Adi Global Distribution Inc 10-Q for FY2026 Q3
Adi Global Distribution Inc. (ADIG)
10-Q
2026-11-12
For: 2026-10-03
View Original
Added on
November 12, 2026
About this 10-Q
Adi Global Distribution Inc filed this 10-Q on November 12, 2026, covering the quarter ended October 3, 2026 (FY2026 Q3).
ADI reported third-quarter net revenue of $1,306 million, up 8.6%, but a $659 million goodwill impairment produced a net loss of $655 million. Gross margin fell to 20.9% from 22.6%, while Adjusted EBITDA declined to $66 million from $82 million. AI summary
Headline figures
Quarter ended October 3, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.31B
- up 8.6% from $1.2B a year earlier
- Net loss
- $655M
- compared with net income of $26M a year earlier
- Diluted EPS
- -$8.65
- compared with $0.34 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended October 3, 2026
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from _____ to _____
Commission file number 001-43281
(Exact name of registrant as specified in its charter)
(Registrant’s telephone number, including area code)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address of Principal Executive Offices) | (Zip Code) | |||||||
( | ||||||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||||||||
| ☒ | Smaller reporting company | |||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The number of shares outstanding of the registrant's common stock, par value $0.001 per share, as of November 5, 2026, was 76,002,155 shares.
Table of Contents
| Page | ||||||||
Unaudited Consolidated and Combined Condensed Balance Sheets as of October 3, 2026 and December 31, 2025 | ||||||||
Unaudited Consolidated and Combined Condensed Statements of Operations for the Three and Nine Months Ended October 3, 2026 and September 27, 2025 | ||||||||
Unaudited Consolidated and Combined Condensed Statements of Comprehensive (Loss) Income for the Three and Nine Months Ended October 3, 2026 and September 27, 2025 | ||||||||
Unaudited Consolidated and Combined Condensed Statements of Cash Flows for the Nine Months Ended October 3, 2026 and September 27, 2025 | ||||||||
Unaudited Consolidated and Combined Condensed Statements of Changes in Equity for the Three and Nine Months Ended October 3, 2026 and September 27, 2025 | ||||||||
PART II | ||||||||
2
Part I. Financial Information
Item 1. Financial Statements
ADI GLOBAL DISTRIBUTION INC.
CONSOLIDATED AND COMBINED CONDENSED BALANCE SHEETS
(UNAUDITED)
| (in millions, except share and per share amounts) | October 3, 2026 | December 31, 2025 | |||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Accounts receivable, net | |||||||||||
| Inventories, net | |||||||||||
| Other current assets | |||||||||||
| Total current assets | |||||||||||
| Property, plant and equipment, net | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued liabilities | |||||||||||
| Current portion of operating lease liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt | |||||||||||
| Non-current portion of operating lease liabilities | |||||||||||
| Deferred tax liabilities | |||||||||||
| Other liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and Contingencies (Note 14) | |||||||||||
| Equity: | |||||||||||
Preferred stock, par value of $ | |||||||||||
Common stock, par value of $ | |||||||||||
| Treasury stock, at cost | ( | ||||||||||
| Additional paid-in-capital | |||||||||||
| Net Former Parent investment | |||||||||||
| Accumulated deficit | ( | ||||||||||
| Accumulated other comprehensive loss, net | ( | ( | |||||||||
| Total equity | |||||||||||
| Total liabilities and equity | $ | $ | |||||||||
See the accompanying Notes to the Unaudited Consolidated and Combined Condensed Financial Statements.
3
ADI GLOBAL DISTRIBUTION INC.
