Financial Data and Key Metrics Changes - Resideo achieved record high net revenue of $1.94 billion, up 22% year over year, and 8% on an organic basis, excluding the impact of the SnapOne acquisition and a 1% favorable impact from currency [22][24] - Adjusted EBITDA reached a record $210 million, up 20% year over year, exceeding the high end of the outlook range [24] - Total company gross margin was 29.3%, up 120 basis points year over year, driven by margin-accretive activities at ADI and operational efficiencies at Products and Solutions [23] Business Line Data and Key Metrics Changes - Products and Solutions (P&S) reported net revenue growth of 6% year over year and 5% organic growth, with gross margin at 42.9%, up 160 basis points year over year [11][14] - ADI achieved 33% year over year growth in reported net revenue and 10% organic growth, with organic average daily sales also growing 10% year over year [16][22] - The integration of SnapOne is progressing well, contributing positively to Resideo's performance [20] Market Data and Key Metrics Changes - Demand for new products, including Honeywell Home Focus Pro thermostats and First Alert smoke detectors, remains strong across various sales channels [7][12] - The electrical distribution channel led revenue growth, while the HVAC channel experienced flat to slightly down revenue due to macroeconomic conditions [12][13] - The security channel saw a year-over-year decline primarily due to decreased sales from a large private label customer [13] Company Strategy and Development Direction - Resideo is raising its 2025 outlook, expecting total company net revenue to be in the range of $7.45 billion to $7.55 billion and adjusted EBITDA to be between $845 million and $885 million [27] - The company plans to introduce additional new products in air and comfort, security, and water categories to capitalize on current momentum [14] - Resideo announced plans to spin off its ADI business segment as an independent company, aiming to create significant value and refine strategic focus [29] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the market outlook, citing effective tariff mitigation actions and strong customer relationships despite price increases [8][9] - The company remains agile and well-prepared to react to new developments in a dynamic macroeconomic environment [9] - Management is confident in the continued execution and growth potential, supported by a strong pipeline of new products [6][10] Other Important Information - The company recorded a current liabilities balance of $1.625 billion related to the expected termination of the Honeywell Indemnification Agreement, resulting in a reported GAAP net loss [23] - The termination of the indemnification agreement is expected to benefit adjusted EBITDA by $35 million in the third and fourth quarters [26] Q&A Session Summary Question: Can you help us understand the organic growth in ADI? - Management indicated that 2% of the 10% organic growth in ADI was attributed to price increases due to tariffs, with strong demand across various categories [35][36] Question: What is the status of the SnapOne business? - Management stated that the SnapOne business is holding flat compared to the rest of ADI, with benefits from integration and scaling of exclusive brand products [38][40] Question: How are margins expected to evolve in P&S? - Management expects continued improvement in margins, aiming for a range of 45% to 50% over the long term, driven by new product introductions and operational efficiencies [58][59] Question: How is the company managing tariff impacts? - Management confirmed successful mitigation of tariff impacts through favorable supplier terms and dynamic pricing strategies [63] Question: What is the outlook for M&A? - Management remains open to M&A opportunities, particularly in adjacent categories and technology enhancements, while focusing on the integration of SnapOne [66][68]

Financial Data and Key Metrics Changes - Resideo reported record high net revenue of $1.94 billion, up 22% year over year and 8% on an organic basis, excluding the SnapOne acquisition impact [22][24] - Adjusted EBITDA reached a record $210 million, up 20% year over year, exceeding the high end of the outlook range [24] - Total company gross margin was 29.3%, up 120 basis points year over year, driven by margin-accretive activities at ADI and operational efficiencies at Products and Solutions [23] Business Line Data and Key Metrics Changes - The Products and Solutions segment achieved net revenue growth of 6% year over year and 5% organic growth, with gross margin at 42.9%, up 160 basis points year over year [11][14] - ADI reported 33% year over year growth in reported net revenue and 10% organic growth, with organic average daily sales also growing 10% year over year [16][22] - Exclusive Brands within ADI saw organic net revenue increase of 32% year over year, driven by successful cross-selling [19] Market Data and Key Metrics Changes - Demand for new products, such as Honeywell Home Focus Pro thermostats and First Alert SC5 detectors, remained strong across various sales channels [6][12] - The HVAC channel experienced flat to slightly down revenue due to macroeconomic softness and regulatory changes [13] - The security channel saw a year-over-year revenue decline primarily due to decreased sales from a large private label customer [13] Company Strategy and Development Direction - Resideo plans to spin off its ADI business segment as an independent company, aiming to create significant value and refine strategic focus [28] - The company is focused on introducing new products in air and comfort, security, and water categories to capitalize on current demand [14] - The integration of SnapOne is progressing well and is expected to enhance Resideo's product offerings and market position [20] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the market outlook, citing effective tariff