Resideo Technologies Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 6, 2025
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Operator

Good afternoon. My name is Eric, and I will be your conference operator today. Thank you. I would like to hand the conference over to your host today, Chris Li, Global Head of Strategic Finance. You may begin your conference.

Christopher T. Lee
Christopher T. Lee
Global Head of Investor Relations at Resideo

Thank you, Eric. Good afternoon, everyone, and thank you for joining us for Resideo's first quarter twenty twenty five earnings call. On today's call will be Jay Gelmacher, Resideo's Chief Executive Officer Mike Harlett, our Chief Financial Officer Rob Arnes, President of Resideo's ADI Global Distribution Business and Tom Saran, President of Resideo's Products and Solutions Business. We would like to remind you that this afternoon's call contains forward looking statements. 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.

Christopher T. Lee
Christopher T. Lee
Global Head of Investor Relations at Resideo

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 Resideo's filings with the Securities and Exchange Commission. The company assumes no obligation to update any such forward looking statements. We identify the principal risks and uncertainties that affect our performance in our annual report on Form 10 ks and other SEC filings. In addition, we will discuss non GAAP financial measures on today's call. These non GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from our GAAP results.

Christopher T. Lee
Christopher T. Lee
Global Head of Investor Relations at Resideo

A reconciliation of GAAP to non GAAP financial measures is included in our earnings press release and earnings presentation, which are both accessible on the Investor Relations page of our website at investor.resideo.com. Unless stated otherwise, all numbers and results discussed on today's call other than revenue are on a non GAAP basis. With that, I will turn the call over to Jay.

Jay Geldmacher
Jay Geldmacher
President & CEO at Resideo

Thank you, Chris, and thanks to everyone for joining us today. On today's call, I will briefly cover Resideo's quarterly performance and then share our perspectives on tariffs and how Resideo is executing through this unpredictable macroeconomic environment before handing off the call to Tom, Rob and Mike. As a result of our team's continued execution, Resideo was at or above the high end of the range for all the metrics we provided for our quarterly financial outlook. Total net revenue of approximately $1,800,000,000 which includes the impact of the SnapOne acquisition, grew 19% year over year. Total gross margin was 28.9%, up 200 basis points year over year.

Jay Geldmacher
Jay Geldmacher
President & CEO at Resideo

Total adjusted EBITDA grew 23% year over year to 168,000,000 Total adjusted earnings per share grew 34% year over year to $0.63 I am pleased with our strong first quarter results that were supported by healthy operating fundamentals. We achieved 6% organic revenue growth year over year at our Products and Solutions business segment. At our ADI business segment, we achieved 4% organic revenue growth year over year despite two less selling days in the quarter versus the same period last year and 7% organic average daily sales. Gross margin expansion and EBITDA generation were underpinned by growing operating income dollars year over year. Demand for our new Honeywell Home Focus Pro thermostats and First Alert Vista H series security products continues to be strong, and the velocity around new product introduction is accelerating for both products and solutions and ADI.

Jay Geldmacher
Jay Geldmacher
President & CEO at Resideo

Moving on to tariffs. We have all seen the shifts in policy to date. In this fluid environment, Resideo remains agile and we are well prepared to react to any new development. Based on what we know today about tariff policy, we have taken actions in the first and second quarters that have two goals. First, to essentially mitigate the cost impact of any tariffs across both products and solutions and ADI and second, to be well positioned relative to our competition at the current time.

Jay Geldmacher
Jay Geldmacher
President & CEO at Resideo

Let me walk through each business segment, the potential exposure and the key mitigation actions. In the Products and Solutions business segment, we benefit from having a global manufacturing footprint where regional demands are generally sourced in region. As shown on Page nine of our earnings presentation, for goods sold in The United States, about 90% are produced in our Mexico facilities or sourced from Mexican suppliers. Of the goods sourced from Mexico, about 98% are USMCA compliant and not currently subject to tariffs. For those goods that are not manufactured or sourced from USMCA compliant sources, we are evaluating bringing production into our Mexico facilities or sourcing from other Mexico manufacturers.