CONSOLIDATED AND COMBINED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| (in millions, except per share amounts) | October 3, 2026 | September 27, 2025 | October 3, 2026 | September 27, 2025 | |||||||||||||||||||
| Net revenue | $ | $ | $ | $ | |||||||||||||||||||
| Cost of goods sold | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Selling, general and administrative expenses | |||||||||||||||||||||||
| Impairment of goodwill | |||||||||||||||||||||||
| Research and development expenses | |||||||||||||||||||||||
| Intangible asset amortization | |||||||||||||||||||||||
| Transaction related expenses | |||||||||||||||||||||||
| Restructuring expenses | |||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| (Loss) income from operations | ( | ( | |||||||||||||||||||||
| Indemnification agreement expense | |||||||||||||||||||||||
| Other expense (income), net | ( | ||||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Interest income | ( | ( | ( | ( | |||||||||||||||||||
| (Loss) income before taxes | ( | ( | ( | ||||||||||||||||||||
| Provision for (benefit from) income taxes | ( | ||||||||||||||||||||||
| Net (loss) income | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
| (Loss) earnings per common share: | |||||||||||||||||||||||
| Basic | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
| Diluted | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
See the accompanying Notes to the Unaudited Consolidated and Combined Condensed Financial Statements.
4
ADI GLOBAL DISTRIBUTION INC.
CONSOLIDATED AND COMBINED CONDENSED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(UNAUDITED)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| (in millions) | October 3, 2026 | September 27, 2025 | October 3, 2026 | September 27, 2025 | |||||||||||||||||||
| Comprehensive (loss) income | |||||||||||||||||||||||
| Net (loss) income | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||
| Foreign exchange translation gain (loss) | ( | ( | |||||||||||||||||||||
| Changes in fair value of effective cash flow hedges | ( | ( | |||||||||||||||||||||
| Total other comprehensive income (loss), net of tax | ( | ( | |||||||||||||||||||||
| Comprehensive (loss) income | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
See the accompanying Notes to the Unaudited Consolidated and Combined Condensed Financial Statements.
5
ADI GLOBAL DISTRIBUTION INC.
CONSOLIDATED AND COMBINED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Nine Months Ended | |||||||||||
| (in millions) | October 3, 2026 | September 27, 2025 | |||||||||
| Cash Flows From Operating Activities: | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
| Impairment of goodwill | |||||||||||
| Depreciation and amortization | |||||||||||
| Restructuring expenses | |||||||||||
| Stock-based compensation expense | |||||||||||
| Operating lease right-of-use-asset amortization | |||||||||||
| Other, net | |||||||||||
| Changes in assets and liabilities: | |||||||||||
| Accounts receivable, net | ( | ( | |||||||||
| Inventories, net | ( | ( | |||||||||
| Other current assets | ( | ( | |||||||||
| Accounts payable | ( | ||||||||||
| Accrued liabilities | |||||||||||
| Lease liabilities | ( | ( | |||||||||
| Obligations payable under the Indemnification Agreement | ( | ||||||||||
| Other, net | |||||||||||
| Net cash used in operating activities | ( | ( | |||||||||
| Cash Flows From Investing Activities: | |||||||||||
| Capital expenditures | ( | ( | |||||||||
| Related party loan activity, net | ( | ||||||||||
| Other investing activities, net | |||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash Flows From Financing Activities: | |||||||||||
| Proceeds from issuance of long-term debt, net of issuance costs | |||||||||||
| Net transfers from Former Parent | |||||||||||
| Net decrease in due to related parties related to cash pooling arrangements | ( | ( | |||||||||
| Cash distribution to Former Parent | ( | ||||||||||
| Other financing activities, net | ( | ||||||||||
| Net cash provided by financing activities | |||||||||||
| Effect of exchange rate changes on cash and cash equivalents | |||||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ||||||||||
| Cash and cash equivalents at beginning of period | |||||||||||
| Cash and cash equivalents at end of period | $ | $ | |||||||||
See the accompanying Notes to the Unaudited Consolidated and Combined Condensed Financial Statements.
6
ADI GLOBAL DISTRIBUTION INC.