mitigation actions and strong customer relationships despite price increases [8][10] - The company raised its 2025 outlook for total net revenue to a range of $7.45 billion to $7.55 billion and adjusted EBITDA to $845 million to $885 million [26] - Management highlighted the importance of maintaining operational agility to respond to dynamic market conditions [10] Other Important Information - The company recorded a current liabilities balance of $1.625 billion related to the termination of the Honeywell Indemnification Agreement, resulting in a reported GAAP net loss [23] - The company expects adjusted EBITDA to benefit from the removal of the $35 million quarterly payment to Honeywell following the termination of the indemnification agreement [24][25] Q&A Session Summary Question: Can you explain the organic growth performance from ADI? - Management indicated that 2% of the 10% organic growth was attributed to price increases due to tariffs, with strong demand in commercial security and other categories [34][35] Question: What is the status of the SnapOne business? - Management stated that SnapOne's performance is holding flat compared to the rest of the ADI business, with benefits from integration being realized [36][39] Question: How are you addressing headwinds in the security market? - Management acknowledged challenges with a large private label customer but emphasized ongoing engagement and potential for future growth [41][46] Question: What will happen to the legacy Control4 platform post-spin? - Management confirmed that the Control4 platform will remain with ADI, with plans to enhance the user experience and product offerings [50] Question: What are the future margin expectations for Products and Solutions? - Management indicated that margins could reach 45% to 50% over a longer period, driven by product value and operational efficiencies [56][57] Question: How is the company approaching M&A opportunities? - Management noted that M&A remains a strategic focus, particularly in adjacent categories and technology opportunities [64][66]

Q2'25 Financial Highlights - Resideo achieved record high net revenue of $1.94 billion, a 22% year-over-year increase[11] - Adjusted EBITDA reached $210 million, up 20% year-over-year[11] - Adjusted EPS was $0.66, a 6% increase compared to the previous year[11] - Cash provided by operating activities totaled $200 million, driven by strong sales and collections[11] Segment Performance - Products & Solutions (P&S) revenue was $666 million, a 6% year-over-year increase[14] - P&S Adjusted EBITDA was $167 million, up 7% year-over-year[14] - ADI Global Distribution revenue reached $1.277 billion, a 33% year-over-year increase[14] - ADI Adjusted EBITDA was $107 million, a 39% increase compared to the previous year[14] Strategic Initiatives - Resideo entered into an agreement with Honeywell to terminate the Indemnification and Reimbursement Agreement, incurring an $882 million expense in Q2'25[12,14] - A one-time cash payment of $1.59 billion will be made to Honeywell in Q3 2025 to eliminate future obligations under the Indemnification Agreement[63] - Resideo is planning to separate into two independent companies to enhance strategic alignment and shareholder value[61,63] Outlook - Resideo raised its 2025 outlook, projecting total net revenue between $7.45 billion and $7.55 billion[47] - Adjusted EBITDA for 2025 is expected to be in the range of $845 million to $885 million[47] - Adjusted EPS for 2025 is projected to be between $2.75 and $2.87[47]

[Introduction](index=1&type=section&id=Introduction) [Parties to the Agreement](index=1&type=section&id=Parties%20to%20the%20Agreement) This agreement, dated July 30, 2025, is between Honeywell and Resideo entities, including RIH and guarantors, to terminate a prior Indemnification and Reimbursement Agreement - The agreement is dated **July 30, 2025**[2](index=2&type=chunk) - Key parties include Honeywell International Inc., Resideo Technologies, Inc., Resideo Intermediate Holding Inc. (RIH), and various guarantors[2](index=2&type=chunk) [Background and Purpose](index=1&type=section&id=Background%20and%20Purpose) The agreement terminates an existing Indemnification and Reimbursement Agreement, obligating RIH to make periodic payments for environmental liabilities, in exchange for a one-time cash payment of **$1.59 billion** - Honeywell and RIH were parties to an Indemnification and Reimbursement Agreement (dated October 14, 2018, and subsequently amended five times) for certain Honeywell environmental remediation liabilities[3](index=3&type=chunk) - RIH was required to make periodic indemnification and reimbursement payments (Indemnification Payments Obligation) to Honeywell under the prior agreement, guaranteed by the Guarantors[3](index=3&type=chunk) - The parties desire to terminate the Indemnification and Reimbursement Agreement and Guarantees in consideration of a one-time cash payment[3](index=3&type=chunk) Termination Payment | Item | Value (USD) | | :--- | :---: | | One-time cash payment | $1,590,000,000.00 | | Purpose | In lieu of all future payments under the Indemnification and Reimbursement Agreement | [Termination Payment and Agreement Details](index=1&type=section&id=Termination%20Payment%20and%20Agreement%20Details) [Termination Payment Terms](index=1&type=section&id=Termination%20Payment%20Terms) The **$1.59 billion** Termination Payment is contingent on the Indemnification Agreement's termination and must be wired by RIH to Honeywell on the Closing Date, tied to debt financing by an initial Outside Date of August 29, 2025 - The Termination Payment is contingent upon the IRA Termination[4](index=4&type=chunk) - RIH shall pay the Termination Payment by wire transfer of immediately available U.S. dollars to Honeywell[4](index=4&type=chunk) - The 'Closing Date' is the date of funding (or the first business day following funding) of the Debt Financing or Alternative