Financial Data and Key Metrics Changes - Adjusted EBITDA reached a record high, approximately at the midpoint of the outlook range [4] - Net revenue was $1.86 billion, up 2% year over year, including a 1% favorable impact from currency [19] - Gross margin increased to 29.8%, up 110 basis points year over year, driven by margin-accretive activities at ADI and operational efficiencies at P&S [19] - Adjusted earnings per share was $0.89, above the high end of the outlook range, up from $0.59 in the prior period [19] Business Line Data and Key Metrics Changes - Products and Solutions (P&S) net revenue grew 2% year over year, with a 1% favorable impact from currency [8] - ADI reported 2% net revenue growth and average daily sales growth of 3%, both year over year, also including a 1% favorable impact from currency [14] - P&S achieved its 10th consecutive quarter of gross margin expansion, with gross margin at 43%, up 80 basis points year over year [12] - ADI's gross margin was 22.6%, up 130 basis points year over year, marking the sixth consecutive quarter of gross margin expansion [17] Market Data and Key Metrics Changes - The HVAC channel revenue was down by a low double-digit percentage year over year due to a softer residential HVAC market [10] - The retail channel experienced strong point-of-sales volumes, driven by demand for new products like the First Alert SC5 Connected Smoke and CO Detector [8] - OEM channel posted low double-digit percentage revenue growth year over year, driven by higher-priced units in both the Americas and EMEA [9] Company Strategy and Development Direction - The company is focused on introducing differentiated new products across its connected home product portfolio to capitalize on profitable growth opportunities [12] - Ongoing separation activities are on track to be completed in the second half of 2026, with Rob and Tom set to lead separate companies as CEOs post-spin [6][7] - The company aims to maintain its world-class execution and capitalize on revenue and cost benefits from its modern platform [18] Management's Comments on Operating Environment and Future Outlook - Management believes the macroeconomic headwinds are transitory and expects to see improvements in the HVAC market by mid-2026 [27][28] - The company anticipates a rebound in cash provided from operations in the fourth quarter following the completion of the ERP implementation [21] - The outlook for 2026 is positive, with expectations for year-over-year growth in organic revenue and adjusted EBITDA above current analyst estimates [23] Other Important Information - The company experienced a one-time tax benefit from terminating the Honeywell indemnification agreement, contributing to higher net income [20] - Total reported cash used by operating activities was $1.571 billion, primarily due to the termination payment made to Honeywell [20] Q&A Session Summary Question: Can you quantify the impact of the HVAC regulatory change? - Management indicated that both HVAC and ERP headwinds had similar impacts on the business, which they believe are transitory [25][26] Question: Will these headwinds continue into 2026? - Management expects the ERP issues to be resolved by the end of the year, while HVAC market impacts may slightly bleed into next year but are still considered transitory [27][28] Question: What growth would P&S have seen without HVAC headwinds? - Management refrained from providing specific growth figures but expressed excitement about their positioning in the HVAC market and the success of new product introductions [29][30] Question: How are operating margins expected to evolve? - Management targets double-digit operating margins for ADI over the next three to five years and anticipates 300-500 basis points of operating margin expansion for P&S in the same timeframe [46][48] Question: What factors should be considered for 2026 guidance? - Management highlighted the $70 million step up in EBITDA from the Honeywell-related indemnity and other initiatives driving performance as key factors for 2026 [61][63]

