It's my pleasure to have Resideo Technologies joining us today. With that, I'll turn it over to Jason Willey, Vice President of Investor Relations.
Great. Thanks, Ryan. Appreciate it. Thanks for having us here. As Ryan said, my name is Jason Willey. I head up Investor Relations for Resideo Technologies. We'll walk through a little bit of an overview of the company and then take a few questions at the end if there are any. So Resideo is a combination of two businesses, really, a distribution business, ADI, and a products business. The products business, you know, serves the residential market. We're present in over 150 million homes in the US and in Europe with our product portfolio. We'll get into a bit of what that portfolio looks like, but, you know, safety, security, comfort, HVAC solutions, energy solutions, all the things that really touch the critical systems of your home. Business has been around...
The products have been around for a long time. The business, Resideo itself, spun out from Honeywell about 5 years ago. Some brands that a lot of people probably be familiar with, Honeywell Home, First Alert, which we acquired about a year and a half ago. So a few themes that we'll kind of hit on as we, you know, move through the presentation today. Really, you know, Resideo is about serving the professional contractor, both through the products business as well as the distribution business. We do that through what is a, you know, a highly, we believe, highly differentiated, broad set of products. We believe we touch on a number of fairly exciting, you know, growth trends in both the residential arena, and we'll walk through some of those.
In both the products business and the distribution business, we see a fairly meaningful opportunity for margin expansion over time. Start with products and solutions. Products and solutions, $2.8 billion of segment revenue and $527 million of segment operating income in 2022. You know, we split this business into, you know, four kind of key product categories. You know, air, you know, about a third of the business. This is driven by our thermostats, which I think is what, you know, a lot of people know, you know, Resideo and the Honeywell Home brand for. You know, also do things such as indoor air quality, humidification, dehumidification, as well as zoning, zoning systems. So really, air products focused on your HVAC system within your home.
You know, safety and security, so this includes the First Alert, brand, you know, smoke and CO detectors, as well as our professionally monitored, you know, security hardware. So these are the panels, sensors, you know, video solutions that, you know, serve the backbone of, you know, professionally monitored security solutions. So things like an ADT, who is our largest kind of customer in this, in this product area. You know, water, you know, ±10% of the products business and smaller portion of the business. A lot of this is focused in Europe. These are things like, you know, shutoff valves, backflow prevention valves. Increasingly, we're doing more on the water leak detection, you know, side of things and more connected products, you know, in this area. Then fourth area, you know, we call energy.
Really, this is kind of our OEM business, so we're a component supplier into various OEMs, you know, servicing water heaters, boilers, you know, furnaces, you know, within the home. So as I kind of said earlier, you know, primary, you know, channel here is through the professional contractor. While we do a little bit for the DIY market, most of what we do is centered around serving the pro. You know, we do that through several go-to-market channels, you know, through the distributors, you know, on the HVAC side, this is people like a WESCO or a Ferguson or a Johnstone, through security dealers, ADI, which is our distribution business, is the largest channel on the security side. We also have our partnerships with our OEMs.
You know, again, this is where we kind of sell through our energy products to, you know, the larger water heater, you know, furnace and, you know, heating and cooling vendors. Increasingly, we're looking at alternative channels to market, so this includes things like partnering with utilities on demand response programs. Also partnering with insurance companies to, you know, help enable, you know, reduce claims activity, you know, through things like water leak detection and water leak prevention, shutoff valves. About 20% of the products business does go through retail. This is, you know, predominantly still serving the professional contractor. This is the pro going into a Home Depot or Lowe's to pick up our products, as well as First Alert.
First Alert, you know, is probably the one piece of the business that does predominantly go direct to the consumer or service the DIY market. About 20% of our business on the product side is through the new construction market, so it goes through and into the home to the home builders. Again, the pro really is the cornerstone of the business here. It's our differentiated kind of value proposition, is what we're able to do, you know, for and with those professional contractors. Talked a little bit earlier about some growth opportunities that, you know, we believe our products, you know, attach fairly well to. You know, connected home, smart home is obviously something that, you know, is talked a lot about. You know, we increasingly have added connectivity into our product portfolio.
