Resideo Technologies Q2 2025 Earnings Report

Resideo Technologies EPS Results

• Actual EPS: $0.66
• Consensus EPS: $0.54
• Beat/Miss: Beat by +$0.12
• One Year Ago EPS: $0.62

Resideo Technologies Revenue Results

• Actual Revenue: $1.94 billion
• Expected Revenue: $1.83 billion
• Beat/Miss: Beat by +$117.43 million
• YoY Revenue Growth: +22.30%

Resideo Technologies Announcement Details

• Quarter: Q2 2025
• Date: 8/5/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, August 5, 2025
• Conference Call Time: 5:00PM ET

Resideo Technologies (NYSE:REZI) develops, manufactures, and sells comfort, energy management, and safety and security solutions to the commercial and residential end markets in the United States, Europe, and internationally. The company operates in two segments, Products and Solutions, and ADI Global Distribution. The Products and Solutions segment provides temperature and humidity control, thermal and combustion solutions, water and indoor air quality solutions, energy products and solutions, water and air solutions, smoke and carbon monoxide detection home safety and fire suppression, security panels, sensors, peripherals, wire and cable, communications devices, video cameras, other home-related lifestyle convenience solutions, cloud infrastructure, installation and maintenance tools, and related software products under the Honeywell Home brand as well as Resideo, Braukmann, First Alert, and BRK brands. The ADI Global Distribution segment engages in the distribution of security, fire, access control, and video products; and participates in the broader related markets of smart home, power, audio, ProAV, networking, communications, data communications, wire and cable, enterprise connectivity, and structured wiring products. The company sells its products and services through a network of professional contractors, distributors, and original equipment manufacturers, as well as retail and online merchants. Resideo Technologies, Inc. was incorporated in 2018 and is headquartered in Scottsdale, Arizona.

Resideo Technologies Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Resideo delivered record Q2 results, with net revenue, adjusted EBITDA, and adjusted EPS all exceeding the high end of guidance and achieving 10% organic growth at ADI and 5% at Products and Solutions.
• Positive Sentiment: The Products and Solutions segment posted its ninth consecutive quarter of year-over-year gross margin expansion, rising 160 basis points to 42.9%.
• Positive Sentiment: ADI reported 33% year-over-year revenue growth (10% organic), driven by strong performance in commercial security, fire, AV, and data categories, 19% e-commerce growth, and an ahead-of-schedule SnapOne integration boosting margins.
• Positive Sentiment: Resideo raised its full-year 2025 outlook, targeting $7.45–7.55 billion in net revenue, $845–885 million in adjusted EBITDA, and $2.75–2.87 in adjusted EPS, reflecting confidence in ongoing momentum.
• Negative Sentiment: Revenue in the Security channel declined year-over-year due to decreased sales from a major private-label customer, indicating pressure in a soft domestic residential market.

Presentation

[Operator]

Good afternoon. My name is Eric, and I will be your conference operator today. At this time, I would like to welcome everyone to the Resideo twenty twenty five Second Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

[Operator]

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 Lee, Global Head - Strategic Finance at Resideo]

Good afternoon, everyone, and thank you for joining us for Resideo's second quarter twenty twenty five earnings call. On today's call will be Jay Geldmacher, Resideo's Chief Executive Officer Mike Carlette, 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. 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.

[Christopher Lee, Global Head - Strategic Finance at Resideo]

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, which can sometimes be identified by the use of adjusted in the description of the measure, should be considered in addition to, not as a substitute for, or in isolation from our GAAP results. 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.

[Christopher Lee, Global Head - Strategic Finance at Resideo]

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, President & CEO at Resideo]

Thank you, Chris, and thanks to everyone for joining us today. Resideo delivered exceptional results in our second fiscal quarter. Both net revenue and adjusted EBITDA were new record highs, and those two financial metrics plus adjusted EPS all exceeded the high end of our outlook range. These record results are consistent with our team's continued execution and the company's healthy operating fundamentals. We achieved year over year organic revenue growth of 10% ADI and 5% in our Products and Solutions business segments.