CONSOLIDATED AND COMBINED CONDENSED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
| Preferred Stock | Common Stock | Treasury Stock | |||||||||||||||||||||||||||||||||
| (in millions, except shares in thousands) | Shares | Amount | Shares | Amount | Shares | Amount | Additional Paid-In Capital | Accumulated deficit | Net Former Parent Investment | Accumulated Other Comprehensive Loss, net | Total Equity | ||||||||||||||||||||||||
| Balance at July 5, 2026 | $ | $ | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||
| Net loss | – | – | – | – | – | – | – | ( | ( | – | ( | ||||||||||||||||||||||||
| Other comprehensive income, net of tax | – | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||
| Preferred stock issuance | – | – | – | – | – | – | ( | – | |||||||||||||||||||||||||||
| Common stock issuance, net of shares withheld for taxes | – | – | – | ( | – | – | – | – | ( | ||||||||||||||||||||||||||
| Stock-based compensation expense | – | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||
| Cash distribution to Former Parent | – | – | – | – | – | – | – | – | ( | – | ( | ||||||||||||||||||||||||
| Net transfers from Former Parent | – | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||
| Issuance of common stock in connection with the Spin-Off and reclassification of Former Parent's net investment | – | – | – | – | – | – | ( | – | |||||||||||||||||||||||||||
| Balance at October 3, 2026 | $ | $ | $ | ( | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||
| Balance at June 29, 2025 | $ | $ | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||
| Net income | – | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | – | – | – | – | – | – | – | – | – | ( | ( | ||||||||||||||||||||||||
| Net transfers to Former Parent | – | – | – | – | – | – | – | – | ( | – | ( | ||||||||||||||||||||||||
| Balance at September 27, 2025 | $ | $ | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||
See the accompanying Notes to the Unaudited Consolidated and Combined Condensed Financial Statements.
7
ADI GLOBAL DISTRIBUTION INC.
CONSOLIDATED AND COMBINED CONDENSED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
| Preferred Stock | Common Stock | Treasury Stock | |||||||||||||||||||||||||||||||||
| (in millions, except shares in thousands) | Shares | Amount | Shares | Amount | Shares | Amount | Additional Paid-In Capital | Accumulated deficit | Net Former Parent Investment | Accumulated Other Comprehensive Loss, net | Total Equity | ||||||||||||||||||||||||
| Balance at January 1, 2026 | $ | $ | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||
| Net loss | – | – | – | – | – | – | – | ( | ( | – | ( | ||||||||||||||||||||||||
| Other comprehensive loss, net of tax | – | – | – | – | – | – | – | – | – | ( | ( | ||||||||||||||||||||||||
| Preferred stock issuance | – | – | – | – | – | – | ( | – | |||||||||||||||||||||||||||
| Common stock issuance, net of shares withheld for taxes | – | – | – | ( | – | – | – | – | ( | ||||||||||||||||||||||||||
| Stock-based compensation expense | – | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||
| Cash distribution to Former Parent | – | – | – | – | – | – | – | – | ( | – | ( | ||||||||||||||||||||||||
| Net transfers from Former Parent | – | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||
| Issuance of common stock in connection with the Spin-Off and reclassification of Former Parent's net investment | – | – | – | – | – | – | ( | – | |||||||||||||||||||||||||||
| Balance at October 3, 2026 | $ | $ | $ | ( | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||
| Balance at January 1, 2025 | $ | $ | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||
| Net loss | – | – | – | – | – | – | – | – | ( | – | ( | ||||||||||||||||||||||||
| Other comprehensive income, net of tax | – | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||
| Net transfers from Former Parent | – | – | – | – | – | – | – | – | ( | – | ( | ||||||||||||||||||||||||
| Balance at September 27, 2025 | $ | $ | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||
See the accompanying Notes to the Unaudited Consolidated and Combined Condensed Financial Statements.
8
ADI GLOBAL DISTRIBUTION INC.