Financing[4](index=4&type=chunk) Key Dates | Date Type | Date | | :--- | :--- | | Initial Outside Date | August 29, 2025 | | Extended Outside Date (if Closing not occurred) | October 30, 2025 | [Effect of Termination](index=2&type=section&id=Effect%20of%20Termination) Upon Honeywell's receipt of the Termination Payment, the Indemnification and Reimbursement Agreement and all related Guarantees will automatically terminate, releasing all parties from future liabilities, except for specific surviving sections related to confidentiality, tax treatment, and general miscellaneous provisions - Effective upon receipt of the Termination Payment, the Indemnification and Reimbursement Agreement and all Guarantees shall automatically terminate[6](index=6&type=chunk) - No party or its affiliates shall have any further liability or obligation under the terminated agreements, except for specific 'Surviving Sections' (Confidentiality, Certain Tax Treatment, and Article IV Miscellaneous, excluding Section 4.7)[6](index=6&type=chunk) - The Indemnification and Reimbursement Agreement and Guarantees remain in full force until the Termination Payment is fully received or if this Agreement is terminated[6](index=6&type=chunk) [Interim Payment Arrangements](index=2&type=section&id=Interim%20Payment%20Arrangements) RIH has made a **$35 million** Q3 2025 payment, while other future payments are suspended until Closing, where they are satisfied by the Termination Payment, or until termination, where they become payable with **5% annual interest** Quarterly Payment Made | Item | Amount (USD) | | :--- | :---: | | Quarterly Payment (Q3 2025) | $35,000,000 | | Status | Paid prior to the date of this Agreement | - From the date of this Agreement until Closing or termination, all other amounts payable by RIH or any Guarantor under the Indemnification and Reimbursement Agreement are suspended and tolled ('Tolled Amounts')[8](index=8&type=chunk) - If Closing occurs, no Tolled Amounts are payable; the Termination Payment satisfies all obligations[8](index=8&type=chunk) - If this Agreement terminates, RIH must pay all Tolled Amounts within two business days, plus interest at **5% per annum**[8](index=8&type=chunk) [Representations and Warranties](index=3&type=section&id=Representations%20and%20Warranties) [General Representations](index=3&type=section&id=General%20Representations) The parties reaffirm representations and warranties from the original Indemnification Agreement, with Resideo Parent, RIH, and Guarantors warranting no existing defaults under key credit agreements - Sections 4.2(a), (b), and (c) of the Indemnification and Reimbursement Agreement are restated and incorporated by reference[10](index=10&type=chunk) - Resideo Parent, RIH, and each Guarantor represent that no default or event of default has occurred or is continuing under the Indemnification and Reimbursement Agreement, the Current Credit Agreement, or any other Indebtedness[11](index=11&type=chunk) [Financing Commitments and Availability](index=3&type=section&id=Financing%20Commitments%20and%20Availability) Resideo Parent and RIH confirm a fully executed, binding Debt Commitment Letter is in effect, with no material breaches, ensuring financing availability for the Termination Payment by the Outside Date, and their payment obligation is not conditional on obtaining financing - Resideo Parent and RIH have delivered a true, complete, and correct copy of a fully executed Debt Commitment Letter and Fee Letter for the Debt Financing[12](index=12&type=chunk) - The Debt Financing Commitment is in full force and effect, legally binding, and enforceable[15](index=15&type=chunk) - No material breach or default exists under the Debt Financing Commitment, and no event has occurred that would prevent the Debt Financing from being available by the Outside Date[15](index=15&type=chunk) - Resideo Parent and RIH have no reason to believe they will be unable to satisfy conditions for funding or that the Debt Financing will not be available by the Outside Date, together with cash on hand, to pay the Termination Payment[15](index=15&type=chunk) - The obligations of Resideo Parent and RIH under this Agreement are not subject to any conditions regarding their ability to obtain financing for the Termination Payment[17](index=17&type=chunk) [Compliance with Agreements](index=5&type=section&id=Compliance%20with%20Agreements) Resideo Parent, RIH, and each Guarantor warrant that the execution and performance of this Agreement will not violate or breach any existing agreements or instruments, subject to obtaining required revolving and general consents as defined in the Debt Financing Commitment - Subject to receipt of 'Required Revolving Consent' and 'Required Consent' (as defined in the Debt Financing Commitment), the execution and performance of this Agreement will not result in a violation or breach of, or a default under, any agreement or instrument to which Resideo Parent, RIH, or any Guarantor is a party[18](index=18&type=chunk) [Financing Obligations](index=5&type=section&id=Financing%20Obligations) [Efforts to Secure Debt Financing](index=5&type=section&id=Efforts%20to%20Secure%20Debt%20Financing) Resideo Parent and RIH are obligated to use reasonable best efforts to consummate the Debt Financing by the Outside Date, including complying with, maintaining, and enforcing the Debt Financing Commitment, negotiating Financing Agreements, obtaining necessary consents, and satisfying all conditions - Resideo Parent and RIH shall use reasonable best efforts to consummate the Debt Financing on or before the Outside Date[19](index=19&type=chunk) - Efforts include complying with and enforcing the Debt Financing Commitment, negotiating Financing Agreements, obtaining 'Required Consent' and 'Required Revolving Consent', and satisfying all applicable conditions[19](index=19&type=chunk) - Resideo Parent and RIH shall inform Honeywell of the status of their efforts to arrange