[Jay Geldmacher, President & CEO at Resideo]

Gross margin expansion and increased EBITDA generation were underpinned by growing operating income dollars at ADI and P and S, both sequentially and year over year. Demand for our new products, including the Honeywell Home Focus Pro thermostats and First Alert combined smoke and carbon monoxide connected detectors continues to be strong. We are excited about our pipeline of new products that both business segments are introducing in the 2025. ADI's integration of SnapOne continues to progress well and ahead of schedule. Tom, Rob and Mike will speak in greater detail to our execution and results shortly.

[Jay Geldmacher, President & CEO at Resideo]

Resideo has been executing amidst a dynamic macroeconomic environment. While our market outlook continues to be relatively cautious, especially given the ongoing dialogue around tariffs by the U. S. Administration, we believe our pipeline of products and the strength of our integration of SnapOne is positioning us well. Our tariff mitigation actions have been effective and are materially unchanged from what we shared last quarter.

[Jay Geldmacher, President & CEO at Resideo]

Consistent with the first quarter, ADI and P and S customer demand in the second quarter has been healthy. Even as we have raised prices to pass along the cost impact of tariffs, our relationships with our customers continue to be excellent. We have also taken other actions such as working with our partners in our supply chains to mitigate the impact of tariffs. Resideo continues to remain agile, and we believe we are well prepared to react to new developments in this dynamic environment. I am pleased with the team's consistent execution.

[Jay Geldmacher, President & CEO at Resideo]

Due to the strength of our business, Resideo is raising its 2025 outlook, which Mike will speak more to in his comments. Let me now hand the call over to Tom.

[Thomas Surran, President - Products & Solutions at Resideo]

Thanks, Jay. The Products and Solutions team executed well in the second quarter, delivering year over year organic net revenue growth and the ninth consecutive quarter of year over year gross margin expansion. P and S reported net revenue growth of 6% year over year and 5% organic growth, which excludes an approximate 1% favorable impact from currency. Revenue grew across the majority of our sales channels, driven by customer demand for our new products price realization. Now let me walk through each of our primary channels.

[Thomas Surran, President - Products & Solutions at Resideo]

The electrical distribution channel led revenue growth in the quarter. Revenue associated with our VRK branded safety products sold to professionals increased from a combination of increasing content per new home and the transition to UL eighth edition fire safety products. The retail channel had a record quarter of revenue growth, driven primarily by strong point of sales volumes for both our new Honeywell Home Focus Pro series of thermostats and our new First Alert SC5 connected smoke and carbon monoxide detector. The SC5 was developed in partnership with Google Nest, is compatible with the Google Home app, and was specifically designed to seamlessly replace Google's discontinued Nest Protect alarms. The OEM channel posted a third consecutive quarter of year over year revenue growth, driven primarily by the sale of higher priced and more profitable units as the energy equipment market in The Americas and EMEA continues to improve.

[Thomas Surran, President - Products & Solutions at Resideo]

Revenue in the HVAC channel was flat to slightly down in the quarter as the market experienced some softness due to the macroeconomic environment. In addition, we experienced some disturbance in the market from the recent transition of refrigerants used in the HVAC equipment in accordance with the new United States regulations. Despite that, we believe we have grown our position in the segment, driven primarily by continued demand for our new products. Revenue in the Security channel was down year over year, primarily due to a decrease in sales from a large private label customer. The general market was also down slightly in the continued soft domestic residential market.

[Thomas Surran, President - Products & Solutions at Resideo]

Gross margin was 42.9%, up 160 basis points year over year. This is the ninth consecutive quarter of year over year gross margin expansion, driven primarily by continued efficient utilization of our factories that more than offset an immaterial amount of tariff related expenses. The vast majority of P and S goods sourced from Mexico are USMCA compliant, which continue to be exempt from tariffs. Looking ahead to the 2025, we expect continued demand for our new products introduced earlier in the year. We intend to capitalize on this momentum by introducing additional new products in the air and comfort, security and water categories.

[Thomas Surran, President - Products & Solutions at Resideo]

In closing, the Products and Solutions team is executing against our strategic plans, delivering new products against a multiyear product roadmap while achieving organic net revenue growth, gross margin expansion and adjusted EBITDA growth. With that, let's turn the call over to Ross.

