Resideo Technologies, Inc. (REZI) 2026 Q3 法說會逐字稿

Hello, everyone. Thank you for joining us and welcome to the Resideo's third quarter 2026 earnings conference call.

(Operator Instructions)

I will now hand the conference over to Chris Lee, Global Head of Strategic Finance. Please go ahead.

Good afternoon, everyone, and thank you for joining us for Resideo's third quarter 2026 earnings call.

Joining me on today's call is Tom Surran, Resideo's Chief Executive Officer and Shane Harrison, Resideo's Chief Financial Officer.

This afternoon's call contains forward-looking statements. Statements other than historical facts made during this call may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in Resideo's filings with the Securities and Exchange Commission. The company assumes no obligation to update any such forward-looking statements. We identified the principal risks and uncertainties that affect our performance in our annual report on Form 10-K and other SEC filings.

In addition, we will discuss non-GAAP and stand-alone supplemental financial measures on today's call. These financial measures, which can sometimes be identified by the use of adjusted or standalone in the description of the measure, should be considered in addition to, not as a substitute for or in isolation from our GAAP results. Standalone measures are supplemental financial measures intended to provide historical results. Before the ADI spin-off on a more comparable basis to the company following the spin-off.

Reconciliations of GAAP to non-GAAP and stand-alone financial measures are included in our earnings release as well as our financial data workbook, which are accessible on the Investor Relations page of our website at investor.resideo.com. Unless stated otherwise, all numbers and results discussed on today's call other than revenue and gross margin are on a non-GAAP or stand-alone basis.

We completed the spin-off of ADI on August 3, and the financial statements presented in our third quarter 2026 earnings release, earnings call and Form 10-Q filing reflect the continuing operations of Resideo. And the treatment of ADI as a discontinued operation for all periods presented.

Recast income statements reconciling historical Resideo results to Resideo GAAP results from continuing operations for each quarter of 2025 and 2026 have been provided in our earnings release and our financial data workbook.

With that, I will turn the call over to Tom.

Thank you, Chris, and thanks to everyone for joining us today.

In our first quarter following the spin-off of ADI, Resideo delivered both top and bottom line third quarter results that were near the high end of our outlook.

This is a testament to the team's continued resilience, strong execution and commitment to delivering what we promised at our recent Investor Day.

Total revenue was driven by both volume growth and pricing across most of our sales channels.

Our gross margin was 40.4% as customers continue to see the value of our differentiated non-discretionary products.

We accomplished this in a challenging housing environment.

Stand-alone adjusted EBITDA was $154 million, growing 5% year over year. As our teams demonstrated cost discipline that helped drive operating leverage in the business.

Professional installers are adopting the differentiated products we design and manufacture, resulting in Resideo winning business.

Leveraging our scale and experience enables us to navigate through the inflationary cost environment, while also creating opportunities to invest in our future growth.

Our execution is rooted in a mindset of continuous improvement in all that we do, and we believe that mindset will be the driving force for Resideo's continued success.

Let's walk through the dynamics for revenue growth in the quarter.

In the third quarter, we reported total revenue of $727 million, growing 3% year over year, which includes. An unfavorable impact of approximately 50 basis points from foreign currency exchange.

Let me unpack the growth rate further.

We achieved 6% or $41 million of growth across all sales channels excluding OEM security.

We consider these non-OEM security sales channels to be our core because they are the foundation that underlie our future growth and earnings potential.

Let's walk through the key drivers for each of our core sales channels.

Performance in the retail channel was exceptional with revenue growth of 15% year-over-year, driven by both volume and pricing power.

Volumes were robust for our First Alert and Honeywell Home branded air and safety products as evidenced by point-of-sale data across many of our key accounts.

Demand for our newer product is enthusiastic, including our new highly rated combo smoke and carbon monoxide detector, purpose-built for easy installation while touting differentiated features and needing the latest safety certification standards.

Retail pricing strength reflected more efficient promotional spending, price increases and demand driven toward higher margin products.

Performance in the OEM combustion channel was also strong, reporting 9% revenue growth year-over-year against very strong results last year.