Jay Geldmacher
Jay Geldmacher
President & CEO at Resideo

It is worth noting that we have a variety of manufacturing facilities globally and are constantly evaluating new sites, both of which gives us optionality as we continue this assessment. We have also communicated a phased price increase to our customers intended to offset the cost impact of the tariffs. In the ADI business segment, determining the tariff impact is more nuanced than Products and Solutions. As shown on Page 10 of our earnings presentation, ADI is exposed to more significant China tariff given its purchasing profile, and we cannot predict supplier actions around price. As such, we have taken a conservative approach and estimate a maximum potential impact before any mitigations to be between 2025% of ADI's total cost of goods sold.

Jay Geldmacher
Jay Geldmacher
President & CEO at Resideo

However, this will be offset by mitigation actions that include the following: ADI has communicated a phased price increase to our customers to offset the tariff cost impact. We have also made strategic inventory purchases and taken commercial actions with our suppliers. In addition to the evolving tariff landscape, we are closely monitoring data points around customer behavior. Customer demand in the first quarter was healthy across both businesses and we saw minimal signs of customer hesitancy or order cancellation. We saw limited indications of customers buying ahead of anticipated tariff related price increases. These data points to date are positive indicators on our current customer demand. As a result of our strong first quarter and the tariff mitigation actions we are taking, Resideo is maintaining its 2025 outlook. We believe our strong execution and proactive approach enables Resideo to manage through the uncertainties associated with this highly dynamic environment for the rest of the year. Mike will speak more to this in his comments. Let me now hand the call over to Tom.

Thomas Surran
Thomas Surran
President of Products & Solutions at Resideo

Thanks, Jay.

Thomas Surran
Thomas Surran
President of Products & Solutions at Resideo

The Products and Solutions team delivered another quarter of strong operational execution, resulting in year over year organic growth and the eighth consecutive quarter of year over year gross margin expansion. Products and Solutions reported revenue growth of 5% year over year and 6% organic growth, which excludes a 1% unfavorable impact from currency. Revenue grew across substantially all our sales channels due to both volume and mix, driven by customer demand for our new products and from price realization. Now let me walk through each of our primary channels. The HVAC channel achieved volume, mix and price growth in the quarter, driven primarily by continued demand for our recently introduced connected and non connected Honeywell Home FocusPro thermostats.

Thomas Surran
Thomas Surran
President of Products & Solutions at Resideo

A greater proportion of overall FocusPro sales were from connected thermostats that were sold to a broader set of customers during the quarter. The electrical distribution channel was again strong in the first quarter. Revenues associated with our BRK branded safety products, which are sold to professionals, reached a record high, driven primarily by strong volumes and mix. We continue to see an increase in content per new home, and we see rising adoption with a broader set of customers beyond homebuilders, such as property managers. The retail channel continued to perform well in the first quarter, driven primarily by strong point of sales volumes.

Thomas Surran
Thomas Surran
President of Products & Solutions at Resideo

Revenue from the First Alert safety products grew in the high single digits year over year. The Focus Pro Thermostat was launched to retail during the quarter, and sales related to the Focus Pro are expected to be a bigger contributor to the retail channel in the future. The OEM channel posted a second consecutive quarter of year over year revenue growth, driven primarily by the sale of higher priced and more profitable units amidst an improving energy equipment market in both The Americas and EMEA. Revenue in the security channel was down year over year. However, the rate of year over year decline is abating, as evidenced by security sales with one of our largest customers that were modestly up year over year.

Thomas Surran
Thomas Surran
President of Products & Solutions at Resideo

Early sales of the new Vista series that were sold in the quarter are trending positively. Gross margin for the quarter was 41.4%, up 190 basis points year over year. This is the eighth consecutive quarter of year over year gross margin expansion, driven by continued efficient utilization of our factories supported by a supply chain that we look to continuously improve and from contributions from the sale of new products. We did absorb an immaterial amount of tariff related expense for products prior to the implementation of the USMCA tariff preference treatment. As Jay stated, approximately 98% of product and solutions goods sourced from Mexico and sold in The U.