[Rob Aarnes, President - ADI Global Distribution at Resideo]

Thanks, Tom. The ADI team achieved 33% year over year growth in reported net revenue in the second quarter and 10% organic growth after excluding the impact of the SnapOne acquisition and the impact from currency. Organic average daily sales grew 10% year over year. ADI also recorded organic growth despite the benefit of two percentage points from recouping tariff related impacts through price realization. As a reminder, this is the last quarter that SnapOne will be excluded from organic growth calculations as we lap the one year anniversary of the close of the acquisition.

[Rob Aarnes, President - ADI Global Distribution at Resideo]

To establish go forward disclosure, with the inclusion of SnapOne, total ADI year over year growth in reported net revenue was 9%. Now getting into revenue drivers. Organic net revenue growth was driven primarily by continuing commercial customer strength across most product categories and increasing contributions from the digital channel. From a product category perspective, we saw solid double digit percentage organic revenue growth year over year in multiple categories with notable contributions from the commercial security, fire, professional audiovideo and data communication product categories. These performance trends also hold true on a total ADI basis.

[Rob Aarnes, President - ADI Global Distribution at Resideo]

From a customer perspective, the cohort of top integrators also saw solid double digit percentage growth year over year, showcasing our importance to these valuable customers. ADI is winning more new project business, evidence of our scale and execution capabilities. Organic e commerce net revenue grew 19% year over year, achieving another quarter of strong revenue contribution and a new record in run rate daily sales average. E commerce continues to be structurally accretive to total ADI gross margin. With the inclusion of SnapOne, total ADI e commerce net revenue grew 8% year over year.

[Rob Aarnes, President - ADI Global Distribution at Resideo]

Exclusive Brands organic net revenue increased 32% year over year while also generating more gross margin dollars in the quarter versus the same period last year. Growth was primarily driven by continued success on cross selling exclusive brands added to our portfolio with the Snap on portfolio. In the quarter, we added nearly 200 SKUs. We also continue to be recognized for the value we deliver to the customer, notably being named the number one top industry distributor in the CE Pro 100 brand analysis. With the inclusion of SnapOne, total ADI exclusive brands revenue grew five percent year over year.

[Rob Aarnes, President - ADI Global Distribution at Resideo]

The integration of SnapOne continues to progress nicely and remains ahead of our synergy goals this quarter. We are excited to highlight that the acquisition has been accretive to Resideo in our first full year of ownership. ADI reported 22.2% gross margin in the second quarter, up two eighty basis points year over year. The margin expansion was primarily driven by higher volumes of Snap on exclusive brands sales across ADI's entire customer base and the sales of lower cost inventory that provided a temporary benefit. Note that we have adjusted prices dynamically related to tariff mitigation actions and to protect ADI's gross margin dollars.

[Rob Aarnes, President - ADI Global Distribution at Resideo]

The increased margin dollars float down to support our adjusted EBITDA growth. In closing, ADI is executing well. Driven by our customer first ethos, we look to continue driving organic revenue growth and adjusted EBITDA growth throughout 2025 and beyond. Now let's turn the call over to Mike to discuss our second quarter's financial results and 2025 outlook.

[Michael Carlet, CFO at Resideo]

Thanks, Rob. Good afternoon, everyone. Let's get straight into the quarterly results. As Jay highlighted, our second quarter was very strong with net revenue, adjusted EBITDA and adjusted earnings per share all above our outlook for the quarter. Total net revenue was a record high $1,940,000,000 up 22% year over year and up 8% on an organic basis, excluding the impact of the SnapOne acquisition and a 1% favorable impact from currency.

[Michael Carlet, CFO at Resideo]

Both Tom and Rob spoke earlier about the drivers of organic net revenue growth in their respective businesses. Total company gross margin in the quarter was 29.3%, up 120 basis points year over year. The increase is primarily driven by the more margin accretive activities at ADI and the structural operating efficiencies at P and S. Second quarter total company adjusted earnings per share was $0.66 above the high end of our outlook range and up from $0.62 from the same period in the prior year. In the quarter, we recorded a current liabilities balance of $1,625,000,000 in conjunction with the expected termination of the Honeywell Indemnification Agreement with a corresponding expense of $882,000,000 This results in a reported GAAP net loss and loss per share.

