Sign in

You're signed outSign in or to get full access.

RT

RESIDEO TECHNOLOGIES, INC. (REZI)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered record gross margin (29.8%), GAAP diluted EPS ($0.85), and Adjusted EBITDA ($229M), with total revenue up 2% YoY to $1.864B; Adjusted EPS ($0.89) exceeded the high-end of the outlook range .
  • Versus S&P Global consensus, revenue slightly missed ($1.864B vs $1.878B*), while Adjusted EPS materially beat ($0.89 vs $0.57* primary EPS; $0.71* normalized); Adjusted EBITDA was essentially in-line ($229M vs $230M*) .
  • FY 2025 guidance was trimmed (revenue to $7.43–$7.47B from $7.45–$7.55B; Adjusted EBITDA to $818–$832M from $845–$885M; Adjusted EPS to $2.57–$2.67 from $2.75–$2.87) amid transitory headwinds from ADI’s ERP implementation and HVAC refrigerant transition; Q4 2025 guidance introduced: revenue $1.853–$1.893B, Adjusted EBITDA $211–$225M, Adjusted EPS $0.42–$0.52 .
  • Key catalysts: termination of the Honeywell Indemnification Agreement ($1.59B payment; removes up to $140M annual cash obligations) , continued margin expansion across segments , and management’s early view that 2026 organic revenue and Adjusted EBITDA will be above current Street estimates .

What Went Well and What Went Wrong

What Went Well

  • Record profitability: gross margin 29.8% (+110 bps YoY), Adjusted EBITDA $229M (+21% YoY), Adjusted EPS $0.89 (record; above guidance high-end) .
  • Segment margin expansion: P&S gross margin 43.0% (+80 bps YoY; 10th consecutive quarter); ADI gross margin 22.6% (+130 bps YoY; 6th consecutive quarter) .
  • New products gaining traction: “ElitePRO premium smart thermostats…selling extremely well,” supporting P&S price realization and strong retail/OEM channels .
  • Management quote: “We achieved record-high gross margins, earnings per share, and Adjusted EBITDA…enabled by continued organic net revenue growth and margin expansion by both the ADI and P&S business segments.” — CEO Jay Geldmacher .

What Went Wrong

  • ADI ERP transition headwinds: planned store closures and implementation issues caused “a few points of unachieved revenue growth” and lower cash collections; SG&A/R&D combined +$15M YoY in Q3 due to non-recurring ERP costs .
  • HVAC refrigerant regulatory transition: softer residential HVAC market disrupted channel dynamics; P&S HVAC revenue down low double-digit, though margins remained strong and demand seen as transitory .
  • FY 2025 guide-down vs Q2 raised outlook: reductions reflect ERP and HVAC impacts despite structural margin progress and Honeywell indemnity removal benefits .

Financial Results

Consolidated Performance (actuals)

MetricQ1 2025Q2 2025Q3 2025
Net Revenue ($B)$1.770 $1.943 $1.864
Gross Margin (%)28.9% 29.3% 29.8%
GAAP Diluted EPS ($)$(0.02) $(5.59) $0.85
Adjusted EPS ($)$0.63 $0.66 $0.89
Adjusted EBITDA ($M)$168 $210 $229

Segment Breakdown

SegmentMetricQ3 2024Q2 2025Q3 2025
Products & SolutionsNet Revenue ($M)$645 $666 $661
Products & SolutionsAdjusted EBITDA ($M)$157 $167 $165
ADI Global DistributionNet Revenue ($M)$1,183 $1,277 $1,203
ADI Global DistributionAdjusted EBITDA ($M)$92 $107 $92

KPIs (Q3 2025)

KPIValue
P&S Gross Margin (%)43.0%
ADI Gross Margin (%)22.6%
ADI Average Daily Sales Growth (YoY)3%
ADI E-commerce Revenue Growth (YoY)3%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Revenue ($B)Q4 2025N/A (Q3 initiated only)$1.853–$1.893 Introduced
Adjusted EBITDA ($M)Q4 2025N/A$211–$225 Introduced
Adjusted EPS ($)Q4 2025N/A$0.42–$0.52 Introduced
Net Revenue ($B)FY 2025$7.45–$7.55 $7.43–$7.47 Lowered
Adjusted EBITDA ($M)FY 2025$845–$885 $818–$832 Lowered
Adjusted EPS ($)FY 2025$2.75–$2.87 $2.57–$2.67 Lowered
Adjusted Cash from Ops ($M)FY 2025$405–$435 $410–$450 Raised
Non-GAAP AssumptionsQ4 2025D&A $51M; Interest $38M; SBC $15M D&A $52M; Interest $48M; SBC $15M Updated

