Resideo’s 2026 Q2 Call: P&S Growth Guidance Cuts to 2%, OEM Security Weakness Isolated to One Customer, ERP Status Conflicting

Date of Call: Aug 12, 2026

Financials Results

• Revenue: $2B, up 2% year-over-year
• EPS: $0.83 per diluted share, up 26% year-over-year
• Gross Margin: 43.6%, up 70 basis points year-over-year and up 100 basis points sequentially

Guidance:

• Full-year 2026 standalone revenue outlook: $2.9B-$2.95B.
• Full-year 2026 standalone adjusted EBITDA outlook: $605M-$625M.
• Q3 2026 standalone revenue outlook: $705M-$730M.
• Q3 2026 standalone adjusted EBITDA outlook: $145M-$155M.
• Expect lower OEM Security revenue by $40M-$50M in second half 2026 vs prior year.
• Input cost inflation expected to be a slight gross margin headwind in second half 2026.
• No material tariff refunds expected for remainder of 2026.

Business Commentary:

Record Revenue and Profitability Growth:

• Resideo reported record revenue of just under $2 billion for Q2 2026, up 2% year-over-year.
• Adjusted EBITDA grew 19% year-over-year to $249 million, also a new quarterly record.
• The growth was driven by strong performance across sales channels and product families, including increased volumes and favorable tariff refunds.

Products & Solutions Segment Performance:

• The Products & Solutions segment reported 4% year-over-year revenue growth, including a 35 basis point favorable impact from currency.
• The segment achieved its 13th consecutive quarter of year-over-year gross margin expansion, with a gross margin percentage of 43.6%, up 70 basis points year-over-year.
• Growth was driven by increased volumes in customer demand and favorable manufacturing and supply chain variances, despite soft housing trends and inflationary input costs.

Standalone Financial Outlook:

• Resideo's standalone revenue outlook for 2026 is in the range of $2.9 billion to $2.95 billion, with adjusted EBITDA expected to be between $605 million and $625 million.
• The outlook anticipates continued demand across all channels except OEM Security, with a projected reduction in revenue from a large OEM Security customer expected to impact second-half performance.

Input Cost and Pricing Strategy:

• The company is experiencing higher input costs, such as memory, metals, and shipping, which are increasing at a pace greater than originally expected.
• Resideo has implemented price increases, though they are not a complete offset to these costs, with further impacts anticipated in the second half of the year.

Sentiment Analysis:

Overall Tone: Positive

• Management expressed being 'pleased with both the top and bottom-line performance' and stated 'we are extremely confident in our profitable growth path ahead.' They highlighted exceeding outlook ranges, achieving a 13th consecutive quarter of gross margin expansion, and excitement about new product launches.

Q&A:

• Question from Erik Woodring (Morgan Stanley): Could you comment on the comparison between new standalone P&S revenue guidance and prior expectations, and why it appears to guide down after beating Q2? Also, how should we think about gross margin linearity over the next two quarters?
  Response: Management clarified the math was slightly off and P&S growth is actually higher than 2%, with overall company growth around 3%. The standalone guidance reflects the OEM Security headwind. For gross margins, Q3 will see the most impact from temporary input cost increases before pricing fully catches up, with some margin pressure expected.

• Question from Dan Stratemeier (Jefferies): Can you compare the upcoming NPIs over the next 18 months to those from the last 18 months? Also, explain the 1%-1.5% pricing philosophy in the five-year CAGR targets given current inflationary pressures.
  Response: Excited about NPIs like the new smoke/CO detector platform and Fortic security products, with momentum continuing. Pricing is currently absorbing cost shocks but these are not seen as long-term trends, expecting costs to unwind as supply and capacity normalize.

• Question from Ian Zaffino (Oppenheimer & Co.): What was the HVAC market environment in Q2 and how should we think about comps for the back half? Also, clarify the contribution of price vs. volume to Q2 gross margin.
  Response: HVAC market was flat year-over-year in Q2 with an expected more normalized market in second half. Comps are muted. Price was not a contributor to Q2 gross margin; improvement was driven by operational execution and efficiency, offsetting inflationary costs.

• Question from Tomo Sano (J.P. Morgan): Can you break down the 70 bps gross margin improvement into volume, manufacturing, mix, pricing, etc.? Also, comment on Pro channel health.
  Response: Margin improvement was primarily driven by volume increases and operational efficiency/conversion cost improvements, with inflationary costs and tariff refunds largely offsetting each other. Pro channel health is expected to remain positive with growth across distribution channels, except OEM Security.