NOTES TO THE UNAUDITED CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS
Note 1. Description of the Business and Basis of Presentation
Description of Business
ADI Global Distribution Inc. (“ADI,” the “Company,” “we,” “us,” or “our”) is a leading, global specialty distributor of professionally installed low-voltage products, including security and audio-visual (“AV”) solutions, serving commercial and residential markets through an omnichannel go-to-market platform. ADI sells primarily to professional installers, dealers and integrators. We offer an expansive list of products from leading suppliers across key specialty low-voltage categories. ADI complements supplier products with a suite of exclusive brands and service offerings.
The Company has one operating segment and one reportable segment, based upon the information used by our chief operating decision maker (“CODM”). The Company’s CODM is its Chief Executive Officer. Our CODM utilizes net income as the primary measure of segment performance because it reflects the underlying business performance and provides the CODM with a basis for making resource allocation decisions. The CODM uses net income to monitor budget versus actual results, for assessing performance of the segment and as a component in determining management’s compensation. Our CODM does not utilize assets for making resource allocation decisions.
Separation from Resideo Technologies, Inc.
On July 1, 2026, the Board of Directors of Resideo Technologies, Inc. (“Resideo” or “Former Parent”) approved the previously announced separation of Resideo's ADI Global Distribution business into an independent, publicly traded company through the pro rata distribution of all of the issued and outstanding common stock of ADI to Resideo's common stockholders (the “Separation” or “Spin-Off”).
On August 3, 2026, Resideo completed the Spin-Off through the pro rata distribution of 100 % of the outstanding shares of ADI common stock to holders of Resideo common stock as of the close of business on July 20, 2026 (the “Record Date”). Each Resideo common stockholder received one share of ADI common stock for every two shares of Resideo common stock held. The shares of ADI common stock held by Resideo were recapitalized into 76 million shares of ADI common stock.
Following the Separation, Resideo retained no ownership interest in ADI, and ADI became an independent, publicly traded company. ADI's common stock began regular way trading on the New York Stock Exchange under the ticker “ADIG” on August 4, 2026.
In connection with the Separation of ADI from Resideo, ADI issued 150,000 shares of Series A Cumulative Convertible Participating Preferred Stock of ADI (“ADI Preferred Stock”) to Resideo, which Resideo delivered to the holders of Resideo preferred stock in exchange for a portion of their Resideo preferred stock. Following the exchange, 150,000 shares of Resideo preferred stock were cancelled, and ADI had 150,000 shares of ADI Preferred Stock outstanding. Immediately following the Separation, Clayton, Dubilier & Rice, LLC (“CD&R”) (or any private equity fund managed or advised by CD&R or any general partner thereof, or any of their respective affiliates) (the “CD&R Group”) beneficially owned shares of ADI common stock and ADI preferred stock, which, taken together on an as-converted basis, represented approximately 19.69 % of ADI's total voting power.
In connection with the Separation, on August 3, 2026, the assets comprising the ADI businesses were contributed to ADI, a wholly-owned subsidiary of the Former Parent, and, as partial consideration for such contribution, the Company made a cash payment to Resideo in the amount of $900 million.
In connection with the Separation, ADI and Resideo entered into a Separation and Distribution agreement and certain ancillary agreements that govern the relationship between the parties following the Separation, including a transition services agreement, a tax matters agreement and an intellectual property matters agreement (the “Separation and Distribution Agreement”). Refer to the “The Separation and Distribution” section included in the Company's Information Statement for additional information.
The Separation and Distribution Agreement provided for a cash adjustment based on the Company's cash balances as of the closing of the Spin-Off, with a target cash amount of $150 million. During the third quarter of 2026, the Company received approximately $20 million from Resideo in complete settlement of this adjustment.
9
In addition, all per share amounts presented in the Unaudited Consolidated and Combined Condensed Financial Statements have been retroactively adjusted to give effect to this recapitalization.
