Resideo Technologies, Inc. (REZI) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call shows strong financial performance with revenue and gross margin growth, despite a decline in EPS due to one-off costs. The Q&A reveals optimism about product launches and market stabilization, with no significant risks highlighted. New partnerships and acquisitions are seen as synergistic, and guidance indicates stronger growth ahead. Given the market cap, a positive stock price movement of 2% to 8% is expected over the next two weeks.
Key Financial Performance
Net Revenue (Full Year 2025) Approximately $7.5 billion, growing 11% year-over-year. Growth attributed to strong demand across multiple channels and improved operational efficiency.
Adjusted EBITDA (Full Year 2025) $833 million, up 20% year-over-year. Growth driven by operational efficiency and favorable product mix.
Adjusted Earnings Per Share (Full Year 2025) $2.68, growing 17% year-over-year. Increase due to higher net income and operational improvements.
Adjusted Cash Provided by Operations (Full Year 2025) $453 million, up 2% year-over-year. Growth attributed to strong cash collections and timing of payments.
Products & Solutions Organic Net Revenue (Full Year 2025) Grew 4% year-over-year. Growth driven by strong volume demand for safety products and increased prices for OEM products.
Products & Solutions Gross Margin (Full Year 2025) Expanded by 110 basis points year-over-year. Improvement due to operational efficiency.
ADI Organic Net Revenue (Full Year 2025) Grew 3% year-over-year despite three fewer selling days. Growth driven by all product categories and favorable product mix.
ADI Gross Margin (Full Year 2025) Expanded by 200 basis points year-over-year. Improvement due to favorable product mix and sales of lower-cost inventory.
Net Revenue (Q4 2025) $1.895 billion, up 2% year-over-year. Growth driven by volume and price increases across product families and sales channels.
Gross Margin (Q4 2025) 29.6%, up 110 basis points year-over-year. Increase driven by operating efficiencies and favorable price and mix.
Adjusted Earnings Per Share (Q4 2025) $0.50, down from $0.59 in the prior year period. Decrease due to higher interest expenses related to debt incurred for terminating the Honeywell Indemnification agreement.
Adjusted EBITDA (Q4 2025) $226 million, up 21% year-over-year. Increase driven by higher net income and a $35 million benefit from the terminated Indemnification agreement.
Cash Provided by Operating Activities (Q4 2025) $299 million, higher than anticipated. Increase due to strong cash collections and timing of payments.
Products & Solutions Net Revenue (Q4 2025) Grew 6% year-over-year. Growth driven by volume and price increases, offset by soft HVAC channel performance.
Products & Solutions Gross Margin (Q4 2025) 41%, up 20 basis points year-over-year. Improvement due to better factory utilization.
ADI Net Revenue (Q4 2025) Declined 0.5% year-over-year. Decline due to lower video surveillance sales, partially offset by growth in commercial security and professional audio visual categories.
ADI Gross Margin (Q4 2025) 22.7%, up 110 basis points year-over-year. Improvement due to favorable price and mix.
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Operating Highlights
New Product Introductions: 10 major new products were introduced in 2025, including the First Alert SC5 connected smoke and carbon monoxide detector and the Honeywell Home ElitePRO Thermostat. These products have received positive customer reception and are building demand momentum for 2026.
Product Adoption: Sales of new products like the Honeywell Home Focus Pro Thermostat and First Alert SC5 connected smoke and carbon monoxide detector showed increasing adoption in 2025.
Revenue Growth: Net revenue reached $7.5 billion in 2025, growing 11% year-over-year. Products & Solutions grew organic net revenue by 4%, and ADI grew organic net revenue by 3%.
Channel Performance: Retail channel achieved record high revenue in Q4 2025. Electrical distribution channel also saw record high annual revenue, driven by demand for BRK branded safety products.
Operational Efficiency: Gross margin expanded by 110 basis points year-over-year for Products & Solutions and 200 basis points for ADI in 2025. ADI achieved operational stabilization and completed ERP implementation.