Growth continues to be driven primarily by steady demand for higher price products.

From a geographic view, EMEA performance was a notable call-out for the OEM combustion channel due to a seasonal build-in advance of the upcoming heating season.

Our distribution channel revenue was up. 3% year-over-year, comprised of our three primary professional distribution channels, electrical, HVAC and security.

Let me start with the electrical channel.

The electrical distribution channel achieved record volume growth, resulting in double-digit percentage revenue growth year-over-year.

We believe our position in the electrical channel has improved with several competitive conversions.

Demand for new and existing BRK and Honeywell Home branded air and safety products was robust despite the current soft housing market.

We saw demand across all our electrical subsegments, including single-family and multi-family homes, manufactured housing and MRO.

Our content per new residential built home continues to be nearly $400. The HVAC distribution channel grew revenue by a mid-single-digit percentage year-over-year, driven by both volume and price.

The HVAC channel also achieved sequential revenue growth.

Product demand was healthy from both our Americas and EMEA HVAC customers. Especially for our newer, higher-value products, such as dehumidifiers and connected thermostats, our HVAC channel inventory balance remains stable over the last several months, consistent with the broader residential HVAC environment.

Complementing the product demand in our HVAC channel was a solid uptick in our ProIQ service subscriptions.

These services, which are not yet material to our financial results, include software tools that professionals are using to improve the speed and quality of their installations, build homeowner loyalty, and generate new business.

Today's announcement of the addition of our AI-powered intelligence layer within ProIQ services is designed to proactively predict HVAC problems. Demonstrating the continued value we are providing to professionals through our differentiated hardware and software intelligence.

Revenue from the general securities distribution channel was flat year-over-year in line with the continued soft market for security installations, which are typically highly correlated with the resale of existing homes.

In the fourth quarter, we will announce the launch of a series of new security products that are integrated with our next-generation FORTIQ software platform.

We look forward to building momentum with our professional community at our upcoming Connect 2026 User Conference, which is oversubscribed due to record demand.

Moving to OEM Security, the channel reported $33 million of third quarter revenue.

Down $17 million year-over-year, performing in line with the reduced solutions we shared last quarter.

As previously discussed, we consider OEM Security to be non-core to Resideo.

We have shifted our strategic focus and security products, including investments and operating expenses away from OEM Security towards our branded products for two key reasons.

First, when we act as an outside design manufacturer for OEM security customers, products we design and make for them are used to compete against ourselves in the general market.

Second, OEM security sales generate less margin than our branded products.

We believe selling a branded product in the general security marketplace where we can provide innovation and drive value. Is healthier for Resideo over the long-term.

I would like to reinforce how we are executing our strategy as a stand-alone company and highlight a few tangible examples of the progress we are making.

Our strategy is built around a powerful self-reinforcing cycle, investing in innovation to drive revenue growth, expanding margins through differentiated product design, continuously improving operational efficiency. And reinvesting the benefits back into our innovation engine.

And importantly, we are already seeing this strategy come to life.

On innovation, our Elite Pro thermostats are a great example of how differentiated new products can drive growth with annualized revenue growth of approximately 50% since their introduction to the market.

On margin expansion, our new combo smoke and carbon monoxide detector, which I spoke of earlier, is built on a redesigned common platform that improves product margins while delivering innovative features to our customers.

And on operational excellence, we are taking deliberate actions to simplify our business and improve efficiency, including SKU rationalization. And the planned exit of three underutilized manufacturing facilities, including the announcement in the third quarter of the closure of our manufacturing operations in Scotland.

These actions are designed to reduce our cost structure and improve utilization across our manufacturing footprint.

Each of these initiatives reinforces the others.

Innovation drives demand and create opportunities for higher margins.

Operational improvements further expand profitability and generate resources to reinvest in our next generation of products.

This is the flywheel we are building at Resideo, innovation driving growth and operational excellence, expanding profitability and those profits fueling the next wave of innovation.

We believe this self-reinforcing cycle will be a powerful driver of sustainable growth. Margin expansion and long-term shareholder value.