[Michael Carlet, CFO at Resideo]

This item was adjusted out to arrive at our adjusted EPS and adjusted EBITDA. Total company adjusted EBITDA was a record $210,000,000 in the quarter, up 20% year over year and exceeding the high end of our outlook range. The primary drivers of the increase were the positive contribution from Snap one as well as customer demand. These positive drivers were partially offset by investments made in both business segments. Going forward, we expect our adjusted EBITDA to benefit from the removal of the $35,000,000 quarterly payment to Honeywell related to the termination of the indemnification agreement.

[Michael Carlet, CFO at Resideo]

Total cash provided by operating activities was $200,000,000 driven primarily by strong sales and collections in the quarter. Now before I provide our financial outlook for the 2025 and the full year 2025, let me walk you through some of our market perspectives and assumptions that are incremental to those shared with you last quarter. As previously noted, adjusted EBITDA is expected to benefit by $35,000,000 in each of the third and fourth quarters related to the terminated indemnification agreement, while cash provided by operations benefits by $35,000,000 as we did make a payment to Honeywell in July. In our cash provided by operations outlook, we assumed $20,000,000 of separation related payments in the 2025. In a continued dynamic environment, we are maintaining our second half twenty twenty five expectations.

[Michael Carlet, CFO at Resideo]

For our second half outlook, we account for the impacts from the terminated indemnification agreement and a shift in ADI's implementation of a new ERP system from the second quarter to the third quarter. And while this is not a change, we felt it important to reiterate that we included the impact of all tariffs currently in force as of today in our outlook. We continue to assume we will benefit from USMCA tariff exemptions for products manufactured in Mexico. With all that, we are raising our twenty twenty five outlook as follows: total company net revenue to be in the range of 7,450,000,000.00 to $7,550,000,000 total company adjusted EBITDA to be in the range of $845,000,000 to $885,000,000 and note this range is inclusive of $70,000,000 related to the payments made to Honeywell in the 2025. Total company fully diluted earnings per share to be in the range of $2.75 to 2.87 and cash from operations excluding the Honeywell termination payment of $4.00 5,000,000 to $435,000,000 We are initiating an outlook for the 2025 as follows: total company net revenue to be in the range of 1,850,000,000.00 to $1,900,000,000 and total company adjusted EBITDA to be in the range of $220,000,000 to $240,000,000 total company's fully diluted earnings per share to be in the range of $0.70 to $0.76 Please go to our Investor Relations website to access our earnings presentation, which includes our outlook ranges along with key modeling assumptions for 2025.

[Michael Carlet, CFO at Resideo]

Now, let me hand the call back to Jay for some final comments before opening the call up for questions.

[Jay Geldmacher, President & CEO at Resideo]

Thanks, Mike. The last several months have been momentous for Resideo. Last week, we announced two important events. The first was an agreement with Honeywell to accelerate and eliminate all future monetary obligations related to the indemnification and reimbursement agreement. The second was to announce our intention to spin off our ADI business segment as an independent company.

[Jay Geldmacher, President & CEO at Resideo]

Both events are expected to create significant value in the near and long term while refining our strategic and operational focus and simplifying our story within the investment community. Operator, let's now open the call up for questions.

[Operator]

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

[Erik Woodring, MD - Equity Research at Morgan Stanley]

Awesome. Thank you guys for taking my questions. I have a small handful if I may. Maybe just to start, Rob, I'll start with you. Just really strong organic performance from ADI.

[Erik Woodring, MD - Equity Research at Morgan Stanley]

I'd love if you can just kind of help us understand kind of price times quantity or price times volume in the second quarter just understand kind of where you got that 10% organic growth because obviously that is a multi quarter high. And I'll ask a similar question but maybe opposite just in the interest of time which is I think most of the kind of as reported versus organic growth metrics you gave for ADI would suggest the SnapOne business is declining. I think it was a headwind to ecom exclusive brands and total growth. Can you maybe just help us understand what's going on in Snap one? Obviously, a bit more residential exposure.

[Erik Woodring, MD - Equity Research at Morgan Stanley]

But just could comment maybe compare and contrast Snap one with what you're seeing in kind of ADI organically, please. Thank you.

