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Resideo (REZI) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Industrials· Aug 12, 2026

Source: earnings call transcript

Executive summary

Resideo Q2 FY26 — Strong Q2 Performance Exceeds Outlook, ADI Spin-off Completed, Stand-alone Outlook Initiated

Resideo delivered strong Q2 FY26 results, exceeding outlook across key metrics, driven by robust performance in its Products & Solutions segment and the successful spin-off of ADI Global Distribution. The company initiated its stand-alone outlook for the remainder of FY26, focusing on its pure-play building technologies mission and leveraging new product introductions and operational optimizations, despite anticipated headwinds in the OEM security channel and inflationary input costs.

Highlights

5

  • Total revenue grew 2% year-over-year to just under $2 billion, a new quarterly record.

  • Total adjusted EBITDA grew 19% year-over-year to $249 million, a new quarterly record.

  • Total adjusted earnings per share grew 26% year-over-year to $0.83.

  • Products & Solutions (P&S) segment revenue grew 4% year-over-year, with its 13th consecutive quarter of gross margin expansion.

  • P&S gross margin percentage was 43.6%, up 70 basis points year-over-year and 100 basis points sequentially.

Concerns

3

  • Operating cash flow decreased year-over-year by $52 million, driven primarily by $45 million in payments for nonrecurring business separation activities and $20 million higher cash interest paid.

  • OEM security channel revenue is expected to be $40 million to $50 million less in the second half of 2026 versus the prior year due to reduced volumes with a large customer.

  • A slight headwind to gross margin is anticipated in the second half of 2026 due to higher input costs (memory, metals, PCBs, semiconductors, shipping) increasing faster than expected.

Guidance & targets

CategoryTargetConfidence
Full-year 2026 Stand-alone Revenue
$2.9 billion to $2.95 billion
high materiality
High
Full-year 2026 Stand-alone Adjusted EBITDA
$605 million to $625 million
high materiality
High
Q3 2026 Stand-alone Revenue
$705 million to $730 million
medium materiality
High
Q3 2026 Stand-alone Adjusted EBITDA
$145 million to $155 million
medium materiality
High
Full-year 2026 Sales to ADI
approximately $175 million
medium materiality
High
OEM Security Channel Revenue Impact
$40 million to $50 million less
medium materiality
High
Corporate Costs Allocated to Stand-alone Resideo
approximately $80 million
low materiality
High
Material Tariff Refunds
no material tariff refunds
low materiality
High
Material Tariff Cost Increases
no material cost increases
low materiality
High
Revenue Growth Across Channels (excluding OEM security)
continued demand for our products and year-over-year revenue growth
medium materiality
High
Term Loan B Repayment
approximately $200 million
medium materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Products & Solutions
Favorable 35 basis point impact from currency. Revenue grew across substantially all sales channels and product families, driven primarily by volume from customer demand. Retail channel saw strong YoY revenue growth from higher-value products (smoke/CO detectors, new thermostats). OEM combustion channel (energy category) posted 7th consecutive quarter of YoY growth, driven by higher-priced products in EMEA. HVAC distribution channel returned to YoY growth, driven by volume and adoption of Honeywell Home Elite Pro thermostat, dehumidification, and water filtration products. Electrical distribution channel had YoY revenue growth driven by volume, demand for BRK branded nonconnected safety products. Security distribution channel flat YoY due to soft market for security installs. OEM security sales down slightly YoY due to reduced volumes with a large OEM security customer, in line with strategy to focus on higher-margin branded business. Gross margin expansion driven by volume increases, favorable manufacturing and supply chain variances, and tariff refunds, partially offset by product sales mix. Incurred inflationary input costs, partially offset by price actions. Operating expenses increased due to higher legal settlement costs.
13th consecutive quarter of year-over-year gross margin expansionR&D as % of total segmented revenue: approximately 5%Gross margin percentage change YoY: +70 bpsGross margin percentage change sequentially: +100 bpsAdjusted EBITDA growth YoY: 6%
4% year-over-year growth4%—Gross margin percentage was 43.6%

Product announcements

ProductTypeDetails
New Smoke and CO Detector Platformlaunch
New Video Surveillance and Intrusion Security Productslaunch
Fortic Platformroadmap
Honeywell Home Elite Proupdate
New Dehumidification and Water Filtration Productsupdate

Deals & partnerships

ADI Global Distribution Spin-off of the ADI Global Distribution business from Resideo.

The spin-off was completed on August 3, 2026. Starting in Q3 FY26, ADI will be classified as discontinued operations for all periods. ADI will remain an important partner to Resideo.

Capital programs

Tianjin facility closure completed

Benefit:optimize operations, reduce product costs

Part of a long-term plan to review manufacturing footprint and optimize costs.