Thomas Surran
Thomas Surran
President of Products & Solutions at Resideo

S. Are USMCA compliant, which are currently exempt from tariffs. We are excited to continue the cadence of new product introductions. In the quarter, we introduced the First Alert Smart Smoke and Carbon Monoxide Alarm in partnership with Google Nest. Our new connected alarm is compatible with Google Home app and was designed to seamlessly replace Google's expiring DeskProtect alarms.

Thomas Surran
Thomas Surran
President of Products & Solutions at Resideo

Google Nest passed the baton to Resideo to lead the future of smart home safety through continued innovation. With feedback from our professional customers, we previewed our most advanced cameras and video analytics ever. The Burt Alert CX4 camera series features ultra high definition cameras offering four k sharpness and intelligent viewing capabilities. These cameras will target both the high end residential as well as the small and medium sized business video surveillance market. We have a number of market relevant products in the air and comfort, security and water categories scheduled for launch later in 2025.

Thomas Surran
Thomas Surran
President of Products & Solutions at Resideo

We are excited for our customers to realize the benefits and value of our forthcoming products whilst building upon the demand momentum seen for our new product releases in the last six months. I am pleased with the go forward direction of Products and Solutions, an accelerating cadence of new products alongside organic revenue growth and another consecutive quarter of year over year gross margin expansion. With that, let's turn the call over to Rob.

Rob Aarnes
Rob Aarnes
President, ADI Global Distribution at Resideo

Thanks, Tom. The ADI team achieved 29% year over year growth in reported net revenue in the first quarter. And after excluding the impact of the SnapOne acquisition and an immaterial impact from currency, organic net revenue growth was 4% year over year despite two less selling days this quarter versus the same period last quarter. Organic average daily sales grew 7% year over year. Organic net revenue growth was driven by strength across commercial product categories, continuing contributions from large accounts and the digital channel.

Rob Aarnes
Rob Aarnes
President, ADI Global Distribution at Resideo

These results were achieved despite an increased number of store closures due to weather in January and February. Strong customer demand in the latter half of the quarter offset both the lower number of selling days and increased closure days. From a product category perspective, we saw solid growth year over year in multiple categories, with notable contributions from the commercial security, professional audiovideo and networking product categories, partially offset by a low single digit percentage decline in the residential audiovideo category due primarily to a soft U. S. Residential market.

Rob Aarnes
Rob Aarnes
President, ADI Global Distribution at Resideo

Organic e commerce net revenue grew 15% year over year, achieving another quarter of strong revenue performance and a new record in run rate daily sales average. E commerce continues to be structurally accretive to the total ADI gross margin and was a bigger contributor to first quarter's total gross profit dollars than last quarter. We continue to invest in providing a leading omnichannel experience that makes the buying experience easier and more streamlined for our customers. Exclusive Brands continues to be a strategic priority for the business. Exclusive Brands organic net revenue increased 26% year over year while also generating a healthy amount of gross margin dollars in the quarter.

Rob Aarnes
Rob Aarnes
President, ADI Global Distribution at Resideo

The strategic benefit of the SnapOne acquisition is evident as the combined team launched almost 100 new products in the quarter. The team also continues to earn industry recognition for our exclusive brands product portfolio. At the Integrated Systems Europe trade show, the team took home nine Best of Show awards with product winners in exclusive brands, including Episode and Triad speakers, Luma cameras and Arachnus switches. The team is also working on some exciting new product launches for the second including the award winning Luxe by Control4, our fourth generation lighting control solution, and the new Control4X4 interface for smart home systems. The integration of SnapOne continues to progress nicely, and we are ahead of our one year we are ahead of our year two synergy goals.