Basis of Presentation
The accompanying Unaudited Consolidated and Combined Condensed Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial information. In the opinion of management, the Unaudited Consolidated and Combined Condensed Financial Statements include all adjustments, consisting of normal, recurring adjustments, necessary to fairly present the Company's financial position, results of operations, comprehensive income and cash flows for the periods presented. Accordingly, these financial statements do not include all of the information and notes required by GAAP for complete financial statements and should be read in conjunction with the Audited Combined Financial Statements for the year ended December 31, 2025 and the notes thereto included within the Company's Information Statement filed as an exhibit to the Company's Form 10-12B/A on July 1, 2026 (the “Information Statement”).
Prior to the Separation, the Company historically operated as part of Resideo and not as a separate, publicly traded company. For periods prior to the Separation, the accompanying financial statements were derived from Resideo's historical consolidated financial statements and accounting records and were prepared on a carve-out basis. All revenues and costs, as well as assets and liabilities, directly associated with the Company were included in the financial statements. The assets and liabilities comprising the Company are reflected at their historical cost basis and, in connection with the Separation, were transferred to ADI at their historical carry-over basis. The financial statements also include allocations of certain corporate and shared costs from Resideo for periods prior to the Separation. These allocations were determined on a reasonable basis; however, the amounts are not necessarily representative of the amounts that would have been incurred had the Company operated independently of Resideo for the periods presented.
Former Parent's investment, which includes net income attributable to the Company prior to the Separation, represents Resideo's historical interest in the recorded net assets of the Company. All significant transactions between the Company and Resideo prior to the Separation have been included in the accompanying Unaudited Consolidated and Combined Condensed Financial Statements. Transactions with Resideo prior to the Separation are reflected in the Unaudited Consolidated and Combined Condensed Statements of Changes in Equity as Net transfers to Former Parent and, for periods prior to the Separation, in the Unaudited Combined Condensed Balance Sheets within Former Parent's investment. Prior to the Separation, certain financing transactions with Resideo were deemed to have been settled immediately through Former Parent's investment, while other transactions historically settled in cash between Resideo and the Company were reflected as amounts due from or due to related parties. Upon completion of the Separation, Resideo ceased to be a related party of the Company and transactions with Resideo are no longer reported as related party transactions. Refer to Note 15. Related Party Transactions for additional information.
Prior to the Separation, Resideo operated centralized treasury functions and certain of the Company’s cash was transferred to Resideo through centrally managed cash programs, while Resideo funded the Company’s operating and investing activities as needed. Cash and cash equivalents reflected in the Unaudited Consolidated and Combined Condensed Balance Sheets represent amounts held by the Company’s legal entities. These historical arrangements may not be indicative of the manner in which the Company would have financed its operations had it operated independently of Resideo during the periods presented.
Prior to the Separation, certain third-party debt of Resideo and related interest expense were reflected in the Company’s historical financial statements. Refer to Note 8. Long-Term Debt for additional information.
Following the Separation, the Unaudited Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries and no longer include allocations from Resideo. Accordingly, the Unaudited Consolidated and Combined Condensed Statements of Operations and Comprehensive Income for the three and nine months ended October 3, 2026 include the combined results of the Company for the period prior to the Separation and the consolidated results of the Company following the Separation. The comparative periods for 2025 consist entirely of the combined results of the ADI businesses.
The historical combined financial information for periods prior to the Separation may not be indicative of the results of operations or financial position that would have been achieved had the Company operated as a separate, publicly traded company during these periods, nor is such information necessarily indicative of the Company's future results.
10
Reporting Period
We report financial information on a fiscal quarter basis using a modified four-four-five week calendar. Our fiscal calendar begins on January 1 and ends on December 31. We have elected the first, second and third quarters to end on a Saturday in order to not disrupt business processes. The effects of this election are generally not significant to reported results for any quarter and only exist within a reporting year.
Note 2. Summary of Significant Accounting Policies
Our significant accounting policies are detailed in Note 2. Summary of Significant Accounting Policies of the Audited Combined Financial Statements included in the Information Statement. There have been no significant changes to these policies that have had a material impact on the Unaudited Consolidated and Combined Condensed Financial Statements and the accompanying disclosure notes for the three and nine months ended October 3, 2026.
