REZI earnings call transcript, November 10, 2026

After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Chris Lee, Global Head of Strategic Finance. Please go ahead.

Good afternoon, everyone, and thank you for joining us for Residio's third quarter 2026 earnings call. Enjoy. Joining me on today's call is Tom Saran, Residio's chief executive officer, and Shane Harrison, Residio's chief financial officer. This afternoon's call contains forward-looking statements. Other than historical facts made during this call may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements. As a result of a number of factors, including those described from time to time in Residio's filings with the Securities and Exchange Commission, the company assumes no obligation to update any such forward-looking statements. We identified the principal risks and uncertainties that affect our performance in our annual report on Form 10-K and other SEC filings. In addition, we will discuss non-GAAP and stand-alone supplemental financial measures on today's call. These financial measures, which can sometimes be identified by the use of adjusted or stand-alone in the description of the measure, should be considered in addition to, not as a substitute. before or in isolation from our GAAP results. Stand-alone measures are supplemental financial measures intended to provide historical results before the ADI spin-off on a more comparable

Thank you, Chris.

And thanks to everyone for joining us today. In our first quarter, following the spinoff of ADI, Resideo delivered both top and bottom line third quarter results that were needed. There's a high end of our outlook. This is a testament to the team's continued resilience, strong execution, and commitment to delivering what we promised at our recent investor day. Total revenue. was driven by both volume growth and pricing across most of our sales channels. Our gross margin was 40.4% as customers continued to see the value of our differentiated, non-discretionary products. We agree. We accomplished this in a challenging housing environment. Standalone adjusted EBITDA was $154 million, growing 5% year over year, as our teams demonstrated cost discipline that helped draw by operating leverage in the business. Professional installers are adopting the differentiated products we design and manufacture, resulting in Resideo winning business. Leveraging our scale and experience in a enables us to navigate through the inflationary cost environment, while also creating opportunities to invest in our future growth. Our execution is rooted in a mindset of continuous improvement in all that we do, and we believe that mindset will be the driving force for Residio's continued success. Let's walk through the dynamics for revenue growth in the quarter. In the third quarter, we reported total revenue of $727 million.

Growing 3% year-over-year, which includes an unfavorable impact of approximately 50 basis points from foreign currency exchange. Let me unpack the growth rate further. We achieved 6% or 40%. $31 million of growth across all sales. We consider these non-OEM security sales channels a foundation that underlie... ...our future growth and earnings potential. Let's walk through the key drivers for each of our core sales channels. Performance in the retail channel was exceptional. With revenue growth of 15%... year-over-year, driven by both volume and pricing power, volumes were robust for our first Alert and Honeywell Home branded air and safety products, as evidenced by point-of-sale data across many of our key accounts. Demand for our newer products was enthusiastic, including our new, highly-rated combo smoke and carbon monoxide detector, purpose-built for easy installation while touting differentiated features. And meeting the latest safety certification standards. Retail pricing strength reflected more efficient promotional spending, price increases, and demand driven toward higher margin products. Performance in the OEM combustion channel was also strong, reporting 9% revenue growth year-over-year against very strong results last year. Growth continues to be driven primarily by steady demand for higher-priced products. Graphic view, EMEA performance was a notable call-out for the OEM combustion channel due to a seasonal build-in advance of the upcoming heating season. Our distribution channel revenue was up.

3% year-over-year, comprised of our three primary professional distribution channels, electrical, HVAC, and security. Let me start with the electrical channel. The electrical distribution channel achieved record volume. Resulting in double-digit percentage revenue growth year-over-year. We believe our position in the electrical channel has improved with several competitive conversions. Demand for new and existing BRK. and Honeywell Home-branded air and safety products was robust despite the current soft housing market. We saw demand across all our electrical sub-segments, including single-family and multifamily homes. Manufactured housing and MRM. Our content per new residential built home continues to be nearly $400. The HVAC distribution channel grew revenue by a mid- single digit percentage year over year, driven by both volume and price. The HVAC channel also achieves sequential revenue growth. Product demand was healthy from both our Americas and EMEA HVAC customers, especially for our newer higher value products, such as dehumidifiers and connected thermostats. Our HVAC channel inventory balance remains stable over the last several months. Consistent with the broader residential HVAC environment. Complementing the product demand in our HVAC channel was a solid uptick in our pro-IQ service subscriptions. These services, which are not yet material to our... ...for financial results include software tools that professionals are using to improve the speed and quality of their installations, build homeowner loyalty, and generate new business. Today's announcement of the addition of our AI-powered intelligence layer within pro-IQ...

...services is designed to proactively predict HVAC problems, demonstrating the continued value we are providing to professionals through our differentiated hardware and software intelligence. Revenue from the general security... ...distribution channel was flat year-over-year, in line with a continued, typically highly correlated with...