Rob Aarnes
Rob Aarnes
President, ADI Global Distribution at Resideo

Store and distribution center consolidations, which can be complex, are tracking well against plan, and we are gaining cross sales momentum. ADI reported 21.6 gross margin in the first quarter, up three sixty basis points year over year. The execution demonstrated by the entire team directly contributed to the significant year over year gross margin expansion. We see additional opportunities to expand gross margins further with margin accretive category mix shifts both domestically and internationally. I've said in the past that our customer first ethos is integral to how we execute operationally.

Rob Aarnes
Rob Aarnes
President, ADI Global Distribution at Resideo

This is especially true in the current macroeconomic environment where delivering an optimized customer experience breeds loyalty and profitable customer behavior. As Jay mentioned, we have strong momentum to date. We intend to build upon this momentum generated by our focused execution to continue driving organic revenue growth and margin expansion through 2025 and beyond. Let's now turn the call over to Mike to discuss our first quarter's financial results and 2025 outlook.

Michael Carlet
Michael Carlet
Executive VP & Chief Financial Officer at Resideo

Thanks, Rob, and good afternoon, everyone. Let's get straight into the quarterly results, starting with revenue. First quarter total company net revenue was $1,770,000,000 up 19% year over year and up 5% on an organic basis, excluding the impact of the Snap on acquisition and a 1% unfavorable impact from currency. Reported total company net revenue was at the high end of our outlook range. Both Tom and Rob spoke earlier about the drivers of organic net revenue growth in their respective businesses.

Michael Carlet
Michael Carlet
Executive VP & Chief Financial Officer at Resideo

Total company gross margin in the quarter was 28.9, up 200 basis points year over year. The increase was primarily driven by three items: structural operating efficiencies that we continue to realize in Products and Solutions the contributions from new product sales at Products and Solutions and the contributions from the more margin accretive activities at ADI. First quarter total company adjusted earnings per share was $0.63 up from $0.47 from the same period in the prior year. In the quarter, we recorded a larger than normal non cash charge related to the timing of Honeywell submissions under the reimbursement agreement, which impacted reported GAAP net income and earnings per share, but not our annual cash payments to Honeywell. Total company adjusted EBITDA was $168,000,000 in the quarter, up 23% year over year and toward the high end of our outlook range.

Michael Carlet
Michael Carlet
Executive VP & Chief Financial Officer at Resideo

The primary driver of the increase was the positive contribution from SnapOne, partially offset by investments being made in both business segments. Cash used by operating activities was $65,000,000 in line with normal seasonality. Use of cash was primarily related to an increase in accounts receivable due to higher sales and cash outflows for accounts payable, including some early payments to receive supplier discounts. We continue to track toward our outlook of $375,000,000 of cash provided by operating activities in 2025. Now before I provide our financial outlook for the second quarter of twenty twenty five and the full year, let me walk you through some of our market perspectives and assumptions that are incremental to those shared with you last quarter when we first set our 2025 outlook.

Michael Carlet
Michael Carlet
Executive VP & Chief Financial Officer at Resideo

Starting with our market perspectives. We continue to have a relatively cautious market outlook, and we have not substantially changed our view on the macroeconomic environment shared with you on the February 2025 call, despite the increased unpredictability in the market. As Jay noted, we assume the USMCA tariff exemption for products manufactured in Mexico will continue. We have included all tariffs currently in force as of today in our outlook. This includes tariffs on products and solutions and ADI exclusive brand products primarily imported from China.

Michael Carlet
Michael Carlet
Executive VP & Chief Financial Officer at Resideo

For ADI third party products we distribute, we have only included impacts where our suppliers have notified us of a price increase. We have not made any assumptions for changes to customer behavior nor associated product volumes resulting from higher prices that likely will be more prominent in the market. And we make no assumptions for foreign currency fluctuations. Our 2025 financial outlook was based on 12/31/2024 currency rates. Now on our outlook.

