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Resideo Falls 3.3% After Hours as GAAP Profit Drops Despite Margin Expansion

Resideo Technologies (NYSE: REZI) shares fell about 3.3% in after-hours trading after the company reported modest revenue growth and higher adjusted EBITDA but a sharp decline in GAAP earnings following its ADI separation.

Third-quarter revenue increased 3% year over year to $727 million. Excluding OEM Security, revenue rose 6% to $694 million, supported by volume growth and pricing across sales channels and product categories. OEM Security revenue fell 34% to $33 million as volumes from a major customer declined.

Gross margin improved to 40.4%, marking the 14th consecutive quarter of year-over-year expansion. Standalone adjusted EBITDA increased 5% to $154 million, while adjusted diluted EPS rose 8% to $0.52.

GAAP results were much weaker. Income from continuing operations fell 66% to $31 million, while diluted EPS declined 71% to $0.14. The quarter included $30 million of non-recurring separation expenses tied to the ADI spin-off as well as higher restructuring and debt-extinguishment costs.

Resideo also used a $900 million dividend from ADI and $200 million of cash to repay $1.1 billion of debt, reducing gross debt to $2.1 billion at quarter-end.

For 2026, the company expects revenue of $2.927-$2.947 billion, standalone adjusted EBITDA of $614-$624 million and adjusted EPS of $1.92-$1.98. Fourth-quarter revenue is expected at $710-$730 million.

The 3.3% after-hours decline appears to reflect investor concern over the steep drop in GAAP profitability and continued softness in OEM Security, despite improving margins, higher adjusted earnings and meaningful debt reduction.
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Author
Global Finance News 11-11-26
Resideo Drops 9.4% in Premarket Despite Beat as ADI Spin-Off Costs and Cash Burn Alarm Investors

May 12, 2026 | NYSE: REZI

Resideo is falling sharply in premarket despite beating its own guidance on every key metric — a reaction that speaks to concerns sitting below the headline numbers around cash consumption, ADI margin pressure, and the complexity of an impending corporate separation.

The top-line results are genuinely solid. Net revenue of $1.912 billion grew 8% year-on-year, above the high end of guidance. Adjusted EBITDA jumped 28% to $215 million, also above the high end. Adjusted EPS of $0.65 beat guidance and improved modestly from $0.63 a year ago. Net income recovered meaningfully to $38 million from just $6 million in Q1 2025. The Products and Solutions segment was particularly strong, with revenue up 9%, adjusted EBITDA margin expanding to 25.1%, and twelve consecutive quarters of year-on-year gross margin expansion.

The concern is elsewhere. Operating cash outflow deteriorated sharply to negative $145 million from negative $65 million a year ago, driven by business separation activities, higher cash interest payments, and working capital dynamics. With $3.23 billion in total debt on the balance sheet and a spin-off of ADI Global Distribution in process, that cash burn is drawing attention.

ADI itself is showing cracks. While revenue grew 8%, the segment's adjusted EBITDA fell 8% to $66 million, with margin compressing to 5.5% from 6.4%. Higher freight costs, unfavorable product mix, and a soft US residential market are weighing on what is the larger of the two business units by revenue. Average daily sales growth of just 1% excluding the calendar benefit of four extra sales days tells a more modest underlying demand story.

Full-year guidance was reaffirmed at $7.8 to $7.9 billion in revenue and $935 million to $985 million in adjusted EBITDA — but reaffirmation without a raise, following a beat quarter, often disappoints a market that was hoping for an upgrade. Combined with the cash flow deterioration and spin-off execution risk, that is likely enough to explain today's sharp premarket decline.
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Global Finance News 05-13-26