Independent Director in accordance with our Corporate Governance Guidelines. In electing Mr. Teich, the independent directors of the Board considered Mr. Teich in light of the following selection criteria: • Qualifies as independent, in accordance with relevant listing standards; • Able to commit the time and level of engagement required to fulfill the substantial responsibilities of the role; and • Possesses effective communication skills to facilitate discussions among members of the Board, including among the independent directors, Mr. Geldmacher and Mr. Fradin, and engage with key stakeholders. As the Lead Independent Director, Mr. Teich has the following duties and responsibilities: • Review Board meeting agendas and Board meeting schedules to ensure there is sufficient time for discussion of all agenda items; • Provide input regarding presentation materials and other written information provided to directors for Board meetings; • Preside at all meetings at which the Chairperson is not present including executive sessions of the independent directors; • Be available for consultation and direct communications with the Company’s shareholders; and • Perform such other duties as the Board may determine from time to time. Director Independence Providing objective, independent judgment is at the core of the Board’s oversight function. The Nominating and Governance Committee conducts an annual review of the independence of the directors and reports its findings to the full Board. The Board has affirmatively determined that all non-employee directors, other than Mr. Fradin who is a former employee of Honeywell, satisfy the independence criteria in the applicable NYSE listing standards and SEC rules (including the enhanced criteria with respect the Audit Committee and the Compensation and Human Capital Management Committee). Regarding Mr. Fradin, the Board considered that more than three years have elapsed since Mr. Fradin was employed by Honeywell, but acknowledges that other relationships described in this Proxy Statement currently suggest that Mr. Fradin may not be fully independent. to members of For a director to be considered independent, the Board must determine that the director does not have any material relationships with Resideo, either directly or as a partner, shareholder or officer of an organization that has a relationship with Resideo, other than as a director and shareholder. Material relationships can include vendor, supplier, consulting, legal, banking, accounting, charitable and family relationships, among others. In addition to Mr. Fradin, Mr. Geldmacher as an employee of Resideo, does not satisfy the independence criteria described below. Criteria for Director Independence The Board considered all relevant facts and circumstances in making its determination that all of our directors are independent other than Mr. Fradin and Mr. Geldmacher, including the following: • No such director or nominee receives any direct compensation from Resideo other than under the non-employee director compensation program described beginning on page 25. • No immediate family member (within the meaning of the NYSE listing standards) of any such director or nominee is an employee of Resideo or otherwise receives direct compensation from Resideo. • No such director or nominee is affiliated with Resideo or any of its subsidiaries or affiliates. • No such director or nominee is an employee of Resideo’s independent accountants and no such director or nominee (or any of their respective immediate family members) is a current partner of Resideo’s independent accountants, or was within the last three years, a partner or employee of Resideo’s independent accountants and personally worked on Resideo’s audit. 18 | 2021 PROXY STATEMENT • No such director or nominee is a member, partner or principal of any law firm, accounting firm or investment banking firm that receives any consulting, advisory or other fees from Resideo. • No Resideo executive officer is on the compensation committee of the board of directors of a company that their respective immediate family employs any of our non-employee directors or nominees (or any of members) as an executive officer. • No such director or nominee (or any of their respective immediate family members) is indebted to Resideo, nor is Resideo indebted to any such director or nominee (or any of their respective immediate family members). • No such director or nominee serves as an executive officer of a charitable or other tax-exempt organization that received contributions from Resideo. • While a non-employee director’s or nominee’s service as an outside director of another company with which Resideo does business would generally not be expected to raise independence issues, the Board also considered those relationships and confirmed the absence of any material commercial relationships with any such company. Specifically, those commercial relationships were in the ordinary course of business for Resideo and the other companies involved and were on terms and conditions available to similarly situated customers and suppliers. The above information was derived from Resideo’s books and records and responses to questionnaires completed by the directors and officers in connection with the preparation of this Proxy Statement. In assessing Dr. Yusuf’s independence, the Board considered that, in the ordinary course of business, the Company purchases products and services from IBM, Dr. Yusuf’s employer. These transactions were entered into before Dr. Yusuf joined the Board, and he has no personal involvement in them, nor does he derive any material benefit from them. The amounts involved are immaterial to both the Company and IBM. Committees of the Board Our Board consists of five standing Committees: Audit, Compensation and Human Capital Management, Nominating and Governance, Finance and Innovation and Technology. As noted above, a special committee, the Strategic & Operational Committee, was dissolved effective December 3, 2020, upon completion of its work overseeing our transformation review and CEO transition. The Strategic & Operational Committee met 21 times during 2020. The Board has adopted written charters for each Committee, which are available on our Investor Relations website at investor.resideo.com. All Board members are invited to attend the meetings of each Committee, except as restricted by independence standards. The following table sets forth the Board Committees and the current members of each of the Committees. Roger Fradin Jay Geldmacher Paul Deninger Cynthia Hostetler Brian Kushner Jack Lazar Nina Richardson Andrew Teich Sharon Wienbar Kareem Yusuf 2020 Meetings Independent Audit Compensation and Human Capital Management Nominating and Governance Innovation and Technology Finance Member Member Member Member Chair Chair Member Member Member Member Member Member Member Chair Chair Member Member Member Chair Member 5 7 6 32 3 2021 PROXY STATEMENT | 19 Each of the Audit, Compensation and Human Capital Management and Nominating and Governance Committees consists solely of directors who have been determined by the Board to be independent in accordance with SEC independence standards (including the regulations, NYSE listing standards and the Company’s director heightened independence standards and considerations for members of the Audit and Compensation and Human Capital Management Committees). COMMITTEE AUDIT COMMITTEE Jack Lazar, Chair Paul Deninger Brian Kushner RESPONSIBILITIES • Appoint and recommend to the shareholders for approval the firm to be engaged as the Company’s independent auditor and be directly responsible for the compensation, retention and oversight of the independent auditor, including the resolution of disagreements between management and the independent auditor regarding financial reporting; • Review the results of each external audit and other matters related to the conduct of the audit and advise the Board on whether it recommends that the audited financial statements be included in the Annual Report on Form 10-K; • Review with management and the independent auditors, prior to filing, the interim financial results to be included in quarterly reports on Form 10-Q; • Evaluate the independent auditor’s performance at least annually; • Approve all non-audit engagements with the independent auditor; • Review reports of the independent auditor and the chief internal auditor related to the adequacy of the Company’s internal accounting controls, disclosure processes and its procedures designed to ensure compliance with laws and regulations; • Consider and review, in consultation with the independent auditor and the chief internal auditor, the scope and plan for forthcoming external and internal audits; • Review annually the performance of the internal audit group; • Review management’s assessment of the effectiveness of the Company’s internal control over financial reporting; • Review, approve and establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, auditing matters and for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters or other legal, ethical, reputational or regulatory concerns; • Produce the annual Report of the Audit Committee included in the Proxy Statement; and • Oversee major financial risks and enterprise exposures and risk assessment and risk management policies. Each member of the Audit Committee is an independent director under applicable SEC rules and NYSE listing standards and is “financially literate” under NYSE listing standards. The Board has determined that Messrs. Lazar, Deninger and Kushner each qualify as an “audit committee financial expert” under applicable SEC rules. In addition to Resideo, Mr. Lazar serves on the audit committee of three other public reporting companies. The Board has determined that Mr. Lazar’s simultaneous service on these other boards does not impair his ability to serve effectively on the Company’s Audit Committee. COMPENSATION AND HUMAN CAPITAL MANAGEMENT COMMITTEE Sharon Wienbar, Chair Nina Richardson Andrew Teich • Review and approve the corporate goals and objectives relevant to the compensation of the CEO, evaluate the CEO’s performance relative to these goals and objectives and determine and approve the CEO’s compensation level; • Review and approve the individual goals and objectives of the other executive officers and set the annual salary and other remuneration of the executive officers; • Periodically review the operation and structure of the Company’s compensation programs; • Review proposals for and determine total share usage under the Company’s equity compensation programs; • Oversee the Company’s plans, policies and programs related to hiring, development and retention of talent; • Review or take such action in connection with the bonus, stock, retirement and other benefit plans of the Company and its subsidiaries; • Establish and review annual stock ownership guidelines applicable to directors and senior management; • Review and discuss with management the Compensation Discussion and Analysis and other executive compensation disclosure included in the Proxy Statement; • Assist the Board in oversight of the Company’s policies and strategies relating to human capital management, including diversity, equity and inclusion; • Produce the annual Compensation and Human Capital Management Committee Report included in the Proxy Statement; and • Exercise sole authority to retain and terminate a compensation consultant, as well as to approve the consultant’s fees and other terms of engagement. See “Oversight of Compensation Consultant” on page 20 regarding the Compensation and Human Capital Management Committee’s engagement of a compensation consultant. The Compensation and Human Capital Management Committee may form and delegate its authority to subcommittees and management, when appropriate, including delegation to the CEO to determine and approve annual incentive and long-term incentive awards for non-executive employees of the Company as prescribed by the Compensation and Human Capital Management Committee. For more information on the responsibilities and activities of the Compensation and Human Capital Management Committee, including its processes for determining executive compensation, see “Compensation Discussion and Analysis” beginning on page 39. 20 | 2021 PROXY STATEMENT COMMITTEE NOMINATING AND GOVERNANCE COMMITTEE Nina Richardson, Chair Cynthia Hostetler Andrew Teich Sharon Wienbar FINANCE COMMITTEE Paul Deninger, Chair Roger Fradin Cynthia Hostetler Brian Kushner INNOVATION AND TECHNOLOGY COMMITTEE Andrew Teich, Chair Paul Deninger Roger Fradin Brian Kushner Jack Lazar Kareem Yusuf RESPONSIBILITIES • Make recommendations to the Board concerning size, composition and organization of the Board, qualifications and criteria for election to the Board, nominees to be proposed by the Company for election to the Board, retirement from the Board, whether to accept any resignation tendered by a director and Board Committee assignments; • Actively seek individuals qualified to become Board members and recommend them to the full Board including those suggested or including evaluating all potential candidates, for consideration, nominated by third parties; • Consider director candidates holistically to ensure a diversity of perspectives, taking into consideration factors such as skills, experience, gender, ethnicity, race, nationality and age; • Make recommendations to the Board on whether to include disclosures in the Proxy Statement on director independence, governance and director nomination matters; • Oversee the Company’s new director orientation program and continuing education program for incumbent directors; • Review and reassess the adequacy of the Company’s Corporate Governance Guidelines; • Oversee and report to the Board on the Company’s compliance with its programs relating to the Code of Business Conduct, and the Company’s role as a responsible corporate citizen, including its ESG programs; and • Oversee the annual performance review of the Board and its Committees. • Review matters related to the Company’s capital structure and allocation, financial condition, leverage and financial strategies, interest rate risk, expense management, strategic investments and dispositions such as significant mergers, acquisitions, divestitures, joint ventures, real estate purchases and other debt and equity investments; • Consider, review and recommend to the Board any Company dividend and share repurchase policies and programs; • Approve the Company’s derivatives and hedging policies and strategies for managing interest rate and foreign exchange rate exposure; • Review the Company’s investment policies and practices, credit ratings and ratings strategy; • Review the Company’s investor relations strategy; and • Review the types of information to be disclosed in connection with earnings releases and earnings guidance provided to analysts and rating agencies. • Facilitate the Board’s oversight, review, discussion and understanding of the Company’s major technology and innovation strategies and plans in the following key areas: – investments in technology and software; – development and execution of technology strategies; – overall strategy, effectiveness and risk profile of its product technology and software cybersecurity program; – technology trends with significant impacts on our business; and – research and development operations. Compensation and Human Capital Management Committee Matters Compensation and Human Capital Management Committee Interlocks and Insider Participation No current member of the Compensation and Human Capital Management Committee has served as one of our officers or employees at any time. None of our executive officers serves as a member of the compensation committee of any other company that has an executive officer serving as a member of our Compensation and Human Capital Management Committee or Board. Oversight of Compensation Consultant The Compensation and Human Capital Management Committee has sole authority to retain a compensation consultant to assist the Compensation and Human Capital Management Committee in the evaluation of director, CEO or senior management compensation, but only after considering all factors relevant to the consultant’s independence from management. In addition, the Compensation and Human Capital Management Committee is directly responsible for approving the consultant’s compensation, evaluating its performance and terminating its engagement. The Compensation and Human Capital Management Committee has retained Frederic W. Cook & Co. (“FW Cook”) as its independent compensation consultant to assist the Compensation and Human Capital Management Committee with the design of our executive compensation programs as well as to provide objective advice on compensation practices and the competitive landscape for the compensation of Resideo’s executive officers. FW 2021 PROXY STATEMENT | 21 Cook reports to the Compensation and Human Capital Management Committee, has direct access to Compensation and Human Capital Management Committee members, interacts with Resideo management when necessary and appropriate and attends Compensation and Human Capital Management Committee meetings either in person or by telephone. FW Cook provides services only to the Compensation and Human Capital Management Committee as an independent consultant and does not have any other consulting engagements with, or provide any other services to, Resideo. The independence of FW Cook has been assessed according to factors stipulated by the SEC and the Compensation and Human Capital Management Committee concluded that no conflict of interest exists that would prevent FW Cook from independently advising the Compensation and Human Capital Management Committee. FW Cook compiles information and provides advice regarding the components and mix (short-term/long-term; fixed/variable; cash/equity) of the executive compensation programs of Resideo and its peer group (see page 42 for further details regarding the compensation peer group) and analyzes the relative performance of Resideo and the compensation peer group with respect to the financial metrics generally used in the programs. FW Cook also provides information regarding emerging trends and best practices in executive compensation. The Compensation and Human Capital Management Committee also received general advice from FW Cook in 2020 and 2021 regarding the terms of the severance and transition agreements entered into with Resideo’s executive officers. Compensation Input from Senior Management The Compensation and Human Capital Management Committee considers input from senior management in making determinations regarding the overall executive compensation program and the individual compensation of the executive officers. As part of Resideo’s annual planning process, the CEO, CFO, and Chief Human Resources Officer develop targets for Resideo’s incentive compensation programs and present them to the Compensation and Human Capital Management Committee. These targets are reviewed by the Compensation and Human Capital Management Committee to ensure alignment with our strategic and annual operating plans, taking into account the targeted year- over-year and multi-year improvements as well as identified opportunities and risks. The CEO does not provide recommendations on his own compensation. Unless otherwise set by negotiated offer terms, the CEO recommends base salary adjustments and cash and equity incentive award levels for Resideo’s other executive officers. The recommendations of the CEO are based on performance appraisals (including an assessment of the achievement of pre-established financial and non-financial management objectives) together with a review of supplemental performance measures and prior compensation levels relative to performance. The CEO presents to the Compensation and Human Capital Management Committee and the full Board his evaluation of each executive officer’s contribution and performance over the past year, strengths and development needs and actions and presents to the full Board succession plans for each of the executive officers. The Board’s Role in Risk Oversight The Board is actively engaged in overseeing and reviewing the Company’s strategic direction and objectives, taking into account (among other considerations) Resideo’s risk profile and exposures. It is management’s responsibility to manage risk as overseen and assessed by the Board. The Board receives regular updates on risk exposures and there is open communication between management and the directors. The Company has established processes to report and monitor for material risks applicable to the Company. The Board oversees these reporting processes and will review annually Resideo’s enterprise risk management programs. The Board as a whole has responsibility for risk oversight, including succession planning relating to the CEO and risks relating to the competitive landscape, strategy, business conditions and capital requirements of the Company. The Committees of the Board also oversee Resideo’s risk profile and exposures relating to matters within the scope of their authority. The Board regularly receives detailed reports from the Committees regarding risk oversight in their areas of responsibility. The Audit Committee discusses the Company’s risk profile, risk management, and exposure (and Resideo’s policies relating to the same) with management, the internal auditors and the independent auditors. Such discussions include the Company’s major financial risk exposures and the steps management has taken to monitor and control these exposures. The Audit Committee is also charged with oversight of Resideo’s Integrity & Compliance program and risks relating to enterprise-wide cybersecurity, including review of the state of the Company’s cybersecurity program, emerging cybersecurity developments and threats and the Company’s strategy to mitigate cybersecurity risks. 22 | 2021 PROXY STATEMENT The Compensation and Human Capital Management Committee considers risks related to the attraction and retention of talent and the design of compensation programs and incentive arrangements. The Compensation and Human Capital Management Committee periodically undertakes a review of Resideo’s incentive structure to avoid encouraging material risk taking through financial incentives. The Nominating and Governance Committee considers risks related to the Company’s reputation, environmental and sustainability matters, health and safety issues, equal employment opportunity, anti- harassment matters and community/government relations. The Nominating and Governance Committee also oversees succession planning for the Board and the appropriate assignment of directors to the Board Committees for risk oversight and other areas of responsibilities. The Finance Committee considers risks related to the Company’s capital structure, capital allocation decisions, financial condition, interest rate risk, expense management and strategic investments and dispositions. leverage and financial strategies, The Innovation and Technology Committee considers risks related to the Company’s overall technology and innovation strategies and its product technology and software cybersecurity program. While it was in effect during 2020, the Strategic & Operational Committee considered risks related to the Company’s product and market strategy and oversight related to the CEO transition period and the Company’s management of the COVID-19 pandemic related health and safety and business continuity matters. Enterprise Risk Management Program As a part of its overall risk management strategy, the Company, with advice from the Audit Committee, has adopted an Enterprise Risk Management (“ERM”) framework consisting of enhancements to our ability to manage uncertainty and mitigate risk as we drive shareholder value creation. The ERM framework is being deployed to create a robust risk management program that is aligned with the Company’s strategic and business objectives based on an enterprise-wide “top down” and “bottom up” view of commercial, strategic, legal, compliance, cybersecurity and reputational risks. The ERM program is overseen and governed by the Audit Committee and managed by members of senior management. Working with the ERM program management team, the Board and the Audit Committee regularly assess the overall risks applicable to the Company, its businesses and functions as well as management action plans to mitigate or minimize the risks identified, providing the Audit Committee and the full Board with visibility into the risks that impact us and the plans to mitigate them. Nominating Board Candidates – Procedures and Qualifications Minimum Qualifications for Director Nominees and Board Member Attributes Board Composition, Characteristics and Skills Collectively, the Board must be capable of effectively overseeing risk management, capital allocation and leadership succession. In addition, the composition of the Board, as well as the perspective and skills of its individual members, needs to align with the Company’s growth and commercial strategy. Board composition and the members’ perspectives and skills should evolve at an appropriate pace to meet the challenges of the Company’s changing commercial and strategic goals. The identification and evaluation of director candidates is an essential part of this process. The Nominating and Governance Committee has primary responsibility for reviewing with the Board, on an annual basis, the requisite skills and characteristics of Board members, as well as the composition of the Board as a whole. This assessment independence, procedures for shareholder suggestion or nomination of candidates for the Board and any requirements of applicable law or listing rules. includes a consideration of director While the Company’s Corporate Governance Guidelines do not prescribe diversity standards, as a matter of practice, the Nominating and Governance Committee considers diversity in the context of the Board as a whole the skills, experience, gender, ethnicity, race, nationality and age of current and and takes into account prospective directors to facilitate Board deliberations that reflect a broad range of perspectives. The Board believes that increased heterogeneity leads to better governance. The Nominating and Governance Committee is dedicated to actively seeking to recruit director candidates with diverse characteristics and attributes who satisfy the Board’s nomination criteria and will contribute to the collaborative culture of the Board. 