With that, let me turn the call over to Shane.

Thanks, Tom. I'd like to start by saying how thrilled I am to have joined the Resideo team.

Over my first two months, I've had the opportunity to visit many of our sites, meet with our teams around the world and really dig into our products, operations and strategies.

And what I've seen has only reinforced my excitement about the opportunity ahead.

Resideo has iconic brands, accelerating product innovation and leading positions in many of the categories and geographies where we sell.

The strong pipeline of product innovation is just beginning to deliver and the company is filled with incredibly talented and passionate people who are energized by the opportunity to operate as a stand-alone product-focused company.

It's a powerful combination and one that I believe positions Resideo well for long-term growth, gross and EBITDA margin expansion. And continued value creation.

I'm excited to be part of this next chapter and to help the team realize the full potential of this business.

Now on to the Q3 financial details.

Third quarter gross margins were 40.4%, slightly higher than the third quarter of 2025.

Drivers of gross margin expansion were price increases, operational efficiencies and $6 million of tariff refunds, which were partially offset by unfavorable product sales mix. Inflationary input costs.

On inflationary input costs, we experienced an approximate $13 million year-over-year headwind to product input costs in the third quarter, which were partially offset by $3 million of benefits from the price increases we implemented this past June.

Given notice periods for many of our customers, most price increases were not realized until the latter half of the third quarter.

Stand-alone adjusted EBITDA was $154 million, representing growth of approximately 5% year-over-year, driven primarily by higher gross profit dollars and controlled operating expense growth.

R&D continues to represent approximately 5% of total revenue as we invest behind new product launches and speed to market.

Stand-alone adjusted net income was $80 million and stand-alone adjusted earnings per share was $0.52, which excludes $30 million of non-recurring business separation expenses recognized during the third quarter of 2026.

Moving on to cash from operations, total reported cash provided by continuing operations in the third quarter was $33 million versus the approximate $1.6 billion used for the termination of the indemnification agreement with Honeywell. Occurred in the same period last year.

Operating cash flow in the third quarter was negatively impacted by approximately $30 million of spin-related payments made during the quarter.

Turning to the balance sheet.

Our near-term priority after completion of the spin is deleveraging.

After receiving a one-time $900 million dividend from the spin-off of ADI, we repaid $1.1 billion of gross debt in the third quarter.

We also made a $20 million payment at the end of the third quarter to ADI as part of the post-separation adjustment mechanism to true up ADI's cash.

We anticipate further deleveraging and reinvestment in the business as Resideo continues to turn the flywheel and increase EBITDA and cash from operations.

Before I provide our financial outlook for the fourth quarter and the full year 2026, I'd like to make some framing comments.

First, we are flowing through our third quarter outperformance to our 2026 outlook while revising our outlook upward.

Second, after excluding OEM security, we currently expect fourth quarter revenue to be between flat and low single-digit growth year-over-year due to four less sales days in the fourth quarter, expected foreign currency exchange pressure and SKU rationalization. Third.

Included in our fourth quarter outlook is an approximate $30 million year-over-year reduction in OEM security revenue, resulting in revenue of approximately $25 million in the quarter, consistent with our previously communicated expectations.

And fourth, on pricing and input cost inflation, we expect to realize the full benefit of the price increases implemented this past June during this fourth quarter. However, continued inflationary pressures are expected to offset these benefits. Result in a low single-digit $1 million cost headwind, which is reflected in our fourth quarter outlook and is consistent with our commentary in September.

While we anticipate year-over-year gross margin growth in the fourth quarter, which we expect to be driven by the cost structure actions that Tom mentioned as well as continued volume growth from our core sales channels, we are also expecting a modest gross profit dollar reduction as a result of this inflationary environment and the expected lack of tariff refunds.