Michael Carlet
Michael Carlet
Executive VP & Chief Financial Officer at Resideo

We are reaffirming our 2025 full year outlook. We are not tightening our outlook ranges because of the uncertain and highly dynamic environment we are currently operating in. We are planning to take a phased approach to price increases, with AGI progressively raising prices on tariff impacting exclusive brands products starting in the second quarter. Products and Solutions plans to increase prices on non USMCA covered products starting in the second half of twenty twenty five. As a result of these price increases at both ADI and Products and Solutions, we could see upside to the top line.

Michael Carlet
Michael Carlet
Executive VP & Chief Financial Officer at Resideo

Our goal with the price increases and other tariff mitigation actions is to essentially offset the tariff costs and maintain gross profit dollars. We are initiating an outlook for the second quarter of twenty twenty five as follows: total company net revenue to be in the range of 1,805,000,000.000 to $1,855,000,000 total company adjusted EBITDA to be in the range of 175,000,000 to 195,000,000 and total company fully diluted adjusted earnings per share to be in the range of $0.51 to $0.61 Our earnings presentation includes our outlook ranges along with key modeling assumptions for 2025, which can be found on our Investor Relations website. Let's now open the call up for questions. Operator?

Operator

Your first question comes from the line of Ian Zaffino with Oppenheimer. Go ahead.

Ian Zaffino
Managing Director at Oppenheimer & Co. Inc.

Hi, Craig. Thank you very much. Good quarter. I wanted to kind of zero in on pricing a little bit. You know, Rob, help me understand pricing in ADI.

Ian Zaffino
Managing Director at Oppenheimer & Co. Inc.

And what I mean by that is this environment kind of one of your classic inflationary environments where distributors tend to do well and you continue to pick up price, which will then help margins, help profitability. So so is that the way we should think about, what we're seeing as far as tariff related increases? And then maybe, Tom, I'll I'll kinda ask you this as well on the P and S side. I I know it's a different story. But, you know, as you look to get price, do you anticipate any type of demand impact?

Ian Zaffino
Managing Director at Oppenheimer & Co. Inc.

Or are you seeing kind of any sensitivity to your ability to maybe push through some of that pricing?

Rob Aarnes
Rob Aarnes
President, ADI Global Distribution at Resideo

Yes.

Rob Aarnes
Rob Aarnes
President, ADI Global Distribution at Resideo

I'll go first. Great question, Ian. That is probably the question of the day. I would say similar to what we saw in high inflationary environments. I mean, as you heard in the commentary or the opening remarks, we've taken the price increases that we have been given today from our suppliers, and we have passed those through in a phased approach.

Rob Aarnes
Rob Aarnes
President, ADI Global Distribution at Resideo

We've also taken another other a number of other commercial actions with our suppliers to, first and foremost, to be able to completely mitigate all tariff related impacts both on our third party business as well as our exclusive brands. So we feel that we're in good position today based on what we know. At the same time, we are being very prudent, if not thoughtful, based on the complexity of the environment, you know, multiple variables in play, and have built those, you know, built those impacts into our guidance going forward.

Thomas Surran
Thomas Surran
President of Products & Solutions at Resideo

Yeah. Ian, you all set, Rob?

Ian Zaffino
Managing Director at Oppenheimer & Co. Inc.

Yeah. Okay.

Thomas Surran
Thomas Surran
President of Products & Solutions at Resideo

On the P and S side, let's also just kinda go back to scale. Less than 10% of the products coming into America would be subject to tariff overall. And of those, the majority or a significant portion of them are would require very small price increases. We've been very proactive in reaching out to our customers and explaining what we intended to do with our pricing throughout this whole process. And the magnitude of the price increases for everything excluding China is such that they understand and I do not expect it to have a material impact.