You know, thermostats, you know, water leak detection, indoor air quality monitoring, you know, moving forward, you know, connecting those smoke and CO detectors, and being able to tie all that together to be able to provide to, you know, to our contractors, to end consumers, more insight and more intelligence about what's going on in the home. You know, specifically on the energy management side of things, I think this is where we're working with our utility partners on demand response programs, things like grid management. So we not only provide, you know, the connected thermostats that help support these programs, but we also have back-end software that helps the utilities run those demand response programs.
You know, within the life safety world, I think you increasingly see people kind of taking awareness about what's going on around them. You know, you've seen pretty meaningful growth here over the last decade or so in terms of security solutions and monitored security solutions within the home. We see opportunity for this going forward, again, to integrate the smoke and the CO into this, as well as to bring more kind of video analytics and AI and ML to this world and make the information that you're getting from that video you get from your security service actually usable and actually add some intelligence to that.
And finally, you know, the energy transitions, you know, a lot of this is, you know, focused on what's happening in Europe, but I think, over time, has applicability across, you know, our different geographies. You know, we have, you know, hydrogen-ready products already in Europe. Increasingly, we're doing components that fit into the heat pump market. Then on the margin side of things, as I kind of said earlier, you know, we see opportunities in both businesses to expand the margin, you know, profile. You know, a few of the things that are going to drive that, you know, we've began the process of optimizing our manufacturing operations. You know, we have ±15 manufacturing facilities, you know, largely in North America, in Europe.
You know, that portfolio is, you know, while it has helped us through particularly some of the supply chain challenges that we've had, we're very in market in here, and we're very dispersed, particularly in Europe. We manufacture here in North America, largely in Mexico, but we still do have facilities in the U.S. You know, recently, we announced that we, you know, closed one of those facilities in San Diego and moved that manufacturing to Southeast Asia. We see more opportunities for similar types of opportunities with the portfolio over time. You know, one of the things that's ongoing as well is, you know, we saw a lot of pressure from inflation, you know, in input costs, particularly in 2022.
We began to recoup some of those costs, and, you know, certainly we've seen those benefits on the freight side of things, but also in some of our material input, and we think this will have a meaningful kind of impact on margin as we, you know, as we move through, particularly 2024. Recently, we announced the sale of our Genesis Wire and Cable business. I think this is part of an ongoing effort to look at the portfolio, to divest non-strategic assets, as well as do just some pruning of, you know, what was a collection of assets that was inherited at the spin.
As we indicated, you know, kind of post that Genesis transaction, we do see opportunity to undertake more of these types of things over time and really kind of focus the portfolio on, you know, what the core strategies of the business are. I think really most importantly, as we think over time about the opportunity in the business, is to enhance what we're doing from an innovation perspective. You know, one of the challenges of, you know, the structure of the business and the background of the business is it didn't get a lot of investment, you know, over time, particularly from a new product development and innovation standpoint. It's been a clear effort of the management team that came in three years ago to ramp up those capabilities.
Even as we've done some restructuring in 2023, you know, we've been careful to ensure that we continue to make the necessary investments from an innovation and a new product perspective. You know, one of the things that you'll see in 2023 is we did bring more new products to market relative to what we've been able to do in the previous few years, and we think that we have momentum here, and this will be critical over time as we do look to, you know, expand the margins of this business. So talk a little bit about ADI. So ADI is our, you know, distribution business. So it's a leading low-voltage security distribution platform in the U.S. You can see here, you know, the collection of different product categories.
You know, intrusion systems, commercial fire, access control, video surveillance, wire and cable. ADI has been a very consistent grower over the past, you know, decade plus. It's a business that, you know, has a, you know, very traditional industrial distribution model to it, but one that has been consistently able to outperform the overall market, I think, through very, you know, very strong execution. So a little bit about ADI. As I said, you know, primarily focused on the physical security market, other key categories, you know, datacom and AV, but you know, the roots of ADI are on the physical security side of things. Predominantly focused in North America and the U.S.
This is a branch-based operation, about 200 branches globally, but the bulk of the opportunity and the revenue today comes from North America and the U.S. specifically. About two-thirds commercial, one-third, you know, residential. Most of that residential is in the intrusion market, and this is kind of where you see the distribution of our products business, as well as increasingly a little bit of residential AV, which we've kind of entered both organically and also through acquisition. And one of the themes for the business, and I think for distributors in general, is we're seeing more of the business move to digital or e-commerce or, you know, what we call touchless sales.