With that, for the fourth quarter of 2026, we expect net revenue to be in the range of $710 million to $730 million, stand-alone adjusted EBITDA to be in the range of $145 million to $155 million, which is up slightly year-over-year at the midpoint, stand-alone adjusted earnings per share to be in the range of $0.42 to $0.48 and cash from operations to be at least $54 million. For full year 2026. We expect net revenue to be in the range of $2.927 billion to $2.947 billion stand-alone adjusted EBITDA to be in the range of $614 million to $624 million, which represents 21% of revenue stand-alone adjusted earnings per share to be in the range of $1.92 to $1.98 and cash from operations to be at least $165 million for the full year.

In closing, we remain focused on executing our strategy with discipline and consistency.

While the macroeconomic environment remains dynamic, we believe our focus on these factors within our control positions Resideo to navigate these challenges.

The strong performance in our core channels in the third quarter combined with our expected introduction of exciting new products in the fourth quarter underscores our confidence in the momentum that we are building as we enter 2027.

As a stand-alone company, Resideo is now more focused on product innovation, growth acceleration and growing profitability, making it an exciting time for us and for our investors. We remain firmly committed to delivering on the long-term financial targets we outlined at our Investor Day.

Let's now open the call up for questions. Operator.

(Operator Instructions)

Erik Woodring, Morgan Stanley.

Super, guys.

Thank you very much for taking my questions tonight.

So, Tom, I just want to start with you. Obviously, revenue excluding that OEM security business grew 6% year-over-year despite kind of mixed housing market data point. Can you maybe just give us a little bit more color on growth.

By volume versus pricing and just higher level, just what you're seeing in real time when it comes to repair and remodeling, new construction demand, just some of those key macro drivers. Just if you could contextualize for those for us, that would be super helpful. And then a quick follow-up, please.

Sure.

Thanks for joining us tonight, Erik. It's a great question. So you're saying. The core business, 6% year over year growth, and you want a little more color commentary on what's going on with some of the business. It was a really solid quarter throughout the business. If you go through each of the segments, the distribution, the product areas, everything that is in our core business performed very well.

And so you say, what about volume versus price? If we extract out the OEM security and just look at our core business.

Our volume and price both increased. Slightly more price because we had some of the inflationary costs, but we had very nice volume improvement, which is indicative of how we are performing and what you've described as a fairly tough market related to the housing.

Now, one of the reasons for that is what we provide.

In many cases is a non-discretionary product, right? So this is the heating and cooling systems, this is the safety systems, this is the security systems.

These products are, again, non-discretionary. And what we're seeing in the marketplace is what we perceive is gaining share in those markets.

Does that help?

Yes, that's awesome.

Thank you.

Thank you, Tom.

Maybe just a follow-up to that is obviously there was... News last month that Apple plans to get further into, or I guess let's say get into the smart home market maybe rather than fighting against it.

I guess from my perspective from the cheap seats, it looks like what they're trying to do is a little bit more DIY versus you're obviously focused on the professional, but just any thoughts on what this could mean for Resideo and some of the products that you sell that might or might not be. Competition in that market. Just high level, any thought that you have, please? Thanks so much.

I would define it as creating an opportunity more than a competitive situation. And I don't know if you caught the press release, we announced where we were going to be updating our software for some of the features that they brought to market. But you're right, they play in a different place in the home. So they're about the engagement and the interaction. And some of the automations on audio/video. That is not where we play. Where we focus is on the infrastructure systems of the house and making sure that the house is comfort and protectable.

So what we want to make sure, though, is that we're compatible with those systems, the smart home ecosystems of Apple, Amazon, Google. And so that's why we announced what we did.

The fact is that if Apple is successful with this, they brought some new features, having customers understand and engage more with their critical systems, that will be great for us.

Alexander Virgo, Evercore ISI.

Thanks very much.

Afternoon, everyone. Thanks for taking the question.

I wondered if you could just unpick some of the differences in growth.

The retail plus 15 distribution plus 3 stands out to me as quite significantly different.

And I wondered if you could layer into that perhaps some of the new product investment benefits that you're getting either now or when we might expect to see that really kick through into the growth.

And then I've got a quick sort of follow-up if I could.