Thomas Surran
Thomas Surran
President of Products & Solutions at Resideo

And you're talking about an almost immaterial level of quantity of products and even revenue that would be impacted by this. Now in terms of the products from China, those will require a larger price increase. But again, that's a sub portion of that small portion of the sub 10% that would actually be impacted there. And the largest customer that's impacted by that, we've had communication, and they do not expect at this time to have any change in their demand as a result. So for us, we do not expect any material change in our demand.

Ian Zaffino
Managing Director at Oppenheimer & Co. Inc.

Okay. Thanks, guys. Then from the beginning. Okay. And then if I could tie it up to, you know, the the the top level, Michael, maybe comment on kind of what we should expect from a pricing mix volume perspective for the consolidated business. Thanks.

Michael Carlet
Michael Carlet
Executive VP & Chief Financial Officer at Resideo

Yes. I think as we talked about and we're not going to specifically guide to what the price impacts will be. We know the phased approach as they're impacting us. We're holding our guidance in light of the uncertainty, so we feel really good about that. As we mentioned, there could be some upside given the timing of those price increases and any impacts on demand.

Michael Carlet
Michael Carlet
Executive VP & Chief Financial Officer at Resideo

So as we go forward, we would expect there's certainly to be some price action that's going to increase the top line. We think it's relatively small as we sit here today, as Tom was just talking, FP and S, a little bit more substantial at ADI. It will be phased throughout the rest of the year.

Ian Zaffino
Managing Director at Oppenheimer & Co. Inc.

Okay. Thanks for all the color guys. Good quarter again.

Michael Carlet
Michael Carlet
Executive VP & Chief Financial Officer at Resideo

Thank you.

Operator

Your next question comes from the line of Woodring with Morgan Stanley. Your line is open.

Erik Woodring
Erik Woodring
Analyst at Morgan Stanley

Great. Thanks so much for taking my questions guys and echo the comments, a really nice quarter. Jay, can we just go back and maybe double click on the comments you made about really no buying ahead, no customer hesitancy. I just want to make sure I understand, is that a March quarter comment? Is that relevant for the month of April as well?

Erik Woodring
Erik Woodring
Analyst at Morgan Stanley

Can you maybe just double click on things like linearity in the month of April for P and S and ADI? Just so we better understand kind of how things or how buying behavior, if at all, changed in the month of April, where there was obviously a lot of volatility relative to March, where there was just less volatility? And then I have a follow-up, please. Thank you.

Jay Geldmacher
Jay Geldmacher
President & CEO at Resideo

Thanks, Eric. I'm going let both Tom and Rob respond to their individual businesses. But as I stated in my comments, during Q1, it was minimal, as I said, and we saw not very little from the standpoint of pull ahead. There was a little bit of it there, but the demand seems strong still. I'll let as I said, I'll let Tom and and Rob comment on each one of their businesses, which I think will be helpful from a color standpoint.

Thomas Surran
Thomas Surran
President of Products & Solutions at Resideo

Yeah. Hi, Eric. It's Tom. I'll take, p and s first. I think one of the important things was throughout this whole process, we've been communicating with our customers, and we've been informing them of what actions we would be taking.

Thomas Surran
Thomas Surran
President of Products & Solutions at Resideo

And so, again, kind of related to Ian's question, with not having a very large portion of products that are impacted by this, the need for our customers to do some kind of buy ahead is fairly minimal. I mean, there's nothing to buy ahead from. So for us, I would you know, there would be some possible, but it it would be very de minimis amounts. And we don't see anything in April Because, again, right now, where we are, what we're taking on products, and our communication to our customers.

Rob Aarnes
Rob Aarnes
President, ADI Global Distribution at Resideo

Yeah. So so we're in a little bit different spot, but let me let me walk through each piece. So like Tom and p and s business, the ADI business maintains, I mean, really dynamite relationships with our customers, you know, since the tariff the tariffs kinda, you know, noise started happening. We were very proactive in communicating to our customers exactly what the impacts were gonna be, and we've continued to do so as new information has become relevant to us. And they've been very, very appreciative of that.

