REZI

Leadership and Corporate Updates

• Outgoing CEO Jay Geldmacher was recognized for six years of service, leading through two major acquisitions, the ADI spinoff, and volatile market conditions, building a strong company culture and stakeholder relationships.
• Shane Harrison was announced as Resideo's next CFO, joining September 1, with extensive financial, strategic, and execution experience from prior roles.
• The ADI Global Distribution spinoff was completed on August 3, 2026. Starting Q3 2026, ADI will be classified as discontinued operations for all prior periods. Post-spinoff, Resideo operates as a pure-play building technologies company, with ADI remaining a key external partner.

Operational Achievements

• Resideo exceeded the high end of its prior Q2 2026 outlook ranges for all metrics at both the consolidated and segment levels.
• P&S delivered the 13th consecutive quarter of year-over-year gross margin expansion, driven by volume increases, favorable manufacturing and supply chain variances, and tariff refunds, partially offset by inflationary input costs.
• New premium products (including the Honeywell Home Elite Pro smart thermostat, combination smoke/CO detectors, and new dehumidification/water filtration products) have outperformed adoption expectations and increased Resideo's penetration in high-value market segments.
• Channel inventory across most core product categories remains healthy, with only a modest sequential increase in residential HVAC channel inventory.

Strategic Priorities

• Focus on higher-margin branded product lines, with a planned exit from low-margin unbranded OEM business that conflicts with the company's own branded offerings.
• Accelerate new product introduction (NPI) with shorter development cycles and a robust product pipeline, including upcoming launches of a new global smoke/CO detector platform, video surveillance, and intrusion security products in H2 2026.
• Continued strategic optimization of global manufacturing operations, including footprint consolidation, product platform reconfiguration (reducing product line complexity), and efficiency improvements to reduce product costs and expand margins over the long term.

• This is the first standalone guidance for Resideo post-ADI spinoff, with full year 2026 guidance set for revenue of $2.9 to $2.95 billion and adjusted EBITDA of $605 to $625 million. Guidance reflects ~3% year-over-year revenue growth for P&S, higher than analyst estimates of 2% that did not account for accurate standalone base comparisons.
• Q3 2026 standalone guidance is revenue of $705 to $730 billion and adjusted EBITDA of $145 to $155 million. EPS and operating cash flow guidance will be added after the post-closing cash adjustment for the ADI separation is completed, and will be provided with the Q3 2026 earnings release.
• Full year guidance incorporates an expected $40 to $50 million revenue headwind in H2 2026 from lower volumes with a large OEM security customer, and includes ~$80 million in full-year standalone corporate costs.
• Gross margin is expected to face a slight headwind in H2 2026, concentrated in Q3, as faster-than-expected input cost inflation outpaces the impact of previously implemented price increases; most inflation pressure will be offset by pricing by the end of the year.
• No material additional tariff costs or material future tariff refunds are expected for the remainder of 2026.

Consolidated Resideo (including ADI prior to spinoff): Total Q2 2026 revenue grew 2% year-over-year to just under $2 billion, a new quarterly record. Total adjusted EBITDA grew 19% year-over-year to $249 million, also a new quarterly record, including a $27 million favorable impact from tariff refunds primarily received by ADI. Adjusted earnings per share grew 26% year-over-year to 83 cents.

ADI Global Distribution Segment: ADI will report its full Q2 2026 results and outlook on its standalone earnings call tomorrow; no detailed segmented financials were shared on this call. As a standalone company post-spinoff, full-year 2026 sales from Resideo to ADI are projected to be approximately $175 million.

Products and Solutions (P&S) Segment: Revenue grew 4% year-over-year, including a 35 basis point favorable currency impact, accounting for 100% of Resideo's standalone revenue post-spinoff. By channel: Retail grew strongly on higher volumes of higher-value products; OEM Combustion (Energy) grew 7th consecutive quarter, driven by demand for higher-priced products in EMEA; HVAC Distribution returned to year-over-year growth, led by strong adoption of the Honeywell Home Elite Pro smart thermostat; Electrical Distribution grew year-over-year on volume, driven by demand for BRK non-connected safety products; Security Distribution revenue was flat year-over-year amid soft existing home security installation demand; OEM Security sales were down slightly year-over-year as expected, aligned with the company's strategy to focus on higher-margin branded business. P&S gross margin was 43.6%, up 70 basis points year-over-year and up 100 basis points sequentially. P&S adjusted EBITDA grew 6% year-over-year, driven by higher gross profit dollars. R&D investment holds steady at approximately 5% of P&S segment revenue.

• Persistently soft residential macroeconomic conditions, including low existing home sales and stagnant new home construction, which dampen demand for residential building technology products.
• Faster-than-expected input cost inflation for key components including memory, metals, semiconductors, printed circuit boards, and shipping, driven by dynamic global market conditions.
• Planned volume reductions from a large OEM security customer create a material near-term revenue headwind in H2 2026.
• Forward-looking results are subject to additional uncertainties from the post-spinoff transition, including finalization of post-closing separation adjustments.

Q: An analyst asked if the math of 2% year-over-year standalone P&S revenue growth for 2026 (down from prior whole-company guidance of ~5% growth) was correct, and why guidance would be downgraded after a strong Q2 beat. What is driving a softer second half? / A: Management said the analyst's growth calculation was incorrect, with actual projected standalone P&S growth coming in at almost 3% year-over-year, in line with prior long-term expectations. The only material change to the H2 outlook is the expected volume reduction from a large OEM security customer, which arose mid-year and is driven by the customer's independent strategic decisions, not broader market weakness. Most other channels are still expected to deliver year-over-year growth in H2. The analyst also asked about gross margin trajectory through H2, and management replied that the largest input cost pressure will hit in Q3 before price increases fully catch up, so 14 consecutive quarters of gross margin expansion is not guaranteed but the impact will be modest.