Resideo Technologies, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Resideo achieved record net revenue, adjusted EBITDA, and adjusted EPS in Q2 2025, with all metrics exceeding outlook ranges.
• ADI's integration of Snap One is progressing well and ahead of schedule.
• Strong demand for new products like Honeywell Home FocusPRO thermostats and First Alert connected detectors.
• Tariff mitigation actions have been effective, and the company remains agile in a dynamic macroeconomic environment.
• Both business segments have pipelines of new products for the second half of 2025.

Segment Performance

• ADI Global Distribution: Reported net revenue grew 33% year-over-year in Q2 2025, with 10% organic growth excluding Snap One acquisition and currency impact. Including Snap One, total ADI net revenue grew 9% year-over-year. Organic revenue growth was driven by commercial customer strength across product categories and digital channel growth. E-commerce net revenue grew 19% year-over-year, and Exclusive Brands organic net revenue increased 32% year-over-year. ADI's gross margin was 22.2%, up 280 basis points year-over-year.
• Products & Solutions: Net revenue grew 6% year-over-year, with 5% organic growth. Revenue growth was seen in electrical distribution, retail, and OEM channels, while HVAC and security channels faced challenges. Gross margin was 42.9%, up 160 basis points year-over-year, driven by efficient factory utilization and USMCA compliant sourcing.

Guidance

• Raised 2025 outlook: Total company net revenue expected to be in the range of $7.45 billion to $7.55 billion; adjusted EBITDA in the range of $845 million to $885 million; fully diluted earnings per share in the range of $2.75 to $2.87; cash from operations excluding Honeywell termination payment in the range of $405 million to $435 million.
• Third quarter 2025 outlook: Total company net revenue in the range of $1.85 billion to $1.90 billion; adjusted EBITDA in the range of $220 million to $240 million; fully diluted earnings per share in the range of $0.70 to $0.76.
• Adjusted EBITDA to benefit by $35 million in each of the third and fourth quarters due to the terminated indemnification agreement.

Risks

• Dynamic macroeconomic environment, including ongoing U.S. administration tariff discussions.
• Impact of shifting ADI's ERP system implementation from Q2 to Q3 2025.
• Dependence on USMCA tariff exemptions for products manufactured in Mexico.

Question and Answer

Q: Strong organic performance at ADI, impact of Snap One.

A: Rob Aarnes stated 1-2% of ADI's 10% organic growth was from tariff price increases. Snap One's performance is flat compared to ADI's organic growth, with the Snap business holding steady relative to ADI's organic growth.

Q: Margins at P&S, future margins.

A: Thomas Surran mentioned continued margin improvement expected, aiming for 45%-50% over time, driven by new products, manufacturing efficiency, and product mix.

Q: Tariffs, ability to push back on suppliers.

A: Robert Aarnes said the company is able to push back on suppliers, buy ahead inventory, and get suppliers to absorb part of tariffs, effectively mitigating tariff impacts.

Q: M&A, future opportunities.

A: Robert Aarnes indicated Resideo continues to look at M&A opportunities, focusing on adjacent space categories, Pro AV, datacom, and filling out product portfolios; Jay Geldmacher and Thomas Surran also noted M&A is part of both businesses' strategic plans.