[Rob Aarnes, President - ADI Global Distribution at Resideo]

Yes. Sure, Eric. So thanks. So first question, if I look at that 10% growth, you can attribute 1% to 2% of that to probably closer to 2% to the tariffs, the price increases that we have implemented throughout the second quarter. As you know, when we get the price increases, we pass those right through.

[Rob Aarnes, President - ADI Global Distribution at Resideo]

When we met, I guess, last earnings call, I think we talked about the potential volatility. We weren't quite sure what was going to happen in demand in the second quarter, but we were pleasantly surprised. I mean, we did see momentum in March. And then through April, May and June, we just continued to see that momentum, specifically in the categories I mentioned in the prepared remarks, commercial security, fire video, professional AV and datacom. When I look at what we saw in the second quarter, the pipeline build, I mean, we're at record levels there.

[Rob Aarnes, President - ADI Global Distribution at Resideo]

And that continued, by the way, into July. So I feel really good about the demand that we generated. I feel like we absolutely took share in the market and give me confidence to kind of continue that as we move through the rest of Q3. In terms of the actual overall performance, a good segment, good performance or the performance of Snap, right, versus the rest of the business. I wouldn't say declining.

[Rob Aarnes, President - ADI Global Distribution at Resideo]

I would say holding flat compared to the rest of the business. As you know, it's a kind of a tough tough macro environment out there on the residential side. We're seeing the same thing in residential security. But I will tell you this. We are seeing, terrific benefits from the integration, as we scale Snap's exclusive brand products to the rest of our ADI customer base.

[Rob Aarnes, President - ADI Global Distribution at Resideo]

We had a kind of a a prepared time line for that when we had originally done the deal the first year, and we decided to accelerate that. We've moved really fast. I think we're I'd say we're in the fourth or fifth inning on that in terms of scaling to all of our stores. The majority of the assortment is up on the ADI website. So from that perspective, the integration is paying significant dividends for us.

[Rob Aarnes, President - ADI Global Distribution at Resideo]

But, you know, I'd say, yeah, the SNAP business is overall about flat right now compared to the rest of the ADI business.

[Erik Woodring, MD - Equity Research at Morgan Stanley]

Okay. That color is super helpful. Thank you for all of that. And Tom, maybe I'll jump to you. When we were going when you were going through kind of the retail channel, highlighted the First Alert SE5 smoke detector, which is kind of what I would call kind of expanding with a partner that is also trying to, I guess, and correct me if I'm wrong, disintermediate you in other relationships.

[Erik Woodring, MD - Equity Research at Morgan Stanley]

And you kind of called that on the security side. Can you maybe just help us understand kind of in totality when we think about the headwinds in security versus maybe some of these new opportunities you're disclosing? I think previously you had talked about the security customer being maybe 100,000,000 headwind. Last quarter you talked about it being a little bit less. But overall, just help us understand kind of what's going on with that relationship because it seems like there's some headwinds, but there's also some tailwinds emerging.

[Erik Woodring, MD - Equity Research at Morgan Stanley]

And and maybe just unpackage that for us a little bit, please.

[Thomas Surran, President - Products & Solutions at Resideo]

K. So first, let's deal with the s e five. So that was done working with Google hand in hand to make sure we delivered a product that they believe to be worthy successor of the best protect alarms. So that was tightly integrated in terms of the teams. They were excellent to work with.

[Thomas Surran, President - Products & Solutions at Resideo]

I hope they feel the same about how we performed. In terms of our relationship with Google, we're continuing to have discussions about other ways we can work going forward. Now I think what you you were mentioning there is, well, Google had a security product which was sold to another party, which is now in the security market, and we compete in the security market. We're not competing with Google in the security market. That's that's really kind of the one piece of it.

[Thomas Surran, President - Products & Solutions at Resideo]

And our relationship with Google, we'd like to see strengthening going forward. In terms of the security market though, how do we look at that in that large private label customer that we talked about? That relationship is dynamic. You know, there was some forecasts that were related that we've tried to keep everyone informed about how it's progressed. The amount of the downturn has been less.