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 2025)Trend
Tariffs/MacroTariff mitigation effective; cautious macro; USMCA exemptions for Mexico; price pass-through; organic growth across segments Continued mitigation; no material tariff impact to demand; rate cuts uncertain Stable mitigation; limited demand impact
ADI ERP ImplementationPlanned for H2; impact contemplated; modern platform to enhance pricing/cross-sell/digital Temporary headwinds: store closures, process issues; “few points” of lost revenue growth; $15M cost increase split Q3/Q4; collections improving; pipeline at record levels Short-term drag; improving into Q4
HVAC Refrigerant TransitionEmerging disturbance; HVAC channel flat-to-slightly down; position improving via products Softer residential HVAC; distributor inventory/cash constraints; expected normalization by Q1–mid 2026 Transitory headwind; expected to fade
Product PerformanceFocusPRO thermostats; First Alert SC5 launch; strong retail/OEM/ED channels ElitePRO/X8S premium thermostats launched; SC5 demand strong; continued cadence of new security/water/IAQ products Broadening portfolio; pricing/mix accretive
Separation Plan (ADI/P&S)Announced intention to spin ADI; synergy progress with Snap One CEOs named for each company at separation; completion expected H2 2026 Advancing preparations
2026 OutlookN/AInitial view: organic revenue and Adjusted EBITDA above current Street estimates Positive bias vs consensus
ADI E-commerce/Exclusive BrandsE-commerce +19% YoY (organic) in Q2; Exclusive Brands +32% (organic) E-commerce +3% YoY; Exclusive Brands +3% YoY; cross-selling Snap One brands accretive to margin Still accretive; growth moderated

Management Commentary

  • Strategic posture: “Resideo demonstrated solid execution…Adjusted EBITDA was a record high…despite incremental macro and operational headwinds…record high adjusted EPS exceeded the high end of our outlook range due primarily to higher net income associated with terminating the Honeywell Indemnification Agreement.” — CEO Jay Geldmacher .
  • Product roadmap: “Elite Pro premium smart thermostats…largest touch screens in their class…powered by our ProIQ services…we have conviction to continue introducing differentiated new products across our connected home portfolio.” — P&S President Tom Surran .
  • ADI platform modernization: “ERP deployment sets ADI up for future growth and margin expansion…enhancements expected to deliver cross selling, optimize pricing management and enhance digital user experiences.” — ADI President Rob Aarnes .

Q&A Highlights

  • HVAC headwinds: Management views impact as transitory; normalization expected by end of Q1/mid-year 2026; strong positioning with FocusPRO and ElitePRO across price points .
  • ERP quantification: ~$15M incremental SG&A/R&D impact split ~half Q3/~half Q4; revenue impact greater in Q3 but not significantly; collections and order rates recovering in October; pipeline at record levels .
  • Margin trajectory: Double-digit ADI operating margin targeted over 3–5 years; P&S operating margin expansion of 300–500 bps over 3–5 years seen as achievable, subject to standalone allocations post-separation .
  • 2026 framing: Starting point adds ~$70M Adjusted EBITDA benefit from Honeywell indemnity removal plus reversal of transitory impacts; initiatives (product launches, ERP benefits, omni-channel, Snap synergies) support exceeding consensus .
  • Control4/Snap One: Control4 OS (X4) and related portfolio will remain with ADI to drive ecosystem synergies and product rejuvenation .

Estimates Context

MetricQ1 2025 Estimate*Q1 2025 ActualQ2 2025 Estimate*Q2 2025 ActualQ3 2025 Estimate*Q3 2025 Actual
Revenue ($B)$1.736 [*]$1.770 $1.823 [*]$1.943 $1.878 [*]$1.864
Primary EPS ($)$0.254 [*]Adj EPS $0.63 $0.323 [*]Adj EPS $0.66 $0.57 [*]Adj EPS $0.89
EPS Normalized ($)$0.307 [*]Adj EPS $0.63 $0.54 [*]Adj EPS $0.66 $0.71 [*]Adj EPS $0.89
EBITDA ($M)$157 [*]Adjusted EBITDA $168 $179 [*]Adjusted EBITDA $210 $230 [*]Adjusted EBITDA $229

Values retrieved from S&P Global*. Note: Company-reported Adjusted EBITDA may differ in definition from SPGI “EBITDA” consensus.

  • Q3: Slight revenue miss vs consensus; significant EPS beat; Adjusted EBITDA in-line. Drivers: P&S margin efficiency; ADI margin accretive activities (cross-selling exclusive brands; e-commerce mix) offset by ERP-related costs; HVAC market disruption impacted top line .

Key Takeaways for Investors

  • Margin story intact: Structural efficiency (P&S) and mix/pricing (ADI) continue to lift margins; track gross margin trajectory and segment Adjusted EBITDA in Q4 as ERP headwinds abate .
  • Short-term setup: Q4 guide embeds residual ERP/HVAC impacts; watch ADI order rate normalization and collections recovery through quarter-end .
  • 2026 upside bias: Management preliminarily sees organic revenue and Adjusted EBITDA above current Street estimates; Honeywell indemnity removal adds ~$70M annual EBITDA headroom vs 2025 run-rate .
  • Spin catalyst: Separation progressing with named CEOs; expected H2 2026; potential for rerating via clearer segment narratives and targeted capital allocation .
  • Product cadence supports pricing/mix: ElitePRO/X8S thermostats, SC5 detectors, and broader connected portfolio drive retail/OEM strength; monitor retail sell-through and OEM bookings .
  • ADI platform modernization: New ERP/digital stack to enhance pricing, cross-sell, and customer experience; expect normalized growth/margin capture into 2026 .
  • Risk monitors: Tariff policy changes, residential HVAC normalization timing, and execution on ERP stabilization/separation planning .