Accounting Pronouncements
We consider the applicability and impact of all recent accounting standards updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”). ASUs not listed below were assessed and determined to be either not applicable or are expected to have an immaterial impact.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Topic 220): Disaggregation of Income Statement Expenses. This ASU requires entities to disaggregate operating expenses into specific categories, such as purchases of inventory, employee compensation, depreciation and amortization to provide enhanced transparency into the nature and function of expenses. The guidance is effective for annual reporting years beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. We are currently assessing the impact of adoption on our disclosures.
Note 3. Revenue Recognition
Disaggregated Revenue
The following tables present revenue by geographic location and product type, as we believe this presentation best depicts how the nature, amount, timing and uncertainty of net revenue and cash flows are affected by economic factors:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| (in millions) | October 3, 2026 | September 27, 2025 | October 3, 2026 | September 27, 2025 | |||||||||||||||||||
Americas (1) | $ | $ | $ | $ | |||||||||||||||||||
International (2) | |||||||||||||||||||||||
| Total net revenue | $ | $ | $ | $ | |||||||||||||||||||
(1)Americas represents North, Central and South America.
(2)International represents all geographies that are not included in Americas.
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| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| (in millions) | October 3, 2026 | September 27, 2025 | October 3, 2026 | September 27, 2025 | |||||||||||||||||||
| Third-party brands | $ | $ | $ | $ | |||||||||||||||||||
| Exclusive brands | |||||||||||||||||||||||
| Total net revenue | $ | $ | $ | $ | |||||||||||||||||||
Note 4. Inventories, net
Inventories, net consist of the following:
| (in millions) | October 3, 2026 | December 31, 2025 | |||||||||
| Raw materials | $ | $ | |||||||||
| Finished products | |||||||||||
| Total inventories, net | $ | $ | |||||||||
Note 5. Goodwill and Other Intangible Assets, net
Changes in the carrying value of goodwill were as follows:
| (in millions) | Goodwill | ||||
| Balance as of January 1, 2026 | $ | ||||
| Impairment of goodwill | ( | ||||
| Impact of foreign currency translation | ( | ||||
| Balance as of October 3, 2026 | $ | ||||
Goodwill Impairment
Goodwill is assessed for impairment annually on the first day of the fourth quarter, or more frequently if indicators of impairment are present or circumstances suggest that impairment may exist.
As of the quarter ended October 3, 2026, the Company’s results reflected continued weakness in the residential market further impacting the demand for exclusive brand products as well as unfavorable product and customer mix shifts which contributed to a change in the Company's near-term outlook. Consequently, management updated its financial projections, including revised near-term revenue and operating margin expectations, which resulted in lower projected operating results and reduced projected future cash flows. In addition, management considered declines in the Company's stock price and market capitalization. Based on these factors, the Company concluded that a triggering event had occurred and performed an interim quantitative goodwill impairment assessment.
The Company operates as a single reportable segment and has one reporting unit for purposes of goodwill impairment testing. Accordingly, goodwill is tested for impairment at the Company level.
The Company estimated the fair value of its reporting unit using both an income approach and a market approach, with each approach weighted equally in determining the estimated fair value of the reporting unit. Under the income approach, the Company utilized a discounted cash flow model based on management's most recent financial projections. Under the market approach, the Company estimated fair value using valuation multiples derived from guideline public companies.
The valuation required significant judgment and the use of significant assumptions. The income approach incorporated assumptions regarding projected future cash flows, including revised near-term revenue and operating margin expectations, the discount rate and the terminal growth rate. The discount rate reflects the risks inherent in the projected future cash flows, including macroeconomic and industry-specific factors. The market approach incorporated valuation multiples derived from guideline public companies selected based on their comparability to the Company. The fair value estimate was classified within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs.