2021 PROXY STATEMENT | 23 Identifying and Recruiting New Members of the Board The Nominating and Governance Committee shall actively seek individuals qualified to become directors. Through discussions with the Chairman, Lead Independent Director, CEO and other Board members, specific skill sets, experience and knowledge important for new Board members will be identified and prioritized in accordance with the procedures set forth in the Nominating and Governance Committee Charter, the Company’s Corporate Governance Guidelines, organizational documents and applicable law. Potential candidates meeting these criteria then will be identified either by professional reputation or existing Board members. Candidates are interviewed by the Chairman, CEO, Chair of the Nominating and Governance Committee, and other members of the Board, as appropriate, to ensure that candidates not only possess the requisite skills and characteristics but also the personality, leadership traits, work ethic and independence to effectively contribute as a member of the Board. On successful completion of this process, the Nominating and Governance Committee will recommend the proposed candidate to the Board and the Board may nominate the successful candidate for election to the Board at the annual meeting of shareholders or such other time as the Board determines appropriate. recruiting agencies, The Nominating and Governance Committee has the sole authority to retain and terminate any search firm to be used to identify director candidates and has sole authority to approve the search firm’s fees and other retention terms. Search firms retained by the Nominating and Governance Committee shall be provided guidance as to the the Board is then seeking. The Nominating and particular experience, skills or other characteristics that Governance Committee has retained third-party search firms to identify potential director candidates and directed the firms to ensure that the pool of candidates included women and other diverse candidates. The Nominating and Governance Committee may also retain other external advisors, including for the purposes of performing background reviews of potential candidates. Resideo’s current Board members were either identified through a nationally-recognized search firm or were recommended by an existing member of the Board. Dr. Yusuf joined the Board in 2021. Dr. Yusuf was identified as a potential director candidate by a search firm retained by the Nominating and Governance Committee to identify and assess potential director candidates. General Criteria In addition to the specific criteria and priorities developed collectively, director candidates are considered by the Nominating and Governance Committee in light of a range of more general criteria: • Exemplification of the highest standards of personal and professional integrity • Experience and industry background that align with the Company’s strategic and business objectives • Potential contribution to the composition, diversity and culture of the Board • Age, educational background and relative skills and characteristics • Ability and willingness to constructively challenge management through active participation in Board and Committee meetings and to otherwise devote sufficient time to Board duties Shareholder Recommendations for Director Nominees Any shareholder wishing to recommend a candidate for director should submit the recommendation in writing to Resideo Technologies, Inc., Nominating and Governance Committee, 901 E. 6th Street, Austin, TX 78702, Attention: Corporate Secretary. The written submission should comply with all requirements set forth in the Company’s Certificate of Incorporation and By-Laws. The Nominating and Governance Committee will consider all candidates recommended by shareholders who comply with the foregoing procedures and satisfy the minimum qualifications for director nominees and Board member attributes. Advance Notice Director Nominations Resideo’s By-Laws provide that any shareholder entitled to vote at an annual meeting of shareholders may nominate one or more director candidates for election at that annual meeting by following certain prescribed procedures. To be timely, the shareholder must provide written notice of the shareholder’s intent to make such a nomination or nominations to Resideo’s Corporate Secretary not less than 90 days nor more than 120 days prior to the first anniversary date of the immediately preceding annual meeting, except as otherwise provided in our 24 | 2021 PROXY STATEMENT By-Laws. The notice must contain all of the information required in our By-Laws. Any such notice must be sent to Resideo Technologies, Inc., 901 E. 6th Street, Austin, TX 78702, Attention: Corporate Secretary. For the 2022 annual meeting of shareholders, such notice must be delivered to the Corporate Secretary no earlier than February 9, 2022 and no later than March 11, 2022. Proxy Access Director Nominations In addition to advance notice procedures, our By-Laws also include provisions permitting, subject to certain terms and conditions set forth therein, shareholders who have maintained continuous qualifying ownership of at least 3% of our outstanding common stock for at least three years to nominate a number of director candidates not to exceed the greater of two candidates or 20% of the number of directors then in office who will be included in our annual meeting proxy statement. Shareholders who wish to nominate a proxy access candidate must follow the procedures described in our By-Laws. Proxy access candidates and the shareholder nominators meeting the qualifications and requirements set forth in our By-Laws will be included in the Company’s proxy statement and ballot. To be timely, a shareholder’s proxy access notice must be delivered to our principal executive offices, Resideo Technologies, Inc., 901 E. 6th Street, Austin, TX 78702, Attention: Corporate Secretary, no less than 120 days and no more than 150 days prior to the first anniversary date that we commenced mailing of our definitive proxy statement (as stated in such proxy statement) for the immediately preceding annual meeting, except as otherwise provided in the By-Laws. For the 2022 annual meeting, such notice must be delivered to our principal executive offices no earlier than November 24, 2021 and no later than December 24, 2021. Director Onboarding and Continuing Education Under our Corporate Governance Guidelines, all new directors participate in an orientation program upon joining the Board. Orientation includes presentations by senior management to familiarize our new directors with Resideo’s strategic plans, financial statements and key issues, policies and practices and materials pertaining to its Committees, corporate governance policies and practices and the Company’s businesses, the Board, functions, the Company’s expense, seminars, conferences and other continuing education programs designed for directors of public companies. initiatives and processes. Board members may attend, at Board Meetings and Attendance The Board met nine times in 2020. Each director attended at least 89% of the meetings of the Board and Committees on which the director served. Though we have no specific policy regarding director attendance at annual meetings of shareholders, our directors are expected to attend. All of the then-serving directors attended our 2020 annual meeting of shareholders. Board and Committee Evaluations As part of the Board’s commitment to good governance, the Board conducts an annual process to assess the effectiveness of the full Board and the operations of its Committees. The Nominating and Governance Committee will oversee the evaluation of the Board as a whole and its Committees and solicit feedback from directors as to whether the Board is continuing to evolve and to be refreshed in a manner that serves our business and strategic needs. After distribution of the self-evaluation materials to directors, the Nominating and Governance Committee will receive comments from all directors and report to the Board, identifying areas for improvement in the performance of the Board and its Committees. The Nominating and Governance Committee intends to retain an external third-party to facilitate the evaluation process at least once every three years. The Nominating and Governance Committee will annually review the scope and content of the self-evaluation to ensure it is contemporary, appropriate for the needs of the Company and that actionable feedback is solicited on the operation and effectiveness of the Board and its Committees. Before recommending the re-nomination of a slate of incumbent directors for an additional term, the Nominating and Governance Committee will evaluate whether incumbent directors possess the requisite skills and perspective, both individually and collectively, to continue to serve our business and strategic needs. This assessment will include members’ qualification as independent, strength of character, judgment and ability to devote sufficient time to attendance at, and preparation for, Board meetings. 2021 PROXY STATEMENT | 25 Non-Employee Director Compensation Director Compensation Our Compensation and Human Capital Management Committee, with assistance from the independent compensation consultant, periodically reviews and makes recommendations to our Board regarding the form and amount of compensation for non-employee directors. Directors who are also our employees receive no compensation for service on our Board. As described in more detail below, the non-employee directors elected to forego their annual cash retainers payable for service on the Board for the first quarter of 2020 in support of the Company’s cost cutting initiatives in response to the COVID-19 pandemic. Near the end of fiscal 2020, the Compensation and Human Capital Management Committee reviewed the Company’s financial condition and paid a special year-end bonus to current employees who were previously impacted by COVID-19 salary reductions and furloughs in recognition of their significant hard work during a challenging year. At the same time, the Compensation and Human Capital Management Committee approved comparable restorative payments to Board members in an amount equal to the amount by which the cash retainer payments had been reduced in 2020. Additionally, after completion of its work, the Strategic & Operational Committee was dissolved, effective December 3, 2020. We believe that annual compensation for non-employee directors should consist of both a cash component, designed to compensate members for their service on the Board and its Committees, and an equity component, designed to align the interests of directors and shareholders. Our non-employee directors generally receive pro-rated equity grants when they first join the Board. The table below outlines the current annual compensation program for our non-employee directors. Board of Directors Annual Cash Compensation Annual Retainer ($) Member of the Board of Directors Chairman of Board—Additional Cash Retainer Lead Director—Additional Cash Retainer Board Committee Membership—Additional Cash Retainers: Audit Committee Compensation and Human Capital Management Committee Finance Committee Nominating and Governance Committee Innovation and Technology Committee Chair* 25,000 15,000 10,000 10,000 10,000 Strategic & Operational Committee (dissolved) 360,000** 90,000 175,000 25,000 Member 10,000 7,500 5,000 5,000 5,000 10,000 Committee Chair retainers include the member retainer fees. * ** Reflects significant time commitment related to oversight of the Company’s comprehensive operational and financial review and CEO transition. Board of Directors Annual Equity Compensation Annual Restricted Stock Units (“RSUs”) Annual Retainer ($) 120,000 Cash elements are paid in quarterly installments in arrears and pro-rated if necessary, including for changes in Committee service or for partial years of service. The RSUs are granted on the date of each Annual Meeting of Shareholders and generally vest on the earliest of the first anniversary of the date of grant, the director’s death or disability, or removal from the Board coincident with the occurrence of a change in control. Directors who join the Board between Annual Meetings generally receive a pro-rated RSU grant. We do not separately compensate our directors for attending Board or Committee meetings. In March 2021, the Compensation and Human Capital Management Committee reviewed market data on director compensation among the Company’s peer group, recognizing that the Company’s annual director compensation levels have remained flat since the Spin-Off. Based on its review and conclusion that total director compensation was below the peer median, the committee recommended, and the Board approved, three changes to director compensation. The Board approved an increase to the annual equity compensation from $120,000 to $130,000 26 | 2021 PROXY STATEMENT effective with the awards to be made in connection with the 2021 Annual Meeting of Shareholders, an increase in the annual cash retainer for the Chair of the Nominating and Governance Committee from $10,000 to $15,000 effective April 1, 2021, and an increase in the annual cash retainer for the Chair of the Compensation & Human Capital Management Committee from $15,000 to $20,000 effective April 1, 2021. Director Deferred Compensation Plan In September 2019, the Compensation and Human Capital Management Committee approved the adoption of the Resideo Deferred Compensation Plan for Non-Employee Directors (the “Director Deferred Compensation Plan”). This plan encourages our directors to hold a portion of their compensation in the form of equity or deferred cash, which can only be monetized at the end of their tenure on the Board or in other limited circumstances. At the the Compensation and Human Capital Management Committee also permitted non-employee same time, directors to defer their annual equity award in accordance with the terms of our 2018 Stock Plan for Non-Employee Directors of Resideo Technologies, Inc. (the “Director Stock Plan”). Prior to the first day of each calendar year beginning on or after January 1, 2020, each non-employee director may (i) elect to convert all of his or her annual cash retainer fees as well as any annual committee and chair fees other than reimbursements otherwise payable to him or her by the Company into deferred stock units or deferred cash pursuant to the Director Deferred Compensation Plan, and (ii) elect to defer payment of his or her annual equity grant of restricted stock units once the award has vested in accordance with its terms and conditions. Each deferred stock unit under the Director Deferred Compensation Plan and each vested restricted stock unit that a non-employee director has elected to defer under the terms of the Director Stock Plan represents the right to receive one share of our common stock generally on the first day of the seventh calendar month following the date the non-employee director incurs a separation of service from us. Other Benefits: Non-employee directors are also provided with $350,000 in business travel accident insurance. Director Compensation for 2020 In 2020, each non-employee director received his or her annual cash retainer amount in addition to the annual equity retainer award of RSUs with a grant date fair value of approximately $120,000. Annual equity retainers generally vest with respect to 100% of the RSUs awarded on the first anniversary of the grant date, subject to continued service on the Board. Beginning in 2020, each of our non-employee directors has the ability to elect to defer all of his or her annual cash retainer as well as his or her annual equity retainer award pursuant to the terms of our Director Deferred Compensation Plan and Director Stock Plan, respectively, as discussed above. The table below reflects the 2020 compensation paid to our non-employee directors. Dr. Yusuf was not a director for any portion of 2020 and therefore is not listed in the tables below. Director Name Roger Fradin Paul Deninger Cynthia Hostetler(2) Brian Kushner Jack Lazar Nina Richardson Andrew Teich(3) Sharon Wienbar Fees Earned or Paid in Cash ($) Stock Awards (1)($) $275,000 $115,000 $ 51,055 $ 94,126 $128,322 $115,822 $440,537 $116,896 $119,992 $119,992 $148,188 $119,992 $119,992 $119,992 $119,992 $119,992 Total ($) $394,992 $234,992 $199,243 $214,118 $248,314 $235,814 $560,529 $236,888 (1) The stock award values set forth in the above 2020 Director Compensation Table represent the aggregate grant date fair value of stock awards computed in accordance with FASB ASC Topic 718. Annual equity retainer awards in the form of RSUs totaling 12,172 shares were made to non-employee directors on June 8, 2020 with a fair value of $9.858 per share. (2) Ms. Hostetler received an RSU award for 6,143 shares with a fair value of $4.59 per share upon joining the Resideo Board on March 19, 2020. This award vested in full on June 12, 2020. (3) Mr. Teich’s fees earned include the retainer payments he received for his service as Chair of the special Strategic & Operational Committee that was formed in late 2019 and completed its work in December 2020. 2021 PROXY STATEMENT | 27 A more detailed discussion of the assumptions used in the valuation of stock awards made in fiscal year 2020 may be found in Note 18 of the Notes to the Financial Statements in the Company’s Form 10-K for the year ended December 31, 2020. Director Name Roger Fradin Paul Deninger Cynthia Hostetler Brian Kushner Jack Lazar Nina Richardson Andrew Teich Sharon Wienbar Outstanding Equity Awards as of 12/31/2020 (#) 23,329 23,329 12,172 12,172 23,329 23,329 23,329 23,329 Stock Ownership Guideline for Non-Employee Directors To further align the interests of directors with the long-term interests of our shareholders, non-employee directors are required to own, until their separation from service from the Board, at least five times the value of their annual cash retainer, or $450,000, in our common stock by the fifth anniversary of their appointment to the Board. For purposes of the guidelines, share ownership includes shares of Resideo common stock, restricted stock units and deferred stock units. Accordingly, the guidelines align our directors’ economic interests in the performance of the Company with those of our shareholders. As of December 31, 2020, all directors, except Ms. Hostetler who joined the Board in 2020 and Dr. Yusuf who joined the Board in 2021, have met the minimum stock ownership required under our stock ownership guidelines. Compensatory Arrangement with Former Director and Executive Officer On January 5, 2020, the Company entered into a letter agreement with Niccolo de Masi, who was a director and executive officer of the Company until January 6, 2020 and remained an employee until March 13, 2020. In addition to severance benefits under our Severance Plan for Designated Executive Employees, with enhanced salary continuation payments of 18 months, Mr. de Masi was also eligible for continued vesting of his November 18, 2018 restricted stock unit award that he received upon his election as a director and before he became an executive officer and he was eligible to receive a payment equal to his 2020 target annual incentive award, pro-rated for the portion of 2020 during which he remained employed, which amount would only include one-half of the amount tied to the individual performance component. All the severance benefits were subject to the conditions in the Executive Severance Plan, and the additional benefits were subject to Mr. de Masi’s compliance with other covenants governing his separation, including a one-year non-competition and two-year non-solicitation restriction. 28 | 2021 PROXY STATEMENT Other Executive Officers In addition to Mr. Geldmacher, whose biographical information is included above, the following is a list of individuals serving as executive officers of Resideo as of the date of this Proxy Statement. All of Resideo’s executive officers have been appointed by the Board and serve at the discretion of the Board and CEO. There are no family relationships among any of our executive officers. NAME, AGE, YEAR FIRST APPOINTED AN EXECUTIVE OFFICER Robert Aarnes, 51, 2018 President, ADI Global Distribution POSITION BUSINESS EXPERIENCE Stephen Kelly, 53, 2018 Executive Vice President and Chief Human Resources Officer Jeannine Lane, 60, 2018 Executive Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer Prior to joining the Company, Mr. Aarnes served as president of Honeywell’s ADI Global Distribution business since January 2017. Mr. Aarnes served as vice president and general manager of Honeywell’s ADI North America business from November 2014 to January 2017. Mr. Aarnes served as vice president of operations of Honeywell’s ADI North America business from January 2013 to November 2014. Prior to joining Honeywell, Mr. Aarnes served as president and chief executive officer of GUNNAR Optiks, LLC, a company that specializes in developing and manufacturing digital eyewear, from September 2008 to November 2012. Mr. Aarnes received his bachelor’s degree in political science from the United States Naval Academy and his MBA in management from San Diego State University. Prior to joining the Company, Mr. Kelly served as vice president of Human Resources and Communications for Honeywell’s aerospace business from 2014 to 2018. Mr. Kelly was the vice president of Corporate Human Resources, Organizational Development & Learning at Honeywell from 2013 to 2014. Mr. Kelly joined Honeywell in 2008 and has served in various human resources leadership positions for Honeywell’s aerospace business. He was vice president for Honeywell’s aerospace business’s of Human Resources in 2013. Previously, Mr. Kelly was vice commercial segment president of Human Resources for Honeywell’s Aerospace Defense & Space unit from 2011 to 2013. He was vice president of Human Resources for Honeywell’s aerospace Engineering & Marketing unit to joining Honeywell, Mr. Kelly was vice president of Human Resources for the Dental business at Danaher Corporation, a global science and technology innovator, from 2007 to 2008. Mr. Kelly was Vice President of the EMEA region and global head of staffing and talent management of the Industrial Technologies business at Danaher from 2005 to 2007. to joining Danaher, Mr. Kelly was the head of Human Prior Resources for BHA Group, Inc., a leading global supplier of replacement parts and services for industrial air pollution control systems. Mr. Kelly received his bachelor’s degree in personnel administration from the University of Kansas and a master’s degree in organizational development from Ottawa University. from 2008 to 2011. Prior Prior to joining the Company, Ms. Lane was the Vice President and General Counsel of Honeywell Homes since January 2018. She was the Vice President and General Counsel of Honeywell Security and Fire from 2015 to 2017, Honeywell Fire Business and Honeywell Safety Business from 2014 to 2015, Honeywell Life Safety Business from 2013 to 2014 and Honeywell Security from 2004 to 2013. Ms. Lane holds a bachelor’s degree in political science from SUNY University at Albany and a Doctorate of Law from Albany Law School. 2021 PROXY STATEMENT | 29 POSITION BUSINESS EXPERIENCE Inc., an industrial Prior to joining the Company, Mr. Merrill served as president of the Commercial Business Unit and chief marketing officer at FLIR technology company focused on Systems, intelligent sensing solutions, from 2014 until 2020. He was employed by Samsung Electronics from 2006 until 2014 where he most recently served as vice president of Samsung’s U.S. tablet business. Mr. Merrill began his career in the telecommunications industry with posts at CenturyLink and Covad Communications. Mr. Merrill received his bachelor’s degree in English at Wabash College, master’s of science degree in telecommunications from the University of Colorado and an MBA from the Harvard Business School. Ironhawk Mr. Theodore is the founder and managing director of Advisory Group, a boutique investment advisory service firm, and has served in these positions since May 2008, and continues to serve as managing director. Prior to joining the Company, Mr. Theodore served as interim chief executive officer of the Consumer Division of Artesyn Embedded Technologies, a power supply company, from 2019 to 2020. From 2017 to 2019, Mr. Theodore was chief financial officer and acting chief operating officer of Artesyn’s Asia Pacific operations. From 2015 to 2017, Mr. Theodore was general manager of the healthcare services division of Transworld Systems, Inc., a provider of ARM financial services to the government, education, healthcare and commercial business segments. Prior to joining Transworld Systems, Mr. Theodore held various executive financial and operational leadership roles at global manufacturing and distribution companies. Mr. Theodore received his bachelor’s degree in accounting from Saint John Fisher College and an MBA from Owen Graduate School of Management at Vanderbilt University. Mr. Trunzo most recently served as managing director at Gryphon Investors, a private equity firm, since October 2019, and he was an independent consultant advising private equity firms from January 2017 to October 2019. From April 2015 to November 2016, Mr. Trunzo was executive vice president and CFO of FEI Company, a microscope technology company, before it was acquired by ThermoFisher Scientific in September 2016. Prior to that, he served in leadership roles at FLIR Systems, Inc., an industrial technology company focused on intelligent sensing solutions, including as senior vice president and CFO from 2010 to 2015, and as senior vice president, Corporate Strategy and Development from 2003 to 2010. Earlier in his career, Mr. Trunzo worked in various capacities at Bank of America Securities and PNC Bank. Mr. Trunzo received his bachelor’s degree in economics from the Catholic University of America and an MBA from the University of Pittsburg. Mr. Trunzo has also completed Harvard Business School’s Advanced Management Program. NAME, AGE, YEAR FIRST APPOINTED AN EXECUTIVE OFFICER Travis Merrill, 45, 2020 Executive Vice President, Chief Strategy & Commercial Officer Phillip Theodore, 53, 2020 President, Products & Solutions Anthony L. Trunzo, 58, 2020 Executive Vice President, Chief Financial Officer 30 | 2021 PROXY STATEMENT Our Planet, Our People, Our Purpose Our Board of Directors and the Company’s committees play a key role in oversight of the Company’s Environmental, Social and Governance (ESG) efforts. We believe that as a publicly traded company, the impact of our global business operations on Our Planet, how we care for and manage Our People, and what we stand for in Our Purpose, are critical to the Company’s success. In 2020, we established an ESG Council comprised of various functional and business leaders to ensure continued focus on these important initiatives, and to report out regularly to the Board and its Committees. Our Planet We understand that the earth’s resources are limited, and we need to be a good steward of them to make Our Planet a better place for future generations. A focused approach to sustainability is a priority for us and our leadership is accountable for our sustainability efforts to ensure that enough resources are deployed to manage our commitments and maintain appropriate controls. This commitment is documented in our Sustainability Opportunity policy endorsed by our CEO and publicly available on our website. We communicate with internal and external stakeholders to promote awareness of their responsibilities and how they can contribute to improving sustainability efforts. In our initial year as Resideo, we used calendar year 2019 as a baseline to measure our environmental impact and to establish sustainability targets for the organization, with a core objective of reducing our carbon impact both in terms of our operational footprint and in the product offerings to our customers and the public at large. Our stated goals in 2020 were to reduce our energy usage, water consumption and greenhouse gas emissions by 20% by 2025. We also stated our goal to reduce both hazardous waste and non-hazardous waste by the same 20% target over the same period. We have made progress and see continuing opportunities to reduce our carbon footprint and minimize greenhouse gas emissions (GHG) in two main areas: • Sustainability in our Operations — how we’re optimizing our supply chains, our facilities and reducing non-renewable resources wherever possible; • Sustainability Through our Products — many of the products we manufacture help consumers achieve comfort while also reducing their energy use and ensuring their homes are protected from damage; Sustainability in our Operations Aligned to Resideo’s commitment to design, build and supply products that help keep our customers comfortable, safe and secure and also support environmental responsibility, we also focus on the environmental impact of our operations. In 2020, all core environmental metrics showed improvement versus our baseline year of 2019 for our manufacturing footprint (figures are normalized by annual revenue): Measurement Units 2020 Levels Energy Consumption Equivalent Greenhouse Gas Emissions Water Consumption Hazardous Waste Generation Non-Hazardous Waste Generation BBTU MT CO2 e m3 Million kg Million kg 570 60,000 680,000 0.5 8.2 YOY Savings (normalized by revenue) 9.4% 12.2% 8.1% 28.4% 5.2% Sustainability Through our Products Resideo’s greatest strength in sustainability is built on a foundation of air, energy, water and security product lines designed to enable our customers to save energy, water, and carbon, with a presence in over 150 million homes worldwide. 