Rob Aarnes
Rob Aarnes
President, ADI Global Distribution at Resideo

And what we're hearing is they're taking those same kind of actions with their customers, obviously. That's what I would say is part one. In terms of your question around buy ahead, in the first quarter, we saw minimal to almost nothing. I mean, really, really immaterial. But we saw demand pick up in a lot of our commercial categories, security in fact, almost all of our commercial categories, security pro professional video or professional audio video as well as data communications In March, as I said in my remarks, and then we saw that continue into April, and the same result when it with regards to forward bias.

Rob Aarnes
Rob Aarnes
President, ADI Global Distribution at Resideo

We did not it was immaterial in the month of April and even to start off May. So I feel, you know, cautiously optimistic, if you will, when I look at our record backlog, our record amount of project registrations, our record pipeline. It continues to grow and move up to the right. That so far, in addition to mitigating any price increases, we're still seeing a nice demand trajectory in the channel.

Erik Woodring
Erik Woodring
Analyst at Morgan Stanley

Okay. That's really helpful. And thank you for all the color from all three of you, frankly. If we could maybe take one big step back and kind of forget tariffs and all of this kind of near term stuff. Obviously, they're relevant to this question, but can you just help us maybe better understand from your perspective?

Erik Woodring
Erik Woodring
Analyst at Morgan Stanley

And I guess this is for Tom and Rob. It's just where you think we are in each of the kind of residential and commercial kind of spending cycle? Just a lot of moving pieces. And obviously, I assume macro might have some impact on the broader cycle. So just again, not necessarily on a quarter to quarter basis, but where do you think we're going if we look out through the year and into 2026, just as it relates to the spending cycle on each kind of side of the relative business?

Erik Woodring
Erik Woodring
Analyst at Morgan Stanley

I realize that's a big picture comment, but just looking for big picture feedback, please. Thank you.

Thomas Surran
Thomas Surran
President of Products & Solutions at Resideo

Okay. I mean, this is Tom, Eric. In terms of the overall environment, spending cycle, I guess the the thing the way that we think about it and look at it is to say, what's going on in the housing market? That that impacts many of our segments, obviously, because we're so residentially focused on P and S. And I would say right now, we're still in a somewhat depressed condition because of the very low level of existing home sales, which create a demand for fix and replace and remodel in preparation of a sale or post sale.

Thomas Surran
Thomas Surran
President of Products & Solutions at Resideo

So that is something that is the level of that, it stays at fairly low levels. Currently, we're seeing about 4,000,000 units sold of existing housing stock, a more healthy number would be about 5,000,000. So it's kind of a little bit depressed there. The overall general remodeling activity not related to home sales is pretty good. It's healthy.

Thomas Surran
Thomas Surran
President of Products & Solutions at Resideo

And then in the new home sales, I would say that's recovered to a reasonable level. So I would say, overall, we have more tailwinds behind us for that market to improve as we go forward than we do any form of head.

Jay Geldmacher
Jay Geldmacher
President & CEO at Resideo

I would add one thing for Tom on that too. And Tom mentioned it, Eric, in his comments. And we talk about almost every quarter just as update to the business. But the overall content per new home for RNC has continued to increase, and that ties to new products that Tom's coming up that Tom and P and S have come up with as well as what's nice is we've been able to gain additional business within that segment.

Rob Aarnes
Rob Aarnes
President, ADI Global Distribution at Resideo

Yeah. So I'll I'll I'll put the stamp on this too. So Tom and Jay did a great job describing the macro environment. We don't see a lot of change in the last six to twelve months. And, obviously, our residential audio video business, which is now primarily Snap, would be the, you know, category that's affected, with this, with this macro environment. But I'm gonna tell you, you know, we we when we took over the Snap business, right, there was a lot of there's a lot of work to do, and we have, we have approached this aggressively, you know, when it comes to integration around upgrading sales tools, right, commercial programs, really some some great changes in the sales team and really getting this team laser focused on things they can control, specifically around taking share.