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Based on the interim quantitative goodwill impairment assessment, the carrying value of the Company's reporting unit exceeded its estimated fair value. As a result, the Company recognized a non-cash goodwill impairment charge of $659 million during the three months ended October 3, 2026. The impairment charge was recognized in Impairment of goodwill in the Unaudited Consolidated and Combined Condensed Statements of Operations.
The Company also performed an impairment assessment for its long-lived assets. No impairment charges were identified for long-lived assets during the nine months ended October 3, 2026.
All intangible assets are subject to amortization. These intangible assets consisted of the following:
| October 3, 2026 | December 31, 2025 | ||||||||||||||||||||||
| (in millions) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||
| Customer relationships | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||
| Patents and technology | ( | ( | |||||||||||||||||||||
| Software | ( | ( | |||||||||||||||||||||
| Trademarks | ( | ( | |||||||||||||||||||||
| Total intangible assets | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||
Note 6. Accrued Liabilities
Accrued liabilities consist of the following:
| (in millions) | October 3, 2026 | December 31, 2025 | |||||||||
| Compensation, benefit and other employee-related | $ | $ | |||||||||
| Deferred revenue | |||||||||||
| Customer rebate reserve | |||||||||||
Other (1) | |||||||||||
| Total accrued liabilities | $ | $ | |||||||||
Note 7. Leases
Operating lease expense recognized in Selling, general and administrative expenses was $19 million and $58 million for the three and nine months ended October 3, 2026, respectively, and $18 million and $50 million for the three and nine months ended September 27, 2025, respectively.
Total operating lease costs include variable lease costs of $4 million and $12 million for the three and nine months ended October 3, 2026, respectively, and $4 million and $11 million for the three and nine months ended September 27, 2025, respectively, recognized in Selling, general and administrative expenses.
The following table summarizes the carrying amounts of our operating lease assets and liabilities:
| (in millions) | October 3, 2026 | December 31, 2025 | |||||||||
| Operating lease right-of-use assets | $ | $ | |||||||||
| Current portion of operating lease liabilities | $ | $ | |||||||||
| Non-current portion of operating lease liabilities | $ | $ | |||||||||
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The following table summarizes supplemental cash flow information related to operating leases:
| Nine Months Ended | |||||||||||
| (in millions) | October 3, 2026 | September 27, 2025 | |||||||||
| Cash paid for operating lease liabilities | $ | $ | |||||||||
| Non-cash activities: operating lease right-of-use assets obtained in exchange for new operating lease liabilities | $ | $ | |||||||||
As of October 3, 2026, we have additional operating leases that have not yet commenced, primarily related to ongoing real estate optimization. The total undiscounted future lease payments for these leases were $23 million.
Note 8. Long-Term Debt
The Company had the following debt outstanding as of:
| (in millions) | October 3, 2026 | ||||||||||
| $ | |||||||||||
| Term Facility | |||||||||||
| Gross debt | |||||||||||
Less: current portion of long-term debt (1) | ( | ||||||||||
| Less: unamortized deferred financing costs | ( | ||||||||||
| Total long-term debt | $ | ||||||||||
(1) Included within Accrued liabilities on the Unaudited Consolidated and Combined Condensed Balance Sheet.
Senior Notes due 2034
On June 30, 2026, ADI Escrow Issuer LLC (the “Escrow Issuer”), a direct, wholly-owned subsidiary of ADI and an indirect, wholly-owned subsidiary of our Former Parent, completed an offering of $400 million aggregate principal of the Escrow Issuer’s 7.125 % Senior Notes due 2034 (“Senior Notes due 2034”). The Senior Notes due 2034 were issued pursuant to an Indenture, dated June 30, 2026 (the “Indenture”), between the Escrow Issuer and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). The proceeds from the offering of the Senior Notes due 2034 were used as part of the financing for the Spin-Off.