2021 PROXY STATEMENT | 31 AIR Our roots extend over a century to the very first thermostat built with a programmable setpoint schedule to reduce energy use resulting in lower heating and cooling costs for the homeowner. Since then, the features of our Connected and Non-Connected Thermostat lines have evolved to drive better savings without sacrificing comfort by leveraging geofencing, setpoint optimization and other intelligence. For our Connected Thermostats installed in homes and businesses, we estimate that more than 1.2 TWh of electricity and 97M Therms of natural gas were saved last year. In addition to energy savings, our thermostats are involved in most major residential utility Demand Response programs in North America. Resideo’s Energy Management division also controls a fleet of flexible Distributed Energy Resources (DERs) serving at the forefront of the smart electricity grid. These DERs are enabling the proliferation of renewable generation sources lowering both costs and emissions across the country, and as a leader in the industry, Resideo’s contribution will be key to a sustainable future. ENERGY HVAC monitoring is also a growing part of our product portfolio, with energy and cost savings for buildings and the professional contractors who service them: • Our Remote Appliance Monitoring products connect data from our Connected Thermostats and additional sensors to professional contractors trained in spotting problems in HVAC equipment before they develop into issues. The contractor is often able to consult with the homeowner to remedy the situation without an unnecessary site visit, saving time and transportation energy; • Our new LifeWhere product takes remote monitoring to the next level by injecting machine learning into the equation to detect signs of issues and inefficiencies before a costly failure occurs. Resideo produces many products that are key components in systems people use every day. Our Atmospheric and Powered Gas Water Heater Valves are found in four million water heater tanks produced each year. Efficiency standards and innovation have recently driven water heater efficiency up by 6% for atmospheric and 3% for tanks with powered valves. Based on the installed base of these water heaters over the last decade, we believe our valves in these more efficient systems contributed to a reduction of an estimated 1T Therms of natural gas savings last year. In summary, our leading air and energy products contributed to the following direct savings in our customer homes in 2020: Measurement Units 2020 Savings Electricity Consumption Billion kWh Natural Gas Consumption Million Therms Equivalent Greenhouse Gas Emissions Million MT CO2 e 1.2 140 1.6 WATER Our Connected and Non-Connected Water Valves & Preventers help enable more efficient management of building hot water. These allow lower temperatures to be used in water systems, saving energy by reducing how 32 | 2021 PROXY STATEMENT much heat is required and improving safety by limiting scalding. Resideo Water Leak and Freeze Detectors (WLDs) are one of our premier connected products that pays dividends for our customers and insurance companies by detecting leaks and freeze-related water breaks in water heater tanks, washers, and sinks before they become catastrophic failures. A recent pilot program concluded that 11% of catastrophic failures were avoided thanks to these innovative products. When extrapolating to all these devices in use this would have saved $1.6M in claims and 2.7M gallons of water in 2020 alone. Our People Our human capital management is a critical component of our overall Company strategy. We are committed to creating a diverse, equitable and inclusive workplace, where employees can bring their authentic selves to work each day. We sponsor employee resource groups for Women, LGBTQIA+, Black, Latino, Veterans, and people with Differing Abilities, and strive to attract diverse talent. Ensuring “pay for performance” and aligning our total rewards program with shareholder interests, including the 2020 rollout of an employee stock purchase plan, are key to our vision. Engaging and developing our talent is vital to our business and operating results. This year we launched an improved Employee Voice Survey and created action plans to respond to employee feedback, developed a people manager certification training program, enhanced our global mentor program, and revamped our annual performance planning process to empower managers to provide quarterly feedback to our employees through quarterly “pulse” conversations versus having annual end-of-year development conversations. These initiatives have spawned “continual personnel improvement” where we’re challenging our employees, gauging their satisfaction with Resideo and developing our future leaders. Additional information regarding our employee programs, including health and safety data, can be found in the Human Capital section of the Company’s recent annual report on Form 10-K, available on our website. COVID-19 Health and Safety Measures As with most companies, the COVID-19 pandemic had a substantial impact in 2020 on our workplaces and our employees. Our commitment to providing a safe and healthy workplace for all employees was heightened by the challenges of the pandemic, and we responded aggressively to the constantly changing global landscape of learnings, guidance and directives. In response to the pandemic, we took numerous actions to protect the health and safety of our employees, visitors and customers. These actions included formation of a response team, contact tracing and tracking of exposure and positive cases, enhanced cleaning protocols, moving to work from home where possible, suspension of most business travel and in-person meetings, the purchase of face coverings, gloves, hand sanitizer, and hand held thermometers, installation of thermal scanners at our manufacturing sites, installation of floor demarcations and plastic shields in our ADI branches and on manufacturing lines, weekly internal audits, external audits of select sites, leasing of additional vans to permit distancing where we provide transportation to employees, daily symptom self-assessments, curbside and contactless pickup in many locations, enhanced employee benefits, COVID-19 testing, and policies requiring face coverings and physical distancing. Some additional specific actions we took to protect our employees, customers and visitors included: • Global COVID-19 Response Team: As the pandemic’s scope became clear in February 2020, we created a global coronavirus response team including representatives from key functions and business units. The team tracked developing guidance from the World Health Organization (WHO), the Centers for Disease Control and Prevention (CDC), and similar agencies, and identified various actions for protecting the health and safety of our employees, while also ensuring we could continue to meet the needs of our customers. • Work from Home Implemented Where Feasible: On March 16, 2020, we moved globally to a work from home model for all positions where feasible, intended to not only protect remote workers but to decrease traffic onsite to protect our essential frontline workers. • Restrictions on Business Travel, Conferences and Site Visitors: Beginning in March 2020, we significantly limited business travel, eventually cancelling all business travel for a period and pivoting instead to quality electronic platforms for meetings. • Health and Welfare Benefits: When our Mexico manufacturing associates found it difficult to obtain COVID-19 testing and treatment, we offered special COVID-19 health coverage and separately engaged a 2021 PROXY STATEMENT | 33 vendor to provide rapid, priority testing. We took advantage of changes in U.S. law to permit 401(k) distributions and increased options for use of flexible spending accounts. In addition, where feasible we enhanced benefit coverage to include COVID-19 related illness. • Hotline for Employee COVID-19 Concerns: We utilized our existing Integrity & Compliance hotline as an avenue for employees to report a COVID-19 safety concern, and specifically noted that the Company prohibits retaliation against employees who report unsafe or unhealthy working conditions regarding the pandemic. We continue to stay abreast of the changing COVID-19 landscape and monitor our workplaces to provide a safe and healthy working environment for our employees. Our Purpose Resideo is working to address some of the fundamental global challenges we as citizens face today. 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 work every day to simplify the connected world so that people have peace of mind and can focus on what matters most. We are starting at home – with our neighborhoods and communities – and committing to making a difference for our customers and the industries we serve. As a company, we provide people with products and technologies to manage their homes to help keep them more comfortable, efficient, and secure. We believe that for the communities where we do business and our employees live, the basic needs of safety, security, housing and freedom from hunger must first be met, before people are able to fully thrive and improve the quality of their lives. We provide support to these local communities through various, global corporate-wide and localized grassroots philanthropic efforts. Safety and Security Resideo has been a strong supporter of Mission500, a security industry non-profit that serves the needs of children and communities in crisis in the U.S. Resideo is a financial supporter of the organization and also has employee representation on Mission500’s Advisory Board, participating in monthly board calls to shape the strategy and direction for the organization. Resideo employees have raised funds and been given time to participate in humanitarian trips, most recently to Matlapa, Mexico, to build ecological latrines in the Eastern Mexico rain forest, and on multiple previous trips to Ponce, Puerto Rico, to help rebuild homes and infrastructure following Tropical Storm Karen and Hurricane Maria that left much of the island community destroyed. Housing Resideo has recently embarked on a program with Habitat for Humanity, a global nonprofit housing organization working in local communities across all 50 states in the U.S. and in approximately 70 countries. Resideo has identified approximately 25 communities where we have a sizable employee population and will identify work projects and cause marketing that will benefit the elderly, veterans and communities in need. Resideo will also thermostats and other smart home controls to help Habitat make product donations of security systems, homebuyers be safe and comfortable in their new homes. This partnership will have a strong employee engagement and give our employees an opportunity to address local housing issues and better serve the communities in which they live. 34 | 2021 PROXY STATEMENT Hunger Our localized, grass-roots philanthropic employee efforts have been focused on engagement with local hunger relief organizations including Feeding America, a U.S.-based non-profit with a nationwide network of more than 200 food banks that feed more than 46 million people through food pantries, soup kitchens, shelters and other community-based agencies. Employees in our Golden Valley, Minnesota, Melville, New York, and several other smaller locations have coordinated food drives and fundraising efforts that supported the local Feeding America organizations. COVID-19 Response Resideo has implemented an ongoing Social Outreach program in our Mexico-based manufacturing facilities (Tijuana, Chihuahua and Juarez) to donate food baskets and cleaning supplies to local civil associations each month. We have also provided manufacturing employees with personal protective equipment (PPE) including facemasks and hand sanitizer to share with their family members. Resideo has also partnered with the Maquiladora Association (INDEX) to provide PPE supplies to first responders and local COVID-19 designated hospitals. In our Golden Valley, Minnesota, facility, Resideo donated to North Memorial Hospital and Regions Hospital approximately 700 N95 protective masks and we contributed 1,500 N95 masks to hospitals on Long Island, New York. 2021 PROXY STATEMENT | 35 Related Party Transactions Certain Transactions with Related Parties Our ADI Global Distribution business (“ADI”) leases its administrative office building in Melville, New York at a current rent of approximately $1,100,000 per year and reimburses the landlord for certain real estate taxes and insurance premiums paid on the property, the future value of which cannot be readily determined. ADI has exercised its right to terminate the lease in February 2022 for a termination fee of $150,000. After ADI entered into this lease, the property was acquired by a partnership known as “New Island Holdings.” Other than the recent exercise of the right to terminate early, there have been no material amendments to the lease since the property was acquired by New Island Holdings. Mr. Fradin, the Chairman of our Board, is a limited partner in New Island Holdings, holding a 12% ownership interest. The value of the aggregate payments allocable to Mr. Fradin’s share of New Island Holdings from January 1, 2017 through the expiration of the lease in February 2022 is approximately $720,000. The limited partners of New Island Holdings receive distributions based on total lease payments generated from the portfolio of buildings that the partnership owns, less applicable mortgage and other expenses. In 2020, the Company entered into a master agreement and related statements of work (SOWs) for consulting services with Box and One Consulting with aggregate fees totaling $200,560. Travis Merrill, who was appointed as Executive Vice President, Chief Strategy & Commercial Officer effective December 21, 2020, was the sole employee of Box and One Consulting, but has terminated all prior arrangements with Box and One Consulting after joining the Company. The consulting services provided by Box and One Consulting concluded prior to Mr. Merrill’s appointment as an officer of the Company and no further consulting services were provided by Box and One Consulting since such appointment. Review, Approval and Ratification of Transactions with Related Parties The Company has a written Policy Concerning Related Party Transactions (the “Policy”) regarding the review, approval and ratification of transactions between the Company and related parties. The Policy applies to any transaction in which Resideo or its subsidiary is a participant, the amount involved exceeds $120,000 and a related party has a direct or indirect material interest. A related party means any director or executive officer of the Company, any nominee for director, any shareholder known to the Company to be the beneficial owner of more than 5% of any class of the Company’s voting securities and any immediate family member of any such persons. Under the Policy, reviews are conducted by management to determine which transactions or relationships should be referred to the Audit Committee for consideration. The Audit Committee then reviews the material facts and circumstances regarding a transaction and determines whether or not the transaction is fair and reasonable and consistent with the Policy and whether the transaction should be ratified or approved. The Policy is in addition to the provisions addressing conflicts of interest in our Code of Business Conduct and any similar policies regarding conflicts of interest adopted by the Board. Our directors, executive officers and all other employees are expected to comply with the terms of the Code of Business Conduct. 36 | 2021 PROXY STATEMENT Beneficial Ownership Delinquent Section 16(a) Reports Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who beneficially own more than 10% of a registered class of the Company’s equity securities, to file initial reports of ownership and reports of changes in ownership of the Company’s common stock and other equity securities with the SEC within specified periods. Due to the complexity of the reporting rules, the Company undertakes to file such reports on behalf of its directors and executive officers and has instituted procedures to assist them with these obligations. Based solely on a review of filings with the SEC and written representations from the Company’s directors and executive officers, the Company believes that in 2020 all of its directors and executive officers filed the required reports on a timely basis with respect to Resideo’s equity securities under Section 16(a), except that a Form 4 for Mr. Nefkens was inadvertently filed late on April 8, 2020 in connection to a disposition of shares that occurred on March 20, 2020. Stock Ownership of Certain Beneficial Owners The following shareholders reported to the SEC that they beneficially owned more than 5% of Resideo common stock as of December 31, 2020. Name and Address of Beneficial Owner BlackRock, Inc. 55 East 52nd Street, New York, NY 10055 The Vanguard Group 100 Vanguard Boulevard Malvern, PA 19355 Praesidium Investment Management Company, LLC 1411 Broadway – 29th Floor New York, NY 10018 Title of Class Amount and Nature of Beneficial Ownership (#) Percent of Class (1) Common Stock 22,110,497(2) 15.26% Common Stock 14,407,911(3) 9.94% Common Stock 7,781,233(4) 5.37% (1) Percentage ownership based on the Schedule 13G/A filings of The Vanguard Group and BlackRock, Inc. as further described below. (2) According to Schedule 13G/A filed with the SEC on January 25, 2021, BlackRock, Inc. is the beneficial owner of 22,110,497 shares (with sole voting power with respect to 21,833,292 shares and sole dispositive power with respect to 22,110,497 shares). (3) According to Schedule 13G/A filed with the SEC on February 10, 2021, The Vanguard Group is the beneficial owner of 14,407,911 shares (with sole voting power with respect to 0 shares, shared voting power with respect to 141,714 shares, sole dispositive power with respect to 14,158,541 shares and shared dispositive power with respect to 249,370 shares). (4) According to a Schedule 13D filed with the SEC on December 13, 2019, Praesidium Investment Management Company, LLC (“Praesidium”), in its capacity as investment manager to certain managed accounts and investment fund vehicles on behalf of investment advisory clients, is the beneficial owner of 7,781,233 shares (with sole voting power with respect to 7,331,691 shares and sole dispositive power with respect to 7,781,233 shares). As the managing members of Praesidium, Peter Uddo and Kevin Oram may be deemed to beneficially own such shares. 2021 PROXY STATEMENT | 37 Stock Ownership of Directors and Executive Officers The following table shows the ownership of Resideo common stock, as of April 14, 2021, by each director, each of the NEOs, and all directors and executive officers as a group. The address of each director and executive officer shown in the table below is c/o Resideo Technologies, Inc., 901 E. 6th Street, Austin, TX 78702. Executive officers and directors are subject to stock ownership guidelines. Please see the “Compensation Discussion and Analysis” for a discussion of executive stock ownership guidelines and the “Stock Ownership Guideline for Non-Employee Directors” for a discussion of non-employee stock ownership guidelines. Name Non-Employee Directors Roger Fradin Paul Deninger Cynthia Hostetler Brian Kushner Jack Lazar Nina Richardson Andrew Teich Sharon Wienbar Kareem Yusuf Named Executive Officers Jay Geldmacher(1) Anthony Trunzo Robert Aarnes Stephen Kelly Jeannine Lane Michael Nefkens (former CEO) Robert Ryder (former Interim CFO) Michael Flink (former EVP, Transformation) Sachin Sankpal (former President, Products & Solutions) All Current Directors and Executive Officers as a Group (16 individuals) Shares of Common Stock (2) Rights to Acquire Shares of Common Stock(3) Total(4) Percentage of Class Beneficially Owned 180,565 16,502 6,143 17,404 43,052 19,630 135,308 16,277 0 0 0 36,418 69,464 26,157 45,161 5,687 54,442 59,967 12,172 12,172 12,172 12,172 12,172 12,172 12,172 12,172 940 192,737 28,674 18,315 29,576 55,224 31,802 147,480 28,449 940 0 0 45,134 45,134 107,549 143,967 52,641 48,968 0 0 45,704 40,134 122,105 75,125 45,161 5,687 100,146 100,101 568,723 386,679 955,402 * * * * * * * * * * * * * * * * * * * * Indicates that the percentage of beneficial ownership does not exceed 1%, based on 144,896,552 shares of Company common stock outstanding as of April 14, 2020. (1) Mr. Geldmacher is also a director of Resideo. (2) This column includes shares held of record, shares held by a bank, broker or nominee for the person’s account, shares held through family trust arrangements and shares held jointly with the named individuals’ spouses. For Mr. Fradin, this column includes 8 shares held by a limited liability company owned by Mr. Fradin. (3) This column includes shares of Company common stock that may be acquired under employee stock options that are exercisable as of April 14, 2021 or will become exercisable within 60 days thereafter and shares subject to restricted stock units that will vest within 60 days of April 14, 2021. No non-employee directors have Company stock options. (4) This table does not include performance-based restricted share units or time-based stock options and restricted stock units that will not be earned and/or paid within 60 days of April 14, 2021. 38 | 2021 PROXY STATEMENT Executive Compensation Proposal 2: Advisory Vote to Approve Executive Compensation We seek an annual non-binding advisory vote from our shareholders to approve the compensation of our Named Executive Officers as described in the “Compensation Discussion and Analysis” section below and the accompanying compensation tables. This vote is commonly known as “Say-on-Pay”. We encourage you to read the “Compensation Discussion and Analysis” and accompanying compensation tables to learn more about our executive compensation programs and policies. Our Board believes that its 2020 compensation-related pay decisions and our executive compensation programs align the interests of shareholders and executives by emphasizing variable compensation tied to achieving measurable goals that drive value. This vote is not intended to address a specific item of compensation, but rather our overall compensation policies and procedures related to the Named Executive Officers. Because the Say-on-Pay vote is advisory, it will not be binding upon our Board. However, our Board will take into account the outcome of the vote and discussions with investors when considering future executive compensation arrangements. Our Board recommends that shareholders vote in favor of the following resolution: “RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation of the Named Executive Officers, as disclosed in the Company’s Proxy Statement for the 2021 Annual Meeting of Shareholders pursuant to the executive compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the 2020 Summary Compensation Table and the other related tables and disclosure.” The Board of Directors unanimously recommends a vote “FOR” Proposal 2, to approve, on an advisory basis, the compensation of the Company’s Named Executive Officers, as stated in the above resolution. 2021 PROXY STATEMENT | 39 COMPENSATION DISCUSSION AND ANALYSIS Executive Summary Our Named Executive Officers This Compensation Discussion and Analysis (“CD&A”) describes the basic objectives, principles, decisions and rationale underlying our executive compensation policies and decisions made by the Compensation and Human Capital Committee of the Board (referred to as the “Committee” throughout the Executive Compensation section). The CD&A describes the material elements of the compensation of our executive officers identified below (the “Named Executive Officers” or “NEOs”) for fiscal 2020: NAMED EXECUTIVE POSITION(S) DATES POSITION(S) HELD (2020 – PRESENT) Continuing Executives Jay Geldmacher Anthony Trunzo Robert Aarnes Stephen Kelly Jeannine Lane Former Executive Officers President and Chief Executive Officer May 28, 2020 – present Executive Vice President, Chief Financial Officer June 8, 2020 – present President, ADI Global Distribution January 1, 2020 – present Executive Vice President, Chief Human Resources Officer Executive Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer January 1, 2020 – present January 1, 2020 – present Michael Nefkens President and Chief Executive Officer January 1, 2020 – May 27, 2020 Robert Ryder Michael Flink Interim Chief Financial Officer January 1, 2020 – June 7, 2020 Executive Vice President, Transformation Senior Vice President, Executive Advisor (non-executive) January 1, 2020 – May 31, 2020 June 1, 2020 – March 31, 2021 Sachin Sankpal President, Products and Solutions January 7, 2020 – October 12, 2020 Key executive team developments during fiscal 2020 that are relevant to this year’s executive compensation outcomes are: • Mr. Nefkens, our former President and CEO, left the Company on May 27, 2020. • The Board appointed Mr. Geldmacher President and CEO of the Company effective May 28, 2020, replacing Mr. Nefkens. • From November 7, 2019 to June 14, 2020, Mr. Ryder served as Interim Chief Financial Officer pursuant to an engagement letter between the Company and Horsepower Advisors LLC (“Horsepower”). As a consultant, incentive or equity compensation and is excluded from the Mr. Ryder was not eligible for our annual discussions in this CD&A of how the Committee sets executive compensation for our executive officers. The fees paid by the Company to Horsepower for Mr. Ryder’s services are represented in the Summary Compensation Table under “All Other Compensation.” • The Board appointed Mr. Trunzo Executive Vice President and Chief Financial Officer, effective June 8, 2020. • From January 17, 2020 to May 31, 2020, Mr. Flink served as Executive Vice President, Transformation, after which he transitioned to Senior Vice President, Executive Advisor, which was not an executive officer position, until his employment terminated on March 31, 2021. • Mr. Sankpal left the Company on October 14, 2020. 40 | 2021 PROXY STATEMENT As a result of these executive leadership changes during fiscal 2020, the compensation of several NEOs for fiscal 2020 was determined based on our compensation policies and practices and negotiations with the NEOs in connection with their hire as the Board sought to build an executive team with the skills and experience to continue the transformation of our business. To effect these leadership transitions and ensure a smooth transition of responsibilities and leadership, the Committee approved transition and severance agreements with departing NEOs. Our Business and Leadership Transformation in 2020 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. We are a leader in the home heating, ventilation and air conditioning controls and security markets. We have a global footprint serving commercial and residential end-markets. In late 2019, we commenced a comprehensive operational and financial review of our business, focused on growing revenue, improving gross margins, optimizing our organizational footprint and improving efficiency and working capital management. During fiscal 2020, we executed on these transformation initiatives, including rightsizing our cost structure and building a product innovation engine. Going into 2021, we plan to accelerate targeted investments to ensure we are well positioned for long-term growth and profitability expansion. Notwithstanding the global headwinds in 2020, the actions our Board and leadership team took in 2019 and 2020 resulted in a stronger balance sheet, business growth and improved financial performance. These actions included, among others: • Formation of a special committee of the Board, the Strategic & Operational Committee, in late 2019 to oversee the comprehensive operational and financial review, provide guidance to management particularly during the CEO transition period and oversee the CEO transition. This committee completed its work in December 2020; • Execution on our multi-year, multi-phase operational and financial review to grow revenue and gross margin, optimize SG&A, and improve efficiency and working capital management; • Appointment of Mr. Geldmacher as CEO in May 2020 following a robust executive search and effecting other executive leadership transitions; and • Completion of an equity offering that raised approximately $279 million of net proceeds and refinancing of our senior secured term loan to deleverage our balance sheet and provide financial flexibility to pursue strategic investments. Our Response to the COVID-19 Pandemic As the COVID-19 pandemic began to affect our business, our leadership team focused on protecting our employees and customers, stabilizing our operations, and taking actions to protect our financial condition. The actions that impacted our human capital, including compensation and benefits, included: • Instituted extensive and comprehensive health and safety protocols to protect employees and customers at all facilities that remained opened; • Ensured our employees in the U.S. had medical coverage for testing and related costs due to testing and treatment for COVID-19; • Implemented cost reductions in the form of salary reductions, furloughs, and reduced hours for certain employees, including reduced salaries for certain senior executives; • Eliminated Board service fees for the first quarter of 2020; • Implemented special COVID-19 medical insurance protection for employees working in our Mexico facilities; • Extended permission for employees with a flexible spending account to reduce coverage mid-year and adopted plan provision to use 2020 unused funds for services in 2021; and • Adopted the COVID-19 provision in the Resideo 401(k) Plan to allow for distributions of up to $100,000 under the CARES Act. 2021 PROXY STATEMENT | 41 Where employee agreement was necessary, an overwhelming majority of employees joined their worldwide colleagues in supporting this effort to help us preserve our business continuity. In addition to cost savings, our employees all stepped up and faced the challenges of operating during a pandemic head on. Our employees found creative ways to keep moving forward safely, which allowed us to continue our essential work of protecting public health and keeping people safe through our water heater, furnace and potable water controls, as well as our security products and services. Following a review of our financial condition near the end of fiscal 2020 and in recognition of our employees’ significant hard work during a challenging year, we paid a special year-end bonus to current employees who were previously impacted by COVID-19 salary reductions and furloughs. The amount was generally comparable to the financial impact of the pay reductions earlier in the year. Our Executive Compensation Philosophy and Approach We operate in a highly competitive and rapidly evolving market. Our ability to compete and succeed in this environment depends on our ability to recruit, incentivize and retain talented individuals. We believe we have created a compensation program for our employees, including our executives, that provides a compelling and engaging opportunity. The program offers rewards