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Resideo (REZI) Q4 FY25 earnings call: guidance and Q&A

Earnings call· Dec 2025 (Q4 FY25)· Industrials· Feb 24, 2026

Source: earnings call transcript

Executive summary

Resideo Q4 FY25 — Exceeds Outlook with Strong P&S Growth and ADI Operational Stabilization

Resideo concluded Q4 FY25 exceeding its financial outlook, driven by robust performance in Products & Solutions and the successful stabilization of ADI's operations post-ERP implementation. The company achieved record full-year results in revenue, adjusted EBITDA, and adjusted EPS, positioning it for a planned business separation in H2 2026. Management remains cautiously optimistic about 2026, anticipating continued growth despite macroeconomic uncertainties.

Highlights

5

  • Net revenue of $1.895 billion, up 2% year-over-year, exceeded the high end of the outlook range.

  • Adjusted EBITDA of $226 million, up 21% year-over-year, was above the high end of the outlook range.

  • Products & Solutions (P&S) net revenue grew 6% year-over-year, achieving its 11th consecutive quarter of gross margin expansion.

  • ADI Global Distribution achieved full operational stabilization post-ERP system implementation, with e-commerce revenue growing 3% year-over-year.

  • Full-year 2025 saw record highs in net revenue ($7.5 billion, up 11%), adjusted EBITDA ($833 million, up 20%), and adjusted EPS ($2.68, up 17%).

Concerns

4

  • Adjusted EPS of $0.50 was down from $0.59 in the prior year period, primarily due to higher interest expense of approximately $20 million.

  • ADI Global Distribution reported a small year-over-year decline of 50 basis points in net revenue, mainly due to a decline in the video surveillance category.

  • HVAC channel revenue for P&S was down by a low to mid-single-digit percentage year-over-year.

  • Increased SG&A costs related to ERP implementation and ongoing investments in real estate and digital at ADI offset gross profit gains, leading to a small decline in adjusted EBITDA for the segment.

Guidance & targets

CategoryTargetConfidence
Full-year 2026 Net Revenue
$7.8 billion to $7.9 billion
high materiality
High
Full-year 2026 Adjusted EBITDA
$935 million to $985 million
high materiality
High
Full-year 2026 Diluted Earnings Per Share
$3.00 to $3.20
high materiality
High
Q1 2026 Net Revenue
$1.866 billion to $1.890 billion
medium materiality
High
Q1 2026 Adjusted EBITDA
$193 million to $207 million
medium materiality
High
Q1 2026 Diluted Earnings Per Share
$0.58 to $0.62
medium materiality
High
2026 Cash Provided by Operations (excluding separation-related payments)
Similar to last year
medium materiality
Medium
ADI Growth Rate
Higher than Products & Solutions
medium materiality
Medium
Total Company Gross Margin
Very modest expansion
medium materiality
Medium
Products & Solutions Gross Margin
Greater expansion than ADI
medium materiality
Medium
Total Company R&D Expenses
Similar percentage of revenue to the second half of 2025's run rate
low materiality
Medium
Revenue Linearity
Slightly higher revenue in the second half versus the first half
low materiality
Medium
Business Separation
Anticipated to occur in the second half of 2026
high materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Products & Solutions
Revenue growth driven by volume and price across multiple product families and sales channels, offsetting soft HVAC. Strong retail channel with record high revenue. Electrical distribution channel saw very strong revenue growth and record annual revenue in 2025. OEM channel posted fifth consecutive quarter of YoY revenue growth. Security channel revenue down modestly YoY. HVAC channel revenue down low to mid-single-digit percentage YoY, but better than anticipated with normalizing channel inventory.
Currency impact: ~1% favorableGross margin expansion: 20 bps YoY (11th consecutive quarter)Adjusted EBITDA growth: 6% YoYOrganic net revenue (FY25): 4% YoYGross margin expansion (FY25): 110 bps YoY
Grew 6%6%—41%
ADI Global Distribution
Small year-over-year decline in net revenue and average daily sales. Growth in commercial security and professional audio visual product categories was offset by a decline in video surveillance. Fully operational on new ERP system, leading to increased customer confidence and improved operational metrics. Gross margin expansion driven by favorable price and mix. SG&A costs related to ERP implementation and investments offset gross profit gains.
Average daily sales decline: 50 bps YoYCurrency impact: ~80 bps favorableGross margin expansion: 110 bps YoY (7th consecutive quarter)Adjusted EBITDA: small decline YoYOrganic net revenue (FY25): 3% YoYOrganic average daily sales (FY25): 4% YoYGross margin expansion (FY25): 200 bps YoYE-commerce net revenue growth: 3% YoYE-commerce average daily sales growth: 3% YoYExclusive brands net revenue growth: 2% YoY
Declined 50 bps-0.5%—22.7%

Product announcements

ProductTypeDetails
First Alert SC5 connected smoke and carbon monoxide detectorlaunch
Honeywell Home ElitePRO Thermostatlaunch
Honeywell Home Focus Pro Thermostatlaunch
Control4 X4 operating systemlaunch
Episode business music linelaunch

Deals & partnerships

Snap One Integration of Snap One into ADI Global Distribution

Integration progressing well. Focus on combining under one common platform, real estate/footprint optimization, and leveraging R&D firepower for light commercial NPIs. Despite soft resi AV macro, greater potential seen beyond that.