Rob Aarnes
Rob Aarnes
President, ADI Global Distribution at Resideo

And that is what's most exciting to me is we are seeing that quarter over quarter with the Snap integration and the execution there, the cross selling capabilities. Obviously, we can mitigate a lot of the soft macro environment in the residential space with the strength we're seeing in commercial. But I'm also very pleased with what I'm seeing from the Snap business and the aggressiveness by which they're taken to go out and take share and grow the business.

Erik Woodring
Erik Woodring
Analyst at Morgan Stanley

Awesome, guys. Thank you very much for the color and good luck.

Jay Geldmacher
Jay Geldmacher
President & CEO at Resideo

Thank you.

Operator

Your next question comes from the line of Amit Daryanani with Evercore ISI. Your line is open.

Analyst

Hi. This is Hannah for Amit. Just curious, when the macro environment improves and housing turnover picks back up, how much leverage is there in the model on gross margins? And do you see these getting comfortably above 30% when the end markets do improve?

Michael Carlet
Michael Carlet
Executive VP & Chief Financial Officer at Resideo

Hey, I think overall that we continue to think we have structural improvement opportunities on the P and S side to continue to grow gross margin. We're not going to specifically guide gross margin for the future. What we do think is regardless of the market conditions that are out there, as we continue to execute and control what we can control, we do think we see opportunities for ongoing gross margin accretion both from our structural improvements, the launch of new products. As Rob mentioned at ADI, some of the new product investments on exclusive brands and the things we're doing at ADI to drive margins. We are optimistic that we'll continue to see gross margin improvements certainly for the next few years as we continue to execute without setting a specific goal out there or a specific number.

Jay Geldmacher
Jay Geldmacher
President & CEO at Resideo

And I'd like to add that I agree with everything what Mike just said. We've also, as you know, we've demonstrated the type of gross margin expansion now for multiple quarters. And I think that's a little bit of the proof of the pudding, but then what Mike said, agree with.

Analyst

Okay. Thank you.

Operator

There are no further questions at this time. This concludes today's conference call. Thank you all for joining. You may now disconnect.

Analysts
    • Christopher T. Lee
      Global Head of Investor Relations at Resideo
    • Jay Geldmacher
      President & CEO at Resideo
    • Thomas Surran
      President of Products & Solutions at Resideo
    • Rob Aarnes
      President, ADI Global Distribution at Resideo
    • Michael Carlet
      Executive VP & Chief Financial Officer at Resideo
    • Ian Zaffino
      Managing Director at Oppenheimer & Co. Inc.
    • Erik Woodring
      Analyst at Morgan Stanley
    • Analyst
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Key Takeaways

  • Resideo delivered Q1 net revenue of $1.8 billion (up 19% YoY), gross margin of 28.9% (+200 bps), adjusted EBITDA of $168 million (+23%), and adjusted EPS of $0.63 (+34%).
  • Products & Solutions achieved 6% organic revenue growth driven by new Honeywell Home Focus Pro thermostats and First Alert Vista H security products, while ADI grew 4% organically and 7% in average daily sales despite two fewer selling days.
  • The company is proactively mitigating tariff risk by sourcing ~98% of P&S goods through USMCA-compliant channels and offsetting a 20–25% COGS impact at ADI with phased price increases, strategic inventory purchases, and supplier actions.
  • Resideo reaffirmed its 2025 outlook and issued Q2 guidance of $1.805–1.855 billion in net revenue and adjusted EPS of $0.51–$0.61, reflecting confidence amid an unpredictable macroeconomic environment.
  • Innovation momentum continues with new Google Nest-compatible smoke/CO alarms, Burt Alert CX4 cameras, and nearly 100 new products launched post SnapOne acquisition, with synergies already ahead of plan.
AI Generated. May Contain Errors.
Earnings Conference Call
Resideo Technologies Q1 2025
00:00 / 00:00

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