for performance and engages our participants by requiring them to focus on driving the business to generate long-term value for our shareholders. We believe this approach is building a performance-driven leadership culture. Utilizing this philosophy, our executive compensation program has been designed to: • Be market competitive, targeting median pay levels for total annual compensation, as defined by our peer group; • Create sustained increases in shareholder value through incentives designed to drive high performance; • Reward achievement of near- and long-term business performance targets; • Make pay decisions based on an executive’s skills and responsibilities, individual performance, experience, importance to the organization, retention, affordability and internal pay equity; • Encourage employees to think like owners and align the interests of our leaders at all levels with those of our shareholders by granting equity awards to mid-level and senior leaders; and • Deliver compensation in accordance with good governance practices that do not encourage undue risk-taking by our employees. Our executive compensation program for 2020 utilized revenue growth, adjusted EBITDA, gross margin and operating cash flow as components of our annual incentive plan. A substantial portion of our long-term incentive awards is linked to relative total shareholder return that reinforces our belief that the interests of our executive team must be intricately linked to that of our shareholders. We remain committed to best practices in compensation governance for public companies, as described in more detail below, and will regularly review our executive compensation strategy to maintain alignment with our objectives. Our Commitment to Compensation Best Practices As part of our executive compensation program, the Committee is committed to regularly reviewing and considering best practices in governance in executive compensation. Following our spin-off from Honeywell, we implemented and maintain the following policies and practices that guide our ongoing, annual executive compensation program. As described above, the compensation for several of our NEOs who were hired or whose employment transitioned during fiscal 2020 was determined by negotiations with those executives and therefore may not have reflected the practices below for compensation in the NEO’s first year of employment or year of transition; however, the Committee remains committed to these best practices over the long term. 42 | 2021 PROXY STATEMENT WHAT WE DO WHAT WE DON’T DO ✖ Allow hedging or pledging of our securities by our directors and employees, including our NEOs ✖ Backdate or spring-load equity awards ✖ Reprice stock options or stock appreciation rights without shareholder approval ✖ Offer any compensation programs or policies which reward excessive risk-taking ✖ Provide multi-year guaranteed payments to executive officers ✖ Offer tax reimbursement payments or gross-ups on any severance or change in control payments ✖ Provide any significant perquisites Maintain robust stock ownership guidelines requiring our officers and directors to hold a significant ownership position in the Company Provide compensation packages heavily weighted toward equity compensation Tie our incentive compensation programs directly to the creation of shareholder value Link our annual bonus plan goals directly to our annual operating plan to drive our growth plan Use multiple performance metrics for our 2020 annual incentive plan and include a maximum cap on all our incentive award payouts Ensure a significant portion of our NEOs’ compensation is variable and based on company performance Retain an independent compensation consultant, selected by the Committee, to advise on competitive compensation practices Provide for severance benefits to our NEOs in connection with a change in control of the Company that requires a double trigger Require our NEOs, where permitted by law, to sign non-competition and intellectual property agreements Set the annual goals for our CEO with consultation and regular performance evaluations by our independent directors Maintain a compensation recoupment (“clawback”) policy triggered by a material restatement of the Company’s financial statements which is applicable to all our NEOs Evaluate and manage risk in our compensation programs Peer Group and Market Data With the assistance of our independent compensation consultant, FW Cook, the Committee selected the companies below to include in our peer group based on similar size revenue and market capitalization as well as alignment with our current profile, targeting industrial and distribution companies and internet and technology companies and focusing on the connected home. This peer group was used to support 2020 compensation decisions. • A.O. Smith Corp. • Acuity Brands, Inc. • ADT Inc. • Alarm.com Holdings, Inc. • Allegion plc • Anixter International, Inc. • Arlo Technologies Inc. • BlackBerry Limited • Fortune Brands Home & Sec. • Itron, Inc. • Juniper Networks, Inc. • Lennox International Inc. • NCR Corporation • NETGEAR, Inc. • Nuance Communications • Owens Corning • Pentair plc • Watsco, Inc. While the Committee considers peer group information provided by its independent consultant as part of its benchmarking analysis, it may also refer to other available resources including published compensation data from surveys to fully understand competitive compensation practices in the external marketplace for executive talent. 2021 PROXY STATEMENT | 43 Although the Committee uses median benchmark data to guide its compensation decisions, actual compensation levels may vary based on the Committee’s consideration of other factors described below. Elements of Compensation Overview Our Committee has the primary authority to determine and approve the compensation of our NEOs. The Committee is charged with reviewing our executive compensation policies and practices annually to ensure that the total compensation paid to our NEOs is fair, reasonable, competitive to our peers and commensurate with the level of expertise and experience of our NEOs. Our Committee reviews and approves the total amount of compensation for our NEOs and the allocation of total compensation among each of in the case of negotiated arrangements for new and transitioning executives that may involve consideration of other factors as described below, the Committee’s decisions related to NEO compensation levels and mix for fiscal 2020 were determined principally on the following factors: the components. Except • Individual and Company performance; • Each executive’s scope of responsibility and experience; • The judgment and general industry knowledge obtained through years of service with comparably-sized companies in our industry and other similar industries; and • Input about competitive market practices from our independent compensation consultant. Our management team and human resources leadership worked closely with the Committee to analyze competitive market practices and effectively design and implement our executive compensation program. Our CEO regularly participates in Committee meetings and develops and provides recommendations to the Committee regarding the compensation for our NEOs (excluding himself) and the design of our incentive compensation programs. Our CEO and other NEOs are not present when their own compensation arrangements are discussed by the Committee. Resideo’s 2020 Executive Compensation Program We have designed both near- and long-term incentive (LTI) compensation packages that we believe are competitive and support the compensation objectives described above. The key elements of our compensation program for NEOs, other than NEOs who were hired or were transitioning in fiscal 2020 are set forth below. BASE SALARY • Salaries are competitive with median market practice for the individual’s role, taking into consideration individual performance, experience, scope of role relative to market benchmarks and other factors ANNUAL INCENTIVE PLAN LONG-TERM INCENTIVES • Our 2020 annual incentives were tied to achieving growth and profitability targets approved by the Board. • Financial metrics for 2020 were revenue, adjusted EBITDA, gross margin and operating cash flow, which represented 80% of the target incentive opportunity • The individual performance component of each executive’s annual incentive was linked to an assessment of their individual business initiatives, which represented 20% of the target incentive opportunity • Target long-term incentive values were granted to our NEOs through three equity instruments: • Stock options representing thirty percent (30%) of the total LTI value vesting annually over three years in equal, one-third installments • RSUs representing twenty percent (20%) of the total LTI value, vesting annually over three years in equal, one-third installments • Performance share units (“PSUs”) representing fifty percent (50%) of the total LTI value, with potential payout determined based on our total shareholder return measured against the total shareholder return of the companies in the S&P 400 Industrials Index (rTSR) The Committee approved a 2020 executive compensation program which reflects our business strategy and a strong pay-for-performance culture. The Committee views stock options as an equity instrument that strongly aligns the compensation realized by our NEOs with the long-term returns generated for our shareholders, as no compensation is earned unless the Company’s stock price increases from the level at which the option is granted. 44 | 2021 PROXY STATEMENT In addition, our rTSR-based PSUs will be earned based on our shareholder returns performance against that of the companies in the S&P 400 Industrial Index over a three-year performance period. Our RSU awards further align the interests of our NEOs with our shareholders and provide a meaningful retention vehicle. Fiscal 2020 Compensation Program for Mr. Geldmacher, Our New CEO As described above, our former CEO left the Company in fiscal 2020 and the Board conducted a search and appointed Mr. Geldmacher as CEO in May 2020. The terms of Mr. Geldmacher’s compensation for fiscal 2020 and other terms of his offer letter reflect negotiations between the Committee and Mr. Geldmacher, taking into consideration the Committee’s desire to attract Mr. Geldmacher to leave his prior employment to join Resideo, to do so during the restrictions and uncertainty presented by the COVID-19 pandemic and to join the Company while we were in midst of transforming the business. The summary below describes the key terms of Mr. Geldmacher’s offer letter and compensation program for fiscal 2020 and factors considered by the Committee in designing the program: Compensation Element Fiscal 2020 Factors Considered Base Salary $900,000 Annual Incentive Target 150% of base (pro-rated and guaranteed for fiscal 2020) Long-Term Incentive Sign-on Bonus Make-Whole Bonus Severance Benefits Perquisites Relocation and Legal Fees Market competitive base salary reflective of Mr. Geldmacher’s experience Incentive for Mr. Geldmacher to leave his prior employment and join Resideo mid-year with an expectation of delivering on a previously determined operating and financial plan over which he had no input, and joining at a time when the impacts of the pandemic and the Company’s transformation were uncertain; 150% of base target reflects a market competitive level Create long-term incentives with three- year cliff vesting to attract and retain Mr. Geldmacher during the Company’s ongoing transformation and in light of the uncertainty presented by the pandemic based on market competitive incentive values Incentive for Mr. Geldmacher to leave his prior employment Ensure that Mr. Geldmacher is made whole for compensation he may have earned but would not receive from his prior employment to incentivize him to join Resideo mid-year LTI award valued at $3.097 million (reflecting a pro-rated amount of $5.2 million annual LTI value), delivered 10% in RSUs, 15% in stock options and 25% as PSUs, all vesting on the third anniversary of the grant date, and 50% in cash if Mr. Geldmacher remains employed for three years $2,000,000 subject to ratable repayment if he resigns other than for good reason or is terminated for cause within two years $90,000 for forfeited quarterly bonus opportunity with his prior employment Same as other NEOs, but also provided if he terminates employment for good reason Provide Mr. Geldmacher additional protection to incentivize him to leave his prior employment Same as other NEOs, but also includes an annual executive physical valued at up to $5,000 and the right to use a private jet for business and commuting purposes, including a full tax gross-up for such use Ensure Mr. Geldmacher’s health and safety, particularly in light of the COVID-19 pandemic and Mr. Geldmacher’s need to effectively lead the Company; during fiscal 2020, Mr. Geldmacher only used a private jet for limited business travel Same relocation assistance as for any officer plus reimbursement of temporary housing for up to 12 months and up to $75,000; reimbursement of legal fees related to negotiation and documentation of his employment agreement up to $37,500 Additional benefits to facilitate Mr. Geldmacher’s relocation, which is not expected to occur until the COVID-19 pandemic subsides, and to cover his reasonable legal expenses negotiating his offer terms; the relocation expenses were not incurred in fiscal 2020 2021 PROXY STATEMENT | 45 Fiscal 2020 compensation decisions for our other NEOs were determined in accordance with the general philosophy and compensation practices described above and included the compensation elements described below. 2020 Base Salary Our base salaries provide a competitive level of fixed compensation for our NEOs that is aligned with their role and accounts for additional factors such as their level of experience and individual performance. The Committee considers competitive fixed cash compensation to be an important foundation of a competitive total compensation program that will both retain and motivate our executives. At the Committee reviews the competitiveness of base salaries relative to external benchmarks and considers changes, as appropriate, taking including key elements of our into consideration market data as well as factors specific to our Company, compensation philosophy described above. For 2020, base salaries for NEOs were generally increased 3% to reflect market-based increases; however, base salaries for Mr. Aarnes and Ms. Lane were increased by a greater amount to reflect their positions and levels of responsibility within the Company. Mr. Geldmacher and Mr. Trunzo joined the company during fiscal 2020 and their base salaries were determined by reference to their experience levels and negotiation of the offer letter terms. Fiscal 2020 annual base salaries for the NEOs, including any change from the prior year, are reflected below: least annually, Name Title Jay Geldmacher President and Chief Executive Officer Anthony Trunzo Executive Vice President, Chief Financial Officer Robert Aarnes President, ADI Global Distribution Stephen Kelly EVP, Chief Human Resources Officer Jeannine Lane EVP, General Counsel, Corporate Secretary and Chief Compliance Officer 2019 base salary 2020 base salary Percent increase N/A N/A $900,000 $585,000 $450,000 $500,000* $430,000 $442,900 $400,000 $450,000 N/A N/A 11% 3% 13% N/A 3% N/A Michael Nefkens Former President and Chief Executive Officer $900,000 $900,000 Michael Flink Former EVP, Transformation Sachin Sankpal Former President, Products & Solutions $469,000 $483,070 N/A $500,000 * Mr. Aarnes’ annual salary was further increased to $575,000 effective December 14, 2020 to reflect the significance of Mr. Aarnes’ contributions and leadership within the Company and the ADI business. As discussed, above, as part of the Company’s actions to reduce costs when the COVID-19 pandemic began to impact the Company’s business, the Company implemented pay reductions, including a 15% reduction in annual base salary payments for NEOs from April 20 to July 26, 2020. In December 2020, the Committee approved a special bonus payment to each current NEO whose salary had been reduced at the same time the Company then-current employees in an amount approximating the base salary made similar bonus payments to all reduction during the year. 2020 Annual Incentive Plan The fiscal 2020 annual incentive plan provided NEOs the opportunity to earn a payout with a target set as a percent of the NEO’s base salary. The Committee set financial metrics that represented 80% of the target incentive opportunity and individual performance objectives that represented 20% of incentive opportunity. Under the 2020 annual incentive plan, our NEOs were eligible to receive a payout ranging from a threshold payment of 30% to a maximum of 200% of the target award allocated to the achievement of each financial metric. For each of the Committee set each NEO’s target equal to 100% of the NEO’s base salary, except for Mr. Kelly and Ms. Lane whose targets were equal to 80%, and Mr. Flink whose target was 90%, of base salary. the NEOs who participated in the annual incentive plan for fiscal 2020, the target As a result of the transformation initiatives underway at the Company in late 2019 and early 2020, the Board did not finalize the operating budget for fiscal 2020 until April 2020, at which time the Committee set the metrics for the 2020 annual incentive plan. The levels of financial performance set for each metric at target and maximum were substantially similar to the levels discussed by the Committee earlier in February 2020; however, in light of 46 | 2021 PROXY STATEMENT the uncertainty presented by the pandemic, the threshold levels were set below the levels previously discussed, with an intent of requiring a comparable level of effort to achieve those threshold levels in light of the more challenging operating conditions that existed in April. In determining the financial metrics used to set performance targets for our 2020 annual incentive compensation awards, our leadership team and Committee considered, among other factors, feedback from our Board that gross margin represents an important measurement of the long-term financial health of the business. To that end, gross margin was added as a component of the financial metrics of the Resideo annual incentive plan, along with revenue, adjusted EBITDA, and operating cash flow. The relative weighting of each financial metric and a definition of the metric is set forth below: Financial Metric Weighting Definition* Revenue Adjusted EBITDA Gross margin Operating cash flow 35% 25% 25% 15% Total value of the products and services sold to our customers net of discounts and returns from continuing operations Earnings before interest, taxes, depreciation, and amortization, excluding Honeywell reimbursement agreement payments, stock compensation expense, restructuring charges and certain other expenses related to our transformation initiatives and the Spin-Off (all as reported in our earnings release for the full year ended December 31, 2020) Ratio of gross profit, or revenue less fixed and variable cost of goods sold, to revenue Adjusted EBITDA plus changes in working capital less adjusted capital expenditures during the year * The Committee determined that each financial metric would be determined excluding fluctuations in foreign currency. The annual incentive award financial metrics for our NEOs, other than Mr. Aarnes and Mr. Sankpal, were based on consolidated Resideo results. The financial metrics for Mr. Aarnes’ annual incentive award were weighted 50% on the results of the ADI business, and 50% based on Resideo’s consolidated results. The financial metrics for Mr. Sankpal’s annual incentive award were weighted 50% on the results of the Products & Solutions business, and 50% on Resideo’s consolidated results. However, following the end of the year, when the Committee evaluated the Company’s performance to certify the results for annual the Committee determined to approve payouts for all NEOs, including Mr. Aarnes and Mr. Sankpal, based solely on consolidated results. The Committee made this determination for two reasons: (i) in light of the COVID-19 pandemic that impacted the Company’s business in the middle of the management team was working collaboratively toward achievement of overall results regardless of particular impacts on the Company’s business segments and (ii) certain financial benefits impacted the Company’s consolidated results that did not flow through to the business segments and could not reasonably be allocated to the business segments. As indicated below, each NEO who participated in the annual incentive plan thus earned a payout equal to 77.6% of the NEO’s target bonus based on these financial results. the Committee wanted to ensure that incentive payouts, the year, The tables below summarize the plan goals and performance results for 2020 for the Company overall and for the ADI and Products & Solutions segments. Notably, the Committee did not change the incentive metrics or approve adjustments related to the impact of COVID-19 after they were set in April. As indicated above, each NEO who participated in the 2020 annual incentive plan was ultimately paid based solely on the Company’s consolidated results, which slightly exceeded the near- or above-target results achieved by each segment and represents substantial improvement over 2019 results. Financial Performance (80% of bonus) For the period January 1 - December 31, 2020 Total Company Financial Metric* (% weighting) Revenue $M (35%) Gross Margin (25%) Adjusted EBITDA $M (25%) Operating Cash Flow $M (15%) Threshold ($M) $ 3,912 27.4% $ $ 283 209 Goal ($M) $ 5,101 28.8% $ $ 435 321 Maximum ($M) $ 5,356 30.0% $ $ 500 369 Actual ($M) $ 5,047 27.5% $ $ 427 404 Financial Performance % 99% 95% 98% 126% 2021 PROXY STATEMENT | 47 Financial Performance (80% of bonus) For the period January 1 - December 31, 2020 ADI Global Distribution Financial Metric* (% weighting) Revenue $M (35%) Gross Margin (25%) Adjusted EBITDA $M (25%) Operating Cash Flow $M (15%) Threshold ($M) $ 2,391 17.3% $ $ 164 121 Goal ($M) $ 2,958 18.2% $ $ 252 186 Maximum ($M) $ 3,106 18.9% $ $ 290 214 Actual ($M) $ 2,903 17.1% $ $ 219 212 Financial Performance (80% of bonus) For the period January 1 - December 31, 2020 Products & Solutions Global (P&S) Financial Metric* (% weighting) Revenue $M (35%) Gross Margin (25%) Adjusted EBITDA $M (25%) Operating Cash Flow $M (15%) Threshold ($M) $ 1,521 41.4% $ $ 374 343 Goal ($M) $ 2,242 43.6% $ $ 576 528 Maximum ($M) $ 2,354 45.3% $ $ 662 607 Actual ($M) $ 2,144 41.9% $ $ 527 511 * Each financial metric is reported excluding fluctuations in foreign currency. Financial Performance % 98% 94% 87% 114% Financial Performance % 96% 96% 91% 97% 2020 Annual Incentive Plan – Individual Performance Objectives (20% of target award) The Committee conducted a qualitative assessment to determine the individual performance objectives portion of the 2020 annual incentive award payout, which accounts for 20% of the target award. The Committee first reviewed corporate performance for each business unit and functional area and noted general 2020 accomplishments that were significant to understanding individual NEO performance. Because the individual performance component for certain NEOs was guaranteed in connection with their transition and no individual performance component was determined for newly hired NEOs whose annual incentive payouts were guaranteed for fiscal 2020, set forth below are the objectives and results against those objectives for those NEOs who were eligible to receive a payout based on individual performance objectives: Robert Aarnes, President, ADI Global Distribution Objectives Results • Ensure ADI global targets are achieved • Achieve targeted internal rate of return (IRR) thresholds for key digital-enablement investments • Build and develop internal competence within ADI for growth initiatives Based on the results below, the Committee approved a payout of Mr. Aarnes’ personal performance component at 100% of target for this component (equal to 20% of total target incentive) ➣ Efficiency and cost savings projects completed ➣ Pricing initiatives implemented to achieve IRR thresholds ➣ E-commerce revenue growth achieved ➣ Transitioned development team into ADI ➣ Synergies from prior acquisitions achieved ➣ Growth initiatives pipeline developed; certain activities delayed due to COVID-19 impacts 48 | 2021 PROXY STATEMENT Stephen Kelly, Executive Vice President, Chief Human Resources Officer Objectives Results • Design and implement Employee Stock Purchase Plan • Strengthen organizational capability and capacity • Strengthen HR organizational capability via self-service and Based on the results below, the Committee approved a payout of Mr. Kelly’s personal performance component at 100% of target for this component (equal to 20% of total target incentive) process standardization/simplification ➣ ESPP successfully launched ➣ Payroll processing simplified ➣ Succession depth below officer level identified ➣ Key role stability mission critical experience identified ➣ Organizational capabilities achieved ➣ Global HR operations network implemented and processes standardized Jeannine Lane, Executive Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer Objectives Results • Drive a robust integrity and compliance and regulatory function • Continued development of Law, HSE and Risk Management Program • Effective management of litigation and IP strategy Based on the results below, the Committee approved a payout of Ms. Lane’s personal performance component at 100% of target for this component (equal to 20% of total target incentive) ➣ Supported executive leadership onboarding and transition ➣ Operationalized and enhanced board support and governance processes ➣ Integrity and compliance model finalized ➣ Key compliance trainings rolled out ➣ Code of Conduct attestation level of 99.5% ➣ Data privacy compliance evaluated ➣ Global coordination around COVID-related regulations ➣ Continued progress defending and assessing IP portfolio ➣ Supported brand transition matters with Honeywell In determining the actual 2020 bonus awards paid to each NEO pursuant to the annual incentive plan, the following formula was applied. The base salary amount used in the formula was the NEO’s 2020 base salary rate, excluding the impact of the base salary reductions related to the Company’s COVID-19 cost savings. Annual Incentive Cash Bonus = Base Salary × Target Bonus Percentage × [ Financial Performance Payout Percentage + Individual Performance Payout Percentage ] In connection with our recent leadership transition, the Committee approved compensation arrangements for Mr. Nefkens, Mr. Flink and Mr. Sankpal. Mr. Nefkens’ payout would be calculated based on his target incentive award, pro-rated for his period of service during 2020. In connection with Mr. Flink’s transition, he ceased serving as an executive officer effective May 31, 2020; however, he was entitled to a payment of his fiscal 2020 annual incentive award, in accordance with the Company’s actual financial results with respect to the financial metric components and reduced by 50% for the individual performance component, but guaranteed at that reduced level. Mr. Sankpal was eligible to receive a payment based on the Company’s actual financial results with respect to the financial metric components of the award and a reduced individual component that was equal to 10% of the total target award, which individual component was guaranteed, with the resulting amount pro-rated based on Mr. Sankpal’s period of service during 2020. In connection with the hire of Mr. Geldmacher and Mr. Trunzo, the Committee guaranteed payouts equal to their pro-rated target annual incentive for fiscal 2020. Accordingly, they did not participate in the annual incentive plan described above. 2021 PROXY STATEMENT | 49 The table below shows the total amount of annual participated in the plan (the table excludes those NEOs whose payouts were guaranteed as described above): incentive plan payouts for fiscal 2020 for each NEO who NEO Robert Aarnes Stephen Kelly Jeannine Lane Michael Flink Sachin Sankpal Financial Performance Result Individual Performance Result Total Incentive Result (%) Target Incentive Payout ($)(1) Actual Incentive Payout ($) 77.6% 77.6% 77.6% 77.6% 77.6% 20% 20% 20% 10% 10% 97.6% 97.6% 97.6% 87.6% 87.6% 500,000 354,320 360,000 434,763 500,000 488,000 345,816 351,360 380,852 337,475 (1) Target bonus reflected above for Mr. Sankpal was pro-rated based on the actual number of days he was employed during 2020. Discretionary Payments In connection with the Committee’s evaluation of individual NEO performance during fiscal 2020, the Committee approved a $150,000 performance recognition payment to Mr. Trunzo for his exceptional efforts in fiscal 2020 to complete an equity financing and debt refinancing that strengthen the Company’s balance sheet and provide meaningfully increased financial flexibility. Also, in fiscal 2020, as described above, the Committee approved special bonus payouts to each then-serving NEO approximating the amount of the NEO’s COVID-19 related salary reduction amount. 