financing upon reasonable request[19](index=19&type=chunk) [Restrictions on Financing Modifications](index=5&type=section&id=Restrictions%20on%20Financing%20Modifications) Resideo Parent and RIH cannot amend the Debt Financing Commitment without Honeywell's consent if it reduces available cash, imposes new conditions, or impacts enforcement rights, with exceptions for syndication - Resideo Parent and RIH shall not amend, supplement, modify, replace, terminate, or reduce the Debt Financing Commitment without Honeywell's prior written consent if it would[20](index=20&type=chunk) - Reduce net cash proceeds below the Termination Payment amount (together with cash on hand)[20](index=20&type=chunk) - Impose new or additional conditions that could delay or prevent payment or make timely funding less likely[20](index=20&type=chunk) - Adversely impact enforcement rights against other parties to the Debt Financing Commitment[21](index=21&type=chunk) - Exceptions allow for adding lenders or making assignments in connection with syndication[21](index=21&type=chunk) [Alternative Financing Provisions](index=6&type=section&id=Alternative%20Financing%20Provisions) If Debt Financing becomes unavailable, Resideo Parent and RIH must promptly notify Honeywell and secure Alternative Financing with comparable terms that do not adversely affect the ability to pay the Termination Payment - If Debt Financing becomes unavailable, Resideo Parent and RIH must promptly notify Honeywell and use reasonable best efforts to obtain Alternative Financing[22](index=22&type=chunk) - Alternative Financing terms must not impose new or expanded conditions that materially and adversely affect the ability to pay the Termination Payment[22](index=22&type=chunk) - Resideo Parent and RIH are not required to pay fees or interest rates in excess of those contemplated by the original Debt Commitment Letter (including flex provisions) or agree to materially less favorable terms[22](index=22&type=chunk) [Financing Status Notifications](index=6&type=section&id=Financing%20Status%20Notifications) Resideo Parent and RIH must promptly notify Honeywell of any material breach, default, or termination related to Debt Documents or financing availability, excluding legally privileged information - Resideo Parent and RIH must give Honeywell prompt written notice (within two business days) of[23](index=23&type=chunk) - Any material breach or default by any party to the Debt Documents[23](index=23&type=chunk) - Belief that all or part of the Debt Financing will not be obtained[23](index=23&type=chunk) - Receipt of any written notice regarding breach, default, termination, or repudiation of Debt Documents[24](index=24&type=chunk) - Any expiration or termination of any Debt Commitment Letter[24](index=24&type=chunk) - Information subject to attorney-client or other legal privilege is not required to be shared[24](index=24&type=chunk) [Financing Not a Condition](index=7&type=section&id=Financing%20Not%20a%20Condition) Resideo Parent and RIH acknowledge and agree that their obligations under this Agreement, including the payment of the Termination Payment, are not conditional on obtaining financing, and compliance with financing-related sections does not relieve them of their payment obligations - The obligations of Resideo Parent and RIH under this Agreement are not subject to any conditions regarding obtaining financing[25](index=25&type=chunk) - Compliance or non-compliance with Section 5 (Financing) does not relieve Resideo Parent or RIH of their obligation to pay the Termination Payment when due, regardless of financing availability[25](index=25&type=chunk) [Confidentiality and Public Disclosure](index=7&type=section&id=Confidentiality%20and%20Public%20Disclosure) [Confidentiality of Agreement](index=7&type=section&id=Confidentiality%20of%20Agreement) This Agreement and related discussions are confidential and cannot be used or referred to without prior written consent, except for disclosures required by law (with prior review opportunity for other parties) or to affiliates and Debt Financing Sources on a strictly confidential basis - This Agreement and related discussions are confidential and may not be used, circulated, quoted, or referred to without prior written consent of the other Parties[26](index=26&type=chunk) - Exceptions include disclosures required by applicable Law (with reasonable opportunity for review and comment) or to affiliates and Debt Financing Sources on a strictly confidential basis[26](index=26&type=chunk) [Public Announcement Cooperation](index=7&type=section&id=Public%20Announcement%20Cooperation) Parties will cooperate on public announcements regarding this Agreement, requiring mutual consent for statements unless legally mandated, and will review each other's press releases and Form 8-K filings - Parties shall cooperate in good faith regarding public announcements and disclosures concerning this Agreement, requiring prior written consent unless legally required[27](index=27&type=chunk) - Resideo Parent intends to issue a press release and investor presentation, and both Honeywell and Resideo Parent will file a Current Report on Form 8-K[28](index=28&type=chunk) - Each party will provide the other a reasonable opportunity to review and comment on such public disclosures[28](index=28&type=chunk) [Termination of This Agreement](index=8&type=section&id=Termination%20of%20This%20Agreement) [Conditions for Termination](index=8&type=section&id=Conditions%20for%20Termination) This Agreement may terminate by mutual consent, by Honeywell if Closing is delayed beyond August 29, 2025, by Resideo Parent if delayed beyond October 30, 2025 (with Reinstatement Payment), or if a court order permanently restrains transactions, provided the terminating party is not in breach - This Agreement may be terminated prior to Closing by[30](index=30&type=chunk) - Mutual written agreement of Honeywell and Resideo