What Resideo Technologies (REZI) Said on Its Q3 Earnings Call

Key Points

• Q3 revenue rose 3% to $727 million, while revenue excluding non-core OEM security grew 6%, driven by gains in retail, combustion and professional distribution. Adjusted EBITDA increased about 5% to $154 million despite inflationary cost pressures.
• Resideo raised its full-year 2026 outlook, forecasting revenue of $2.927 billion to $2.947 billion and adjusted EBITDA of $614 million to $624 million. Its Q4 forecast factors in a sharp decline in OEM security revenue and expects limited tariff refunds.
• Following the ADI spinoff, Resideo repaid $1.1 billion in gross debt and made deleveraging a near-term priority. The company is also investing in branded security and AI-enabled HVAC services while planning to close three underutilized manufacturing facilities.

Resideo Technologies NYSE: REZI reported third-quarter revenue growth of 3% and raised its full-year outlook, as stronger sales across its retail, combustion and professional distribution channels offset a decline in its non-core OEM security business.

The results marked the company’s first quarter following the August 3 spinoff of ADI. CEO Tom Surran said revenue and earnings came in near the high end of Resideo’s outlook despite a challenging housing market.

Revenue was $727 million, including an approximately 0.5-percentage-point headwind from foreign currency. Excluding OEM security, revenue rose 6%, or $41 million, as both prices and volumes increased. Surran said pricing contributed slightly more than volume to the growth in those channels.

“What we provide, in many cases, is a non-discretionary product,” Surran said, citing heating, cooling, safety and security systems. He added that the company believes it is gaining share in those markets.

Retail Leads Core Channel Growth

Retail revenue increased 15% year over year, supported by volume and pricing gains for First Alert and Honeywell Home air and safety products. Surran cited demand for a new combination smoke and carbon monoxide detector, as well as more efficient promotional spending and a shift toward higher-margin products.

OEM combustion revenue rose 9%, driven primarily by demand for higher-priced products. Professional distribution revenue increased 3% overall. Within that group, electrical distribution posted double-digit growth, HVAC distribution grew by a mid-single-digit percentage, and general security distribution was flat.

Surran said security installations remain tied to existing-home sales, while demand for electrical products was robust across several categories, including single-family and multifamily housing, manufactured homes, and maintenance and repair.

OEM security revenue fell $17 million to $33 million, in line with the company’s reduced volume expectations. Resideo considers the channel non-core and is shifting investment toward branded security products, which Surran said generate higher margins and do not compete with the company’s own offerings in the same way products made for OEM customers can.

Margins Rise Despite Cost Pressure

Gross margin was 40.4%, slightly higher than a year earlier. CFO Shane Harrison said price increases, operational efficiencies and $6 million in tariff refunds helped offset an unfavorable product mix and inflationary input costs. Surran said the net tariff benefit, after tariffs paid, was $4 million.

Input costs increased by approximately $13 million year over year in the quarter, partly offset by $3 million in realized price increases. Harrison said most of the increases announced in June took effect during the latter half of the quarter because of customer notice periods.

Standalone adjusted EBITDA rose approximately 5% to $154 million. Standalone adjusted net income was $80 million, or $0.52 per share, excluding $30 million in nonrecurring separation expenses.

Cash provided by continuing operations was $33 million, after approximately $30 million in spin-related payments. Resideo repaid $1.1 billion in gross debt during the quarter after receiving a one-time $900 million dividend from the ADI spinoff. Harrison said deleveraging is a near-term priority.

Full-Year Outlook Raised

Harrison said Resideo is passing its third-quarter outperformance through to its 2026 forecast and slightly raising the implied fourth-quarter outlook at the midpoint. The company expects:

• Fourth-quarter revenue: $710 million to $730 million.
• Fourth-quarter standalone adjusted EBITDA: $145 million to $155 million, with adjusted earnings of $0.42 to $0.48 per share.
• Full-year revenue: $2.927 billion to $2.947 billion.
• Full-year standalone adjusted EBITDA: $614 million to $624 million, with adjusted earnings of $1.92 to $1.98 per share.
• Cash from operations: At least $54 million in the fourth quarter and $165 million for the full year.

The fourth-quarter forecast includes an approximately $30 million year-over-year decline in OEM security revenue to about $25 million. Excluding that channel, Resideo expects revenue to range from flat to low-single-digit growth, reflecting four fewer sales days, foreign exchange pressure and product-line rationalization.

Harrison said the company expects the full benefit of its June price increases in the fourth quarter, but continued inflation should still produce a low-single-digit-million-dollar net cost headwind. The outlook assumes little or no tariff refund because the timing and receipt of additional claims are uncertain.

Product Investment and Efficiency

Resideo is adding an AI-powered predictive capability to its Pro-IQ Services suite, intended to help professionals identify potential HVAC problems and prepare for repairs. Surran said subscriptions are not yet material to financial results and that the immediate focus is on providing value to professional customers.

The company also plans to introduce new security products integrated with its FORTIQ software platform. To improve efficiency, Surran said Resideo plans to exit three underutilized manufacturing facilities, including manufacturing operations in Scotland.

Looking longer term, Harrison reiterated the company’s Investor Day framework for mid-single-digit annual revenue growth over the five-year period through 2030, alongside gross margin improvement and controlled overhead spending. He said Resideo was still preparing its 2027 budget.

About Resideo Technologies (NYSE:REZI)

Resideo Technologies is a provider of products and services for home comfort, safety, security and energy management. Its offerings include thermostats and other heating and cooling controls, indoor air quality products, water leak detection devices, fire and carbon monoxide alarms, and security systems. Products are sold under brands that include Honeywell Home and First Alert. The company also operates ADI Global Distribution, a distributor of security, audio-visual, communications and smart-home products.

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