2020 Long-Term Incentives The goal of our long-term incentive plan is to align the compensation of our executives with the interests of shareholders by encouraging sustained long-term improvement in operational and financial performance and long-term increase in shareholder value. Long-term incentives also serve as retention instruments and provide equity-building opportunities for executives. Equity awards to our employees are granted under the Amended and Restated 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates (the “2018 Stock Incentive Plan”). For fiscal 2020, the Committee approved an increase in the amount of the LTI value attributed to performance stock units. The table below shows the mix of LTI components for 2019 and 2020: Performance Stock Units Stock Options Restricted Stock Units 2019 (% of Total LTI) 33% 33% 33% 2020 (% of Total LTI) 50% 30% 20% As described above, Mr. Geldmacher’s LTI award for fiscal 2020 reflected the particular circumstances of his hire. Mr. Geldmacher’s LTI value for fiscal 2020 was issued in the form of performance stock units (25%), stock options (15%), restricted stock units (10%) and a long-term cash incentive award (50%). All of Mr. Geldmacher’s awards cliff vest after three years. 2020 Stock Options The stock options awarded in 2020 will vest ratably over three-years with one-third of the option shares vesting on each anniversary of the grant date until fully vested on the third anniversary of the grant date, assuming the recipient is continually employed through each vesting date, provided that the options granted to Mr. Geldmacher will vest in full on the third anniversary of the grant date subject to his continued employment. The options will expire if unexercised prior to the seventh anniversary of the grant date. 50 | 2021 PROXY STATEMENT 2020 Restricted Stock Units The annual restricted stock units (or RSUs) awarded in 2020 will vest ratably over three-years with one-third of the shares vesting on each anniversary of the grant date until fully vested on the third anniversary of the grant date, assuming the recipient is continually employed through each vesting date, except as indicated below. The RSUs granted to Mr. Geldmacher will vest in full on the third anniversary of the grant date, subject to his continued employment through such date. The RSUs granted to Mr. Nefkens in 2020 under the CEO transition plan vested monthly until a successor was appointed in May 2020. In addition to the annual LTI awards, the Committee approved three separate RSU awards as follows: • Mr. Sankpal was granted a sign-on award of 215,231 RSUs pursuant to his offer letter. The RSUs were scheduled to vest as to one-third of the units on each of the first three anniversaries of the grant date, subject to his continued employment In connection with Mr. Sankpal’s termination of employment, the RSUs were modified to permit continued vesting that portion of the RSUs that were not otherwise subject to pro-rata vesting upon termination. through such dates. • Mr. Trunzo was granted a sign-on award of 300,000 RSUs pursuant to his offer letter. The RSUs will vest as to 50% of the units on each of the third and fourth anniversaries of the grant date, subject to his continued employment through such date. • Mr. Aarnes was granted a one-time award of 50,000 RSUs that will vest on the fifth anniversary of the grant date, subject to his continued employment through such date. The RSUs were granted to serve as an incentive to Mr. Aarnes’ continued service and performance with the Company. 2020 Performance Stock Units The performance stock units (or PSUs) granted in 2020 reflect a change in the performance metrics from the performance stock units granted in prior years. Previously, PSUs vested based on achievement of internal financial metrics, including revenue and adjusted EBITDA. When the PSUs were originally granted in February 2020, the Committee set metrics for the PSUs whereby 50% of the award would vest based on certain revenue goals and 50% would vest based on a relative total shareholder return (rTSR) metric. In April 2020, upon completion of the budget for 2020, the Committee reviewed the metrics and determined to modify the award so that the entire award would vest based on achievement of the rTSR metric previously approved. In determining to make this modification, the Committee considered the leadership and business transformation underway and considered that revenue was also used a financial metric under the annual incentive plan and the use of rTSR as the sole metric for the PSUs created a strong alignment with shareholder interests. Accordingly, all of the PSUs granted in 2020, as modified, will vest based on a relative total shareholder return (rTSR) metric and will be earned by comparing our total shareholder return to the total shareholder return of other companies in the S&P 400 Industrial Index from January 1, 2020 through December 31, 2022. The threshold, target and maximum levels of rTSR achievement that correspond to the number of shares that will be earned are forth below, and the levels were not changed from the levels originally approved in February 2020. set Performance below the threshold will result in no shares being paid. Threshold Target Maximum *linear interpolations between points Percentile Rank Payout as percent of target shares 25th 55th 75th 50% 100% 200% 2021 PROXY STATEMENT | 51 Other Components of Our Compensation Program Offer Letter Agreements and Transition Letter Agreements As described above, the Board effected several executive leadership changes in fiscal 2020. In connection with those transitions, the Committee approved offer letters for newly hired NEOs and transition letter agreements for departing NEOs. The terms of these agreements are described in more detail below under “Compensatory Arrangements with NEOs.” The following principles guided the Committee’s decision to enter into these agreements: • The Board determined that it was important to make key executive leadership changes as part of the Company’s transformation. The Board conducted a robust search for executive leaders who had the right skills and experience to lead the company at this critical time and sought to attract them to leave their prior employment to join Resideo. Accordingly, the compensation terms in the offer letters were designed to attract and retain these talented executives. Among other things, these terms include guaranteed bonus for fiscal 2020 to recognize the uncertainty presented by the pandemic and the Company’s transformation. In addition, the Committee approved vesting schedules for Mr. Geldmacher and Mr. Trunzo that created longer retention periods. The specific terms of Mr. Geldmacher’s offer letter, including factors considered by the Committee, are described above under “New CEO Fiscal 2020 Compensation Program.” • The Board felt it was important to ensure a seamless transition of responsibilities from NEOs who were departing the Company and incentivize them to remain with the Company for appropriate transition periods. Accordingly, each transition agreement was designed to incentivize the departing NEO to ensure the success of the transition based on the relevant circumstances. Severance Plan Each of our NEOs participates in the Resideo Technologies, Inc. Severance Plan for Designated Officers (the “Severance Plan”). The terms of the Severance Plan were established following a review of the severance practices among companies in our approved compensation peer group. The Severance Plan addresses severance for our NEOs upon a termination following a change in control (“CIC”), considered a “double trigger”, and is intended to ensure the continued attention of our NEOs to their roles and responsibilities without the distraction that may arise from the possibility of a job loss concurrent with a CIC of the Company. In addition, the Severance Plan provides for severance payments and benefits that become payable if the employment of one of our NEOs is terminated by us without “cause” (as defined in the Severance Plan) subject to such individual signing and not revoking a release of claims agreement. The Committee has adopted the Severance Plan to provide competitive post-employment compensation arrangements that promote the continued attention, dedication and continuity of the members of our senior management team, including our NEOs, and enable us to continue to recruit talented senior executive officers. The Committee intends to periodically review the severance available to our NEOs under the Severance Plan to ensure ongoing competitiveness and alignment with our overall compensation philosophy. The severance benefits provided to our NEOs are outlined in the Potential Payments Upon Termination or Change in Control Table found later in this Proxy Statement. Nonqualified Deferred Compensation Plan Executive officers (including the NEOs) may choose to participate in the Resideo Supplemental Savings Plan, a nonqualified deferred compensation plan that permits additional tax-deferred retirement savings options. The Resideo Supplemental Savings Plan has two components, the Deferred Incentive Program (DIP) and the Supplemental Savings Program (SSP). Executive officers can elect to defer up to 100% of their annual incentive award under the DIP component. In addition, under the SSP component, executive officers may also elect to defer eligible compensation that cannot be contributed to the Company’s 401(k) plan due to IRS limitations. The amounts contributed to the Supplemental Savings Plan are eligible for company matching credits, not to exceed 87.5% of the first 8% contributed combined between the SSP and the Company’s 401(k) plan. The participant account balances in the SSP are subject to gains and losses, based on the returns of the Fidelity® U.S. Bond Index Fund. 52 | 2021 PROXY STATEMENT Benefits and Perquisites Our NEOs are eligible to receive the same benefits as our salaried employees in the U.S. The Company and the Committee believe this approach is reasonable and consistent with the overall compensation objectives to attract and retain employees. These benefits include medical, dental, vision, disability insurance, a 401(k) plan and other plans and programs made available to other eligible employees in the U.S. Employee benefits and perquisites are reviewed periodically to ensure that benefit levels remain competitive. Executive Annual Physical Program Starting in 2019, the Committee approved that all officers are required to have an annual executive physical and are eligible to participate in an executive annual physical program paid for by the Company. These physicals provide a more in-depth review of the health of those employees reporting to the President and Chief Executive Officer of the Company. NEO participation in 2020 was limited due to travel and other restrictions related to elective medical appointments. As described above, the Committee approved additional benefits for Mr. Geldmacher related to his health and safety, particularly in light of the COVID-19 pandemic. Executive Stock Ownership Guidelines The Committee believes that the interests of our executives, including our NEOs, will be more aligned with those of our shareholders, and our NEOs will more effectively pursue strategies that promote our shareholders’ long- term interests, if our executives hold substantial amounts of our stock. All of our executive officers, including our NEOs, are subject to minimum stock ownership guidelines that are administered by the Committee. Under these in value to the following guidelines, our executive officers must hold shares of Resideo common stock equal multiples of their current base salary: CEO 6x Base Salary Other Executive Officers 3x Base Salary Our executive officers have five years from the date they become subject to the guidelines to meet the ownership requirement. Shares owned outright, unvested RSU awards and earned performance share awards are counted toward the ownership requirement. Shares may be sold during the accumulation period if satisfactory progress towards meeting the minimum requirement is demonstrated. As of December 31, 2020, Mr. Trunzo, Mr. Aarnes, Mr. Kelly and Ms. Lane have met the minimum stock ownership requirement under the policy. Incentive Recoupment Policy (“Clawback”) In the event of a material restatement of our financial results (a “Restatement”), the Board will review all incentive compensation paid to senior executives on the basis of having met or exceeded specific performance targets for performance periods during the Restatement period. To the extent permitted by applicable law, the Board will seek to recoup incentive compensation, in all appropriate cases (taking into account all relevant factors, including whether the assertion of a recoupment claim may prejudice the interests of the Company in any related proceeding or investigation), paid to, or credited to a deferred compensation account of, any senior executive, if and to the extent that: (i) (ii) (iii) the amount of incentive compensation was calculated based upon the achievement of certain financial results that were subsequently reduced due to a Restatement; the senior executive engaged in misconduct that caused the need for the Restatement; and the amount of incentive compensation that would have been awarded to the senior executive had the financial results been properly reported would have been lower than the amount actually awarded. Hedging and Pledging Policy It is our policy that all of our directors, officers and employees are prohibited from engaging in short sales of Resideo securities and selling or purchasing puts or calls or otherwise trading in or writing options on Resideo securities and using certain financial instruments (including forward sale contracts, equity swaps, collars and exchange funds), holding securities in margin accounts or pledging Resideo securities as collateral, in each case, that are designed to hedge or offset any decrease in the market value of Resideo securities. 2021 PROXY STATEMENT | 53 Tax Deductibility of Executive Compensation Section 162(m) of the Internal Revenue Code generally limits the tax deductibility of compensation paid to the CEO and other covered officers to $1 million in any taxable year. Thus, we generally will not be able to take a deduction for any compensation paid to our NEOs in excess of $1 million. While the Committee considers this limitation on tax deductibility, its decisions regarding executive compensation are determined based on the philosophy and factors described above. Compensation and Human Capital Management Committee Report The Committee has reviewed and discussed with management the Company’s Compensation Discussion and Analysis included in this Proxy Statement. Based on this review and discussion, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and the Company’s Form 10-K for the year ended December 31, 2020. This report is provided by the following independent members of the Board, who comprise the Committee: Sharon Wienbar (Chair) Nina Richardson Andrew Teich 54 | 2021 PROXY STATEMENT Summary Compensation Table The following table sets forth information concerning the compensation awarded to, earned by or paid to our NEOs during 2020. Officer Name Position Year Base Salary ($) Bonus ($)(1) Stock Awards ($)(2) Option Awards ($)(3) Non-Equity Incentive Plan Compensation ($)(4) Changes in Pension Values and Non Qual. Deferred Comp Earnings ($)(5) 2020 526,154 2,894,098 774,547 464,589 2020 326,250 447,775 3,438,060 339,343 — — — — All Other Compensation ($)(6) Total Compensation ($) 38,579 4,697,966 17,749 4,569,177 Jay Geldmacher Tony Trunzo Robert Aarnes President & Chief Executive Officer EVP, Chief Financial Officer President, ADI Global Distribution 2020 487,115 — 2,222,916 524,999 488,000 40,092 19,637 3,782,759 2019 437,671 — 933,308 466,661 490,500 40,977 19,145 2,388,262 2018 60,135 44,987 885,007 — 138,905 9,996 4,440 1,143,470 Stephen Kelly EVP, Chief Human Resources Officer 2020 438,228 — 578,682 232,199 345,816 45,584 25,544 1,666,054 2019 430,000 — 515,995 257,999 279,328 140,014 713,972 2,337,308 2018 65,346 67,898 1,041,057 — 178,415 8,163 9,111 1,369,991 Jeannine Lane Michael Nefkens Robert Ryder Michael Flink EVP, General Counsel, Corporate Secretary and Chief Compliance Officer Former President & Chief Executive Officer Former Interim Chief Financial Officer(7) Former SVP, Executive Advisor Sachin Sankpal Former President, Products & Solutions 2020 434,327 — 538,314 215,997 351,360 84,107 22,587 1,646,692 2020 393,923 — 1,457,118 — — — 2,055,546 3,906,587 2019 895,068 — 2,866,654 1,433,333 655,200 2018 135,385 193,227 4,104,724 — 998,977 — — 502,910 6,353,165 1,645 5,433,958 2020 2019 — — — — — — — — — — — 1,553,344 1,553,344 — 391,000 391,000 2020 477,974 — 701,308 281,399 380,852 202,045 35,952 2,079,531 2019 469,000 — 625,311 312,666 240,597 219,889 370,764 2,238,227 2018 72,154 91,336 1,067,381 — 222,065 70,855 8,412 1,532,202 2020 468,269 — 3,956,834 524,999 — — 2,094,051 7,044,153 (1) For 2020, Mr. Geldmacher received a sign-on bonus and both Mr. Geldmacher and Mr. Trunzo received guaranteed bonus payouts at target, pro-rated for their period of employment, for fiscal 2020 pursuant to the terms of their offer letters. For 2018, our NEOs received a discretionary bonus payment for their significant contributions to our successful Spin-Off from Honeywell. (2) Stock awards in 2020 consisted of restricted stock unit (RSU) awards and performance stock unit (PSU) awards. The amounts reported in this column represent the aggregate grant date fair value of the RSU awards for fiscal years 2020, 2019 and 2018 and of the target level of the PSU awards for fiscal years 2020 and 2019. We calculated these amounts in accordance with the provisions of FASB ASC Topic 718 utilizing the assumptions discussed in Note 18 to our financial statements for the fiscal year ended December 31, 2020. The fair value of the RSUs is based on the average of the high and low prices for Resideo stock on the grant date. The fair value of the PSUs that vest based on the rTSR metric was determined using the Monte Carlo simulation valuation method. The value of the PSUs reflects the original grant date fair value of the PSUs when granted in February 2020 (for NEOs who received their PSUs in February). At that time, the awards had a grant date fair value of $10.995 per share, comprised of $10.27 per share for the 50% of the award subject to the original revenue metric, which was the average of the high and low prices for Resideo stock on the grant date assuming that a payout at target was probable, and $11.72 per share for the 50% of the award subject to the rTSR metric, based on the Monte Carlo simulation model assuming volatility of 30.77% and a risk-free interest rate of 1.35%. When the PSUs were modified in April 2020, the modification date fair value of the award was $2.97 per share, based on the Monte Carlo simulation model assuming volatility of 36.62% and a risk-free interest rate of 0.24%. Accordingly, there was no incremental modification date fair value. The PSUs granted to Mr. Geldmacher and Mr. Trunzo after the modification had a grant date fair value of $3.95 per share, based on the Monte Carlo 2021 PROXY STATEMENT | 55 simulation model using similar assumptions. The grant date fair value of the 2020 RSUs and the grant date fair value of the 2020 PSUs if target performance and maximum performance is achieved are as follows: Name Jay Geldmacher Tony Trunzo Robert Aarnes Stephen Kelly Jeannine Lane Michael Nefkens Michael Flink Sachin Sankpal PSUs RSUs ($) Target ($) Maximum ($) 311,133 463,414 926,828 3,197,845 240,215 480,430 1,270,386 952,530 1,905,060 157,398 421,284 842,568 146,419 391,895 783,790 1,457,118 — — 190,755 510,553 1,021,106 3,004,304 952,530 1,905,060 (3) The amounts reported in this column represent the aggregate grant date fair value of the option awards for fiscal year 2020 and 2019. No options were issued in 2018. We calculated these amounts in accordance with the provisions of FASB ASC Topic 718 utilizing the assumptions discussed in Note 18 to our financial statements for the fiscal year ended December 31, 2020. (4) The amounts in this column represent the total 2020 annual incentive payments made to the NEOs as described in more detail above in the “Compensation Discussion & Analysis – Elements of Compensation” section of this Proxy Statement. The amount shown was paid shortly after the end of the fiscal year. (5) The amounts in this column represent the aggregate change in the present value of each NEO’s accumulated benefit under the Company’s pension plans (as disclosed in the Pension Benefits table below). (6) The amounts reported in this column for 2020 include costs for company contributions under the 401(k) and deferred compensation plan, the imputed value of company-provided life insurance, costs for executive healthcare services and, in the case of Mr. Nefkens and Mr. Sankpal only, severance benefits. The amount for Mr. Ryder includes the payments made to Horsepower, which are described in more detail below in footnote 7. Name Jay Geldmacher Anthony Trunzo Robert Aarnes Stephen Kelly Jeannine Lane Michael Nefkens Michael Flink Sachin Sankpal 401(k) Company Contributions ($) Deferred Compensation Plan Company Contributions ($) Severance ($)(a) All Other ($)(b) — 17,063 17,063 19,950 17,063 — 19,950 — — — — — — — 13,508 — — — — — 2,054,702 — — 2,093,207 38,579 10,686 2,574 5,594 5,524 844 2,494 844 (a) Amounts reflect severance payments and benefits paid to or accrued for Mr. Nefkens and Mr. Sankpal pursuant to the terms of their separation agreements described below under “Compensatory Arrangements with NEOs.” (b) Includes costs for executive healthcare services and excess liability insurance premiums paid by the Company. In the case of Mr. Geldmacher and Mr. Trunzo, includes $37,500 and $10,000, respectively, for reimbursement of legal fees in connection with negotiating their offer letters, which the Company agreed to reimburse pursuant to the terms of the offer letters. (7) Mr. Ryder was appointed as Interim Chief Financial Officer effective November 7, 2019. Mr. Ryder is the President of Horsepower, a consulting firm through which his services have been retained under an engagement letter dated October 22, 2019. Pursuant to that engagement letter, the Company paid Horsepower a bi-weekly fee of $115,000 for Mr. Ryder’s services, as well as reimbursement of reasonable and authorized travel expenses related to performance of the services. Mr. Ryder did not receive any equity or other compensation per the terms of the engagement letter. 56 | 2021 PROXY STATEMENT Grants of Plan-Based Awards – Fiscal Year 2020 The following table summarizes the grants of plan-based awards made to our NEOs during the fiscal year ended December 31, 2020. Estimated Future Payouts Under Non-Equity Incentive Plan Awards Estimated Future Payouts Under Equity Incentive Plan Awards Officer Name Award Type Grant Date Threshold ($)(A) Target ($) Maximum ($) Threshold (#) Target (#) Maximum (#) Jay Geldmacher AIP(1) N/A 804,098 1,608,196 All Other Option Awards: Number of Securities Underlying Options (#) Exercise or Base Price of Option Awards ($/sh.) Closing Price on Date of Grant of Option Awards ($/sh.) Grant Date Fair Value of Stock and Option Awards ($/sh.) All Other Stock Awards (#) — — — — — — 237,035 6.63 6.56 464,589 46,928 — — 300,000 — — — — — — — — — — — 311,133 463,414 — — 2,958,000 — 111,078 9.86 10.09 339,343 24,325 — — — — — — — — — — — 239,845 240,215 — — 184,989 10.27 10.21 524,999 34,653 50,000 — — — — — — — — — — — — — 355,886 952,530 914,500 — 81,818 10.27 10.21 232,199 15,326 — — — — — — — — — — — 157,398 421,284 — — 76,109 10.27 10.21 215,997 14,257 — 141,881 — — — — — — — — — — — — — — — — — 146,419 391,895 — — 1,457,118 — — — — — 99,154 10.27 10.21 281,399 18,574 — — 215,231 — — — — — — — — — — — 190,755 510,553 — — 2,648,417 — 184,989 10.27 10.21 524,999 34,653 — — — — — — 355,886 952,530 — 58,660 117,320 234,640 N/A 297,775 595,549 120,000 500,000 1,000,000 — 30,407 60,814 121,628 — 43,317 86,633 173,266 — 85,037 354,320 708,640 86,400 360,000 720,000 — 19,158 38,316 76,632 — 17,822 35,643 71,286 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 120,000 500,000 1,000,000 — 23,218 46,435 92,870 Stock Options(2) RSU(3) PSU(5) Tony Trunzo AIP(1) RSU(4) Stock Options(2) RSU(3) PSU(5) Robert Aarnes AIP(1) Stock Options(2) RSU(3) PSU(5) RSU(4) Stephen Kelly AIP(1) Stock Options(2) RSU(3) PSU(5) Jeannine Lane AIP(1) Stock Options(2) RSU(3) PSU(5) 05/28/2020 05/28/2020 05/28/2020 06/08/2020 06/08/2020 06/08/2020 06/08/2020 02/20/2020 02/20/2020 02/20/2020 12/14/2020 02/20/2020 02/20/2020 02/20/2020 02/20/2020 02/20/2020 02/20/2020 Stock Options(2) RSU(3) PSU(5) Sachin Sankpal AIP(1) RSU(4) Stock Options(2) RSU(3) PSU(5) 02/20/2020 02/20/2020 02/20/2020 01/07/2020 02/20/2020 02/20/2020 02/20/2020 Michael Nefkens AIP(1) 302,400 1,260,000 2,520,000 RSU(3) Robert Ryder — Michael Flink AIP(1) 02/20/2020 — — — — — — — 104,343 434,763 869,526 — 43,317 86,633 173,266 — (A) Represents the payment received for the minimum level of performance required to achieve a payout under the plan for 2020. Mr. Geldmacher and Mr. Trunzo were guaranteed a payout equal to target pursuant to the terms of their offer letters. (1) Annual incentive compensation (or AIP) awarded under the Resideo Bonus Plan for the 2020 performance year, which are paid in early 2021. (2) Non-qualified stock options granted under the Resideo 2018 Stock Incentive Plan. The options will vest ratably on first, second and third anniversaries of the grant date, with the exception of the grant to Mr. Geldmacher, which will vest in full on the third anniversary of the grant date. See the Outstanding Equity Awards at 2020 Fiscal Year-End table below for further details on the equity awards listed above. The grant date fair value of stock options was calculated in accordance with FASB ASC Topic 718 using the Black-Scholes option valuation model as of the date of grant based on the assumptions reflected in Note 18 to our financial statements for the fiscal year ended December 31, 2020. 2021 PROXY STATEMENT | 57 (3) Annual restricted stock units granted under the Resideo 2018 Stock Incentive Plan. The restricted stock units will vest ratably on the first, second and third anniversaries of the grant date, with the exception of the grant to Mr. Geldmacher, which will vest in full on the third anniversary of the grant date. See the Outstanding Equity Awards at 2020 Fiscal Year-End table below for further details on the equity awards listed above. The fair value of the RSUs reflected in the final column is based on the average of the high and low prices for Resideo stock on the grant date. (4) The restricted stock units (RSUs) reflected were issued as sign-on awards for Mr. Trunzo and Mr. Sankpal, and as a special retention related restricted stock unit for Mr. Aarnes. The award granted to Mr. Trunzo will vest in equal installments on the third and fourth anniversaries of the grant date. The award granted to Mr. Sankpal was scheduled to vest in equal installments on the first, second and third anniversaries of the grant date, but was modified as described on page 65 of this proxy. The award to Mr. Aarnes will vest in full on the fifth anniversary of the grant date. The fair value reflected in the final column is based on the average of the high and low prices for Resideo stock on the grant date. (5) Performance stock units (PSUs) granted under the Resideo 2018 Stock Incentive Plan. The award is subject to Resideo’s relative Total Shareholder Return ranking against the companies in the S&P 400 Industrials Index for the period from January 1, 2020 through December 31, 2022 and will pay out in February 2023 if earned. The amounts in the Target column represent the number of shares earned at a ranking of the 55th percentile as compared to the companies in the Index. The amounts in the column labeled Threshold represent the total number of shares that would be earned if Resideo were to achieve a ranking of the 25th percentile. The amounts in the column labeled Maximum represent the total number of shares that would be earned if Resideo were to achieve a ranking of the 75th percentile or above. The fair value reflected in the final column is calculated in accordance with the provisions of FASB ASC Topic 718 as described in footnote 2 to the Summary Compensation Table above. Certain Terms of Equity Awards Dividend equivalents may be earned on the 2020 RSU and PSU awards, however they will be subject to the same vesting and forfeiture provisions that apply to the underlying award to which they relate. The Company has not paid dividends since becoming an independent public company. The 2020 option, RSU and PSU awards are subject to double trigger accelerated vesting and payout upon a change in control only if the award is (1) assumed, replaced or continued by the successor entity and (2) the recipient’s employment is terminated without cause or, in the case of certain executives only, if the award recipient resigns for good reason, in each case, within 24 months after the change in control, or if the surviving entity in the change in control transaction refuses to continue, assume, or replace the awards. In such instance the 2020 options and RSU awards will vest in full immediately, and assuming the performance period has not been completed, the 2020 PSU awards will vest based on target performance during the truncated performance period and on a pro rata basis based on a target number of units for the year following the truncated performance period. If an award recipient’s employment ends as a result of his or her death or disability, vesting of the options and RSU awards will accelerate in full, while the 2020 PSU awards will vest on a pro-rata basis, based on actual performance as measured at the end of the performance period. If an award recipient’s employment ends as a result of retirement and the participant accepts certain post-employment conditions, the RSU awards and options will continue to vest in accordance with the original vesting schedule and the 2020 PSU awards will vest in accordance with the previous sentence. In the case of executive officers only, if an award recipient’s employment ends as a result of an involuntary termination without cause by the Company, the options and RSU awards will vest on a pro rata basis immediately and the 2020 PSU awards will vest on a pro-rata basis, based on actual performance as measured at the end of the performance period. If an award recipient’s employment ends for any other reason, unvested options, RSU and PSU awards will be forfeited. With respect to each of the option, RSU and PSU awards described above, if an award recipient breaches certain non-competition or non-solicitation obligations, the recipient’s unvested units will be forfeited, and certain shares issued in settlement of units that have already vested must be returned to the Company or the recipient must pay the Company the amount of the shares’ fair market value as of the date they were issued. The impact of a termination of employment or change in control of our Company on option, RSU and PSU awards held by our NEOs is quantified in the “Potential Payments Upon Termination or Change in Control” section below. All stock awards granted to the NEOs shown in the table above were granted under the 2018 Stock Incentive Plan and are governed by and subject to the terms and conditions of the plan and the relevant award agreements. 