Resideo Technologies (NYSE:REZI) executives used an Investor Day at the New York Stock Exchange to outline the company’s strategy as a standalone building technology business following the planned separation of its ADI Distribution business.
Chris Lee, Resideo’s global head of strategic finance, said the separation is intended to sharpen focus for both companies, provide greater financial flexibility and reduce complexity. He said Resideo will be positioned as a pure-play building technologies company focused on residential sensing and control solutions.
Resideo Sets Growth and Margin Targets
Tom Surran, who said he will become CEO of Resideo after the ADI spin is completed, laid out the company’s long-term financial framework. On a standalone basis using fiscal 2025 results, Surran said Resideo would have generated $2.9 billion in revenue, including about $175 million in intercompany sales to ADI.
Surran said the standalone product business generated a 39.5% gross margin and $581 million in adjusted EBITDA, representing a 20.3% adjusted EBITDA margin. He also said adjusted EBITDA less adjusted capital expenditures was $519 million, which he described as a proxy for free cash flow, representing approximately 89.3% cash generation.
Management’s 2030 targets include:
- Revenue growth at a 4% to 5% compound annual rate.
- Adjusted gross margin of 43% to 45%.
- Adjusted EBITDA margin of 23% to 25%.
- Cash generation rising to 92%.
- Net leverage reduced from 3.3 times to 2.0 times within 24 months.
Surran said capital allocation priorities will begin with deleveraging, followed by organic reinvestment. He said the company will evaluate selective mergers and acquisitions, mainly in adjacent categories, and later consider ways to return capital to shareholders.
Company Emphasizes Comfort, Protection and the Professional Channel
Surran described Resideo’s mission as delivering comfort and protection to homeowners through products tied to air, energy, water, safety and security systems. He estimated the company’s core served markets at more than $40 billion and said Resideo has opportunities in adjacent categories such as ventilation, access control, hydronics control, presence monitoring and video solutions.
He said much of the company’s demand is tied to repair, remodel, maintenance and upgrades, rather than only new construction. In the U.S., Surran cited 114 million existing single-family homes compared with about 700,000 new single-family homes currently being built annually.
Scott Harkins, senior vice president of global sales and marketing, said Resideo’s relationship with professional contractors is central to the company’s strategy. He said more than 100,000 professionals globally sell and install Resideo solutions, supported by more than 30,000 distribution locations. In the U.S., Harkins said more than 90% of contractors are within 15 miles of a Resideo distribution partner.
Harkins also highlighted Resideo’s relationships with builders, saying the company has agreements with all of the top 25 U.S. builders and that those agreements cover more than 60% of new homes built. He said Resideo has doubled its content per home over four years to roughly $400, with the highest content per home at $800.
Product Strategy Centers on Platforms, Connectivity and AI
Scott Ziffra, Resideo’s engineering leader, said the company is building its product strategy around differentiated products, connectivity and intelligence. He highlighted RedLINK Plus, the company’s wireless communication protocol, and FORTIQ, its cloud platform designed to connect devices, services and partners across the home.
Ziffra said Resideo has added more than 130 engineers, bringing its engineering organization to just over 1,000 people, and has increased research and development by more than 130 basis points to roughly 5% of revenue. He said the company has invested more than $100 million in platform and core technologies, is delivering products 30% faster than prior generations and has tripled new product introduction revenue since 2023 to more than $900 million.
Executives said FORTIQ and related software services are intended to help professionals address labor, lead generation and customer loyalty challenges. Ziffra described ProIQ Predict as a service using building science, machine learning and HVAC equipment experience to help predict equipment failures before they occur.
Supply Chain and Manufacturing Remain Vertically Integrated
Patrick Murray, senior vice president of integrated supply chain and IT, said Resideo operates 11 factories with about 8,000 employees producing more than 75 million units annually. He said the company has reduced its manufacturing footprint by four facilities since 2018 and has announced two additional site consolidations.
Murray said Resideo moved from seven ERP systems in 2019 to a single global ERP platform. He also said the company has taken more than $76 million out of working inventory over the last three years and improved cost of poor quality by 65% over the same period.
Automation is also a focus, according to Murray. He said Resideo has deployed more than 300 purpose-built cobots over the last five years and plans to deploy another 300 over the next five years. The company uses an in-house team of 39 automation engineers to develop proprietary systems, which Murray said can be built in half the time and at half the cost of outsourced automation.
CFO Search and Q&A Highlights
Surran said he presented the financial section because Resideo is in the final stages of a search for a new chief financial officer. In the Q&A session, he listed his top three priorities as CEO: product and customer focus, improving business efficiency and using cash flow to reduce leverage to 2 times.
Asked about why Resideo is better positioned as a standalone company, Surran said the Products & Solutions business has operated independently from ADI for the past several years and that separation should help investors and customers better understand Resideo’s focus on comfort and protection.
Lee closed the session by saying Resideo expects to discuss a go-forward standalone outlook for 2026 when it reports earnings after the separation date of Aug. 3.
About Resideo Technologies (NYSE:REZI)
Resideo Technologies, Inc, headquartered in Austin, Texas, is a global provider of home comfort, security and energy management solutions. Formed as an independent company in 2018 following its spin-off from Honeywell, Resideo leverages decades of engineering experience to deliver connected products and services to residential and light commercial customers.
The company’s core offerings include smart thermostats, security systems, video doorbells, water leak and freeze detection devices, and indoor air quality monitors.