Financial Data and Key Metrics Changes - Adjusted EBITDA reached a record high, with net revenue of $1.86 billion, up 2% year over year, including a 1% favorable impact from currency [26][28] - Gross margin increased to 29.8%, up 110 basis points year over year, driven by margin-accretive activities at ADI and operational efficiencies at Products and Solutions [27][28] - Adjusted earnings per share was $0.89, up from $0.59 in the prior period, primarily due to higher net income and a one-time tax benefit from terminating the Honeywell Indemnification Agreement [28] Business Line Data and Key Metrics Changes - Products and Solutions (P and S) net revenue grew 2% year over year, with a tenth consecutive quarter of gross margin expansion [10][16] - ADI reported 2% net revenue growth and average daily sales growth of 3% year over year, with most product categories growing low single digits [17][22] - P and S experienced strong demand for new products, particularly the First Alert SC5 connected smoke and CO detector, and the new Elite Pro smart thermostats [6][10] Market Data and Key Metrics Changes - The residential HVAC market remains soft, with a low double-digit percentage decline in HVAC channel revenue year over year due to market disruptions from regulatory changes [12][13] - The OEM channel posted low double-digit percentage revenue growth year over year, driven by higher-priced units in The Americas and EMEA [11] - E-commerce revenue grew 3% year over year, highlighting the optionality for customers with an omni-channel experience [19] Company Strategy and Development Direction - The company is focused on introducing differentiated new products across its connected home product portfolio to drive future growth [16] - Ongoing separation activities are on track to be completed by 2026, with leadership for separate companies already in place [9] - The integration of SnapOne is progressing well, with expectations to exceed $75 million in run-rate synergies [23][24] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the company's ability to navigate macroeconomic challenges, including inflation and tariff volatility, with no significant impacts from the recent U.S. government shutdown [7][8] - The company anticipates a rebound in cash provided from operations in the fourth quarter following the completion of the ERP implementation [29][30] - The outlook for 2026 is positive, with expectations for year-over-year growth in organic revenue and adjusted EBITDA above current analyst estimates [31][65] Other Important Information - Total reported cash used by operating activities was $1.57 billion, primarily due to the termination payment made to Honeywell [29] - The company is experiencing a healthy pipeline of projects, with increased customer engagement and order rates approaching pre-implementation levels [73][80] Q&A Session Summary Question: Can you quantify the impact of the HVAC regulatory change and ERP on guidance? - Management indicated that both headwinds are expected to be transitory, with the HVAC market changes impacting slightly into next year, while ERP implementation costs are mostly behind them [36][38] Question: What growth would P and S have seen without HVAC headwinds? - Management refrained from providing specific growth figures but emphasized excitement about their positioning in the HVAC market and strong performance in other areas like retail and OEM [40][42] Question: Why are HVAC headwinds considered transitory? - Management explained that every home will eventually need an HVAC system, and the current inventory issues are temporary, with expectations for normalization in the market [50][51] Question: What is the expected impact of ERP on fourth-quarter results? - Management noted that the impact of ERP costs would be roughly split between Q3 and Q4, with a significant portion of revenue impact expected in Q3 [70][74] Question: What are the long-term operating margin expectations for each business? - Management targets double-digit operating margins for ADI and anticipates 300 to 500 basis points of operating margin expansion for P and S over the next three to five years [61][62]

Q3'25 Earnings Presentation November 5, 2025 Disclaimer Forward-Looking Statements This presentation and the related conference call contain "forward-looking statements." All statements, other than statements of fact, that address activities, events or developments that we or our management intend, expect, project, believe or anticipate will or may occur in the future are forward-looking statements. Although we believe forward-looking statements are based upon reasonable assumptions, such statements involve ...

Financial Performance - Third quarter net revenue was $1.86 billion, up 2% year-over-year, with both ADI and Products & Solutions segments growing net revenue by 2%[6] - Record high gross margin of 29.8%, an increase of 110 basis points year-over-year, with margin expansion achieved for ten consecutive quarters in P&S and six consecutive quarters in ADI[6] - Record high net income of $156 million, up 680% year-over-year, compared to $20 million in the third quarter of 2024[6] - Adjusted EBITDA reached a record high of $229 million, up 21% year-over-year from $190 million in the third quarter of 2024[6] - Fully diluted earnings per share was $0.85, with Adjusted EPS of $0.89, exceeding the high-end of the outlook range and setting a new record high[6] - P&S segment delivered net revenue of $661 million, up 2% year-over-year, driven by price realization and customer demand for new products[8] - ADI segment reported net revenue of $1,203 million, up $20 million compared to the third quarter of 2024, with average daily sales growth of 3% year-over-year[11] - Net income for Q3 2025 was $156 million, significantly higher than $20 million in Q3 2024[24] - Non-GAAP adjusted net income for the three months ended September 27, 2025, was $137 million, compared to $88 million for the same period in 2024, reflecting a 55% increase[28] Cash Flow and Expenses - Cash used by operating activities was $1,571 million, with Adjusted cash provided by operations at $19 million after accounting for a $1.59 billion payment to Honeywell[13] - The company experienced a net cash used in operating activities of $(1,571) million for the three months ended September 27, 2025, compared to a cash provided of $147 million in the same period of 2024[26] - The company reported a net cash used in operating activities of $(1,571) million for the three months ended September 27, 2025[36] - Research and development expenses increased by $10 million year-over-year, reflecting planned investments for future growth[9] - Research and development expenses increased by 91% year-over-year to $44 million in Q3 2025, compared to $23 million in Q3 2024[24] - Selling, general and administrative expenses were $324 million in Q3 2025, a slight increase of 2% from $317 million in Q3 2024[24] Assets and Liabilities - Total assets as of September 27, 2025, were $8,188 million, slightly down from $8,199 million at the end of 2024[25] - Long-term debt increased to $3,169 million as of September 27, 2025, compared to $1,983 million at the end of 2024[25] - Cash and cash equivalents decreased to $345 million from $692 million at the end of 2024[25] Future Outlook - The company anticipates fourth quarter 2025 net revenue between $1,853 million and $1,893 million, and full year 2025 net revenue between $7,430 million and $7,470 million[16] Segment Performance - Net revenue for the three months ended September 27, 2025, was $661 million, a 2.5% increase from $645 million in the same period of 2024[32] - Net revenue for the ADI Global Distribution segment for the three months ended September 27, 2025, was $1,203 million, a 1.7% increase from $1,183 million in the same period of 2024[34] - Non-GAAP adjusted EBITDA for the ADI Global Distribution segment for the three months ended September 27, 2025, was $92 million, or 7.6% of net revenue, compared to 7.8% in the prior year[34] Capital Expenditures - The company reported capital expenditures of $(28) million for the three months ended September 27, 2025, compared to $(22) million in the same period of 2024[26] Other Financial Metrics - GAAP income from operations for the three months ended September 27, 2025, was $140 million, representing 21.2% of net revenue, compared to 19.8% in the prior year[32] - Non-GAAP adjusted EBITDA for the three months ended September 27, 2025, was $165 million, or 25.0% of net revenue, up from 24.3% in the same period of 2024[32]