58 | 2021 PROXY STATEMENT Outstanding Equity Awards at 2020 Fiscal Year-End The following table summarizes information regarding outstanding equity awards held by our NEOs as of December 31, 2020. Option Awards Stock Awards Number of Securities Underlying Unexercised Options (#) Exercisable Number of Securities Underlying Unexercised Options (#) Unexercisable Option Price ($) Unexercised Option Expiration Date Number of Shares or Units of Stock That Have Not Vested (#) Market Value* of Shares or Units That Have Not Vested ($) Officer Name Jay Geldmacher Anthony Trunzo Robert Aarnes Grant Date Notes 05/28/2020 05/28/2020 05/28/2020 Total 6/8/2020 6/8/2020 6/8/2020 6/8/2020 Total 9/29/2016 2/28/2017 2/27/2018 2/27/2018 10/29/2018 11/15/2018 2/11/2019 2/11/2019 2/11/2019 2/20/2020 2/20/2020 2/20/2020 (1) (2) (3) (4) (5) (3) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) (16) (17) (3) 12/14/2020 (18) 237,035 6.63 5/27/2027 — — — — 9.86 6/7/2027 — — — — — — — — — — — — — — — — — — — 237,035 111,078 — — — 111,078 — — — — — — — — — 22,943 45,886 24.39 — — — — 184,989 10.27 Total 22,943 230,875 Stephen Kelly 7/29/2016 (19) 2/28/2017 2/27/2018 2/27/2018 10/29/2018 11/15/2018 2/11/2019 2/11/2019 2/11/2019 2/20/2020 2/20/2020 2/20/2020 Total (8) (9) (10) (11) (12) (13) (14) (15) (16) (17) (3) — — — — — — 12,684 — — — — — 12,684 — — — — — — 25,369 — — 81,818 — — 107,187 — — — — — — — — — — — — — — — — — — 24.39 — — 10.27 — — — 46,928 997,689 — 117,320 2,494,223 164,248 3,491,912 — — 24,325 517,150 60,814 1,292,906 — 300,000 6,378,000 385,139 8,188,055 — — — — — — — — — — — — — — — — — — — — — — — — — 7,450 1,120 2,421 4,394 158,387 23,811 51,470 93,416 28,730 610,800 5,558 118,163 12,756 271,193 19,133 406,768 34,653 736,723 86,633 1,841,818 50,000 1,063,000 252,848 5,375,548 13,096 278,421 2,240 3,610 6,533 32,320 8,337 47,622 76,749 138,892 687,123 177,244 7,052 10,578 149,926 224,888 15,326 38,316 325,831 814,598 137,408 2,921,294 2021 PROXY STATEMENT | 59 Officer Name Jeannine Lane Michael Nefkens Robert Ryder Michael Flink Sachin Sankpal Grant Date Notes 2/28/2017 2/27/2018 2/27/2018 10/29/2018 11/15/2018 2/11/2019 2/11/2019 2/11/2019 2/20/2020 2/20/2020 2/20/2020 Total 10/29/2018 2/11/2019 2/11/2019 Total (8) (9) (10) (11) (12) (13) (14) (15) (16) (17) (3) (11) (13) (15) — — 7/25/2014 6/1/2016 2/28/2017 (20) (21) (8) 7/27/2017 (22) 2/27/2018 2/27/2018 10/29/2018 11/15/2018 2/11/2019 2/11/2019 2/11/2019 2/20/2020 2/20/2020 2/20/2020 Total 1/7/2020 2/20/2020 2/20/2020 Total (9) (10) (11) (12) (13) (15) (14) (16) (17) (3) (23) (24) (3) Option Awards Stock Awards Number of Securities Underlying Unexercised Options (#) Exercisable Number of Securities Underlying Unexercised Options (#) Unexercisable Option Price ($) Unexercised Option Expiration Date — — — — — — — — — — — — — — — 11,799 23,599 24.39 — — — — 76,109 10.27 11,799 99,708 — 24.39 5/27/2021 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 131,109 — 131,109 — — — — — — — — — 15,372 30,744 24.39 — — — — — 15,372 — 40,134 — 40,134 — — — — 99,154 10.27 — — — — 129,898 — — — 10.27 — — Number of Shares or Units of Stock That Have Not Vested (#) Market Value* of Shares or Units That Have Not Vested ($) 1,222 2,039 3,695 25,980 43,349 78,556 28,730 610,800 4,631 98,455 6,560 9,840 139,466 209,198 14,257 303,104 35,643 757,770 106,617 2,266,677 — — — — — — — — — — — — 154,400 3,282,544 — — — — — — — — — — — — — — — — 27,507 584,799 181,907 3,867,343 — — 7,916 168,294 18,702 397,605 2,037 43,307 13,831 294,047 3,398 6,157 72,241 130,898 33,690 716,249 7,874 167,401 12,819 272,532 8,546 181,688 18,574 394,883 46,435 987,208 179,979 3,826,354 — 159,903 3,399,538 — — 483,984 22,765 182,668 3,883,522 * (1) (2) (3) Based on the closing stock price for Resideo stock on December 31, 2020 ($21.26). All awards with grant dates prior to October 29, 2018, the date of the Spin-Off, were equity awards (stock options, RSUs and PSUs) issued by Honeywell that were converted to Resideo RSUs on October 29, 2018. These non-qualified stock options will vest in full on May 28, 2023. These RSUs will vest in full on May 28, 2023. These PSUs were awarded in 2020 and can be earned after the end of the three-year performance period ending December 31, 2022. The number of PSUs that the NEO will receive is dependent upon the ranking of our relative Total Shareholder Return as compared to the Total Shareholder Return of the companies in the S&P 400 Industrials Index. The number of PSUs shown is the target number of shares that can be earned. Pursuant to their award agreement, Mr. Geldmacher’s PSU award, if earned, will vest on May 28, 2023 and Mr. Trunzo’s award, if earned, will vest on June 8, 2023. (4) These non-qualified stock options will vest in equal annual installments on June 8, 2021, June 8, 2022, and June 8, 2023. 60 | 2021 PROXY STATEMENT (5) (6) (7) (8) (9) These RSUs will vest in equal annual installments on June 8, 2021, June 8, 2022, and June 8, 2023. These RSUs will vest in equal installments on June 8, 2023 and June 8, 2024. The remaining unvested RSUs under this converted Honeywell award will vest in the amount of 3,662 shares on September 29, 2021 and 3,788 shares on September 29, 2023. The remaining unvested RSUs under this converted Honeywell award vested on February 28, 2021. The remaining unvested RSUs under this converted Honeywell award will vest in equal annual installments on February 27, 2021 and February 27, 2022. (10) The remaining unvested RSUs under this converted Honeywell award vested on February 27, 2021. (11) These Founder’s Grant RSU Awards were granted on October 29, 2018 and will vest in equal amounts on October 29, 2021 and October 29, 2022. (12) The remaining unvested RSUs under this converted Honeywell award vested on March 15, 2021. (13) These non-qualified stock options will vest in equal annual installments on each of February 11, 2020, February 11, 2021 and February 11, 2022. The stock option shown for Mr. Nefkens represents the number of shares which were vested and outstanding as of May 27, 2020 at his separation. The remaining unvested portion of the stock option was forfeited and cancelled on that date. (14) These RSUs vest in equal annual installments on February 11, 2020, February 11, 2021 and February 11, 2022. (15) These PSUs were awarded on February 11, 2019 can be earned based on achievement of certain financial measures set early in 2019. The performance period ends December 31, 2021. The number of PSUs that the NEO will receive is dependent upon the achievement of certain financial metrics approved by the Committee measuring revenue and Adjusted EBITDA. For each NEO the amount of PSUs shown is the target number of units that could be earned and paid out in shares. The PSUs shown for each of Mr. Nefkens and Mr. Sankpal represent the pro-rated target number of PSUs remaining under his award which may be earned through the end of the performance period. (16) These non-qualified stock options will vest in equal annual installments on February 20, 2021, February 20, 2022, and February 20, 2023. (17) These RSUs will vest in equal annual installments on February 20, 2021, February 20, 2022 and February 20, 2023. (18) These RSUs will vest 100% on December 14, 2025. (19) The remaining unvested RSUs under this converted Honeywell award will vest for 6,446 shares on July 29, 2021 and 6,650 shares on July 29, 2023. (20) The remaining unvested RSUs under this converted Honeywell award will vest on July 25, 2021. (21) The remaining unvested RSUs under this converted Honeywell award will vest for 9,205 shares on June 1, 2021 and 9,497 shares on June 1, 2023. (22) The remaining unvested RSUs under this converted Honeywell award will vest for 6,811 shares on July 27, 2021 and 7,020 shares on July 27, 2023. (23) These RSUs vest as to 16,416 shares on January 7, 2021, 71,743 shares on January 7, 2022, and 71,744 shares on January 7, 2023. (24) These non-qualified stock options vested in full on October 14, 2020. Option Exercises and Stock Vested – Fiscal Year 2020 The following table summarizes information regarding stock options exercised by the NEOs during the fiscal year ended December 31, 2020 and RSU awards that vested during that same period. Officer Name Jay Geldmacher Anthony Trunzo Rob Aarnes Steve Kelly Jeannine Lane Mike Nefkens Bob Ryder Michael Flink Sachin Sankpal Option Awards Stock Awards # of Shares Acquired on Exercise (#) Value Realized on Exercise ($) Number of Shares Acquired on Vesting (#)(1) Value Realized on Vesting ($)(2) — — — — — — — — — — — — — — — — — — — — 19,442 41,720 23,751 74,585 — 27,647 62,846 — — 180,026 418,140 242,254 524,450 — 250,726 743,971 (1) Represents the total number of RSUs that vested during 2020 before share withholding for taxes and transaction costs. (2) Represents the total value of RSUs at the vesting date calculated as the average of the high and low prices for Resideo stock on the day of vesting multiplied by the total number of RSUs that vested. The individual totals may include multiple vesting transactions during the year. 2021 PROXY STATEMENT | 61 Pension Benefits The following table provides summary information and related disclosures provide information regarding benefits under the Resideo Technologies Inc. Pension Plan (“RPP”) and the Resideo Supplemental Pension Plan (“SPP”), a nonqualified plan. The RPP and SPP provide pension benefits only to those employees who previously participated in the Honeywell pension plans prior to the Spin-Off. Accordingly, the only NEOs who participate in the RPP and SPP are Messrs. Aarnes, Kelly and Flink and Ms. Lane. The RPP and SPP benefits depend on the length of each NEO’s employment with the Company and certain predecessor companies. This information is provided in the table below under the column entitled “Number of Years of Credited Service.” A participant’s credited service is generally equal to his or her period of employment with the Company or an affiliate (or, for periods prior to October 29, 2018, Honeywell International Inc. or a Honeywell affiliate), excluding periods of employment when the participant was not eligible to participate in the RPP or a predecessor Honeywell plan. The column in the table below entitled “Present Value of Accumulated Benefits” represents a financial calculation that estimates the cash value today of the full pension benefit that has been earned by each NEO. It is based on various assumptions, including assumptions about how long each NEO will live and future interest rates. Additional details about the pension benefits for each NEO follow the table. Officer Name Robert Aarnes Stephen Kelly Jeannine Lane Michael Flink Plan Names Resideo Technologies Inc. Pension Plan (Qualified component) Resideo Technologies Inc. Supplemental Pension Plan (Non-Qualified component) Total Resideo Technologies Inc. Pension Plan (Qualified component) Resideo Technologies Inc. Supplemental Pension Plan (Non-Qualified component) Total Resideo Technologies Inc. Pension Plan (Qualified component) Resideo Technologies Inc. Supplemental Pension Plan (Non-Qualified component) Total Resideo Technologies Inc. Pension Plan (Qualified component) Resideo Technologies Inc. Supplemental Pension Plan (Non-Qualified component) Total Number of Years of Credited Service (#) Present Value of Accumulated Benefits ($) Payments During Last Fiscal Year ($) Early Retirement Eligible? No No Yes Yes 8.0 8.0 12.4 12.4 26.3 26.3 17.8 17.8 73,046 73,751 146,797 226,426 281,955 508,381 470,967 451,608 922,575 970,656 — 970,656 — — — — — — — — — — — — Summary Information • The RPP is a tax-qualified pension plan in which a significant portion of our U.S. employees participate. • The RPP complies with tax requirements applicable to broad-based pension plans, which impose dollar limits on the compensation that can be used to calculate benefits and on the amount of benefits that can be provided. As a result, the pensions that can be paid under the RPP for higher-paid employees represent a much smaller fraction of current income than the pensions that can be paid to less highly paid employees. We make up for this difference, in part, by providing supplemental pensions through the SPP. Pension Benefit Calculation Formulas Within the RPP and the SPP, a variety of formulas are used to determine pension benefits. Different benefit formulas apply for different groups of employees for historical reasons (e.g., past acquisitions by a predecessor company) and the differences in the benefit formulas for our NEOs reflect this history. • The Retirement Earnings Plan (“REP”) Formula is used to determine the amount of pension benefits for each of our NEOs under the RPP and the SPP. Under this Formula, benefits are paid as a lump sum equal to (1) 3% or 6% of final average compensation (the average of a participant’s annual compensation for the five calendar years out of the previous ten calendar years that produces highest average) times (2) credited service. 62 | 2021 PROXY STATEMENT • Under the Pittway (“PW”) formula, the annual annuity benefit is equal to the sum of (1) for each of the first 35 years of service, 1.2% of annual compensation up to a social security breakpoint and 1.85% of annual compensation over the breakpoint and (2) for each year of service over 35, 1.2% of annual compensation. For years after 2015, a participant’s (A) social security breakpoint is determined as of December 31, 2015 and (B) compensation is the lesser of the participant’s 2015 compensation or compensation for the current year. For each pension benefit calculation formula, compensation includes base pay, short-term incentive compensation, payroll-based rewards and recognition and lump sum incentives. The amount of compensation taken into account under the RPP is limited by tax rules. The amount of compensation taken into account under the SPP is not. The table below describes which formulas are applicable to each of our participating NEOs. NAME/FORMULA DESCRIPTION OF TOTAL PENSION BENEFITS Mr. Aarnes REP formula 3% Mr. Kelly REP formula 6% Ms. Lane REP formula 6% Mr. Flink PW formula • Mr. Aarnes’ pension benefits under the RPP and the SPP are determined under the REP formula. • Mr. Kelly’s pension benefits under the RPP and the SPP are determined under the REP formula. • Ms. Lane’s pension benefits under the RPP and the SPP are determined under the REP formula. • Mr. Flink’s pension benefits under the RPP and the SPP are determined under the PW formula. Mr. Flink and Ms. Lane are currently eligible for early retirement. Under the PW formula, Mr. Flink was eligible once he reached age 55 with 10 years of service, and under the REP formula. At early retirement, the monthly pension is computed on the same basis as at normal retirement, but the pension is reduced 6.67% per year for each of the first five years and 3.33% for each of the next five years by which commencement precedes normal retirement date. Ms. Lane participates in the REP formula and would be eligible, upon termination of employment, to receive a lump sum payment of her accrued plan benefit (or an actuarial equivalent annuity payment, determined in accordance with the plan’s actuarial equivalency provisions). Nonqualified Deferred Compensation Officer Name Stephen Kelly Jeannine Lane Michael Flink Executive Contributions in 2020 ($)(1) Registrant Contributions in 2020 ($)(2) Aggregate Earnings in 2020 ($)(3)) Aggregate Withdrawals and Distributions in 2020 ($) Aggregate Balance at the End of Fiscal Year 2020 ($)(4) — — — — 5,553 1,914 38,238 13,508 25,166 — — — 184,276 63,769 850,600 All deferred compensation amounts are unfunded and unsecured obligations of the Company and are subject to the same risks as any of the Company’s general obligations. (1) The amounts in this column were contributed by the NEO into his account under the deferred compensation plan, which includes amounts reflected in the “Base Salary” column of the Summary Compensation Table. (2) Amounts in this column are contributions made to the NEOs account in 2021 for the 2020 calendar year. (3) The amounts in this column represent interest and dividends earned on balances held in the NEO’s account during 2020. (4) Of the balances, the following amounts have reported in the current or prior year’s Summary Compensation Tables: Mr. Kelly – (i) $5,228 reported as Salary and $550 reported as All Other Compensation in the Summary Compensation table for 2018, and (ii) $17,200 reported as Salary and $13,475 reported as All Other Compensation in the Summary Compensation Table for 2019; and Mr. Flink – (i) $38,238 reported as Salary and $13,508 reported as All Other Compensation in the Summary Compensation Table for 2020. 2021 PROXY STATEMENT | 63 Resideo Supplemental Savings Plan The Resideo Supplemental Savings Program (“RSSP”) is a nonqualified deferred compensation plan that allows eligible Resideo employees, including the NEOs, to save additional amounts in excess of what is allowed under the Company’s tax-qualified 401(k) plan due to the annual deferral and compensation limits imposed by the Internal Revenue Code. The RSSP has two components, the Deferred Incentive Program (DIP) and the Supplemental Savings Program (SSP). Executive officers can elect to defer up to 100% of their annual bonus awards under the DIP component. In addition, executive officers may also participate in the SSP component to defer eligible compensation that cannot be contributed to the Company’s 401(k) savings plan due to IRS limitations. The amounts contributed to the SSP component are eligible for matching contributions not to exceed 87.5% of the first 8% contributed combined between the SSP and the 401(k) plan. Matching contributions are always vested. Interest Rate. Participant account balances were moved from the Honeywell plans to the RSSP on October 29, 2018. All funds are invested in the Fidelity U.S. Bond Index Fund and participant accounts are credited with interest based on the fund’s performance. Matching contributions are also treated as invested in Fidelity U.S. Bond Index Fund. Distribution. Amounts transferred from the Honeywell Supplemental Savings Plan or Honeywell Deferred Incentive Plan to the RSSP will follow the same distribution options as applied under the Honeywell plan. For deferrals to the RSSP starting in 2019 or later years, payments will commence at the earlier of the participant’s separation from service, death or the in-service distribution date elected by the participant. Amounts will be paid to participants in a lump sum or installment payments, for payments triggered by separation from service or an in-service distribution at the election of the participant. Participant RSSP accounts are distributed in cash only. Participants can make different payment elections under the SSP and the DIP components of the RSSP. Compensatory Arrangements with NEOs As described above, during fiscal 2020, the Board effected several executive leadership transitions, including hiring a new CEO and CFO. In connection with these transitions, the Committee approved certain offer letters for new executive officers, as well as transition and severance arrangements for certain departing executive officers. Below is a summary of the material terms of these compensatory arrangements. The summary below excludes payments and benefits generally available to all executive officers under the terms of the Company’s equity award agreements that are described above. Offer Letter with Jay Geldmacher, President and Chief Executive Officer the payout was guaranteed at no less than his pro-rated target The Company entered into an offer letter with Mr. Geldmacher, effective May 28, 2020, in connection with his appointment as President and Chief Executive Officer. Pursuant to the letter agreement, Mr. Geldmacher will receive an annual base salary of $900,000. Mr. Geldmacher will have a target annual incentive compensation opportunity equal to 150% of his annual base salary, with a maximum opportunity of no less than 200% and, for 2020, incentive amount. Also for 2020, Mr. Geldmacher was granted a pro-rated long-term incentive award equal valued at $3.097 million at target, 10% of which value will be granted as time-based restricted stock units, 15% as stock options and 25% as performance-based restricted stock units, all of which will vest on the third anniversary of the grant date, and the remaining 50% was granted as a cash bonus payable following the third anniversary of if Mr. Geldmacher remains employed; provided that Mr. Geldmacher will receive a pro-rated payout of the cash bonus if his employment terminates due to death, disability, termination without cause or resignation for good reason. In the event of a change in control, all of Mr. Geldmacher’s equity awards will vest in full in the event they are not assumed in such change in control or if his employment is terminated without cause or for good reason within 24 months following such change in control. the grant Mr. Geldmacher received a cash sign-on bonus of $2.0 million that will be subject to ratable repayment if he resigns other than for good reason or is terminated for cause before completing 24 months of employment. Mr. Geldmacher also was entitled to receive a make-whole payment of up to $90,000 due to the forfeiture of a quarterly bonus opportunity with his prior employer. Mr. Geldmacher will be eligible for the severance benefits that Mr. Geldmacher will also be eligible to provided to the Company’s other executive officers; provided, 64 | 2021 PROXY STATEMENT severance benefits in the event he resigns for good reason. Good reason is defined as Mr. Geldmacher not the Company or reporting directly and exclusively to the Board, serving as the most senior executive of assignment to Mr. Geldmacher of duties materially inconsistent with his position, any material diminution of his position, authority, duties or responsibilities, any reduction in annual base salary or target annual incentive opportunity from the amounts in the offer letter, requiring Mr. Geldmacher to be based at any office or location greater than 25 miles away from the Company’s headquarters or any material breach of the offer letter by the Company. In addition to participating in the Company’s benefits for other employees and executives, Mr. Geldmacher will receive (i) an executive physical benefit valued at up to $5,000 annually, (ii) the right to use a private jet for business and commuting purposes, including a full tax gross-up for any income taxes on such use, (iii) relocation assistance under the Company’s officer level relocation guidelines and reimbursement for temporary housing for up to 12 months and up to $75,000, and (iv) reimbursement of his legal fees related to negotiation and documentation of his employment agreement up to $37,500. Offer Letter with Anthony Trunzo, Executive Vice President, Chief Financial Officer The Company entered into an offer letter with Mr. Trunzo on May 22, 2020, in connection with Mr. Trunzo’s appointment as Executive Vice President, Chief Financial Officer effective June 8, 2020. Pursuant to the terms of the offer letter, Mr. Trunzo will receive an annual base salary of $585,000. Mr. Trunzo will have a target annual incentive compensation opportunity equal to 90% of his annual base salary, and for 2020, the payout shall be no less than his pro-rated target incentive amount. Also for 2020, Mr. Trunzo was granted a long-term incentive award valued at $1,131,148 at target, 20% of which value was granted as time-based restricted stock units, 30% as stock options and 50% as performance-based restricted stock units, subject to the same customary vesting terms for the Company’s equity awards for other executive officers. Mr. Trunzo received a sign-on equity award of 300,000 restricted stock units that will vest as to one-half of such shares on each of the third and fourth anniversaries of the date of grant. Mr. Trunzo will be eligible for the Severance Plan; provided that Mr. Trunzo will also be eligible to receive severance benefits in the event he resigns for good reason. Pursuant to the letter agreement, good reason is defined as assignment to Mr. Trunzo of duties materially inconsistent with his position, any material diminution of his position, authority, duties or responsibilities, any reduction in annual base salary or target annual incentive opportunity from the amounts in the offer letter or any material breach of the offer letter by the Company. In addition to participating in the Company’s benefits for other employees and executives, Mr. Trunzo was entitled to reimbursement of his legal fees related to negotiation and documentation of his offer letter up to $10,000. Separation Agreement with Michael Nefkens, Former President and Chief Executive Officer The Company entered into a separation agreement with Mr. Nefkens on January 22, 2020 in connection with the termination of Mr. Nefkens’ employment. Pursuant to the separation agreement, Mr. Nefkens was entitled to receive severance benefits in accordance with and subject to the Severance Plan and other conditions set forth in the separation agreement provided to Mr. Nefkens, Mr. Nefkens is also entitled to continued vesting of a pro-rated portion of the restricted stock units that were granted to him on October 29, 2018 and he received a to 140% of his base payment equal salary, pro-rated for the portion of In addition, Mr. Nefkens received a long-term incentive grant for fiscal 2020 valued at $1.433 million that vested monthly during fiscal 2020 with a minimum vesting of three months and, following the severance period, Mr. Nefkens will be engaged to provide consulting services for twelve months for an annual fee of $200,000. The payments and benefits under the separation agreement were subject to Mr. Nefkens signing a general release of claims in favor of the Company and complying with his restrictive covenants, including one-year non-competition and two-year non-solicitation restrictions. fiscal 2020 during which Mr. Nefkens remained employed. to his fiscal 2020 target annual incentive award, which is equal Separation Agreement with Sachin Sankpal, Former President, Products & Solutions The Company entered into a separation agreement with Mr. Sankpal on October 14, 2020 in connection with the termination of Mr. Sankpal’s employment effective October 14, 2020. Pursuant to the terms of the separation agreement, Mr. Sankpal was entitled to receive severance benefits in accordance with and subject to the Severance Plan and other conditions set forth in the separation agreement. Mr. Sankpal is entitled to continued vesting of that portion of the restricted stock units that were granted to him on January 7, 2020 that were not 2021 PROXY STATEMENT | 65 otherwise subject to pro-rata vesting upon termination, as well as a payment of his fiscal 2020 annual