So, you know, increasingly, you know, our customers are looking to interact with, you know, ADI in, in varied ways. And so one of the areas where we've made a fairly meaningful investment in this business is in our digital capabilities and the ability to, you know, to transact and interact with our customers in, in that digital realm.... So on the margin kind of theme here, a few areas, you know, one that I kind of just touched on is really kind of that acceleration in e-commerce. So we're up to about 20% of ADI sales come through the e-commerce platform. Significant investment in the, the back-end infrastructure here, the data management, infrastructure. You know, an opportunity that we think we're kind of fairly early on, in is the exclusive brand side.
So, you know, today, less than 5% of ADI's overall sales are exclusive or private brands. This is something that has grown, you know, significantly faster than the overall business, and we see some pretty meaningful opportunities to drive this higher over time. The gross margins for these products are, you know, significantly higher than what we see for our third-party products. The other area of kind of fairly meaningful investment that the team has made over the last 3 years is in what we call, you know, sales force enablement or sales force effectiveness.
So this is really a giving, the salesforce tools to be able to understand pricing better, to ensure that, you know, the way that they're interacting with the customer is, is efficient and driving, you know, maximum profitability from, from individual transactions, really by providing the kind of data and analytics, you know, at the fingertips of the salespeople as they're interacting with the, with the customers. A little bit through the financials. See here, you know, been able to, you know, grow the revenue fairly nicely over the last several years and at the same time bring up operating profitability. You know, 2023, you know, based on the kind of midpoint of our guidance, that we provided, at last earnings report, gonna be down, you know, very low, very low single digits.
We have seen headwinds in the, predominantly in the residential portions of our business and, you know, where volumes have been down. But, you know, good, good profile of, of being able to grow the revenue, increase the profitability, over the last several years. At the same time, a real focus on kind of driving down some of those corporate costs and, and corporate overhead. Made a lot of progress, on this front over the last several years. So the most recent quarter, you know, a few highlights from that. We did deliver, you know, results that were above the midpoint of our outlook range. As I said, we announced the, the disposition of our Genesis Wire and Cable, business, $80+ million of, of proceeds.
It's a very non-strategic, you know, asset, for us, you know, largely commodity wire and cable. Able to sell that at a multiple that was actually a premium to where the equity trades. So we think a good, you know, good transaction for us as well as a, you know, good example of the types of opportunities we think do exist within the, in the portfolio. We did announce some additional restructuring and, you know, we continue to work to bring the cost structure down as we have seen, you know, more challenging volumes and more challenging revenues, particularly in the products business. At the same time, that investment, you know, has continued in, you know, key initiatives around innovation on the product side, as well as the digital experience within ADI.
So we've been very kind of thoughtful and targeted about where we are, where we are cutting, and where we are pruning. And we did announce, with our Q2 earnings, a share repurchase program. So we repurchased $30 million worth of shares on that $150 million kind of authorization, and that's our first share repurchase authorization since we've been a standalone company. Balance sheet. A very healthy balance sheet, you know, strong cash position, about $1.4 billion of total debt. You know, we have seen working capital levels remain a bit extended. This is primarily driven by inventory. We built inventory like others in 2022, when we were experiencing supply chain challenges. We continue to work through bringing, you know, bringing that inventory down.
We've indicated that we expect to, you know, have a fairly strong, you know, operating cash flow year this year. To date, we are executing on those improvements relative to what we delivered for last year. But in general, very comfortable with the financial profile of the, of the balance sheet and, and where we sit from a balance sheet perspective. A little bit about capital allocation. So, you know, what we've said is, you know, the primary use of capitals is expected to be M&A. You know, we've executed on this in both businesses, so we've done, you know, some bolt-on transactions within ADI, primarily focused on the audio, visual, and datacom markets. Expect to continue to look at those, you know, types of, of transactions.
They've been relatively small in size, kind of single-digit $ millions, you know, low double-digit $ million transaction values. On the product side, you know, the big deal was First Alert last year. Other than that, we have also done some bolt-ons here, largely adding kind of technology capabilities. We did an acquisition in EMEA recently to add some security capabilities and life safety capabilities. We did an acquisition earlier, or I guess about this time last year, to add some video capabilities, so a development team there around, you know, some next-generation video capabilities for our security solutions. You know, about $100 million of CapEx on an annual basis is kind of where we've been running. You know, plus or minus, you know, two-thirds of that, you know, 50% to two-thirds of that kind of maintenance.