Okay. So believe it or not, Alex, can you hear me okay? Yeah. So. They're pretty tied, your two questions that you just asked. It's a good question. So when I talked about retail up to 15% and we had our distribution, sure, 3%, but that includes the security distribution. If you carve that out, electrical distribution of 15%, HVAC distribution of 5%. So we had then OEM combustion of 10%. So most of our channels, excluding security and certainly OEM security, were doing, performed very well during the quarter.

Now we've talked a little bit about security. It's part of the home and it's very correlated with existing home sales. So that to be explained what's happening there.

Although I will say, you asked about NPI. So why did retail do 15%? One of the things that's happened there is our new UL 10th edition product was shipping in the third quarter and primarily was featured pretty heavily in the fourth quarter by some of our channel partners and our customers. And October was Fire Safety Month, I don't know if you knew that one, but our product performed very well, the customers, our customers were very excited about what it brought to the customers, and I think that was a big part of what drove some retail, the retail numbers that we were seeing.

In terms of NPI, well, that was an NPI product. And we talked about Denali was an NPI product. And one of the things that we're bringing forward now is the FORTIQ platform. And that's really important because now all of our products, including security, air, safety, all of them are sitting on top of the FORTIQ platform. That not only has the benefit of the information and the common data across everything and the awareness.

But it also helps us accelerate the development of new products. And by the way, I made a little , I said Denali, which you know is a leaf crowd. That was a project they mentioned, so that was the elite crowd.

But overall, we've been seeing the product that we've brought to market, all of the products that we've done have done very well for us and performed very well on the market.

So I think we're already seeing it.

That's very helpful.

Thank you. I wondered as a follow-up, if you could just give us a sense of how much the tariff refund helped the margin gross and EBITDA. I appreciate you gave us the $6 million. It feels like that's sort of a 50, 60 basis points number, but maybe I'm getting the calculation wrong.

Yeah, I think you're going to look at the net, but I'm going to let Shane answer that one.

So in the quarter, there was $6 [million] of tariff refund, but we also paid tariffs.

And so the net tariff benefit in the quarter was $4 million.

Does that help, Alex?

Yeah, that's great.

Thank you very much.

Aaron Kimson, Citizens.

Following up on Erik's question, in light of the Apple Home View announcement in mid-October, I was wondering if you can talk about the importance of the Matter standard and if Matter becomes more important for both your hardware footprint and eventually FORTIQ going forward?

Thanks, Aaron, and thanks for joining us. I think this is your first call.

It is, yeah.

Congratulations. It's great having you. So Apple, we've talked a little bit about that. We've talked about our compatibility.

Where they focus is, yes, it's distinct from what we do. But Apple's been a big advocate of Matter. And Matter is fantastic.

Most of our, in fact, all of our new smart home products support Matter.

And that's great because we want that compatibility with those smart home ecosystems and they all pretty much do support Matter.

Where the matter is different though for us is it's great for that interchange. It's just not very deep for really controlling infrastructures. Just the amount of information related to how a HVAC system works or how your safety systems need to have life safety protocols.

That's just not something that's in a Matter protocol. So it's fantastic for interacting with the ecosystems and communicating information to the end user, but it's not something that we use deeply through our own system.

Got it. That's really helpful.

And then I know you mentioned ProIQ monetization is not material today, but can you help us think about the trajectory of monetization for the ProIQ Predict service? Will monetization be a recurring stream paid for by the buyer of the hardware? And is there a way to monetize it on the channel side by suggesting Pro to reach out to when something is looking like it's going to break?

Yeah, that's exactly. So Aaron, let me just give a little background on ProIQ services. So we did announce ProIQ Predict today, but ProIQ services is actually a suite of services.

And now we have four capabilities in that. The first one is install, and that basically gives the Pro the ability to do templates and configuration in the field to be able to have a more efficient installation experience. The second one is engage, and this is about.

Branding and contacts and booking for the pro. So they can have their brand not only on the product face, but also in the app that the customer uses.

Third is the analyze. And this gives the pro the ability to have alerts and look at trends and history of the products. And then what we announce now is predict.

