Resideo Technologies (REZI) Jefferies Global Industrials Conference 2026 summary

OEM security business update

• OEM security business is being phased out, with a major customer reducing orders, leading to a $40–$50 million revenue drop in H2 2026 and further reductions in 2027.

• Gross margin impact from the reduction is about $10 million, but operating expenses are being scaled down to offset EBITDA impact.

• By 2028, the contract will be largely wound down, with only residual support and replacement revenue remaining.

• Revenue from this customer is expected to decline from $170–$180 million in early 2026 to $100–$120 million by mid-2027, with minimal EBITDA impact due to expense adjustments.

• The business is considered non-core and not strategic, with no plans to pursue similar ODM relationships in the future.

Revenue growth drivers and market strategy

• Growth is driven by new product introductions, geographic expansion, and a focus on adjacent markets.

• U.S. safety business is strong, with plans to enter the European market, which is estimated to be a $2 billion opportunity.

• The company is conservative on pricing and market conditions, assuming only a 1% price increase in forecasts.

• Repair and remodel segment represents about 80% of revenue, providing resilience against new construction downturns.

• Expansion into adjacencies like ventilation, filtration, and humidification is planned, leveraging domain expertise.

Margin expansion and operational efficiency

• Achieved 13 consecutive quarters of gross margin expansion, with a five-year target of 400 basis points improvement.

• Margin growth is driven by factory efficiency, product improvement, and pricing/channel management.

• Factory consolidation and platform reduction are key to leveraging scale and improving efficiency.

• Inflationary cost headwinds, especially in Q3, are being addressed through pricing actions, with a lag in impact.

• Pricing power is supported by brand strength and the relatively small cost of products within larger systems.