In the fourth quarter, we will announce the launch of a series... ...of new security products that are integrated with our next generation Fordiq software platform. We look forward to building momentum with our professional community at our upcoming Connect 2026 User Conference, which is over... ...subscribed due to record demand. Moving to OEM security, this channel reported $33 million of third quarter revenue, down $17 million year-over-year, performing in line with the reduced volume expectations... ...to be shared last quarter. As previously discussed, we consider OEM security to be non-core to Residium. We have shifted our strategic focus on security products, including investments and operating... ...away from OEM security and towards our branded products for two key reasons. First, when we act as an outside design manufacturer for OEM security customers, the products we design and make... ...for them are used to compete against ourselves in the general market. Second, OEM security sales generate less margin than our branded products. We believe selling a branded product in the general... ...security marketplace where we can provide innovation and drive value is healthier for Resideo over the long term. I would like to reinforce how we are executing our strategy as a standalone company and highlight... ...a few tangible examples of the progress we are making. Our strategy is built around a powerful self-reinforcing cycle. Investing in innovation to drive revenue growth. Expanding margins through differentiated product design.

Continuously improving operational efficiency. And reinvesting the benefits back into our innovation engine. And importantly, we are already seeing this strategy come to life. On innovation, our elite... Pro thermostats are a great example of how differentiated new products can drive growth. With annualized revenue growth of approximately 50% since their introduction to the market. On margin expansion, our new combo smoking... carbon monoxide detector, which I spoke of earlier, is built on a redesigned common platform that improves product margins while delivering innovative features to our customers. And on operational excellence. We are taking deliberate actions to simplify our business and improve efficiency, including SKU rationalization and the planned exit of three underutilized manufacturing facilities, including the announcement in the third quarter of the closure of. Our manufacturing operations in Scotland. These actions are designed to reduce our cost structure and improve utilization across our manufacturing footprint. Each of these initiatives reinforces the others. Innovation drives demand and creates opportunities for higher margins. Operational improvements further expand profitability and generate resources to reinvest in our next generation of products. This is the flywheel we are building at Resideo. Innovation driving growth, growth and operational excellence, expanding profitability, and those profits fueling the next wave of innovation. We believe this self-reinforcing

cycle will be a powerful driver of sustainable growth, margin expansion, and long-term shareholder value. With that, let me turn the call over to Shane.

Thanks, Tom.

We will now begin the question and answer session. Please limit yourself to one question and one follow up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star. star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster.

The next question is from the line of Alexander Virgo of Evercore ISI. Your line is now open. Please go ahead.

The next question is from the line of Erin Kimson of Citizens. Your line is open. Please go ahead.

The next question is from the line of.

I agree.

Thank you very much.

I just wanted to follow up on the tariff refunds. Did those come as a surprise? And is there any other tariff refunds factored in? forward guidance? I mean, or were you expecting, I guess, this kind of net 4 million in the third quarter? Thanks. So, hey, Shane. Nice to meet you. To answer your question, the short answer is we file for these refunds pretty far ahead of time, but the visibility of when you get the money, and if you're going to get the money, sometimes can be a little all over the place. So, in this quarter, we did end up getting... We had six million, and we ended up paying the couple out the door, so it was a net four. So, that's the answer there, but going forward to Q4, we have filed for more tariff refunds, but the visibility of seeing and getting... ...is very, very murky. So, in the guide that we just gave, we were assuming no tariff refunds, or very little tariff refunds, and probably a little bit coming out the door, but not anywhere like it used to be in the past.

Okay, thank you. And then, when we think about MPI, is there a way you can maybe help us understand how well they're doing right now in the market? I know you had some introduced a while ago. Maybe how those are performing. How do we think about their contribution, either maybe this quarter or next quarter, versus the guide and versus the other products that are not? Thanks. Okay, Ian. So how do we feel about MPI and how can you be aware of how they're performing? Hopefully we'll keep you posted and we will do it. We'll do a good job of letting you know when significant product, new product releases have occurred. One of the things, you know, I just talked about 40. Having that platform out there is really important in that a lot of things were kind of bottled up. A little bit behind it because we had to have the new platform in the market. And now we can start issuing out more and more products on top of that. There are products, you know, the reality is I'm telling you. about how certain ones did, but of the products we've released and the new products, we've been extremely pleased with how they've performed in the market. And sometimes, you know, we introduce products clearly for increasing revenue, but we also. Introduce products, we've got to think about how they improve our margins. So that's a big driver of what they do. There's also reasons to, you know, sometimes shore up a strategic position on, you know, making sure that we don't have a.

And also making sure that our products have the depth that really is unmatched by our competition. Because when you look at our products, it's not only the headline product, it's everything it attaches to so the pro can get the job done when they're at the house. So we want to make sure, you know, some of these smaller products we introduce, you say, well, why did they do that? It's not going to move. It's that solution for the professional. And that's why he has trusted us. Because we get that. So we're clearly going to introduce MPI to drive revenue growth. We're going to introduce products that improve our cost profile. We're going to introduce products that have strategic importance and basically make sure the pro has.

Okay.

Thank you very much.

The next question is from the line of Tomosano of JP Morgan.

The next question is from the line of Jay Goldberg of Seaport. Your line is open. Please go ahead.

This concludes today's call.

Thank you for attending.

You may now disconnect.