Parent[30](index=30&type=chunk) - Honeywell, if Closing has not occurred by August 29, 2025 (or later, with two business days' notice)[30](index=30&type=chunk) - Resideo Parent, if Closing has not occurred by October 30, 2025 (with two business days' notice and Reinstatement Payment)[31](index=31&type=chunk) - Either party, if a final and non-appealable court order permanently restrains the transactions, provided the terminating party is not in breach[31](index=31&type=chunk) - Neither party can terminate if their own breach caused the failure to consummate transactions[30](index=30&type=chunk) [Procedure and Effect of Termination](index=8&type=section&id=Procedure%20and%20Effect%20of%20Termination) Upon termination, this Agreement becomes void, releasing parties from liability except for specific continuing obligations, and the original Indemnification Agreement and Guarantees remain in force, making any Tolled Amounts plus interest payable - Upon termination of this Agreement, it becomes void, and there is no liability, except for 'Continuing Obligations' (e.g., Section 3, Section 6, Section 7(b), Section 7(c), and specific subsections of Section 8)[30](index=30&type=chunk) - Any liability for breach of this Agreement prior to termination (or for surviving provisions) is not impacted[32](index=32&type=chunk) - If this Agreement terminates for any reason, the Indemnification and Reimbursement Agreement and Guarantees remain in full force and effect[32](index=32&type=chunk) - RIH shall pay any Tolled Amounts plus interest if this Agreement terminates[32](index=32&type=chunk) [Exclusive Remedy: Reinstatement Payment](index=9&type=section&id=Exclusive%20Remedy%3A%20Reinstatement%20Payment) If this Agreement terminates due to delayed Closing and unavailable Debt Financing, Resideo Parent must pay Honeywell a **$100 million** Reinstatement Payment as liquidated damages, serving as the sole remedy for Honeywell, except for pre-termination breaches - If this Agreement is terminated due to failure of Closing by the specified dates (Section 7(a)(2)) and Debt Financing has not been obtained, Resideo Parent shall pay Honeywell the 'Reinstatement Payment'[33](index=33&type=chunk) Reinstatement Payment Details | Item | Value (USD) | | :--- | :---: | | Reinstatement Payment Amount | $100,000,000 | | Payment Trigger | Termination under Section 7(a)(2) when Debt Financing not obtained | | Payment Timing (Honeywell termination) | Within 5 Business Days | | Payment Timing (Resideo Parent termination) | Upon or prior to termination | - The Reinstatement Payment is deemed liquidated damages and the sole and exclusive remedy for Honeywell against Resideo Related Parties, except for pre-termination breaches or Continuing Obligations[33](index=33&type=chunk) - Resideo Parent is not required to pay the Reinstatement Payment more than once[33](index=33&type=chunk) [Miscellaneous Provisions](index=9&type=section&id=Miscellaneous%20Provisions) [Assignment and Amendments](index=9&type=section&id=Assignment%20and%20Amendments) Neither this Agreement nor its rights or obligations can be assigned without prior written consent, and any waivers, amendments, or modifications require written agreement signed by all parties - Neither this Agreement nor any rights or obligations under it shall be assigned without the prior written consent of the other Parties[34](index=34&type=chunk) - No provisions shall be deemed waived, amended, supplemented, or modified unless in writing and signed by each Party[35](index=35&type=chunk) [Specific Performance and Default](index=10&type=section&id=Specific%20Performance%20and%20Default) Honeywell is entitled to specific performance for breaches, including payment of the Termination Payment with interest, but not to force Closing if financing is unavailable; termination under certain conditions constitutes an event of default under the original Indemnification Agreement - Honeywell is entitled to specific performance or other equitable relief to prevent breaches and enforce the terms of this Agreement, including payment of the Termination Payment with **10% annual interest** from the date of breach notification[39](index=39&type=chunk) - Parties acknowledge that irreparable damage would occur from breaches and monetary damages are inadequate[39](index=39&type=chunk) - Honeywell is not entitled to specific performance to cause the Closing if this Agreement is terminable due to the Debt Financing not being obtained[39](index=39&type=chunk) - If this Agreement terminates under Section 7(a)(2) (other than due to Debt Financing unavailability or Honeywell's breach), an event of default under Section 2.12(a)(i) of the Indemnification and Reimbursement Agreement shall be deemed to have occurred[37](index=37&type=chunk) [Tax Treatment](index=10&type=section&id=Tax%20Treatment) The Termination Payment will be treated for U.S. federal income tax purposes as made prior to the Homes distribution, with Resideo Parent and its affiliates not claiming deductions (except interest), and Honeywell being the sole party entitled to related deductions - The Termination Payment shall be treated for U.S. federal income tax purposes as being made immediately prior to the distribution of Homes by Honeywell[38](index=38&type=chunk) - Resideo Parent, its Affiliates, and Guarantors shall not claim any deduction for U.S. federal income tax purposes in respect of the Termination Payment, other than any portion treated as interest[38](index=38&type=chunk) - Honeywell shall be the only person entitled to claim deductions for U.S. federal, state, or local income tax purposes in respect of any Losses relating to Claims or the Termination Payment[38](index=38&type=chunk) [Dispute Resolution and Governing Law](index=11&type=section&id=Dispute%20Resolution%20and%20Governing%20Law) Provisions for dispute resolution, governing law, jurisdiction, waiver of jury trial, court-ordered interim relief, and interpretation from the