Episode Details

Resideo (REZI) Q2 2026 — Q2 2026 (three months to July 4; the Item 2.02 8-K cleared EDGAR at 16:18 ET on Wednesday August 12, AFTER the close - so the reaction session is Thursday August 13, down 20.42 pct to USD20.46 on 7.9M shares, 3.3x normal volume.) Resideo beat on revenue, on Adjusted EBITDA and on Adjusted EPS, printed a record 43.6 pct gross margin at Products and Solutions, and fell 20.42 pct the next session. The reason given was that 2026 guidance came in USD341M of EBITDA below consensus. It did not. Resideo spun off ADI Global Distribution on August 3, ten days before the print, and consensus had not been rebased. THE CALL: BUY (3/5, MEDIUM - THE SELL-OFF WAS MOSTLY ARITHMETIC, THE DISCOUNT IS ONLY MODEST) — base-case value ~$23.27 vs ~$20.50 today. KEY METRICS: - CALL: BUY, 3/5. Fair value USD23.27 against the USD20.50 close, +13.5 pct, from a ten-year owner-earnings DCF off the company's own guidance at a 9.0 pct discount rate and 2.25 pct terminal growth. At 9.5 pct the model prints USD20.91 - almost exactly the tape. We are BELOW all three post-spin Street targets. - THE PHANTOM CUT: FY26 Adjusted EBITDA consensus was USD956M on the OLD consolidated company; the standalone guide is USD605-625M. Oppenheimer, carrying USD949M before the print, rebased its own standalone number to USD611M - four million BELOW the USD615M guide midpoint. Nothing was cut. The models had not caught up. - THE PRINT: revenue USD1,981M, up 2.0 pct, a record. Products and Solutions USD695M up 4.4 pct, ADI USD1,286M up 0.7 pct. P and S gross margin 43.6 pct, up 70bps, the 13th straight quarter of expansion. Adjusted EBITDA USD249M up 18.6 pct. Adjusted EPS USD0.83 vs USD0.66. GAAP diluted USD0.51. - THE BAR: one widely used data feed shows a USD0.4695 estimate, making this a 77 pct beat. That feed's estimate has landed BELOW its own reported actual in each of the last five quarters, by 18 to 43 pct. The real consensus was USD0.68 and the real beat was 22.1 pct. Revenue beat a USD1,940M bar by 2.1 pct. - WHAT THE RECORD WAS MADE OF: USD27M of tariff refunds sit inside that gross margin, and about USD20M of it was earned by ADI, which left on August 3. A USD77M gain on terminating the Honeywell Tax Matters Agreement sits in other income, against USD44M of deferred tax assets written off and USD88M of cash paid out. - THE BALANCE SHEET IMPROVED: total debt went USD3,622M to USD2,322M - USD400M of notes went with ADIG and a USD900M dividend from ADIG retired the 2028 term loan in full plus USD382M of the 2031 tranche. Net debt USD1,773M is 2.9x guided EBITDA against 3.3x consolidated before the spin. USD500M revolver undrawn. - WHAT NO SCREEN SHOWS: on August 3 the preferred conversion price was reset from USD26.92 to USD18.844. At a USD20.50 close that is in the money - 350,000 preferred shares, USD350M of liquidation preference, about 18.6M shares, 12.2 pct dilution. Separately, one data feed prints a USD4,461M market value; the real figure is USD3,113M on 151,847,378 shares. What to watch: UP: Q3 Adjusted EBITDA lands at the top of the USD145-155M guide, the extra USD200M term loan repayment completes, and the 13-quarter gross margin run continues. DOWN: the large OEM security customer slowdown proves to be a pattern rather than one contract, margin stalls, and the preferred converts at USD18.844 into 18.6M shares. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision. Learn investing free in the Charged Alpha app: https://chargedalpha.com/app?source=youtube&ref=video Educational only. Not financial advice.