And this gives them the ability to diagnose potential problems, take preventative maintenance, but also if should something happen, they can understand what failed so they can make sure they bring the correct product part to make the repair to the customer, make it a better experience for everyone, more efficient for them and certainly for the customer, a much simpler process.

But all of this. It's really about creating stickiness with our customer and giving our customers value. So that value and stickiness is our primary thought process as we think about ProIQ services.

Right now, it's not material monetization, but it's delivering really nicely on that idea of the stickiness and how pros feel about the product we're bringing and the fact that we're bringing just a bit extra that they don't receive from other products.

That makes sense.

Thank you.

Ian Zaffino, Oppenheimer.

Great.

Thank you very much.

I just wanted to follow-up on the tariff refunds.

Is there a surprise and is there any other tariff refunds factored in forward guidance?

Or were you expecting, I guess, this kind of net $4 million in the [fourth quarter]? Thanks.

So hey, it's Shane. Nice to meet you. To answer your question, the short answer is we file for these refunds pretty far ahead of time. The visibility is when you get the money. And if you're going to get the money, sometimes can be a little all over the place.

So in this quarter, we did end up getting that $6 million and we ended up paying the couple out the door. So it was a net four.

So that's the answer there. But going forward for Q4, we have filed for more tariff refunds.

But the visibility of seeing and getting those in is very murky. So in the guide that we just gave, we're assuming no tariff refunds or very little tariff refunds.

And probably a little bit coming out the door, but not anywhere like it used to be in the past.

Okay, thank you. And then when we think about NPI.

Is there a way you can maybe help us understand how well they're doing right now in the market? I know you had some introduced a while ago, maybe how those are performing and, how do we think about their contribution either maybe this quarter or next quarter, versus the guide and versus kind of the other products that are not new? Thanks.

So how do we feel about NPI and how can you be aware of how they're performing?

Hopefully, we'll keep you posted and we will do a good job of letting you know when significant new product releases have occurred.

One of the things, I just talked about FORTIQ. Having that platform out there is really important and that a lot of things were kind of bottled up a little bit behind it because we had to have the new platform in the market and now we can start issuing out more and more products on top of that.

There are products, the reality is, I'm telling you about how certain ones did, but of the products we've released and the new products. We've been extremely pleased with how they've performed in the market. And sometimes we introduce products clearly for increasing revenue, but we also introduce products we've got to think about how they improve our margins. So that's a big driver of what they do. There's also reasons to sometimes shore up a strategic position on making sure that we don't have a competitive weakness.

Also making sure that our products have the depth that really is unmatched by our competition, because when you look at our products, it's not only the headline products, it's everything it attaches to so that Pro can get the job done when they're at the house and doing it. So we want to make sure, some of these smaller products we introduce, you say, well, why they do that? It's not going to move. It's that solution for the professional. And that's why he has trusted us is because we get that. So we're clearly going to introduce NPI to drive revenue growth. We're going to introduce products that improve our costs. Profile. We're going to introduce products that have strategic importance and basically make sure the Pro has a complete solution.

Tomo Sano, JP Morgan.

Hello, Tomo. How are you doing?

Thank you for taking my questions.

So you noted that unfavorable mix and input cost inflation partially offset margin gains. How do you expect those headwinds to change in the fourth quarter and beyond, please?

I'll take that one.

So in Q3, you heard us say it was about a $13 million headwind on inflation costs in the quarter.

And then we offset that with about $3 million of realized price increases.

Well, that's so the net 10, let's call it, as a headwind. As we move into Q4 in the guidance we just gave, there is an assumption there that the inflation costs are still going to continue, probably even a little bit higher. But we have a lot more price realization, the price increase realization from our June increases. So the net increase is going to be lower than what we saw in Q3. So less of a headwind, let's call it, for Q4.

Thank you, Shane. And a follow-up to Tom, have you seen any changes in competitors' pricing or promotional activities? How is Resideo's differentiation helping you sustain pricing and protect market share?

Sure.

So right now, obviously it's a season where there's some customers or some competitors are doing promotional pricing, but our pricing, we typically don't do heavy promotional pricing because our pricing is typically related and driven by the needs of the professional.