Risks & headwinds

Global macroeconomic environment uncertainty 2026

Cautious outlook

Geopolitical landscape uncertainty 2026

Cautious outlook

Tariff-related changes 2026

Potential impact

Mitigation:Assumption that USMCA and certain electronic goods exemptions will continue. Resideo will continue to take proactive steps similar to last year to mitigate costs. Agile and prepared to react to potential changes.

U.S. residential housing market growth 2026

Little growth

Mitigation:Focus on broader penetration of product portfolio with residential homebuilders and MRO market strength.

Persistent shortage of housing supply 2026

Persistent

Commercial market GDP growth 2026

Low single-digit

Mitigation:Acknowledging mixed signals across industry verticals and potential negative impacts from tariff/fiscal policy uncertainty and societal dynamics.

HVAC channel softness Q4 FY25, expected to improve by end of Q1 FY26

Low to mid-single-digit percentage decline YoY (Q4 FY25)

Mitigation:Normalization of channel inventory levels with large customers. Increased user demand as weather turned colder helped Q4 performance.

Video surveillance category decline Q4 FY25, returning to growth in near term

Decline in Q4 FY25

Mitigation:Pipeline is refilling nicely for products with multi-month sales cycles. ADI's operational stabilization allows refocus on customer service and taking share.

Higher interest expense Q4 FY25

~$20 million YoY increase

Mitigation:Impacted Q4 EPS, related to incremental debt for Honeywell Indemnification agreement termination.

Increased SG&A costs at ADI Q4 FY25

Offset gross profit gains

Mitigation:Related to completing ERP implementation and ongoing investments in real estate and digital. Expected to normalize as ERP is fully operational.

What to watch in Q1 FY26

ADI Video Surveillance Category Growth

Near term (Q1 FY26)
Current Declined in Q4 FY25
Target Returning to growth

Why it matters

This category's recovery is crucial for ADI to achieve its targeted mid-to-high single-digit revenue growth and overall segment performance.

We anticipate video surveillance returning to growth in the near term as the pipeline is refilling nicely for products that have a multi-month sales cycle.

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

Q&A highlights

Can you provide more detail on the status of HVAC inventory and ERP upgrades, specifically what issues are fully behind you and what might still impact the 2026 outlook?

Jay Geldmacher confirmed the ADI ERP system implementation is fully behind them and operating well. Tom Surran stated that HVAC inventory adjustments by large distributors are mostly complete, with channel inventory levels normalizing, and the market is expected to improve by the end of Q1. Rob Aarnes emphasized ADI's full operational stability post-ERP, allowing the team to refocus on customer service and market share.

“From an ADI perspective, the ERP system is done. It's running. It's up there, all is well. And so that implementation is fully behind us.”

asked by Erik Woodring · answered by Jay Geldmacher

2 min read 5 chapters

Detailed narrative

Q4 FY25 Performance Exceeds Expectations

Resideo concluded 2025 with strong financial results, surpassing its Q4 outlook for net revenue, adjusted EBITDA, and adjusted EPS. The company reported total net revenue of $1.895 billion, a 2% year-over-year increase, and adjusted EBITDA of $226 million, up 21% year-over-year. These results contributed to record annual highs for 2025, with net revenue reaching approximately $7.5 billion (up 11%), adjusted EBITDA $833 million (up 20%), and adjusted EPS $2.68 (up 17%).

Products & Solutions Drives Growth Amidst Market Shifts

The Products & Solutions (P&S) segment delivered robust performance in Q4, with net revenue growing 6% year-over-year, including a 1% favorable currency impact. This growth was fueled by strong activity in retail and electrical distribution channels, alongside stabilization in the OEM market. P&S achieved its 11th consecutive quarter of year-over-year gross margin expansion, reaching 41% in Q4, despite a challenging HVAC market which saw revenue decline by a low to mid-single-digit percentage. New product introductions, such as the First Alert SC5 and Honeywell Home ElitePRO Thermostat, are gaining positive customer reception.

ADI Global Distribution Achieves Operational Stability

ADI Global Distribution reported a slight 50 basis point year-over-year decline in net revenue for Q4, primarily due to a downturn in the video surveillance category. However, the segment successfully completed its ERP system implementation, achieving full operational stabilization. This milestone is expected to restore customer confidence and refocus the team on market share gains. ADI also demonstrated strong gross margin expansion, up 110 basis points to 22.7% in Q4, marking its seventh consecutive quarter of year-over-year growth, driven by favorable price and mix.

Strategic Separation Progresses Towards H2 2026

Resideo's planned business separation into two independent, publicly traded companies is advancing according to schedule, with an anticipated completion in the second half of 2026. Management expressed confidence that this separation will unlock significant shareholder value. The company plans to host Investor Day events prior to the effective separation date to provide detailed insights into the go-forward strategies, financial frameworks, and capital structures for each entity.

Cautious 2026 Outlook Amidst Macroeconomic Uncertainty

For 2026, Resideo provided a cautious financial outlook, projecting total net revenue between $7.8 billion and $7.9 billion and adjusted EBITDA between $935 million and $985 million. The outlook assumes little growth in the U.S. residential housing market, low single-digit growth in repair and remodel, and low single-digit U.S. GDP growth, alongside continued tariff exemptions. The company anticipates ADI's growth rate to be higher than P&S, with modest overall gross margin expansion.

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