Resideo (NYSE: REZI) repays $1.1 billion of debt, but GAAP profit drops

What happened

Resideo Technologies, Inc. (NYSE: REZI) repaid $1.1 billion of debt in its third quarter, leaving gross debt at $2.1 billion. The money came from a $900 million cash dividend from ADI Global Distribution Inc., which Resideo spun off on Aug. 3, plus $200 million of its own cash.

Revenue for the quarter ended Oct. 3 rose 3% to $727 million from $703 million a year earlier. Revenue excluding OEM Security rose 6%. Gross margin was 40.4%, the 14th straight quarter of year-over-year gains. Standalone Adjusted EBITDA rose 5% to $154 million. Standalone Adjusted diluted EPS rose 8% to $0.52.

Key numbers

Metric	Latest	Change	Source
Revenue	$727 million	from $703 million, +3%	SEC 8-K Exhibit 99
GAAP income from continuing operations	$31 million	from $90 million, -66%	SEC 8-K Exhibit 99
Standalone Adjusted EBITDA	$154 million	from $146 million, +5%	SEC 8-K Exhibit 99
Standalone Adjusted diluted EPS	$0.52	from $0.48, +8%	SEC 8-K Exhibit 99
Gross debt repaid in the quarter	$1.1 billion		SEC 8-K Exhibit 99
Net margin (net income divided by revenue)	3.0%	from 22.2%, -19.2 percentage points	Calculated from SEC 8-K

Read more: Resideo Technologies (REZI) company research

Why it matters

Reported earnings tell a weaker story than the adjusted measures. GAAP income from continuing operations fell 66% to $31 million from $90 million. Diluted EPS from continuing operations fell 71% to $0.14. Diluted EPS including discontinued operations was $0.08, down 90.6%.

The release names $30 million of non-recurring business separation expenses in selling, general and administrative costs. It also reports a $17 million rise in restructuring, impairment and extinguishment costs. OptimistFi calculates that net margin, using net income of $22 million, was 3.0%, down from 22.2% a year earlier, a 19.2 percentage point drop.

OptimistFi has argued that REZI works if gross profit keeps improving while last year's cash-flow and net-loss shock proves temporary. The margin streak supports the first half. Operating cash flow from continuing operations was positive this quarter. A year earlier it was a $1.59 billion outflow, when Resideo paid Honeywell to end the Indemnification Agreement.

The caution is OEM Security. Its revenue fell 34% to $33 million on reduced volumes from a large customer. The release said the decline was expected.

Stock perps: every US stock that trades as a perpetual future, by leverage, live

What's next

Resideo holds a conference call at 5:00 p.m. ET on Nov. 10. For the fourth quarter it guides to revenue of $710 million to $730 million, Standalone Adjusted EBITDA of $145 million to $155 million and Standalone Adjusted EPS of $0.42 to $0.48.

For 2026 it expects Standalone Adjusted EPS of $1.92 to $1.98 and operating cash flow of at least $165 million. Fourth-quarter results inside those ranges would support the case. A cash flow shortfall would reopen the question of whether last year's shock was temporary.

More from OptimistFi

• REZI stock: research and coverage of Resideo Technologies
• Stock research on every company OptimistFi covers

From OptimistFi Perps