Indemnification and Reimbursement Agreement are incorporated by reference into this Agreement - Sections 4.3 (Dispute Resolution), 4.4 (Governing Law; Jurisdiction), 4.5 (Waiver of Jury Trial), 4.6 (Court-Ordered Interim Relief), and 4.14 (Interpretation) of the Indemnification and Reimbursement Agreement are incorporated by reference[40](index=40&type=chunk) [Impact of ADI Global Distribution Spin-off](index=11&type=section&id=Impact%20of%20ADI%20Global%20Distribution%20Spin-off) Resideo Parent's planned ADI Global Distribution spin-off will not impact the Trademark or Other License Agreements, subject to Closing, though non-wholly-owned subsidiaries will lose rights, and certain IPLA licenses will terminate - Resideo Parent plans to publicly announce its intention to spin-off its ADI Global Distribution business[41](index=41&type=chunk) - The ADI Global Distribution business does not utilize Licensed Trademarks or other intellectual property subject to the Other License Agreements (except for product distribution)[41](index=41&type=chunk) - Subject to the Closing, any spin-off or Change of Control of the ADI Global Distribution business will not impact the Trademark License Agreement or Other License Agreements[41](index=41&type=chunk) - Subsidiaries ceasing to be wholly-owned by Resideo Parent in connection with the spin-off will cease to have rights under the Trademark License Agreement and Other License Agreements[41](index=41&type=chunk) - The license to Resideo Parent and its Affiliates under Honeywell Content (as defined in the IPLA) will automatically terminate upon consummation of such spin-off or Change of Control of the ADI Global Distribution business[41](index=41&type=chunk) [Survival of Provisions](index=11&type=section&id=Survival%20of%20Provisions) Representations and warranties survive for three years post-Closing, while pre-Closing covenants generally do not, and post-Closing covenants survive until fulfilled - Representations and warranties will survive for three years following the Closing Date[42](index=42&type=chunk) - Covenants required to be performed prior to Closing generally do not survive the Closing, except as provided in Section 7(b)[42](index=42&type=chunk) - Covenants required to be performed after the Closing will survive until performed or satisfied[42](index=42&type=chunk) [Notices and Execution](index=12&type=section&id=Notices%20and%20Execution) All written notices are deemed delivered upon hand delivery, courier receipt, or email transmission, with specific contact details provided, and the Agreement may be executed in counterparts, forming the entire agreement - Notices must be in writing and are deemed delivered upon hand delivery, courier receipt, or email transmission (without delivery failure)[45](index=45&type=chunk) - Contact information for Honeywell and Resideo Parent (including RIH and Guarantors) is provided for notices[45](index=45&type=chunk)[46](index=46&type=chunk) - This Agreement may be executed in counterparts, including by facsimile or PDF signature, and constitutes the entire agreement among the Parties[46](index=46&type=chunk) [Other General Clauses](index=13&type=section&id=Other%20General%20Clauses) This section includes standard contractual clauses such as further assurances, headings for reference only, definitions of capitalized terms, and severability provisions to ensure the agreement remains effective - Each Party shall execute further instruments and documents as reasonably requested to carry out the Termination Payment and other transactions[44](index=44&type=chunk) - Headings are for reference only and do not affect meaning[47](index=47&type=chunk) - Capitalized terms not defined herein have the definition set forth in the Indemnification and Reimbursement Agreement[47](index=47&type=chunk) - If any provision is held invalid, illegal, or unenforceable, other provisions remain in full force, and parties will negotiate in good faith to modify the agreement to effect original intent[48](index=48&type=chunk) [Debt Financing Sources Liability](index=13&type=section&id=Debt%20Financing%20Sources%20Liability) Debt Financing Sources bear no liability to Honeywell or its subsidiaries for claims related to this Agreement or its transactions, without limiting Resideo Parent's or RIH's rights against them under the Debt Commitment Letter - Debt Financing Sources shall have no liability or obligation to Honeywell or its Subsidiaries with respect to any claim or cause of action relating to this Agreement or the transactions contemplated hereunder[41](index=41&type=chunk) - This provision does not limit Resideo Parent's or RIH's rights against the Debt Financing Sources under the Debt Commitment Letter[49](index=49&type=chunk) [Termination Payment Reinstatement](index=13&type=section&id=Termination%20Payment%20Reinstatement) If the Termination Payment is avoided, rescinded, set aside, or must be returned by Honeywell (e.g., in bankruptcy), such portion shall be immediately reinstated and jointly and severally enforceable against Resideo Parent and its then-existing Subsidiaries - If the Termination Payment is avoided, rescinded, set aside, or must be returned by Honeywell (e.g., in bankruptcy), such portion shall be immediately reinstated[50](index=50&type=chunk) - The reinstated payment shall be jointly and severally enforceable against Resideo Parent and its then-existing Subsidiaries (or those that ceased to be subsidiaries to circumvent obligations)[50](index=50&type=chunk) [Third-Party Beneficiaries](index=14&type=section&id=Third-Party%20Beneficiaries) The Debt Financing Sources are express third-party beneficiaries of specific sections of this Agreement, including limitations on their liability and certain dispute resolution provisions - The Debt Financing Sources are express third-party beneficiaries of Section 8(q), Section 8(f) (solely regarding Section 4.5 of the Indemnification and Reimbursement Agreement), and