Latrobe facility closure completed

Benefit:optimize operations, reduce product costs

Part of a long-term plan to review manufacturing footprint and optimize costs.

Risks & headwinds

OEM security channel weakness H2 2026

$40 million to $50 million less revenue in the second half of 2026 versus the same period in the prior year

Mitigation:Focus on higher-margin branded business; impact already baked into medium-term financial targets. The relationship with the customer is healthy, but they are pursuing vertical integration.

Inflationary input costs H2 2026

slight headwind to gross margin

Mitigation:Proactively instituted price increases during Q2; cost reduction efforts. Management believes these are temporary and will unwind as capacity becomes available.

Soft residential macroeconomic environment ongoing

persistently soft; not seeing much change in sales of existing homes or improvement in new home construction levels

Mitigation:Company aims to out-execute the market through new product introductions and operational efficiency.

Higher legal settlement costs Q2 FY26

higher legal settlement costs

What to watch in Q3 FY26

Stand-alone Adjusted EPS and Cash from Operations Outlook

Q3 earnings call
Current not provided this quarter
Target outlook to be provided

Why it matters

These are key financial metrics for stand-alone Resideo, and their reintroduction will provide a more complete financial picture post-spin.

During this short transition period, the stand-alone outlook we are providing is for revenue and adjusted EBITDA only. We intend to provide our outlook for adjusted earnings per share and cash from operations upon completion of certain activity including the post-closing cash adjustment under the separation agreement with ADI that is to be calculated in the coming weeks. We intend to once again provide outlook on these metrics starting with our third quarter earnings call.

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

Q&A highlights

Analyst noted a perceived downgrade in P&S revenue growth guidance from 5% YoY (last quarter) to 2% YoY (new stand-alone guide) for FY26, despite Q2 beat. Asked for clarification on the math and reasons for the change.

Tom Surran clarified the analyst's math was 'a little bit off,' stating the projected P&S growth is closer to 3% for the year, which is in line with expectations. He attributed any change to the OEM security issue that emerged mid-year. Chris Lee added that Q2 P&S outperformed expectations and growth is still anticipated in H2 across most channels, excluding OEM security.

“So the math is a little bit off. So I'd have to go through exactly how you did your calculations. But no, the assumption what we said was that the things with the 2 segments would have similar growth for the year. We did not specify that it was P&S coming up in its revenue growth versus ADI coming down. But the projection that we have for P&S, A, the growth is higher than the number of 2% that you've stated. So overall for the year, it's almost 3%.”

asked by Erik Woodring · answered by Thomas Surran

2 min read 6 chapters

Detailed narrative

ADI Spin-off and Financial Reporting Transition

Resideo successfully completed the spin-off of ADI Global Distribution on August 3, 2026. For Q2 FY26, results are presented on a consolidated basis, but starting Q3 FY26, ADI will be classified as discontinued operations. The company has provided stand-alone results for Products & Solutions (P&S), including adjustments for corporate costs and sales to ADI as an external customer, to reflect the new structure and ensure comparability.

Leadership Changes

Tom Surran assumed the CEO role, succeeding Jay Geldmacher, who led the company for six years through significant acquisitions and market dynamics. Shane Harrison was announced as the new CFO, joining on September 1. Mr. Harrison brings prior experience working with Mr. Surran at FLIR, and is expected to contribute strong financial and strategic capabilities to Resideo.

Products & Solutions Segment Performance

The P&S segment demonstrated strong operational execution, achieving 4% year-over-year revenue growth and its 13th consecutive quarter of gross margin expansion, reaching 43.6%. This growth was primarily driven by increased volumes across most sales channels and product families, including retail, OEM combustion, HVAC distribution, and electrical distribution, despite soft housing trends and inflationary input costs.

Market Dynamics and Headwinds

While most channels showed growth, the OEM security channel is expected to face significant headwinds, with an anticipated $40 million to $50 million reduction in H2 2026 revenue due to a large customer's strategic shift towards vertical integration. Input costs for memory, metals, PCBs, semiconductors, and shipping are increasing faster than expected, creating a slight gross margin headwind in H2, partially offset by proactive price actions.

New Product Introductions and Strategy

Resideo is focused on its mission as a pure-play building technologies company, with significant market momentum from new product introductions. Key launches in H2 2026 include a new smoke and CO detector platform and new video surveillance and intrusion security products, which are expected to fuel near- and medium-term financial targets and drive profitable growth. The company is also rolling out its Fortic platform across products.

Operational Optimization Initiatives

The company is actively reviewing and optimizing its manufacturing footprint and operations worldwide to reduce product costs and improve margins. This includes actions like the previously announced closures of the Tianjin and Latrobe facilities and optimizing product manufacturing. These efforts are part of a long-term plan to materially impact the company's efficiency over the next five years, aiming for improved gross and operating margins.

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