incentive award, in accordance with the Company’s actual financial results with respect to the financial metric components and reduced by 50% for the individual performance component, but guaranteed at that reduced level, all pro-rated for the portion of fiscal 2020 during which Mr. Sankpal remained employed. Mr. Sankpal was entitled to reimbursement of $5,000 for the cost of shipping his household goods in connection with relocation. The payments and benefits under the separation agreement were subject to Mr. Sankpal signing a general release of including claims one-year non-competition and two-year non-solicitation restrictions. complying with the Company covenants, restrictive favor and his of in Separation Agreement with Michael Flink, Former Senior Vice President, Executive Advisor The Company entered into an employment terms letter with Mr. Flink on June 4, 2020 pursuant to which Mr. Flink transitioned from his prior position of Executive Vice President, Transformation to Senior Vice President, Executive Advisor effective June 1, 2020 for a transition period prior to the termination of his employment on March 31, 2021. Mr. Flink was entitled to receive the same compensation he received previously for his continued role as Senior Vice President, Executive Advisor, and, in the event his employment was terminated within one year thereafter, he remained entitled to eighteen months of salary continuation and continued vesting of restricted stock units that were granted to him on October 29, 2018 and November 15, 2018. Mr. Flink was entitled to a payment of his fiscal 2020 annual incentive award, in accordance with the Company’s actual financial results with respect to the financial metric components and reduced by 50% for the individual performance component, but guaranteed at that reduced level, if his employment terminated prior to payout of the incentive award in the ordinary course (in which case the payout would have pro-rated for the portion of fiscal 2020 during which Mr. Flink remained employed). Mr. Flink remained employed through the payout of his incentive award so no incremental benefit was provided, and his individual component paid out at the reduced, guaranteed level. As a condition to the payments and benefits under the employment terms letter, Mr. Flink was obligated at the time of his termination to sign a separation agreement that included a general release of claims in favor of the Company and a requirement that he comply with his restrictive covenants, including one-year non-competition and two-year non-solicitation restrictions. Potential Payments Upon Termination or Change in Control Overview This section describes the benefits payable to our NEOs in two circumstances: • Termination of employment • Change in Control (“CIC”) Officer Severance Plan These benefits are determined primarily under our Resideo Technologies, Inc. Severance Plan for Designated Officers, or Severance Plan, which our Committee approved in November 2018 and reflects their assessment of external market data on benefits commonly offered to senior executives in such circumstances. The Committee strongly believes that our severance benefits are generally in line with current market practices and are particularly important as we do not maintain employment agreements with our NEOs. Benefits provided under the Severance Plan are conditioned on the executive executing a full release of claims and compliance with certain non-competition and non-solicitation covenants in favor of the Company. The right to continued severance benefits under the plan ceases in the event of a violation of such covenants. In addition, we would seek to recover certain severance benefits already paid to any executive who violates such restrictive covenants. In addition to the Severance Plan, several of our other benefits plans, such as our Annual Incentive Compensation Plan, also have provisions that impact these benefits. These benefits ensure that our executives are motivated primarily by the needs of the businesses for which they are responsible, rather than circumstances that are outside the ordinary course of business, i.e., circumstances that might lead to the termination of an executive’s employment or that might lead to a CIC of the Company. Generally, this is achieved by assuring our NEOs that they will receive a level of continued compensation if their employment is adversely affected in these circumstances, subject to certain conditions. We believe that these benefits help ensure that affected executives act in the best interests of our shareholders, even if such actions are otherwise contrary to their personal 66 | 2021 PROXY STATEMENT interests. This is critical because these are circumstances in which the actions of our NEOs may have a material impact upon our shareholders. Accordingly, we set the level and terms of these benefits in a way that we believe is necessary to obtain the desired results. The level of benefit and the rights to benefits are determined by the type of termination event, as described below. In the case of a CIC, severance benefits under the Severance Plan are payable only in the event that both parts of the “double trigger” are satisfied. That is, (i) there must be a CIC of our Company, and (ii)(A) the NEO must be involuntarily terminated other than for cause, or (B) the NEO must initiate the termination of his own employment for good reason. Similarly, our 2018 Stock Incentive Plan does not offer single-trigger vesting of equity awards that are assumed or replaced by an acquirer upon a CIC. Equity Awards Death and Disability – In the case of a recipient’s death or disability, vesting of options and restricted stock units accelerates in full and a pro rata portion of the PSUs will vest and settle if, and to the extent of, Resideo’s actual achievement of the performance measures during the performance period. The options remain exercisable until the earlier of three years after termination or the original expiration date. Involuntary Termination Without Cause – If an executive officer is subject to an involuntary termination without cause by Resideo, a pro rata portion of his or her options and restricted stock units will vest immediately upon termination, and a pro rata portion of the PSUs will vest and settle if, and to the extent of, Resideo’s actual achievement of the performance measures during the performance period. The options will remain exercisable until the earlier of one year after termination or the original expiration date. Voluntary Resignation – If a recipient resigns voluntarily from the Company, he or she will forfeit any unvested options, restricted stock units and PSUs, and will have 30 days to exercise any then-vested options. Retirement – With respect to equity awards granted prior to February 2019, non-vested awards are generally forfeited upon any retirement. Equity awards granted in or after February 2019 generally provide that an award recipient is retirement eligible if he or she is age 55 years or older, has at least 10 years of service to Resideo and also has provided Resideo with at least 6 months’ prior notice that he or she is considering retirement. If an NEO is retirement eligible, his or her employment with Resideo ends as a result of retirement and he or she accepts certain post-employment conditions, the RSU awards and options granted in or after February 2019 will continue to vest in accordance with the original vesting schedule (and options shall remain exercisable until the earlier of their original expiration date and three (3) years after retirement) and the PSU awards granted in or after February 2019 will vest on a pro-rata basis, based on actual performance as measured at the end of the performance period. Ms. Lane is the only NEO who is currently retirement eligible. Pension and Non-Qualified Deferred Compensation Pension and non-qualified deferred compensation benefits, which are described elsewhere in this Proxy Statement, are not included in the table below in accordance with the applicable proxy statement disclosure requirements, even though they may become payable at the times specified in the table. If an officer who participates in the RSSP terminates employment with Resideo, the balance of that executive’s SSP or DIP account will be paid to the executive in June of the year following his or her termination. Similarly, if an officer who is a participant in the RPP or the SPP described above terminates employment, the executive’s balance in the pension plan will be paid to the executive one hundred and five days after his or her termination date. The following table summarizes estimated payments and benefits to which our NEOs would be entitled upon the hypothetical occurrence of various termination scenarios or a CIC. The information in the table below is based on the assumption, in each case, that the termination of employment occurred on December 31, 2020. None of these termination benefits are payable to NEOs who voluntarily resign (other than voluntary resignations for good reason as specified or certain qualifying retirements) or whose employment is terminated by us for cause. NEOs Who Have Terminated Employment The employment of Mr. Nefkens terminated on May 27, 2020, Mr. Sankpal terminated on October 14, 2020 and Mr. Flink terminated on March 31, 2021, each under circumstances that entitle such NEO to severance benefits. Accordingly, the severance amounts shown below for termination by the Company without Cause for Messrs. 2021 PROXY STATEMENT | 67 Nefkens, Sankpal, and Flink reflect the actual amounts they are entitled to in connection with the termination of their employment pursuant to their severance agreements, which are described above under “Compensatory Arrangements with NEOs,” and no amounts are reported for the other scenarios for these NEOs. Death ($) Disability ($) Change-in-Control– No Termination of Employment ($) Change-in-Control– Termination of Employment by Company, Without Cause, by NEO for Good Reason or Due to Disability ($) Payments and Benefits Cash Severance (Base Salary) Annual Incentive Compensation (2)–Year of Termination Outstanding Equity Awards (3)(4) Benefits (5) Named Executive Officer Jay Geldmacher Anthony Trunzo Robert Aarnes Stephen Kelly Jeannine Lane Mike Nefkens Robert Ryder Michael Flink Sachin Sankpal Jay Geldmacher Anthony Trunzo Robert Aarnes Stephen Kelly Jeannine Lane Mike Nefkens Robert Ryder Michael Flink Termination by the Company Without Cause ($)(1) 1,800,000 877,500 862,500 664,350 675,000 1,800,000 — 724,605 750,000 — — — — — 509,508 — — Sachin Sankpal 337,475 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Jay Geldmacher Anthony Trunzo Robert Aarnes Stephen Kelly Jeannine Lane Mike Nefkens Robert Ryder Michael Flink Sachin Sankpal Jay Geldmacher Anthony Trunzo Robert Aarnes Stephen Kelly Jeannine Lane Mike Nefkens Robert Ryder Michael Flink Sachin Sankpal — 6,959,735 6,959,735 — 9,454,344 9,454,344 — 7,408,578 7,408,578 — 3,820,474 3,820,474 — 3,103,115 3,103,115 1,073,902 — 3,133,140 2,474,281 11,023 16,484 13,144 16,904 12,874 23,042 — 14,380 17,282 — — — — — — — — — — — — — — — — — — — — — — — — — — 68 | 2021 PROXY STATEMENT — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 1,800,000 1,170,000 1,150,000 885,800 900,000 — — — — 2,700,000 1,053,000 1,150,000 708,640 720,000 — — — — 6,959,735 9,454,344 7,408,578 3,820,474 3,103,115 — — — — 11,023 21,978 17,525 22,538 17,165 — — — — Death ($) Disability ($) Change-in-Control– No Termination of Employment ($) Payments and Benefits All Other–Payments/ Benefits (6) Total Named Executive Officer Jay Geldmacher Anthony Trunzo Robert Aarnes Stephen Kelly Jeannine Lane Mike Nefkens Robert Ryder Michael Flink Sachin Sankpal Jay Geldmacher Anthony Trunzo Robert Aarnes Stephen Kelly Jeannine Lane Mike Nefkens Robert Ryder Michael Flink Termination by the Company Without Cause ($)(1) — — — — — 200,000 — — 5,000 — — — — — — — — — — — — — — — — — — 1,811,023 6,959,735 6,959,735 893,984 9,454,344 9,454,344 875,644 7,408,578 7,408,578 681,254 3,820,474 3,820,474 687,874 3,103,115 3,103,115 3,406,453 — — — — — 3,872,125 4,916,056 4,916,056 Change-in-Control– Termination of Employment by Company, Without Cause, by NEO for Good Reason or Due to Disability ($) — — — — — — — — — 11,470,758 11,699,323 9,726,103 5,437,452 4,740,280 — — — — — — — — — — — — — — — — — — — — — — Sachin Sankpal 3,579.038 — — The amounts reflected in the first column related to involuntary termination unrelated to a CIC, as well as the final two columns specific to circumstances following a CIC are based on the provisions of the Severance Plan, and the provisions of the 2018 Stock Incentive Plan. (1) Pursuant to their offer letters, Mr. Geldmacher and Mr. Trunzo are also entitled to receive the same severance benefits set forth here for termination by the Company without cause if they terminate their employment for good reason as defined in their offer letters. See “Compensatory Arrangements with NEOs” above for additional information. (2) Severance amounts in the event of involuntary termination not related to CIC represent a cash payment equal to 24 months of annual base salary for Mr. Geldmacher and Mr. Nefkens and 18 months of annual base salary for the other NEOs. Severance amounts related to an involuntary termination or termination for good reason related to a CIC represent a cash payment equal to 24 months of annual base salary as well as two times the NEO’s target annual incentive compensation. (3) In addition to the amounts reflected in the final column, if an NEO is terminated without cause in situations following a CIC, the executive will also be entitled to a pro-rated Annual Incentive Award for the period of employment during the year of termination. (4) Amounts represent the intrinsic value of RSUs, and PSUs as of December 31, 2020 for which the vesting would be accelerated. RSUs will be vested in full upon a termination due to death, disability or an involuntary termination or termination for good reason within 24 months of a CIC. With respect to RSU grants issued after December 31, 2018 only, a pro rata portion of the award would accelerate upon an involuntary termination not related to a CIC. With respect to the PSUs, upon termination due to death, disability or involuntary termination not related to a CIC, a pro rata portion of the PSUs are eligible to vest at actual performance levels at the end of the performance period. In the case of an involuntary termination or termination for good reason within 24 months of a CIC, a pro rata portion of the PSUs will vest at target or at the level of substantially achieved performance, as determined by the Committee prior to the CIC. The value included for RSUs and PSUs is the product of the number of units for which vesting would be accelerated and $21.26, the closing price of Resideo common stock on December 31, 2020, except for the values reflected for Mr. Nefkens, Mr. Sankpal, and Mr. Flink, where the value reflected is based on the actual fair value of the awards accelerated or amended to permit continued vesting on the respective date of termination - $6.60, $10.98, and $28.82, respectively. None of the February 11, 2019 stock option grants are included in the table because the exercise price was below the fair market value as of December 31, 2020. (5) The amounts reflected represent the Company’s cost for continuation of benefits, such as medical, dental, vision and life insurance, for the Salary Continuation Period as defined under the Severance Plan. (6) The amounts reflect payments to be made to Mr. Nefkens for consulting services for one year following his severance period and $5,000 of reimbursement payments for Mr. Sankpal’s relocation following termination of his employment. Mr. Ryder is not eligible to participate in the Severance Plan and has not received any equity awards. His compensation is governed solely by the engagement letter between the Company and Horsepower dated October 22, 2019. 2021 PROXY STATEMENT | 69 CEO Pay Ratio the Dodd-Frank Wall Street Reform and Consumer Protection Act, and As required by Section 953(b) of Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of the individual identified as our median paid employee and the annual total compensation of Mr. Jay Geldmacher, our President and Chief Executive Officer (the CEO). For the year ended December 31, 2020, the total compensation for Mr. Geldmacher, was $4,697,966 as reported in the Total Compensation column of the Summary Compensation Table on page 55. Since Mr. Geldmacher was appointed CEO effective May 28, 2020, we annualized his Salary, Stock and Option Awards, Non-Equity Incentive Plan Compensation, and the Excess Liability Insurance component of the total of All Other Compensation of the Summary Compensation Table. We then added the disclosed values of his Bonus and other components of All Other Compensation amount to arrive at a value of $7,422,494 used for the ratio of annual total compensation for our CEO to the annual total compensation for our median employee. The table below provides the amounts as shown in the SCT and as annualized: Actual Values from SCT ($) For CEO Pay Ratio: Annualized Values + One-Time Values ($) Rationale 526,154 900,000 Annualized salary SCT Components Salary Bonus (Sign-On) Bonus (Guaranteed Annual Cash Incentive) Stock Awards Option Awards 2,090,000 2,090,000 804,098 1,350,000 774,547 464,589 1,902,579 1,141,204 All Other Compensation 38,579 38,711 Total CEO Pay 4,697,966 7,422,494 Not annualized; one-time sign-on payment Annualized for target incentive equal to 150% of salary; actual 2020 amount was guaranteed at target Annualized stock award value Annualized stock option award value Annualized excess liability insurance, plus actual amount of legal fee reimbursement and executive physical For 2020, our last completed fiscal year: • • the annual total compensation of our median employee was $21,539; and the annualized total compensation of our CEO as shown above was $7,422,494. Based on this information, for 2020, the ratio of the annual total annualized compensation of Mr. Geldmacher, our CEO, to the annual total compensation of the median employee was estimated to be 345 to 1. This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described below. To identify our median employee for 2020, we considered our global population as of October 1, 2020 (the “Measurement Date”). As of the Measurement Date, our total global employee population (excluding our CEO) consisted of approximately 14,475 individuals. Total U.S. Employees Total Non-U.S. Employees Total Global Workforce 3,068 11,407 14,475 (no exemptions utilized) To identify the “median employee” from our total global employee population (excluding our CEO), we aggregated annual total base salary and actual incentive awards paid during 2020, including bonuses and commissions. We also annualized the compensation of all newly hired permanent employees who were employed on the 70 | 2021 PROXY STATEMENT measurement date, for the 12-month period ending December 31, 2020, as permitted under SEC rules. All non-US pay components were converted to US dollars using the same currency exchange rates in effect in our financial records at October 1, 2020. Once we identified the median employee, we determined the median employee’s total compensation by applying the same rules required to report NEO compensation on the Summary Compensation Table. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. 2021 PROXY STATEMENT | 71 Equity Compensation Plan Information As of December 31, 2020, information about equity compensation plans is as follows: Number of Shares to be Issued Upon Exercises of Outstanding Options, Warrants and Rights (a) Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) 6,924,987(1) — 6,924.987 15.98 — 15.98 10,862,646(1) — 10,862,646 Plan Category Equity compensation plans approved by security holders Equity compensation Plans not approved by security holders Total Equity compensation plans approved by shareholders in the table above include the 2018 Stock Incentive Plan for Resideo Technologies, Inc. and its Affiliates as well as the 2018 Stock Plan For Non-Employee Directors of Resideo Technologies, Inc., the Resideo Employee Stock Purchase Plan, and the Resideo Technologies UK ShareBuilder Plan. (1) (2) Includes 1,725,223 shares underlying stock options, 4,286,964 shares underlying RSUs and 912,800 shares underlying PSUs (assuming target). Includes 6,940,614 shares available for future issuance under the Resideo Technologies, Inc. 2018 Stock Incentive Plan, 3,000,000 shares available for future issuance under the Resideo Technologies, Inc. Employee Stock Purchase Plan, 723,838 shares available for future issuance under the 2018 Stock Plan for Non-Employee Directors of Resideo Technologies, Inc., and 198,194 shares available for future issuance under the Resideo Technologies UK ShareBuilder Plan. 72 | 2021 PROXY STATEMENT Proposal 3: Ratification of the Appointment of Independent Registered Public Accounting Firm Under its written charter, the Audit Committee of the Board has sole authority and is directly responsible for the appointment, compensation, retention, oversight, evaluation and termination of the independent registered public accounting firm retained to audit the Company’s financial statements. The Audit Committee evaluated the qualifications, performance and independence of the Company’s independent auditors and based on its evaluation, has appointed Deloitte & Touche LLP (“Deloitte”) as the Company’s independent registered public accounting firm for 2021. Deloitte served as the independent auditor of Resideo during 2020. The Audit Committee and the Board believe that the retention of Deloitte to serve as the Company’s independent registered public accounting firm is in the best interests of the Company and its shareholders. The Audit Committee is responsible for the approval of the engagement fees and terms associated with the retention of Deloitte. In addition to assuring the regular rotation of the lead audit partner as required by law, the Audit Committee will be involved in the selection and evaluation of the lead audit partner and considers whether, in order to assure continuing auditor independence, there should be a regular rotation of the independent registered public accounting firm. Although the By-Laws do not require that we seek shareholder ratification of the appointment of Deloitte as our independent registered public accounting firm, we are doing so as a matter of good corporate governance. If the shareholders do not ratify the appointment, the Audit Committee will reconsider whether to retain Deloitte. Representatives of Deloitte are expected to be present at the annual meeting, will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions by shareholders. The Board of Directors unanimously recommends a vote “FOR” Proposal 3, to ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for 2021. Report of the Audit Committee The Audit Committee consists of the three directors named below. Each member of the Audit Committee is an independent director as defined by applicable SEC and NYSE listing standards. In addition, the Board has determined that Mr. Lazar and Mr. Deninger are “audit committee financial experts” as defined by applicable SEC rules and satisfy the “accounting or related financial management expertise” criteria established by the NYSE. In accordance with its written charter, the Audit Committee of the Board is responsible for assisting the Board to fulfill its oversight of: • • • • the integrity of the Company’s financial statements and internal controls; the Company’s compliance with legal and regulatory requirements; the independent auditors’ qualifications and independence; and the performance of the Company’s internal audit function and independent auditors. 2021 PROXY STATEMENT | 73 It is the responsibility of Resideo’s management to prepare the Company’s financial statements and to develop and maintain adequate systems of internal accounting and financial controls. The Company’s internal auditors are responsible for conducting internal audits intended to evaluate the adequacy and effectiveness of the Company’s financial and operating internal control systems. Deloitte, the Company’s independent registered public accounting firm for 2021 (the “independent auditor”), is responsible for performing an independent audit of the Company’s consolidated financial statements and issuing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States of America (“GAAP”). The independent auditor also reviews the Company’s interim financial statements in accordance with applicable auditing standards. In evaluating the independence of Deloitte, the Audit Committee has (i) received the written disclosures and the letter from Deloitte required by applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) regarding the audit firm’s communications with the Audit Committee concerning independence, (ii) discussed with Deloitte the firm’s independence from the Company and management and (iii) considered whether Deloitte’s provision of non-audit services to the Company is compatible with the auditors’ independence. In addition, the Audit Committee assures that the lead audit partner is rotated at least every five years in accordance with SEC and PCAOB requirements, and considered whether there should be a regular rotation of the audit firm itself in order to assure the continuing independence of the outside auditors. The Audit Committee has concluded that Deloitte is independent from the Company and its management. The Audit Committee has reviewed with the independent auditor and the Company’s internal auditors the overall scope and specific plans for their respective audits, and the Audit Committee is monitoring the progress of both in assessing the Company’s preparedness for future compliance with Section 404 of the Sarbanes-Oxley Act. At every regular meeting, the Audit Committee meets separately, and without management present, with the independent auditor and the Company’s Vice President, Internal Audit to review the results of their examinations, their evaluations of the Company’s internal controls and the overall quality of the Company’s accounting and financial reporting. The Audit Committee also meets separately at its regular meetings with the Chief Financial Officer, the Chief Accounting Officer, the General Counsel and Chief Compliance Officer. The Audit Committee has met and discussed with management and the independent auditor the fair and complete presentation of the Company’s financial statements. The Audit Committee has also discussed and reviewed with the independent auditor all matters required to be discussed by applicable requirements of the PCAOB and the SEC. The Audit Committee has discussed significant accounting policies applied in the financial statements, as well as alternative treatments. Management has represented that the consolidated financial statements have been prepared in accordance with GAAP, and the Audit Committee has reviewed and discussed the audited consolidated financial statements with both management and the independent auditor. Relying on the foregoing reviews and discussions, the Audit Committee recommended to the Board, and the Board approved, inclusion of the audited consolidated and combined financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, for filing with the SEC. In addition, the Audit Committee has approved, subject to shareholder ratification, the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for 2021. The Audit Committee Jack Lazar (Chair) Paul Deninger Brian Kushner 74 | 2021 PROXY STATEMENT Audit Committee Pre-Approval Policy The Audit Committee has adopted policies and procedures for pre-approval of audit, audit-related, tax and other services, and for pre-approval of related fee estimates or fee arrangements. These procedures require that the terms and fees for the annual audit service engagement be approved by the Audit Committee. The Audit Committee is required to pre-approve the audit and non-audit services performed by the independent auditor in order to assure that the provision of such services does not impair the auditor’s independence. Unless a type of service to be provided by the independent auditor has received general pre-approval under this policy, it will require specific pre-approval by the Audit Committee before the service is provided. In the event the invoice in respect of any covered service that is the subject of general pre-approval is materially in excess of the estimated amount or range, the Audit Committee must approve such excess amount prior to payment of the invoice. Predictable and recurring covered services and their related fee estimates or fee arrangements may be considered for general pre-approval by the full Audit Committee on an annual basis at or about the start of each fiscal year. Specific pre-approval of such services that have not received general pre-approval may be given or effective up to one year prior to commencement of the services. Under the policy, the Audit Committee has delegated to the Chair the authority to pre-approve audit-related and non-audit services and associated fees, that are not otherwise prohibited by law, to be performed by the Company’s independent registered public accounting firm in an amount of up to $100,000 for any one service; the Chair is required to report any pre-approval decisions to the Audit Committee at its next scheduled meeting. All services set forth in the following table below were approved by the Audit Committee before being rendered. Audit and Non-Audit Fees The following table shows fees for professional services rendered by Deloitte for the years ended December 31, 2020 and 2019. 