Core Insights - Resideo Technologies, Inc. reported strong financial performance in Q3 2025, achieving record-high gross margins, earnings per share, and Adjusted EBITDA, driven by organic revenue growth and margin expansion across its business segments [3][9]. Financial Performance - Total net revenue for Q3 2025 was $1.86 billion, reflecting a 2% increase year-over-year, with both ADI and Products & Solutions segments contributing equally to this growth [9][10]. - Gross margin reached a record high of 29.8%, up 110 basis points from the previous year, with both segments experiencing margin expansion [9][10]. - Net income for Q3 2025 was $156 million, a significant increase of 680% compared to $20 million in Q3 2024 [9][10]. - Adjusted EBITDA for the quarter was $229 million, up 21% from $190 million in the same period last year, with an Adjusted EBITDA margin of 25.0% [9][10]. Segment Performance - Products & Solutions (P&S) segment reported net revenue of $661 million, a 2% increase year-over-year, with strong demand for new products like ElitePRO smart thermostats [4][10]. - ADI Global Distribution achieved net revenue of $1,203 million, also up 2% year-over-year, with average daily sales growth of 3% despite fewer selling days due to planned store closures [6][11]. Cost Management - Research and development expenses increased by $10 million year-over-year, reflecting planned investments for future growth [5]. - Selling, general, and administrative expenses decreased by $3 million compared to the prior year, indicating effective cost discipline [5]. Cash Flow and Liquidity - Net cash used by operating activities was $1,571 million in Q3 2025, compared to $147 million of cash provided in Q3 2024, primarily due to a $1.59 billion payment to Honeywell [8][9]. - After adjustments, the cash provided by operations was $19 million for the quarter [8]. Future Outlook - The company anticipates continued momentum in the market with the expected separation of its business segments into two independent publicly traded companies by the second half of 2026 [4][9].

Investors interested in Industrial Products stocks should always be looking to find the best-performing companies in the group. Has Resideo Technologies (REZI) been one of those stocks this year? By taking a look at the stock's year-to-date performance in comparison to its Industrial Products peers, we might be able to answer that question.Resideo Technologies is a member of the Industrial Products sector. This group includes 187 individual stocks and currently holds a Zacks Sector Rank of #11. The Zacks Se ...

Market Overview - The stock market experienced a strong finish in 2024, driven by optimism around potential tax cuts and a robust M&A environment, but sentiment shifted in early 2025 due to concerns over tariffs, AI spending, and consumer health [2][3] - A remarkable recovery occurred in the second quarter of 2025, with U.S. equities approaching all-time highs, primarily led by large-cap technology and growth stocks, especially those related to AI and semiconductors [3] Fund Performance - Ariel Focus Fund gained +4.75% for the three-month period ending June 30, 2025, outperforming its primary Russell 1000 Value Index, which rose +3.79%, but lagged behind the S&P 500, which jumped +10.94% [4] - Key contributors to the fund's performance included Oracle Corporation, Mosaic Company, and Resideo Technologies, while J.M. Smucker Company, APA Corporation, and Core Laboratories were the largest detractors [4][10][12] Company Insights - Oracle Corporation's shares reached an all-time high of over $245, driven by a potential $30 billion annual cloud contract with OpenAI and a doubling of its backlog, highlighting its strong long-term positioning in AI-driven enterprise software [6] - Mosaic Corporation's stock rose +35.88% due to favorable trade dynamics and a renewed focus on cost discipline, benefiting from increased demand for fertilizers driven by economic growth in developing countries [7][8] - Resideo Technologies rebounded with a +24.63% gain, supported by its leadership in smart home technology, despite challenges from a sluggish U.S. housing market [9] Challenges Faced - J.M. Smucker Company faced a -16.28% decline, primarily due to disappointing results from Hostess Brands, which saw a -14% drop in comparable revenue [10] - APA Corporation and Core Laboratories experienced declines of -11.62% and -23.09%, respectively, amid concerns about the energy sector's future despite ongoing demand for oil and gas [12][13]