Section 8(o) of this Agreement[52](index=52&type=chunk) [Signatures](index=15&type=section&id=Signatures) [Execution of Agreement](index=15&type=section&id=Execution%20of%20Agreement) The Agreement is executed by authorized officers of Honeywell International Inc., Resideo Technologies, Inc., Resideo Intermediate Holding Inc., and various Guarantors, signifying their consent and commitment to the terms outlined - The Agreement is executed by authorized officers of Honeywell International Inc., Resideo Technologies, Inc., and Resideo Intermediate Holding Inc[54](index=54&type=chunk)[55](index=55&type=chunk) - Additional Guarantors, including Resideo Funding Inc., Resideo LLC, Resideo Inc., Alarmnet, Inc., Electronic Custom Distributors, Inc., BRK Brands, LLC, SNAP ONE HOLDINGS CORP., SUNBRITE HOLDING CORPORATION, SUNBRITETV LLC, and SNAP ONE, LLC, also executed the Agreement[56](index=56&type=chunk)[58](index=58&type=chunk)

Core Viewpoint - Resideo Technologies, Inc. reported exceptional financial results for the second quarter of 2025, achieving record high metrics across key financial indicators, driven by organic revenue growth in both the ADI and Products and Solutions segments [3][7][11]. Financial Highlights - The company achieved record net revenue of $1.94 billion, representing a 22% increase year-over-year and exceeding the high-end of the outlook range; organic growth was 8%, with ADI growing 10% and Products and Solutions growing 5% [7][11]. - Gross margin for the total company was 29.3%, up 120 basis points year-over-year, while Products and Solutions gross margin was 42.9%, marking the ninth consecutive quarter of year-over-year improvement [7][10]. - Adjusted EBITDA reached a record high of $210 million, up 20% year-over-year, and also exceeded the high-end of the outlook range [7][11]. Segment Performance - Products and Solutions segment reported net revenue of $666 million, a 6% increase compared to the second quarter of 2024, with strong sales driven by new product demand and price realization [6][8]. - ADI Global Distribution segment delivered net revenue of $1,277 million, up 33% year-over-year, with organic growth of 10% when excluding the Snap One acquisition [11][16]. Cash Flow and Liquidity - The company generated $200 million in cash from operating activities in the second quarter of 2025, compared to $92 million in the same period of 2024, driven by strong sales and collections [13][24]. - As of June 28, 2025, Resideo had cash and cash equivalents of $753 million and total outstanding gross debt of $2.01 billion [13][24]. Outlook - Resideo raised its full-year 2025 outlook, projecting net revenue between $7.45 billion and $7.55 billion, and Adjusted EBITDA between $845 million and $885 million [14].

Company Overview - Resideo Technologies (REZI) shares increased by 16.2% to $28.52 in the last trading session, with a higher-than-average trading volume, compared to a 6% gain over the past four weeks [1][2] Strategic Developments - Resideo announced plans to spin off its ADI Global Distribution business into a standalone public company by the second half of 2026, which is expected to enhance its financial flexibility [2] - The company signed a definitive agreement to eliminate future indemnity payments to Honeywell International Inc. through a one-time cash settlement of $1.59 billion, boosting investor confidence [2] Financial Performance Expectations - Resideo is projected to report quarterly earnings of $0.54 per share, reflecting a year-over-year decline of 12.9%, while revenues are expected to reach $1.83 billion, an increase of 14.9% from the previous year [3] - The consensus EPS estimate for Resideo has remained unchanged over the last 30 days, indicating that stock price movements may not sustain without trends in earnings estimate revisions [4] Industry Context - Resideo Technologies operates within the Zacks Security and Safety Services industry, where Cadre Holdings, Inc. (CDRE) experienced a 1.5% decline in the last trading session and has a Zacks Rank of 4 (Sell) [4][5]

Summary of Resideo's Conference Call Company Overview - **Company**: Resideo Technologies, Inc. - **Industry**: Home automation and security solutions, distribution of low voltage products Key Announcements 1. **Indemnification Agreement with Honeywell**: - Resideo will make a one-time cash payment of **$1,590,000,000** to Honeywell in Q3 2025 to eliminate all future monetary obligations under the indemnification agreement [6][8][19] - This payment accelerates the termination of the indemnification agreement, which had historically capped annual payments at **$140,000,000** [8][19] - The agreement's termination is expected to enhance Resideo's strategic and financial flexibility, leading to immediate accretion in adjusted earnings per share and free cash flow [8][19] 2. **Spin-off of ADI Business**: - Resideo plans to separate its ADI business through a tax-free spin-off to shareholders, creating two independent public companies: Resideo (Products and Solutions) and ADI [6][7][9] - The separation is seen as a natural step to unlock value and allow each business to focus on its distinct strategies [7][9][11] - The spin-off is targeted for completion in **2026**, subject to various conditions including Board approval [22][23] Financial Performance - Resideo expects its second quarter financial results to exceed the high end of its previously published outlook for net revenue, adjusted EBITDA, and adjusted earnings per share [7][23] - The company anticipates total cash of approximately **$750,000,000** as of June 28, 2025 [24] Business Strategies 1. **Products and Solutions (P and S)**: - Focus on innovation and operational transformation, with a multiyear product roadmap aimed at sustained margin expansion [9][10] - P and S delivered a gross margin over **41%** and an adjusted EBITDA margin over **24%** for the last twelve months ended March 2025 [14] - The company