• Question from Jay Goldberg (D2D Advisory): Could you provide more color on the positive end markets you're seeing outside of OEM Security?
  Response: Management stated the overall market remains muted across housing and construction, with no improvement expected. Performance will be driven by execution, not rising tides.

• Question from Dan Stratemeier (Jefferies): Is the OEM Security customer issue a one-off, and what is the forward relationship?
  Response: The issue is with one large customer pursuing vertical integration; the relationship is healthy. Impact is baked into medium-term targets and expected to have a stairstep decline, with the business not being strategic long-term for Resideo.

Contradiction Point 1

P&S Revenue Growth Guidance

Guidance for Products & Solutions (P&S) revenue growth is reduced and later corrected, affecting financial expectations.

Erik Woodring (Morgan Stanley) - Erik Woodring (Morgan Stanley)

2026Q2: The math was slightly off; the projected P&S revenue growth is higher than 2% (~3% for the year). - [Tom Surran](CEO) and [Chris Lee](CFO)

What caused the reduction in standalone Products & Solutions (P&S) revenue growth guidance for 2026 from ~5% to ~2% YoY, and what changes are expected in the second half? - Erik Woodring (Morgan Stanley)

2026Q2: Regarding the standalone Products & Solutions (P&S) revenue guidance for 2026, is the math correct that P&S revenue growth is now guided to ~2% YoY, down from the ~5% mentioned last quarter? - Erik Woodring (Morgan Stanley)

Contradiction Point 2

OEM Security Channel Outlook

Outlook for OEM Security shifts from broad strength to a specific customer weakness, changing market expectations.

Jay Goldberg (D2D Advisory) - Jay Goldberg (D2D Advisory)

2026Q2: The OEM security weakness is concentrated on **one large customer** pursuing vertical integration, not the entire channel. - [Tom Surran](CEO) and [Chris Lee](CFO)

How are the end markets performing, given the weakness in OEM security and positive trends elsewhere? - Dan Stratemeier (Jefferies)

2026Q1: Regarding memory costs, they are transitory... Some cost increases may be passed to customers, but the impact is seen as non-material. - [Tom Surran](CEO)

Contradiction Point 3

Status of ADI ERP System Implementation

Conflicting statements on whether the ERP system implementation is fully complete, impacting operational transparency.

Dan Stratemeier (Jefferies) - Dan Stratemeier (Jefferies)

2026Q2: The company is excited about the NPI pipeline... Development cycles are shortening, and the pipeline remains healthy. - [Tom Surran](CEO)

How do the upcoming New Product Introductions (NPIs) over the next 18 months compare in magnitude and cadence to the past 18 months? - Erik Woodring (Morgan Stanley)

20260225-2025 Q4: The ADI ERP system implementation is fully complete and operational. - Jay Geldmacher, [Thomas Surran](CEO), Robert Aarnes, Michael Carlet

Contradiction Point 4

Outlook for the OEM Security Channel

Contradiction on the health and forward expectations of the OEM security business, impacting segment performance assessment.

Tomo Sano (J.P. Morgan) - Tomo Sano (J.P. Morgan)

2026Q2: The OEM security channel is the exception, where headwinds are expected due to a large customer. - [Tom Surran](CEO)

What is the health of the Pro channel and the expectations for the second half regarding active Pros, retention, and reduced installation times? - Erik Woodring (Morgan Stanley)

20260225-2025 Q4: The pipeline for video surveillance is now recovering nicely, which gives confidence for a return to mid- to high-single-digit growth. - Jay Geldmacher, [Thomas Surran](CEO), Robert Aarnes, Michael Carlet

Contradiction Point 5

Nature and Duration of HVAC Market Headwinds

Contradiction on whether recent HVAC challenges are transitory or indicative of a more persistent market shift, affecting sector outlook.

Ian Zaffino (Oppenheimer & Co.) - Ian Zaffino (Oppenheimer & Co.)

2026Q2: The HVAC market was stable in Q2, with flat revenue but increased volume... Last year's market was impacted by a transition in gases/refrigerants and channel inventory shocks, but no similar disruptions are expected this year. - [Tom Surran](CEO), [Chris Lee](CFO)

How did the Air & HVAC environment perform in Q2, and what is the outlook for the remainder of the year, including key comp data? - Erik Woodring (Morgan Stanley)

20251106-2025 Q3: Excess distributor inventory of older HVAC equipment... causing market chaos... This is seen as transitory because every home requires HVAC eventually, and demand is expected to normalize. - [Jay Geldmacher](CEO)