Resideo Technologies Earnings Call Highlights Growth, Spinoff

Resideo Technologies ((REZI)) has held its Q1 earnings call. Read on for the main highlights of the call.

Resideo Technologies’ latest earnings call struck a cautiously upbeat tone, with management emphasizing solid revenue growth, sharply higher profitability, and strong product momentum while openly flagging pressure from freight inflation, softer end markets, and elevated cash usage tied to the looming ADI spinoff. Executives framed Q1 as proof the strategy is working and reiterated confidence in the 2026 targets despite near-term headwinds.

Revenue Growth Tops Expectations

Resideo posted total net revenue above $1.9 billion, an 8% year-over-year increase that exceeded the high end of its outlook range and included roughly a 2% tailwind from currency. Management highlighted broad-based growth across the portfolio even as certain residential categories softened, positioning the company ahead of its internal plans for the quarter.

Profitability Surges as EBITDA Jumps

Adjusted EBITDA climbed to $215 million, up 28% from a year ago and also above the top end of guidance, underscoring strong operating execution. The company swung to GAAP net income per share of $0.17 from a $0.02 loss last year, demonstrating that higher volumes and cost discipline are increasingly flowing through to the bottom line.

Adjusted EPS Edges Higher

First quarter adjusted earnings per share came in at $0.65, a modest 3% improvement over the prior year’s $0.63 yet still above the high end of management’s guidance. The result reflects both profit expansion and the impact of various adjustments, signaling that core earnings power is trending upward even as the company absorbs separation expenses.

Products & Solutions Extends Margin Streak

The Products & Solutions segment delivered 9% revenue growth, helped by about 200 basis points of currency benefit and roughly 300 basis points from four extra sales days. Gross margin rose 40 basis points to 41.8%, marking the twelfth straight quarter of year-over-year expansion and driving a 12% increase in adjusted EBITDA as operating leverage improved.

ADI Grows Sales and Digital Channels

ADI’s net revenue advanced 8% year-over-year, supported by a 12% gain in e-commerce revenue with average daily online sales up 5%. Exclusive brands sales rose 7% while generating 13% more gross margin dollars, and the distributor added about 60 new SKUs, including Luma cameras, Triad sound solutions and Araknis networking gear to deepen its higher-margin portfolio.

Spinoff Steps and Investor Outreach

Management underscored progress on separating ADI by publicly filing the Form 10 and targeting completion of the spinoff between mid-third and mid-fourth quarter. The company also plans mid-July Investor Day events for both Resideo and ADI to lay out their stand-alone strategies, capital priorities and long-term value-creation plans for shareholders.

Q2 and 2026 Outlook Reaffirmed

The company reaffirmed its 2026 goals and issued second-quarter guidance calling for net revenue between $1.916 billion and $1.940 billion, adjusted EBITDA of $216 million to $230 million, and diluted EPS of $0.71 to $0.75 despite having one fewer sales day. Management expects both ADI and Products & Solutions to grow revenues at similar rates in 2026, with flat overall gross margins and more upside coming in the year’s back half.

Innovation and Product Momentum

Executives pointed to a steady cadence of new product launches and ongoing R&D investment as key growth drivers, especially around integrated solutions. Early market feedback for a new integrated security platform, slated for general release in the second half of 2026, has been encouraging, while adoption is building for the First Alert SC05 and Honeywell Home Elite Pro thermostat.

Company-Level Margin Pressure Emerges

Despite segment strength, total company gross margin slipped 10 basis points year-over-year to 28.8%, largely on higher fuel and freight costs across both businesses. Management stressed that while core operations are healthy, logistics inflation is holding back margin expansion and will remain a focus area for mitigation efforts.

ADI Margin and EBITDA Under Strain

At ADI, gross margin declined 40 basis points to 21.2%, again mainly due to higher freight costs that are proving difficult to fully pass through immediately. Adjusted EBITDA fell by $6 million year-over-year and income from operations was flat, signaling that the distribution arm’s profitability is temporarily lagging its sales growth.

Working Capital Drags on Cash Flow

Operating cash flow swung deeper into negative territory, with $145 million used in the quarter versus $65 million used a year earlier, as separation activities and higher cash interest weighed on results. Working capital dynamics also contributed, highlighting that the company is consuming cash in the near term to fund its strategic repositioning and upcoming spin transaction.

Inflation Forces Price Hikes

Management flagged fuel, freight and other inflationary costs in the “tens of millions” of dollars annually, a burden that will be countered through price increases across segments. Those pricing actions are expected to lag cost spikes, meaning investors should brace for some short-term gross margin headwinds before the full benefits are realized in financial results.

Managing Memory Supply Risk

The company continues to navigate tight memory supply, noting that constraints could persist into 2027 even though allocations have been secured for 2026. While Resideo’s products typically rely on lower-capacity memory, some cost pass-through to customers is anticipated, and management acknowledged ongoing work to limit potential disruption in later years.

Soft Spots in End Markets

Not all demand trends are favorable, with high-end residential AV and select residential channels showing signs of weakness and a more cautious consumer backdrop. Products & Solutions saw its HVAC channel slip 1% year-over-year and, after normalizing for extra selling days, ADI’s average daily sales grew only about 1%, underscoring a more mixed environment.

Impact of One-Time Items and Separation Costs

Reported results were also shaped by notable one-time items, including separation expenses and a litigation settlement that were excluded from adjusted EPS, which would have been $0.15 and $0.12 per share lower, respectively. Adjusted EBITDA benefited from a $35 million gain tied to a terminated indemnification agreement, which investors should consider when assessing underlying trends.

Guidance and Outlook

Looking ahead, Resideo’s reaffirmed 2026 outlook envisions both ADI and Products & Solutions posting similar revenue growth rates, with overall gross margin roughly flat but more expansion in Products & Solutions than at ADI. The year is expected to be back-half weighted due to a shift in ADI orders, and management is counting on price increases and operational efficiency to absorb cost inflation and sustain earnings momentum.

Resideo’s earnings call painted a picture of a company executing well on growth and margin initiatives while methodically advancing a complex corporate separation. For investors, the story blends solid fundamental progress and clear strategic milestones with tangible risks around costs, supply and market softness, leaving the stock’s trajectory tied to management’s ability to deliver on its 2026 promises.