Digital Platform Investments: E-commerce net revenue grew 3% year-over-year, with higher after-business-hours revenue and improved conversion rates.
Business Separation: Resideo is progressing towards a business separation anticipated in the second half of 2026, aiming to unlock significant shareholder value.
Synergy Achievement: Snap One integration achieved $75 million in synergies, 18 months ahead of schedule, with plans for further synergies in the next 18 months.
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Risk or Challenges
Geopolitical Landscape: The global macroeconomic environment is described as uncertain due to geopolitical factors, which could impact the company's operations and financial performance.
Tariff and Fiscal Policy Uncertainty: Potential changes in tariffs and fiscal policies, including the recent Supreme Court ruling, could negatively impact the company's costs and operations. The company assumes exemptions under USMCA and for certain electronic goods will continue, but this is not guaranteed.
U.S. Residential Housing Market: The U.S. residential housing market is expected to show little growth, which could limit demand for the company's products in this sector.
Workforce Dynamics: Societal dynamics impacting the workforce could negatively affect GDP growth and, consequently, the company's commercial market performance.
Video Surveillance Category Decline: A decline in the video surveillance product category has been noted, which could impact revenue growth in the near term.
Interest Expense: Higher interest expenses related to incremental debt incurred to terminate the Honeywell Indemnification agreement have negatively impacted adjusted earnings per share.
Separation-Related Costs: Uncertainty around the specific amounts and timing of separation-related costs could impact cash flow and financial planning.
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Guidance & Outlook
2026 Financial Outlook: The company expects total net revenue to be in the range of $7.8 billion to $7.9 billion, with adjusted EBITDA between $935 million and $985 million, and diluted earnings per share ranging from $3 to $3.20.
First Quarter 2026 Guidance: Net revenue is projected to be between $1.866 billion and $1.890 billion, adjusted EBITDA between $193 million and $207 million, and diluted earnings per share between $0.58 and $0.62.
Market Assumptions for 2026: The U.S. residential housing market is expected to show little growth, while the repair and remodel market is forecasted to grow at a low single-digit percentage. The commercial market is assumed to have low single-digit U.S. GDP growth.
Gross Margin Expectations: The company anticipates modest total gross margin expansion year-over-year, with Products & Solutions expected to have greater gross margin expansion than ADI.
Revenue Growth by Segment: Both business segments are expected to achieve year-over-year net revenue growth in 2026, with ADI forecasted to grow at a higher rate than Products & Solutions.
Operational and Financial Strategies: The company plans to drive greater operating leverage in 2026 while maintaining R&D expenses as a similar percentage of revenue to the second half of 2025's run rate.
Separation Activities: The anticipated business separation is expected to occur in the second half of 2026, with further details to be provided in the coming months.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Can you provide more detail on the HVAC inventory situation and ERP upgrades?
A:The ERP system implementation is fully complete and operational. HVAC inventory levels have been adjusted by large distributors to a new normal, and most of the inventory adjustment is behind them. The HVAC market is expected to stabilize by the end of Q1, and the company has executed well in this market despite challenges.
Q:What would growth and margins for ADI have been in the quarter if normalized for ERP upgrade costs or disruption?
A:The video surveillance category, a significant part of ADI's business, experienced a temporary decline but is now recovering. Most commercial security categories were up year-over-year in Q4, and the company expects to return to mid- to high single-digit growth as the video surveillance pipeline improves.
Q:Why does the 1Q revenue and adjusted EBITDA guidance show higher growth compared to the full-year guidance?
A:The higher growth in Q1 is influenced by more selling days and a stronger Q1 performance last year compared to the second half. The back half of the year is expected to be stronger on a days-adjusted basis.
Q:How do you view the growth potential of P&S compared to ADI, especially with new product launches and housing market conditions?
A:The company is optimistic about new product launches and their product pipeline. However, they remain cautious due to uncertainties in the macro environment, tariffs, and supply chain. Adoption of new products in the building products market is slower, but the company is well-positioned for growth as market conditions improve.