[Thomas Surran, President - Products & Solutions at Resideo]

I'd like to think that that is because of our engagement with that customer, trying to make sure that we rose to any kind of question or opportunity to be able to provide value to them. We're continuing to have discussions about future. There's nothing to update at this point in time, specifically on revenue. I'll let Mike kind of make the call about any time we would want to give greater detail, but it's a customer we continue to support, we continue to work with, and we're hopeful that we can have a long term relationship with that customer.

[Erik Woodring, MD - Equity Research at Morgan Stanley]

Okay. Perfect. That's also really helpful. And then maybe last one for me, and I guess I'll throw this to Rob, but it can be for for for anyone, which is, you know, the the SnapOne has a residential connected home kind of software OS and support OS back in the the control four days. That feels like a kind of perfectly natural technology to kind of leave with PNS, residential part of the business.

[Erik Woodring, MD - Equity Research at Morgan Stanley]

What happens again, I realize that it's early and the spin transaction is expected to be kind of a year from now. But what happens to that legacy Control4 platform that was integrated into SnapOne? Does that go to P and S? Does that stay with ADI? And if it stays with ADI, just kind of where does

[Erik Woodring, MD - Equity Research at Morgan Stanley]

Because it feels like it it's an opportunity for PNS. But please correct me if I'm wrong. Kind of an open ended question for whoever would wanna take it. Thanks so much, guys.

[Rob Aarnes, President - ADI Global Distribution at Resideo]

No, Eric. I appreciate that. We're all smiling in the room here. It's a really good question. No.

[Rob Aarnes, President - ADI Global Distribution at Resideo]

As of right now, and we don't see this changing at all, what came over with the Snap business at the acquisition that sits with ADI today will absolutely remain with us going forward. That's a strategic decision that that we made, and we feel like we can actually, with some proper focus, right, we can actually, you know, do some things to rejuvenate, if you will, to control for a brand. There's a lot of pull throughs, you know, that comes along with that. Of course, there's the oversea ecosystem that's highly complementary there. But, you know, with the launch of x four, which which just was the new operating system, I think it was April time frame, We're seeing good traction with that.

[Rob Aarnes, President - ADI Global Distribution at Resideo]

Of course, Luxe Lighting came out right after that. And we've got, we've got some good ideas, new for new products in the pipeline to support Control4 going forward. So, it's staying with ADI, I think, belongs here, and I think we've got a great opportunity to just continue to enhance the user experience going forward.

[Operator]

Your next question comes from the line of Ian Zaffino with Oppenheimer. Your line is open.

[Ian Zaffino, Managing Director at Oppenheimer & Co. Inc.]

Okay. Thank you very much. Question would be, I guess, on the margins at P and S. You know, you've had a great run on margin expansion here. How are you thinking about ultimate margins, you know, where we could go?

[Ian Zaffino, Managing Director at Oppenheimer & Co. Inc.]

And, you know, I know we're not per se in a normalized environment, but, you know, what do you think you could achieve in this environment? And then maybe as housing and repair model improves, where can margins go from there? Thanks.

[Thomas Surran, President - Products & Solutions at Resideo]

K. So first, I I want you to understand we're not done with kind of the continued improvement in the margins. And there's a couple pieces to the improvement in the margins. One is the value that we're delivering in the products that we're offering. So that's the NPI.

[Thomas Surran, President - Products & Solutions at Resideo]

We have a pipeline that is full of products that we'll be introducing over the next couple of years that we expect to be accretive to margins. Second is how efficiently do you create that value. We have a plan to continue to improve our manufacturing footprint. And third is the mix of the products. So some of our products have higher margins, and we're making sure we shift our investment to those things that are gonna maximize the return on our investment.

[Thomas Surran, President - Products & Solutions at Resideo]

So all that said, you're saying, okay. Where does it end up? We're gonna end up, I would say, in the range of 45 to 50% over a longer period of time. We will continue to see the increments over the next couple years to get to that kind of range.

[Ian Zaffino, Managing Director at Oppenheimer & Co. Inc.]

Okay. And then on the tariffs, help us understand where the kind of power is. Are you able to push back onto your suppliers at all, to the ability to do that? And or is you have to take the price and then hope to pass it through to your customers? How do we think about that? Thanks.