The other major areas of investment have been automation in our factories, particularly down in Mexico, as well as some systems upgrade, primarily on the ADI side. We're putting in a new ERP system, as well as some of the investments around the digital initiatives. And as I talked about previously, you know, share repurchase authorization, a $150 million authorization. We repurchased $30 million on that last quarter. Just kind of close here with a few, you know, things on the acquisition front. So as I said, we did the First Alert acquisition about 18 months ago. It's the largest acquisition by far that we've done as a standalone company, kind of adding key real estate within the home and smoke and CO market.
Deal has performed well, really right in line with what the deal model was. I think we've been able to execute on some additional revenue opportunities, particularly bringing First Alert products into the home builder community. That's kind of helps to offset, you know, just some slower overall market conditions than what we had originally anticipated when we did the deal. But, you know, performing in line with expectations, we've, you know, executed on the synergy plan that we laid out. And I think, you know, one of the real benefits here, particularly over the long term, and really wasn't in at least, you know, from our financial calculations, what we paid for the deal, was the First Alert brand, which we're increasingly using in our security products. I think you'll see more of that over time.
And then on the ADI side, I kind of mentioned a little bit about this. You know, we've done five smaller acquisitions, you know, primarily focused on the AV and the data com markets. You know, deployed about $60 million of capital, you know, $175 million of annual sales from these, you know, five assets. And I think very representative of the types of transactions that, you know, we would look to do going forward to really build out, you know, capabilities in adjacent categories, leverage that, you know, footprint we have, leverage the scale advantages that we have within that business.
So yeah, just to wrap up, again, I think we have a very kind of differentiated portfolio, very differentiated path to market with our, you know, relationships that we have with the professional contractors that we think are unique, you know, across the markets that we play in. And I think we do attach to, you know, a fair amount of attractive kind of growth opportunities, particularly on the residential side of things, when you think about smart home and connectivity in the home, you know, energy management, as well as just some of the, you know, energy transition initiatives that are going on across the globe. And across both businesses, I think, you know, opportunity to continue to improve the margin profile of the business through some, you know, longer term structural initiatives.
That's what I have for today, and if anyone has any questions, happy to take them.
Hey, Jason, maybe I'll start with one. You know, just following up on, on some of the M&A focus towards the end of the presentation. You know, what are you guys seeing in the pipeline today? Is there, you know, a, a set of opportunities that you guys are able to evaluate, or is there a disconnection, you know, kind of on, on valuations?
Yeah, I mean, I think we, we continue to see, you know, opportunities out in the market, both on the, both on the ADI side and, and on the product side. You know, I think that there is a, you know, still in some, particularly in the private kind of company world, still an adjustment in kind of in valuations going on and a bit of a disconnect between the, the bid, and the bid and the ask, you know, out there. You know, that said, I think absolutely there's still kind of actionable things, you know, out in the market today. I mean, our like others, you know, our cost of capital has, has increased, you know, meaningfully over the last 12 months.
And, you know, we factor that in as we, you know, kind of look at opportunities and the return potentials from any acquisitions. You know, I think inherently that makes us probably a little more selective than perhaps what we might have been, you know, 18 months ago. But I think there is definitely, you know, actionable opportunities out in the market on both sides of the business.
Then, you know, how do you guys feel about your credit ratings today? Are you guys happy with where you're rated currently, or do you have any kind of aspirations to get that unsecured rating to, you know, an investment grade status over time?
Yeah, I mean, I think we're very happy with the financial profile and the balance sheet profile today. I think, you know, if you look at the terms we were able to secure on the last, you know, couple of transactions that we did in the debt market, I think, you know, they reflect the quality of the, of the balance sheet. You know, I think we're in constant conversation with the, with the rating agencies. I don't think there is a, you know, a massive push to, you know, move to, to investment grade. I think we, you know, appreciate and like the flexibility of where we, you know, of where we sit today. And, you know, and again, I think are most focused on kind of the, the health of the balance sheet.
You know, and again, we're pretty comfortable with the current leverage profile of the business.
Great. Thank you.
All right. Thank you very much. Appreciate it.