Home automation and security solutions provider Resideo Technologies (NYSE:REZI) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, with sales up 19.1% year on year to $1.77 billion. The company expects next quarter’s revenue to be around $1.83 billion, close to analysts’ estimates. Its non-GAAP profit of $0.63 per share was significantly above analysts’ consensus estimates.
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Resideo (REZI) Q1 CY2025 Highlights:
- Revenue: $1.77 billion vs analyst estimates of $1.72 billion (19.1% year-on-year growth, 3% beat)
- Adjusted EPS: $0.63 vs analyst estimates of $0.31 (significant beat)
- Adjusted EBITDA: $168 million vs analyst estimates of $168.5 million (9.5% margin, in line)
- The company reconfirmed its revenue guidance for the full year of $7.39 billion at the midpoint
- Adjusted EPS guidance for the full year is $2.35 at the midpoint, beating analyst estimates by 6%
- EBITDA guidance for the full year is $765 million at the midpoint, above analyst estimates of $730.3 million
- Operating Margin: 7.7%, in line with the same quarter last year
- Free Cash Flow was -$96 million compared to -$19 million in the same quarter last year
- Market Capitalization: $3.14 billion
StockStory’s Take
Resideo’s first quarter results were shaped by a combination of higher sales volumes, successful new product launches, and disciplined price actions. Management pointed to strong demand for new offerings in both its Products and Solutions and ADI Distribution segments, highlighting the impact of the Snap One acquisition alongside robust organic growth. CEO Jay Geldmacher noted, "We achieved 6% organic revenue growth year-over-year at our Products and Solutions business segment," attributing results to both volume and pricing gains.
Looking forward, Resideo management reaffirmed its full-year outlook, emphasizing a proactive approach to tariffs and ongoing price adjustments. CFO Michael Carlet explained that phased price increases are planned to help offset tariff costs throughout the year, with additional mitigation steps aimed at protecting margins. Management maintained a cautious stance on the macroeconomic environment, but expressed confidence that ongoing execution and cost control will help the company achieve its revenue and profit targets for 2025.
Key Insights from Management’s Remarks
Resideo’s management cited several specific operational and strategic factors that contributed to first-quarter performance, as well as actions being taken in response to a dynamic external environment. The following insights summarize the main themes management discussed:
- Tariff Mitigation Strategy: Resideo is navigating evolving U.S. tariff policy through a combination of phased price increases, supplier negotiations, and a diversified manufacturing footprint. Management reported that about 98% of Products and Solutions goods sourced from Mexico are USMCA compliant and currently exempt from tariffs, reducing exposure for its largest U.S. business lines.
- New Product Momentum: Demand was strong for new product launches, including the Honeywell Home FocusPRO thermostats and First Alert VISTA H series security products. Management emphasized an "accelerating cadence of new product introductions" and highlighted the partnership with Google Nest for smart smoke and carbon monoxide alarms and the upcoming First Alert CX4 Camera Series.
- Snap One Integration Progress: The ADI segment saw significant contributions from the Snap One acquisition, including the launch of nearly 100 new products in the quarter. Integration is ahead of year two synergy goals, and cross-selling initiatives are driving revenue growth, especially in exclusive brands and commercial categories.
- Strength in Commercial Channels: ADI’s commercial product categories, such as security and professional audio/video, showed notable growth, offsetting softness in the U.S. residential audio/video market. E-commerce also set new records for daily sales and contributed positively to margins.
- Margin Expansion Drivers: Gross margin improvements were attributed to operational efficiencies, favorable product mix, and the growing share of exclusive and higher-margin products. Management noted this was the eighth consecutive quarter of year-over-year gross margin expansion in Products and Solutions, reflecting structural improvements and supply chain optimization.
Drivers of Future Performance
Management’s outlook for the next quarter and full year centers on pricing strategies, tariff mitigation, and continued new product introductions as key themes influencing guidance. The company is focused on maintaining margin stability while navigating uncertain market conditions.
- Tariff and Pricing Dynamics: Planned phased price increases are expected to offset tariff-related cost pressures, with management monitoring potential impacts on customer demand and competitive positioning.
- Product Launch Cadence: Management is prioritizing the rollout of new products across air, comfort, security, and water categories, viewing innovation as essential to sustaining revenue and margin growth.
- Macro and Housing Market Trends: While the company sees ongoing challenges in the U.S. housing market, management believes improving new home sales and stable remodeling activity could provide incremental tailwinds if macro conditions improve.
Top Analyst Questions
- Ian Zaffino (Oppenheimer): Asked about the impact of phased price increases on both demand and margin, especially in the context of tariff mitigation. Management replied that ADI expects to fully offset tariff costs, and Products and Solutions anticipates limited demand sensitivity due to proactive customer communication and the small share of products affected.
- Erik Woodring (Morgan Stanley): Inquired about customer buying behavior and whether there was evidence of customers pulling forward purchases ahead of price increases. Executives reported minimal buy-ahead activity, with demand remaining steady in both March and April.
- Erik Woodring (Morgan Stanley): Also questioned where Resideo sees itself in the broader residential and commercial spending cycle. Management described the residential environment as somewhat depressed due to low existing home sales but pointed to improvement in new home sales and resilience in remodeling.
- Amit Daryanani (Evercore ISI): Asked whether gross margins could exceed 30% if end markets improve. CFO Michael Carlet said ongoing structural improvements and new product launches should support continued gross margin expansion, though no specific targets were provided.
- No other analyst questions: There were no further analyst questions on the call beyond those summarized above.
Catalysts in Upcoming Quarters
In coming quarters, the StockStory team will track (1) execution of phased price increases and the effectiveness of tariff mitigation, (2) the impact of new product launches—particularly in connected devices and smart home safety—on channel demand and margin mix, and (3) progress on integration synergies and cross-selling resulting from the Snap One acquisition. Additional attention will be paid to signs of recovery in the U.S. housing market, as well as any shifts in customer demand tied to price adjustments.
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