Core Insights - Ariel Fund's third-quarter 2025 performance was strong, returning +12.39%, outperforming the Russell 2500 Value Index's +8.17% but lagging behind the Russell 2000 Value Index's +12.60% [1] - The rally in U.S. equities was driven by the Federal Reserve's first rate cut of the year, strong corporate earnings, and increased market participation, particularly in technology and small-cap stocks [1] Company Highlights: Resideo Technologies, Inc. (NYSE:REZI) - Resideo Technologies, Inc. reported a one-month return of 6.60% and a remarkable 115.20% increase in share value over the past 52 weeks, closing at $43.47 with a market capitalization of $6.467 billion on October 23, 2025 [2] - The company exceeded expectations in organic revenue, EBITDA, and adjusted EPS, and finalized an agreement with Honeywell, removing future financial obligations [3] - Ariel Fund views Resideo as undervalued, with long-term growth potential driven by rising demand for smart home solutions and ongoing product innovation [3] Financial Performance - Resideo Technologies, Inc. achieved record net revenue of $1.94 billion in Q2 2025, reflecting a 22% year-over-year increase and an 8% organic growth [4] - Despite its potential, Resideo is not among the top 30 most popular stocks among hedge funds, with 25 hedge fund portfolios holding its stock at the end of Q2 2025, down from 27 in the previous quarter [4]

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Market Overview - U.S. equities saw significant gains in Q3, driven by the Federal Reserve's first rate cut of the year, strong corporate earnings growth, and increased market participation [2] - Investor enthusiasm for artificial intelligence contributed to substantial gains in technology stocks, particularly among the "Magnificent Seven" [2] - Small-cap stocks outperformed as capital shifted into undervalued market segments, despite ongoing concerns about tariffs, inflation, and labor market softness [2] Company Highlights - Resideo Technologies, Inc. (REZI) was the top contributor in Q3, with organic revenue, EBITDA, and adjusted EPS exceeding expectations, and a positive outlook supported by demand for smart home solutions [3] - Barrick Mining Corporation (B) experienced a rise in shares due to strong financial results and rising gold prices, alongside a strategic divestiture of its Hemlo Gold Mine for $1.09 billion [4] - ZimVie, Inc. (ZIMV) advanced following an announcement of its acquisition by ARCHIMED, expected to close by year-end [5] - Mosaic Co. (MOS) was the biggest detractor from performance due to an earnings miss, with pressures from lower volumes and rising production costs, although phosphate markets are expected to remain tight through 2025 [6] - Prestige Consumer Healthcare Inc. (PBH) declined after mixed earnings results and a downward revision to guidance, but plans to strengthen supply through an acquisition of Pillar5 [7] - Schlumberger Limited (SLB) traded lower due to a challenging macroeconomic environment, with pressures from OPEC+ supply increases and geopolitical uncertainty impacting oil prices [8] New Positions and Exits - New positions included Arthur J. Gallagher & Co. (AJG), which faced pressure due to a delay in closing its $13.4 billion acquisition of AssuredPartners, but is expected to benefit from stronger synergies [10] - Fiserv, Inc. (FI) was also purchased, seen as a leading provider of payment processing and financial services technology, with a recent stock pullback providing an attractive entry point [11] - Exited positions included ZimVie, Inc., Core Laboratories, Inc. (CLB), and Bio-Rad Laboratories Inc. (BIO) to pursue more compelling opportunities [12] Economic Outlook - As Q4 approaches, U.S. markets are balancing elevated valuations against emerging macroeconomic headwinds, with the Federal Reserve's rate cut providing some support [13] - Investor sentiment remains positive, driven by AI momentum, although risks related to market concentration and policy uncertainty may lead to increased volatility [14] - There is a belief that small-cap equities may outperform large caps over the next two years, with small caps trading at historically attractive levels [14]