aims to deepen relationships with professionals and enhance manufacturing efficiencies [13][14] 2. **ADI Business**: - ADI is positioned as a leader in the low voltage products market, with a focus on margin-accretive growth initiatives [15][16] - The business aims to grow its portfolio of exclusive brands to become a **$1,000,000,000** business [16] - ADI achieved a gross margin of **21%** and an adjusted EBITDA margin of **7.5%** over the last twelve months ended March 2025 [17] Leadership and Management - Tom Saran and Rob Arnes will continue to lead their respective businesses post-spin [12][56] - The leadership teams are expected to be strengthened to support the operations of two separate public companies [59] Additional Insights - The relationship between P and S and ADI is expected to remain strong post-separation, allowing for continued collaboration [18] - The separation is anticipated to be straightforward due to minimal entanglement between the two businesses [33][35] Conclusion - Resideo is taking significant steps to enhance shareholder value through the elimination of the indemnification agreement and the planned spin-off of its ADI business, positioning both entities for future growth and operational independence [5][6][7][9]

Core Viewpoint - Resideo Technologies, Inc. plans to separate its ADI Global Distribution business through a tax-free spin-off, expected to be completed in the second half of 2026, allowing both entities to enhance operational performance and strategic flexibility [1][9]. Company Overview - Resideo is a leading global manufacturer and distributor of technology-driven sensing and controls products for residential and commercial markets, with a focus on maximizing comfort, safety, and cost savings [3][16]. - The Products & Solutions (P&S) segment generated net revenue of $2.6 billion with an adjusted EBITDA margin of 24.2% for the twelve-month period ending March 29, 2025 [4]. - ADI Global Distribution is the leading global wholesale distributor of low-voltage products, with net revenue of $4.5 billion and an adjusted EBITDA margin of 7.5% for the same period [7]. Strategic Rationale - The separation is intended to allow both ADI and P&S to unlock their full potential and better serve stakeholders by focusing on their distinct business models [2]. - ADI will continue to leverage its global footprint and exclusive brands to maintain competitive advantages in the low-voltage products market [6][7]. Financial Expectations - Resideo anticipates its second quarter 2025 financial results will exceed previous outlooks, projecting net revenue between $1.805 billion and $1.855 billion, with adjusted EBITDA of $175 million to $195 million [11][12]. Transaction Details - The spin-off does not require shareholder approval and is subject to customary conditions, including board approval and regulatory approvals [9]. - Resideo has entered into an agreement with Honeywell to accelerate a one-time cash payment of $1.59 billion, eliminating future monetary obligations under the Indemnification Agreement [10].

Core Viewpoint - Resideo Technologies has entered into a definitive agreement with Honeywell to accelerate and eliminate future monetary obligations, involving a one-time cash payment of $1.59 billion in Q3 2025, which is expected to enhance Resideo's financial flexibility and profitability [1][2][3]. Financial Implications - Resideo will make a one-time cash payment of $1.59 billion to Honeywell in Q3 2025, in addition to a scheduled payment of $35 million made on July 29, 2025 [2]. - The termination of the Indemnification Agreement will eliminate annual payments of up to $140 million through 2043, positively impacting Resideo's adjusted earnings per share and free cash flow [2][3]. - Resideo anticipates being above the high-end of its previously provided outlook for Q2 2025, with expected net revenue of $1,805 - $1,855 million, Non-GAAP Adjusted EBITDA of $175 - $195 million, and Non-GAAP Adjusted Earnings Per Share of $0.51 - $0.61 [5]. Strategic Developments - The agreement with Honeywell is seen as a significant turning point for Resideo, enhancing its strategic and financial flexibility while simplifying its obligations to investors [3]. - Resideo plans to finance the payment to Honeywell through approximately $400 million in cash-on-hand and new senior secured debt financing committed by J.P. Morgan and Wells Fargo [3]. - Resideo announced its intention to separate its ADI Global Distribution business through a tax-free spin-off to shareholders, creating two independent public companies [4].

Company Overview - Resideo Technologies, Inc. is a leading global manufacturer, developer, and distributor of technology-driven sensing and controls products and solutions for residential and commercial end-markets [4] - The company specializes in home heating, ventilation, and air conditioning controls, smoke and carbon monoxide detection, home safety and fire suppression products, and security markets [4] - Resideo's solutions and services are utilized in over 150 million residential and commercial spaces globally, with tens of millions of new devices sold annually [4] Upcoming Financial Results - Resideo will release its second quarter 2025 financial results after the close of the New York Stock Exchange on August 5, 2025 [1] - A conference call and simultaneous webcast to discuss the results will take place on the same day at 5:00 p.m. ET [1] Accessing Information - Interested investors can listen to the webcast of the conference call via the Investor Relations section of Resideo's website, where related materials will be posted prior to the call [2] - A replay of the webcast will be available following the presentation [2] - The conference call can also be accessed by dialing 888-660-6357 (U.S., toll-free) or 1-929-201-6127 (international) using the conference title "Resideo Second Quarter 2025 Earnings Call" or the conference ID: 7301399 [3]