Q:Can you provide more details on the spin-off, including timing and milestones?
A:The spin-off is progressing as planned, with an expected completion in the second half of the year. The next milestone is filing a public Form 10, after which more information will be available. There are no surprises or impediments so far.
Q:Are there any additional significant costs expected for the ERP system?
A:No, there are no additional significant costs expected for the ERP system.
Q:Why is the company excited about the Snap One acquisition, and how is Control4 performing?
A:The Snap One acquisition is seen as complementary to ADI, with significant synergy potential. Despite a soft residential AV market, the company has accelerated synergies and plans to optimize operations and expand exclusive brand opportunities. Control4 has returned to growth with the launch of the new X4 operating system, and the company plans to release upgrades more frequently.
Q:What is the strategy for margin expansion while rolling out new products?
A:The company focuses on delivering high-quality, differentiated products efficiently while maintaining strong customer support and supply chain execution. They expect continued margin improvement, though not necessarily linear, as they introduce new products across various markets and adapt to market conditions.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the spin-off structure (e.g., 100% spin or 80% spin) and used general language to describe progress. Additionally, while they expressed excitement about Snap One and Control4, they did not provide detailed financial metrics or timelines for expected returns from these initiatives.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ADI decline
Alert SC
ERP
Global Head
Resideo Full
SC smoke
Snap
Thermostat
achievement
addition
availability
carbon monoxide
conviction
cycle
detail
highlight
hour
inventory level
measure
mix
monoxide detector
note
number product
platform
point improvement
product demand
product introduction
product sale
profitability
sale basis
sale channel
separation
smoke carbon
stabilization
synergy month
tailwind
video surveillance
REZI Transcript
Resideo Technologies, Inc. (REZI) Q4 2025 Earnings Call Transcript
Positive2-24
The earnings call shows strong financial performance with revenue and gross margin growth, despite a decline in EPS due to one-off costs. The Q&A reveals optimism about product launches and market stabilization, with no significant risks highlighted. New partnerships and acquisitions are seen as synergistic, and guidance indicates stronger growth ahead. Given the market cap, a positive stock price movement of 2% to 8% is expected over the next two weeks.
Resideo Technologies, Inc. (REZI) Q3 2025 Earnings Call Transcript
Unknown11-5
The earnings call reflects a mixed sentiment with some positive indicators like margin improvements and optimistic guidance, but also challenges such as ERP and HVAC headwinds, which are considered transitory. The Q&A section revealed management's confidence in overcoming these issues and maintaining guidance, which stabilizes sentiment. However, the significant cash used in operating activities and ERP-related costs counterbalance the positives. Given the market cap, the overall sentiment is neutral as the positives and negatives seem to balance each other out, suggesting a stock price movement within -2% to 2%.
Resideo Technologies, Inc. (REZI) Q2 2025 Earnings Call Transcript
Positive8-5
The earnings call highlights strong financial performance with a 22% YoY revenue increase and a 20% rise in adjusted EBITDA. Despite challenges in the security and HVAC channels, the company benefits from tariff mitigation, new product introductions, and strategic M&A. The Q&A session reveals strong demand in commercial sectors and a solid relationship with Google. The termination of the Honeywell agreement is a negative factor but is offset by optimistic future margin expectations and robust growth in ADI. Given the market cap, the stock is likely to experience a positive movement of 2% to 8%.
Resideo Technologies, Inc. (REZI) Q1 2025 Earnings Call Transcript
Positive5-6
The earnings call indicates strong financial performance with revenue and EPS growth, successful product launches, and effective acquisition integration. The reaffirmed full-year outlook and proactive tariff mitigation strategies are positive. Despite some uncertainties in the macroeconomic environment and tariff impacts, the company's strategic actions and optimistic guidance suggest a positive sentiment. The market cap indicates a moderate reaction, leading to a predicted stock price increase of 2% to 8%.
REZI Report
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