2020 ($) 2019 ($) Description of Services Audit Fees 5,006,000 5,445,000 Fees pertaining to the audit of the Company’s annual consolidated financial statements, audits of statutory financial statements of our subsidiaries and fees pertaining to the review of SEC filings. Audit-Related Fees Tax Fees All Other Fees Total 0 0 0 0 1,895 30,000 5,007,895 5,475,000 2021 PROXY STATEMENT | 75 Proposal 4: Shareholder Proposal Requesting Shareholders’ Right to Act by Written Consent John Chevedden, whose address is 2215 Nelson Ave., No. 205, Redondo Beach, CA 90278, has requested that the following proposal be included in this Proxy Statement and has indicated that he intends to present such proposal at the annual meeting. Mr. Chevedden has submitted documentation indicating that he is the beneficial owner of at least 114 shares of our common stock and has advised the Company that he intends to continue to hold the requisite amount of shares through the date of the 2021 annual meeting. Mr. Chevedden’s proposal and his related supporting statement are followed by a recommendation from the Board. The Board disclaims any responsibility for the content of the proposal and the statement in support of the proposal, which are presented in the form received from the shareholder. Proposal 4: Adopt a Mainstream Shareholder Right – Written Consent Shareholders request that our board of directors take such steps as may be necessary to permit written consent (with as few governing document words as possible) by shareholders entitled to cast the minimum number of votes that would be necessary to authorize an action at a meeting at which all shareholders entitled to vote thereon were present and voting. This written consent is to give shareholders the fullest power to act by written consent consistent with applicable law. This includes shareholder ability to initiate any appropriate topic for written consent. This proposal topic won 95%-support at Dover Corporation and 88%-support at AT&T. Written consent allows shareholders to vote on important matters, such as electing new directors that can arise between annual meetings. This proposal is in favor of adopting a shareholder right to act by written consent with as few words as possible in the governing documents because more words are a management device to limit shareholder rights. In spite of supporting votes exceeding 88% for this proposal topic our management fought hard with REZI shareholder money to prevent shareholders from voting on this proposal topic at our 2020 annual meeting. Our management hired Faegre Drinker, a law firm with 1300 attorneys, at shareholder expense to fight this proposal topic. REZI shareholders could determine that a director needs replacing if the director received a large number of negative votes or if management pay was rejected by 20% of shares or more at the annual meeting (an indication that the chair of the management pay committee needs replacing). A shareholder right to act by written consent still affords REZI management a strong defense for a management holdout position against shareholders. Any action taken by written consent would still need 64% supermajority approval from the shares that normally cast ballots at the REZI annual meeting to equal a majority from the REZI shares outstanding. Please vote yes: Adopt a Mainstream Shareholder Right - Written Consent - Proposal 4 76 | 2021 PROXY STATEMENT Statement of the Board of Directors in Opposition to Proposal 4 Our Board has carefully considered this proposal and, for the reasons set forth below, does not believe it is in the best interests of the Company and our shareholders: • We believe that matters requiring shareholder approval should be presented to, and voted on, by all shareholders. • We believe that providing shareholders with the meaningful ability to call a special meeting of shareholders outside of the annual meeting cycle empowers all shareholders to participate collectively and cast informed votes. • Our existing corporate governance practices, including those listed below, enforce Board and management accountability to our shareholders. We believe that matters requiring shareholder approval should be presented to, and voted on, by all shareholders. Delaware law does not require a communication to all shareholders about the matter raised when shareholders act by written consent. As a result, many shareholders may be denied the ability to participate in major decisions affecting the Company and their interests. Our Board believes that our shareholders are best served by holding meetings in which all shareholders are provided with notice and an opportunity to consider and discuss the proposed actions and vote their shares. Additionally, unlike meetings of shareholders, action by written consent could deny shareholders the ability to vote or otherwise have a say on proposed shareholder actions. The shareholder proposal would permit shareholders owning just over 50% of the Company’s outstanding shares to act on matters that could be of great significance to the Company and all of its shareholders. Furthermore, permitting shareholder action by written consent could create confusion and disruption, as multiple shareholders could solicit written consents at any time on a wide range of issues, which may duplicate or conflict with other proposals. Providing shareholders with the meaningful ability to call a special meeting of shareholders outside of the annual meeting cycle empowers all shareholders to participate collectively and cast informed votes. In 2021, our Board amended the Company’s By-Laws to provide that shareholders holding at least 25% of the outstanding stock of the Company may call a special meeting. A special meeting provides a forum for shareholders, our Board and the Company’s management to consider shareholder concerns, and our Board believes that the 25% ownership requirement to call such a meeting sets a reasonable balance in making an extraordinary action more available to our shareholders without handing excessive power to a small minority. Unlike action by written consent, a special meeting provides all Company shareholders to have the opportunity to participate and make an informed decision. The Company’s existing corporate governance practices empower shareholders and promote Board and management accountability. The Board further believes that our strong corporate governance practices make adoption of this proposal to call special meetings, our corporate unnecessary. governance practices provide transparency and accountability of the Board to all of our shareholders and demonstrates that we are responsive to shareholder concerns. For example: In addition to providing shareholders with the right • Independent Board and Committee Leadership. In addition to our non-employee Chairman of the Board, we have an Independent Lead Director and each of our key Board committees is chaired by and composed solely of independent directors. • Majority Vote Standard. Our By-Laws provide for the election of directors by a majority of votes cast in uncontested elections. • Proxy Access. Our By-Laws provide for proxy access which permits a shareholder, or a group of up to 20 shareholders, owning 3% or more of our outstanding shares of common stock continuously for at least three years to nominate and include in our proxy materials nominees for director constituting up to 20% of the Board or two directors, whichever is greater, subject to the requirements set forth in our By-Laws. 2021 PROXY STATEMENT | 77 • Annual Say on Pay Vote. We provide our shareholders an annual advisory vote on our executive compensation. • Communication with the Board. We encourage open communication from our shareholders and provide a means for shareholders to communicate with and raise concerns to the Board. • Annual Election of Directors Commencing in 2022. This is the last year following our Spin-Off that we have a classified Board, and all directors will be elected annually commencing next year at the 2022 shareholders meeting. In summary, our Board believes that the implementation of this shareholder proposal is unnecessary and not in the best interests of the Company or its shareholders, given shareholders’ ability to call special meetings and the Company’s existing strong corporate governance practices. For the reasons stated above, our Board of Directors unanimously recommends a vote “AGAINST” this Shareholder Proposal 78 | 2021 PROXY STATEMENT Stock Performance Graph The following graph shows a comparison through December 31, 2020 of the cumulative total returns for (i) our common stock, (ii) the S&P MidCap 400 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. The returns in the graph are not intended to forecast or be indicative of possible future performance of our common stock. COMPARISON OF CUMULATIVE TOTAL RETURNS SUBSEQUENT TO SPIN-OFF $200 $150 $100 $50 $0 Spin-Off 12/31/2018 6/30/2019 12/31/2019 6/30/2020 12/31/2020 Resideo S&P Mid Cap 400 Total Return Index S&P 400 Industrials TR 2021 PROXY STATEMENT | 79 Questions and Answers About the Annual Meeting and Voting 1. Who is entitled to vote and how many votes do I have? If you were a holder of record of Resideo common stock at the close of business on the record date, April 14, 2021, you are eligible to vote at the annual meeting. For each matter presented for vote, you have one vote for each share you own. 2. What is the difference between holding shares as a shareholder of record, a registered shareholder and a beneficial owner of shares? Shareholder of Record or Registered Shareholder. If your shares of common stock are registered directly in your name with our transfer agent, EQ Shareowner Services, you are considered a “shareholder of record” or a “registered shareholder” of those shares. Beneficial Owner of Shares. If your shares are held in an account at a bank, brokerage firm or other similar organization, then you are a beneficial owner of shares held in “street name.” In that case, you will have received these proxy materials from the bank, brokerage firm or other similar organization holding your account and, as a beneficial owner, you have the right to direct your bank, brokerage firm or similar organization as to how to vote the shares held in your account. 3. How do I vote if I am a shareholder of record? By Internet. You may vote your shares by internet at www.proxyvote.com. By Telephone. All shareholders of record can vote by touchtone telephone within the U.S., U.S. territories and Canada by calling 1-800-690-6903. The telephone voting procedures are designed to authenticate shareholders’ identities, to allow shareholders to vote their shares and to confirm that their instructions have been recorded properly. By Written Proxy. All shareholders of record can also vote by written proxy card. If you are a shareholder of record and receive a Notice of Internet Availability of Proxy Materials (“Notice”) received or requested from us, you may request a written proxy card by following the instructions included in the Notice. If you sign and return your proxy card but do not mark any selections giving specific voting instructions, your shares represented by that proxy will be voted as recommended by the Board. Via the Virtual Meeting Website. You may vote your shares live at the virtual annual meeting. Even if you plan to attend and participate in our virtual annual meeting via www.virtualshareholdermeeting.com/ REZI2021, we encourage you to vote by internet at www.proxyvote.com or by calling 1-800-690-6903, or by returning a proxy card. This will ensure that your vote will be counted if you are unable to, or later decide not to, participate in the virtual annual meeting. Whether you are a shareholder of record or hold your shares in street name, you may vote online at the virtual annual meeting. You will need to enter the 16-digit control number provided in your proxy materials to vote your shares at the virtual annual meeting. See Question 5 for further details on accessing and voting at the virtual annual meeting. Unless you vote live at the virtual annual meeting, we must receive your vote by 11:59 p.m., Eastern Daylight Time, on June 8, 2021, the day before the virtual annual meeting, for your vote by proxy to be counted. Whether or not you plan to attend the virtual annual meeting, we encourage you to vote by proxy as soon as possible. Your shares will be voted in accordance with your instructions. 4. How do I vote if I am a beneficial owner of shares? As a beneficial owner, you have the right to direct your broker, bank or other similar organization on how to vote via the internet or by telephone if the broker, bank or other similar organization offers these options or by signing and returning a voting instruction form. Your broker, bank or other similar organization will send you instructions for voting your shares. 80 | 2021 PROXY STATEMENT Your broker is not permitted to vote on your behalf on “non-routine” matters unless you provide specific instructions by completing and returning the voting instruction form from your broker, bank or other similar organization or by following the instructions provided to you for voting your shares via telephone or the internet. A “broker non-vote” occurs when a broker submits a proxy for the meeting with respect to a “routine” matter but does not have the authority to vote on non-routine matters because the beneficial owner did not provide voting instructions on those matters. Under NYSE rules, the proposal to ratify the appointment of independent auditors (Proposal 3) is considered a routine item. This means that brokerage firms may vote in their discretion on behalf of clients (beneficial owners) who have not furnished voting instructions at least 15 days before the date of the annual meeting. In contrast, all of the other proposals set forth in this Proxy Statement are “non-routine” items. Brokerage firms that have not received voting instructions from their clients on these matters may not vote on these proposals. 5. How do I attend the virtual annual meeting? The annual meeting will be completely virtual and shareholders will be able to access the meeting live by visiting www.virtualshareholdermeeting.com/REZI2021. We are utilizing the virtual meeting format to enhance shareholder access and encourage participation and communication with our management. We believe a virtual-only meeting provides expanded access, improved communication and cost savings for our shareholders. A virtual meeting will enable increased attendance because shareholders around the world will be able to attend and listen to the annual meeting live, submit questions and vote their shares electronically, at no cost. Participating in the Virtual Annual Meeting. • Instructions the how www.virtualshareholdermeeting.com/REZI2021. attend on to virtual annual meeting are posted at • Shareholders will need to use the 16-digit control number provided in their proxy materials to attend the virtual annual meeting and listen live at www.virtualshareholdermeeting.com/REZI2021. • Shareholders of record and beneficial owners as of the record date may vote their shares electronically live during the virtual annual meeting. • Shareholders with questions regarding how to attend and participate in the virtual meeting may call 800-586-1548 (US) or 303-562-9288 (International) on the date of the annual meeting. • Shareholders encountering any difficulties accessing the virtual meeting during the check-in or meeting time can call 800-586-1548 (US) or 303-562-9288 (International). Additional Information about the Virtual Annual Meeting. • Shareholders may submit questions during the live meeting at www.virtualshareholdermeeting.com/ REZI2021 or in advance of the meeting at www.proxyvote.com. • Management will answer questions on any matters on the agenda before voting is closed. • During the live Q&A session of the meeting, management will answer questions as they come in and address those asked in advance, as time permits. • • In order to allow us to answer questions from as many shareholders as possible, we limit each shareholder to one question. If there are matters of individual concern to a shareholder and not of general concern to all shareholders, or if a question posed was not otherwise answered, shareholders can contact Investor Relations after the meeting at InvestorRelations@resideo.com. • The Q&A session will be posted to our Investor Relations website investor.resideo.com as soon as practicable following the conclusion of the virtual annual meeting. • Although the live virtual meeting is available only to shareholders at the time of the meeting, a replay of the meeting will be made publicly available on our Investor Relations website investor.resideo.com after the meeting concludes. 2021 PROXY STATEMENT | 81 6. What constitutes a “quorum” for the meeting? A quorum is a majority of the outstanding shares that are entitled to vote as of the record date present at the meeting or represented by proxy. A quorum is necessary to conduct business at the annual meeting. Your shares will be counted as present at the annual meeting if you have properly voted by proxy. Abstentions and broker non-votes count as present at the meeting for purposes of determining a quorum. If you vote to abstain on one or more proposals, your shares will be counted as present for purposes of determining the presence of a quorum. 7. What is the voting requirement to approve each of the proposals, and how are votes counted? At the close of business on April 14, 2021, the record date for the meeting, Resideo had 144,896,552 outstanding shares of common stock. Each share of common stock outstanding on the record date is entitled to one vote for each director nominee and one vote for each of the other proposals to be voted on. Resideo is incorporated in the State of Delaware. As a result, the Delaware General Corporation Law (the “DGCL”) and the NYSE listing standards govern the voting standards applicable to actions taken by our shareholders. Under our By-Laws, when a quorum is present, in all matters other than the election of directors and frequency of future advisory votes approving the compensation of our NEOs, the affirmative vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the matter shall be the act of the Company’s shareholders. Under the DGCL and our By-Laws, shares that abstain constitute shares that are present and entitled to vote. Shares abstaining have the practical effect of being voted “against” the matter, other than in the election of directors. With respect to the election of directors, Proposal 1, in order to be elected, each nominee must receive the affirmative vote of a majority of the votes cast at the meeting in respect of his or her election. Broker non-votes and abstentions will have no impact, as they are not counted as votes cast for this purpose. 82 | 2021 PROXY STATEMENT A description of the voting requirements and related effect of abstentions and broker non-votes on each item for shareholder proposal is as follows: VOTING OPTIONS BOARD RECOMMENDATION Proposal 1—Election of Class III Directors Proposal 2—Advisory Vote to Approve Executive Compensation Proposal 3—Ratification of Appointment of Independent Registered Public Accounting Firm Proposal 4—Act on a Shareholder Proposal Requesting a Shareholder Right to Act by Written Consent For, Against or Abstain on each nominee For, Against or Abstain For, Against or Abstain For, Against or Abstain FOR each nominee FOR FOR AGAINST EFFECT OF ABSTENTIONS AND BROKER NON-VOTES None. VOTE REQUIRED TO ADOPT THE PROPOSAL Majority of votes cast for such nominee Majority of shares represented at the annual meeting and entitled to vote Majority of shares represented at the annual meeting and entitled to vote Majority of shares represented at the annual meeting and entitled to vote Abstentions are treated as votes against. Broker non-votes have no effect. Abstentions are treated as votes against. Brokers have discretion to vote on this item. Abstentions are treated as votes against. Broker non-votes have no effect. 8. Can I change my vote? There are several ways in which you may revoke your proxy or change your voting instructions before the time of voting at the meeting (please note that, in order to be counted, the revocation or change must be received by 11:59 p.m. EDT on June 8, 2021): • Vote again by telephone or at www.proxyvote.com; • Transmit a revised proxy card or voting instruction form that is dated later than the prior one; • Shareholders of record and beneficial owners may vote electronically at the virtual annual meeting; or • Shareholders of record may notify Resideo’s Corporate Secretary in writing that a prior proxy is revoked. The latest-dated, timely, properly completed proxy that you submit, whether by mail, telephone or the internet, will count as your vote. If a vote has been recorded for your shares and you subsequently submit a proxy card that is not properly signed and dated, then the previously recorded vote will stand. 9. Is my vote confidential? Yes. Proxy cards, ballots and voting tabulations that identify shareholders are kept confidential except: • As necessary to meet applicable legal requirements and to assert or defend claims for or against the Company; 2021 PROXY STATEMENT | 83 • • In the case of a contested proxy solicitation; If a shareholder makes a written comment on the proxy card or otherwise communicates his or her vote to management; or • To allow the independent judge of election to certify the results of the vote. Broadridge, the independent proxy tabulator used by Resideo, counts the votes and acts as the inspector of elections for the meeting. 10. How will the voting results be disclosed? We will announce preliminary voting results at the virtual annual meeting and publish them on our website www.resideo.com. Voting results will also be disclosed on a Form 8-K filed with the SEC within four business days after the annual meeting, which will be available on our website. 11. What does it mean if I receive more than one Notice? If you are a shareholder of record, you will receive one Notice (or if you are an employee with a Resideo email address, an email proxy form) for all shares of common stock held in or credited to your accounts as of the record date, if the account names are exactly the same. If your shares are registered differently and are in more than one account, you will receive more than one Notice or email proxy form, and in that case, you can and are urged to vote all of your shares, which will require you to vote more than once. 12. What is “householding”? Shareholders of record who have the same last name and address and who request paper copies of the proxy materials will receive only one copy unless one or more of them notifies us that they wish to receive individual copies. This method of delivery, known as “householding,” will help ensure that shareholder households do not receive multiple copies of the same document, helping to reduce our printing and postage costs, as well as saving natural resources. We will deliver promptly upon written or oral request a separate copy of the 2020 Annual Report and Proxy Statement or Notice of Internet Availability of Proxy Materials, as applicable, to a security holder at a shared address to which a single copy of the document was delivered. Please go to www.proxyvote.com to request a copy. Shareholders of record may request to begin or to discontinue householding in the future by contacting Broadridge, either by calling (866) 540-7095, or by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. Shareholders owning their shares through a bank, brokerage firm or other similar organization may request to begin or to discontinue householding by contacting their bank, brokerage firm or other similar organization. 13. Who pays for the solicitation of proxies? Resideo is making this solicitation and will pay the cost of soliciting proxies. Proxies will be solicited on behalf of the Board of Directors by mail, telephone other electronic means. We have retained Innisfree M&A Inc., 501 Madison Avenue, New York, NY 10022, to assist with the solicitation for an estimated fee of $10,000, plus expenses. We will reimburse brokerage firms and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for sending proxy materials to shareholders and obtaining their votes. Our employees may also solicit proxies for no additional compensation. 14. How do I comment on Company business? You will have the opportunity to comment when you vote using the internet or you may write any comments on the proxy card if you vote by mailing a proxy card. You may also send your comments to us at Resideo Technologies, Inc., 901 E. 6th Street, Austin, TX 78702, Attention: Investor Relations. Although it is not possible to respond to each shareholder, your comments are appreciated and help us to understand your concerns. 84 | 2021 PROXY STATEMENT 15. When are the 2022 shareholder proposals due? To be considered for inclusion in the Company’s 2022 Proxy Statement, shareholder proposals submitted in accordance with SEC Rule 14a-8 must be received in writing at our principal executive offices no later than December 24, 2021. Address all shareholder proposals to Resideo Technologies, Inc., 901 E. 6th Street, Austin, TX 78702, Attention: Corporate Secretary. For any proposal that is not submitted for inclusion in next year’s Proxy Statement, but is instead sought to be presented directly at the 2022 annual meeting, notice of intention to present the proposal, including all information required to be provided by the shareholder in accordance with the Company’s By-Laws, must be received in writing at our principal executive offices by March 11, 2022, and no earlier than February 9, 2022. Address all notices of intention to present proposals at the 2021 annual meeting to Resideo Technologies, Inc., 901 E. 6th Street, Austin, TX 78702, Attention: Corporate Secretary. For information on nominating directors for the 2022 annual meeting, please see the information above under “Advance Notice Director Nominations” and “Proxy Access Director Nominations” on page 25. 16. How may I obtain a copy of Resideo’s 2020 Annual Report on Form 10-K and proxy materials? If you would like to receive paper or e-mail copies of our 2020 Annual Report and the Proxy Statement, free of charge, you may request them by internet at www.proxyvote.com, by telephone at 1-800-579-1639 or by e-mail at sendmaterial@proxyvote.com. You will need your 16-digit control number provided in your proxy materials to request paper copies. Requests for materials relating to the 2021 annual meeting may be made by calling 1-800-579-1639, and must be made by May 26, 2021 to facilitate timely delivery. 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 Investor Relations website at investor.resideo.com. 17. How do I contact the Company or the Board of Directors? Our Investor Relations department is the primary point of contact for shareholder interaction with Resideo. Shareholders can contact our Investor Relations department by email at InvestorRelations@resideo.com, by phone at 512-726-3500, or by writing to Resideo Technologies, Inc., 901 E. 6th Street, Austin, TX 78702, Attention: Investor Relations. Shareholders, as well as other interested parties, may communicate directly with the Lead Independent Director, the non-employee directors as a group, or individual directors by writing to Resideo Technologies, Inc., 901 E. 6th Street, Austin, TX 78702, Attention: Corporate Secretary. Our Corporate Secretary reviews and promptly forwards communications to the directors as appropriate. Communication involving substantive accounting or auditing matters are forwarded to the Chair of the Audit Committee. Certain items that are unrelated to the duties and responsibilities of the Board will not be forwarded such as junk mail and mass mailings; product complaints and product inquiries; new product or technology suggestions; job inquiries and resumes; advertisements or solicitations; surveys; spam and overly hostile, threatening, potentially illegal or similarly unsuitable communications. 18. Can other business in addition to the items listed on the agenda be transacted at the meeting? The Company knows of no other business to be presented for consideration at the meeting. If other matters are properly presented at the meeting, the persons designated as authorized proxies on your proxy card may vote on such matters at their discretion. By Order of the Board of Directors, Jeannine Lane Executive Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer April 23, 2021 2021 PROXY STATEMENT | 85

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