And they're basically executing in accordance with the needs for jobs. They have assignments that go into the house, they're doing work. And promotional just seems to be not something that's appropriate at that place.

In terms of our pricing, we believe we still deliver the best value out there in the marketplace. When you look at our products and the value that they provide and the pricing that we're asking, we think we stand at the top of the charts on basically bang for the buck.

Thank you very much.

Jay Goldberg, Seaport.

Hi, good afternoon. Thanks for taking my questions.

Tom, I guess first question for you.

You've talked a lot about new products coming out next year. And I'm wondering, I know you're going to talk about this more at your event next week.

It's super interesting. But I was wondering to what degree have you sort of shown this to some group of Pro customers?

And what's the response you're getting from the new directions, the new products you're getting from the Pros?

And I have a follow-up.

So Jay, you're right. And again, thank you for joining us.

And so I will say that yes, we do get a little bit of a sneak preview of how the customer is going to respond because we have [beta] programs in many cases.

And some of the products that will be discussed at the upcoming Connect 2026 conference have been through [beta] and we know what the feedback from the.

Several hundred of the pros that have tried some of these products, and it's been very positive.

So we have a pretty good idea how they'll be received, at least some of the things that have actually gone through beta.

I think in general, if you're going to be at CONNECT 2026, it'll be great to be able to get the feedback from the pros about how they feel the NPI that we've brought to market and how it's executing for them.

Okay. And then my follow-up would be for Shane.

I guess I was just hoping like this quarter, your revenue came in above where you were pretty close to where I was expecting it, but your profit you were much more profitable. And I'm just wondering, as we're thinking building out our models for next year, especially thinking about operating leverage, it seems to be moving in your favor.

That's the thing to say.

Yeah, that's the right way to think about it. As we laid out a model at Investor Day back in whenever that was, July, I believe.

The model there is, I'm going to remind you of the model because it's something I love to talk about.

At the top-line, we're expecting mid-single-digit growth annually over the five-year period of 2030. Now, that's not going to be linear, but this year, according to our guide, we're going to be right at that, 4.4 if you take out that OEM, the OEM security headwind. You move down the stack from there, you look at gross margin. We're also expecting around [200 basis points] of gross margin improvement every year throughout the 2030.

But for every point that we do gain on gross margin, we're going to throw another probably 50 points of that into R&D, kind of back to the flywheel concept that we talked about and Tom talked about in the prepared remarks.

But then to build that operating leverage below that, it's controlled overhead and SG&A spending that drives.

Another point, call it similar to what we're seeing in gross margin, but at the EBITDA level. And if you do that math over that five-year period, you're going to see what I love, which is a mid-single-digit up into the mid to high single-digit and then high single-digit EBITDA growth. And that's what we want to see, and that's what we're going to plan. Now for 2027, we're right in the middle of the season, so I don't even know what the numbers look like right now, but I can tell you that's what we're striving for, and that flywheel that Tom brought up is real, and we do believe that that is going to be. Very giant enabler of getting this operating leverage that I just talked about.

Very helpful.

Thank you. And then just one last little nit. If I understand it right, your revenue guidance for next year is basically in line with what you laid out at the Analysts Day a month ago.

But you're hitting that even though you no longer have the security OEM business. So.

On a like-to-like basis, you're effectively raising guidance a little bit.

So you're talking about for 26, the 26 guide?

Sorry, for 26, yeah.

Yeah. So yeah, what we did is we outperformed in Q3. We're going to pass that through. We're going to flow that right through. And we're going to keep we're keeping the implied Q4 guide and actually raising it slightly at the midpoint.

So yes, you're seeing a full year 26 guide increase.

And frankly, what we're seeing with our forecasting in Q4 is very similar to what we were seeing three months ago, which is why we're kind of keeping that implied guide for Q4 where it's at and then, yeah, flowing through that Q3.

Okay, perfect.

Thank you.

We have reached the end of the Q&A session. This concludes today's call. Thank you for attending. You may now disconnect.