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Resideo (REZI) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Industrials· May 12, 2026

Source: earnings call transcript

Executive summary

Resideo Q1 FY26 — Strong Outperformance and ADI Spin-off Progress

Resideo delivered strong Q1 FY26 results, exceeding expectations across key metrics, driven by solid execution in both Products & Solutions and ADI segments. The company reaffirmed its full-year outlook, anticipating pricing actions to mitigate rising fuel costs and leveraging business transformation initiatives, particularly at ADI. Significant progress was made on the planned spin-off of ADI, with Investor Day events scheduled for mid-July.

Highlights

5

  • Total net revenue grew 8% year-over-year to over $1.9 billion, exceeding the high end of the outlook range.

  • Total adjusted EBITDA grew 28% year-over-year to $215 million, exceeding the high end of the outlook range.

  • Products & Solutions achieved its 12th consecutive quarter of year-over-year gross margin expansion, up 40 basis points to 41.8%.

  • ADI's e-commerce revenue grew 12% year-over-year and was accretive to gross margin.

  • Key milestones achieved in the ADI spin-off process, including the public filing of ADI's Form 10.

Concerns

5

  • Residential AV business declined due to a continued soft U.S. residential market.

  • Gross margin was impacted by higher fuel costs for freight at both business segments.

  • ADI's adjusted EBITDA declined by $6 million year-over-year, primarily due to the decline in gross margin.

  • Anticipated slight headwind to gross margin for each business segment in Q2 due to pricing actions lagging inflationary costs.

  • Ongoing uncertain macro expected to impact ADI more than Products & Solutions due to consumer confidence and affordability in high-end residential markets.

Guidance & targets

CategoryTargetConfidence
Full-year 2026 Outlook
Reaffirmed
high materiality
High
Full-year 2026 Cash Provided by Operations (excluding separation-related payments)
Unchanged
medium materiality
High
Full-year 2026 Net Revenue Growth (ADI and Products & Solutions)
Approximately the same
medium materiality
Medium
Full-year 2026 Total Company Gross Margin Percentage Expansion
Flat year-over-year
medium materiality
Medium
Full-year 2026 Products & Solutions Gross Margin Percentage Expansion
Greater than ADI
medium materiality
Medium
Q2 2026 Total Company Net Revenue
$1.916 billion to $1.940 billion
high materiality
High
Q2 2026 Total Company Adjusted EBITDA
$216 million to $230 million
high materiality
High
Q2 2026 Total Company Fully Diluted Earnings Per Share
$0.71 to $0.75
high materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Products & Solutions
Net revenue growth across substantially all sales channels and product families due to both price and volume. Strong retail channel growth driven by volume (safety and thermostat products). OEM channel posted sixth consecutive quarter of healthy growth. Electrical distribution channel saw year-over-year growth driven by volume. Security channel net revenue grew driven by price increases. HVAC channel net revenue down only 1% YoY, with volume declines partially offset by higher prices and stabilizing market conditions.
12th consecutive quarter of year-over-year gross margin expansionApproximate 200 basis point favorable impact from currencyApproximate 300 basis points favorable impact from extra 4 daysAdjusted EBITDA grew 12% year-over-year
9% year-over-year growth9%—41.8% gross margin
ADI Global Distribution
Net revenue growth driven by demand in security, professional audio visual, and data communications categories, partially offset by residential audio visual. Saw sequential growth in security product categories, including video surveillance rebound. International business yielded positive returns from operational changes. Gross margin primarily impacted by higher fuel costs for freight. Executing business transformation plans for EBITDA margin expansion later this year.
Average daily sales growth was 1% year-over-yearFavorable impact from currency of approximately 1%E-commerce revenue grew 12% year-over-yearExclusive brands revenue increased by 7% year-over-yearExclusive brands generated 13% more gross margin dollarsAdjusted EBITDA declined by $6 million
8% year-over-year growth8%—21.2% gross margin

Product announcements

ProductTypeDetails
First Alert SC05 connected smoke and carbon monoxide detectorsupdate
Honeywell Home Elite Pro premium smart thermostatupdate
New integrated security platformlaunch
New Luma security cameraslaunch
Triad premium residential sound productslaunch
Araknis residential and SMB networking productslaunch
Control4 operating systemupdate

Deals & partnerships

N/A (internal spin-off) Separation of ADI Global Distribution business from Resideo Technologies, Inc. into two pure-play companies.

Key milestones achieved, including the public filing of ADI's Form 10. Investor Day events for Resideo and ADI are planned for mid-July to introduce leadership teams and discuss go-forward business strategies.