[Rob Aarnes, President - ADI Global Distribution at Resideo]

Yeah. Good good good question. The answer to all the answer to that is an emphatic yes on several different fronts. We have, is just based on our size, I'll start with our branded suppliers first. And so based on our size and scale, right, we tend to have very favorable terms with all of our suppliers.

[Rob Aarnes, President - ADI Global Distribution at Resideo]

Things like, you know, certain certain time periods before, you know, we get price increases told us, and then we have to make it effective in the channel. And so while tariffs might have taken effect, there's usually some distances or a time between the time we get that's our suppliers where we get the tariffs get actually put in place and then when the supplier price increases get put in place. So we're able to actually buy ahead inventory. I think I mentioned that as well earlier, have that average lower cost inventory as it burns through but higher price points in the channel. So typical distribution type of stuff.

[Rob Aarnes, President - ADI Global Distribution at Resideo]

And then on the exclusive brand side, we absolutely are able to go back to a lot of our JDM suppliers and our Centimeters suppliers and actually get them to eat part of the tariffs. And we've been very, very successful with that. So between those two things and then, of course, all the pass through, we've been able to mitigate fully the effects of tariffs since they went into effect late in Q1, early Q2.

[Ian Zaffino, Managing Director at Oppenheimer & Co. Inc.]

Okay. And then just a final question. Just on M and A, how are you thinking about that going forward? I know you're kind of digesting this big, Snap one, but it's been almost a year now. So how are we thinking about M and A?

[Ian Zaffino, Managing Director at Oppenheimer & Co. Inc.]

Are there holes that you need to fill? Are there adjacencies you want to get into? Or is it just per se scale and adding more stores in the ADI side? Thanks.

[Rob Aarnes, President - ADI Global Distribution at Resideo]

Look, we continue to refund our or I'm sorry, we continue to look at a strong M and A pipeline going forward. Yet to your point, look, we were engaged heavily in making sure we drove a proper integration for a year. We're at the one year point. That's going very, very well. Now as we look to the future, I mean, M and A is always in the cards.

[Rob Aarnes, President - ADI Global Distribution at Resideo]

I mean, I'd like it to be in some of the our focus will be in some of the more adjacent based categories where we're seeing some significant growth. We still got some capabilities we wanna build there, ProAV and Datacom specifically. And then I would also tell you with now the the addition of the SnapOne product line, right, there's there's opportunities, there's technology opportunities, right, and ways to kind of fill out better fill out that portfolio as well. So I would say that we're in a great position to continue to look to opportunities.

[Jay Geldmacher, President & CEO at Resideo]

Ian, this is Jay. I mean, I'd add, and I'll let Tom also comment. I mean, it's M and A is part of both businesses' strategic plan. So and Rob's right. In the case of ADI and Snap, you know, that was a big acquisition to digest.

[Jay Geldmacher, President & CEO at Resideo]

And as you've heard, they're doing a really good job on that front, but they have you know, they've they've take quite a bit of time as part of their creation of their an update of their strategic plan to look at m and a opportunities. The same is true with Tom. You know, the last big acquisition that Tom did, of course, was First Alert a few years back, but he is working with his team and taking a look at opportunities. Tom, you wanna add anything to that?

[Thomas Surran, President - Products & Solutions at Resideo]

No. That's exactly right. You said this is same. We absolutely are looking at those opportunities we think add to shareholder value.

[Michael Carlet, CFO at Resideo]

Yep.

[Ian Zaffino, Managing Director at Oppenheimer & Co. Inc.]

All right. Great. Thank you very much.

[Jay Geldmacher, President & CEO at Resideo]

Thanks, Ian.

[Operator]

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

Participants

Analysts

• Christopher Lee, Global Head - Strategic Finance at Resideo
• Jay Geldmacher, President & CEO at Resideo
• Thomas Surran, President - Products & Solutions at Resideo
• Rob Aarnes, President - ADI Global Distribution at Resideo
• Michael Carlet, CFO at Resideo
• Erik Woodring, MD - Equity Research at Morgan Stanley
• Ian Zaffino, Managing Director at Oppenheimer & Co. Inc.