Risks & headwinds

Uncertain global macroeconomic environment Rest of the year

End markets still soft; high-end residential audiovisual market softening; ongoing uncertain macro to impact ADI more than Products & Solutions due to consumer confidence and affordability.

Mitigation:Solid execution, proactive mitigation tactics, reaffirming 2026 outlook.

Inflationary cost dynamics (fuel on freight) Q1, Q2, FY26

Higher costs for freight in Q1 results; millions of dollars incurred each quarter; tens of millions of dollars of cost for FY26. Slight headwind to gross margin for each business segment in Q2 due to lag in pricing actions.

Mitigation:Intend to raise prices later in Q2, expecting full mitigation; collaborative work with customers.

Memory chip supply constraints 2026, potentially 2027

Memory squeeze; nonmaterial cost to customers.

Mitigation:Secured allocation commitments for all of 2026, working on 2027 allocations; Resideo uses smaller capacity/older memory (DDR3/DDR4) which faces less pressure; engineering/product/supply chain working on other means to address.

What to watch in Q2 FY26

Q2 FY26 Total Net Revenue

Q2 FY26
Target $1.916 billion to $1.940 billion

Why it matters

Verifies the company's ability to meet its near-term top-line guidance amidst macro uncertainty and pricing actions.

Our outlook for the second quarter of 2026 is as follows: Total company net revenue to be in the range of $1.916 billion to $1.940 billion.

Find out whether REZI delivers this. Inve re-checks your case every morning.

Q&A highlights

Given the muted near-term outlook, how confident is management that pricing actions will overcome macro uncertainty to meet full-year numbers?

Management is highly confident in their pricing actions, which have been communicated to customers, to offset expected cost increases despite a timing lag. They acknowledge macro uncertainty but feel good about their commercial position.

“But we're very highly confident that what we're doing will offset the cost that we see.”

asked by Dan Stratemeier · answered by Michael Carlet

2 min read 6 chapters

Detailed narrative

Q1 Financial Outperformance

Resideo exceeded its Q1 outlook for all metrics, reporting total net revenue growth of 8% year-over-year to over $1.9 billion. Total adjusted EBITDA increased 28% year-over-year to $215 million, and total adjusted earnings per share grew 3% year-over-year to $0.65. This strong performance was attributed to solid operating fundamentals and the benefit from the terminated indemnification agreement.

Macroeconomic Environment and Mitigation Strategies

The company acknowledged an uncertain global macroeconomic environment and soft end markets, particularly in the high-end residential audiovisual sector. To counter inflationary cost dynamics, primarily related to freight, Resideo plans to implement price increases starting in Q2. Management expects these actions to fully mitigate rising costs, although a slight gross margin headwind is anticipated in Q2 due to the lag in price realization.

Progress on Business Separation

Resideo achieved significant milestones in the planned spin-off of its ADI Global Distribution business, including the public filing of ADI's Form 10. The separation is expected to be completed between the middle of the third quarter and the middle of the fourth quarter of 2026. Investor Day events for both Resideo and ADI are scheduled for mid-July in New York to introduce leadership teams and outline future business strategies.

Products & Solutions Segment Performance

The Products & Solutions segment reported a 9% year-over-year net revenue growth, benefiting from a 200 basis point favorable currency impact and 300 basis points from four extra sales days. This marked the 12th consecutive quarter of gross margin expansion, reaching 41.8%, driven by improved factory utilization. Growth was broad-based across retail, OEM, and electrical distribution channels, with residential HVAC market conditions stabilizing.

ADI Global Distribution Segment Performance

ADI reported an 8% year-over-year net revenue growth, with average daily sales growth of 1% (including 1% favorable currency impact). Growth was fueled by demand in security, professional audiovisual, and data communications, partially offset by softness in residential audiovisual. E-commerce revenue grew 12% year-over-year and exclusive brands revenue increased 7%, both contributing positively to gross margin. ADI is focusing on business transformation actions, including real estate rationalization and OpEx optimization, to drive EBITDA margin expansion in the second half.

Memory Chip Supply and Cost Management

Management addressed concerns regarding memory chip supply, confirming that the supply chain team secured allocation commitments for all of 2026 and is actively working on 2027. They noted that Resideo's products typically use smaller capacity, older generation memory (DDR3/DDR4), which faces less demand pressure than cutting-edge data center chips. Pricing actions are expected to mitigate any non-material cost increases related to memory.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.