In connection with the completion of the Spin-Off, on August 3, 2026 and with the satisfaction of the Escrow Release Conditions (as defined in the Indenture), Escrow Issuer merged with and into ADI Global Distribution Funding LLC (“ADI Funding”), a direct wholly-owned subsidiary of ADI, and ADI Funding assumed the obligations of Escrow Issuer under the Indenture and the Senior Notes due 2034. In addition, ADI and certain of ADI's other subsidiaries (collectively, the “Guarantors”) guaranteed ADI Funding's obligations under the Indenture and the Senior Notes due 2034.
The Senior Notes due 2034 mature on July 15, 2034 and bear interest at an annual rate of 7.125 %, payable semi-annually on January 15 and July 15 of each year, commencing January 15, 2027. The Senior Notes due 2034 are redeemable prior to July 15, 2029 at a make-whole redemption price (with a limited equity-funded redemption option for up to 40 % of the principal at 107.125 %), and become callable at specified redemption prices thereafter in accordance with the Indenture. Following the escrow release on August 3, 2026, the Indenture limits ADI's ability and the ability of its restricted subsidiaries to incur or guarantee additional indebtedness; pay dividends or distributions on, or redeem or repurchase capital stock and make other restricted payments; make investments; consummate certain asset sales; engage in certain transactions with affiliates; grant or assume certain liens; and consolidate, merge, or transfer all or substantially all of ADI's assets. Additionally, upon certain events constituting a change of control, the holders of the Senior Notes due 2034 will have the right to have their Senior Notes due 2034 repurchased at a purchase price equal to 101 % of their principal amount plus accrued and unpaid interest, to (but not including) the date of purchase.
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The Indenture provides for customary events of default, which, if any of them occurs, may cause the principal and accrued interest on the Senior Notes due 2034 to become, or to be declared, due and payable on an accelerated basis.
The fair value of the Senior Notes due 2034 was estimated using quoted market prices for the same or similar debt issuances, which is a Level 2 measurement in the fair value hierarchy. As of October 3, 2026, the fair value of the Senior Notes due 2034 was $394 million.
Credit Agreement of ADI
On July 1, 2026, ADI Funding entered into a senior secured Credit Agreement (the “Credit Agreement”) with the lenders and issuing banks party thereto and JPMorgan Chase Bank, N.A., as administrative agent. The Credit Agreement provides for (i) term loans in an aggregate principal amount of $600 million (the “Term Facility”) and (ii) revolving credit commitments in an aggregate initial principal amount of $500 million (the “Revolving Facility” and, together with the Term Facility, the “Credit Facilities”). With the completion of the Spin-Off, on August 3, 2026, the Company borrowed $600 million under the Term Facility portion of the Credit Agreement and borrowings became available under the five-year $500 million Revolving Facility. No amounts have been drawn under the Revolving Facility. Borrowings under the Credit Facilities bear an interest rate, at the Company’s option, at either a base rate or the Secured Overnight Financing Rate (“SOFR”), in each case plus an applicable margin. The applicable margin on borrowings under the Revolving Facility varies based on ADI’s consolidated total net leverage ratio. The Term Facility requires quarterly amortization payments of 0.25 % commencing the first full quarter after the Spin-Off. As of October 3, 2026, the effective interest rate on the Term Facility was 6.7 %.
In addition, on August 3, 2026, the Guarantors, other than ADI, entered into supplements to the guarantee agreement and collateral agreement related to the Credit Agreement pursuant to which such Guarantors provided guarantees of our obligations under the Credit Agreement and the related documents and pledges of their respective assets, subject to certain exceptions, to secure their respective obligations in each case in a manner consistent with the requirements of the Credit Agreement.
The Term Facility will mature, and the term loans thereunder will be required to be repaid, seven years after the Spin-Off, subject to certain extension rights in the discretion of each lender. The Revolving Facility will mature, and all borrowings thereunder will be required to be repaid, five years after the Spin-Off, with certain extension rights in the discretion of each lender. Borrowings under the Term Facility may not be re-borrowed once repaid. Voluntary prepayments of borrowings may generally be made without premium or penalty, except for a 1 % premium on certain repricing transactions involving the Term Facility in the first six months following the Spin-Off, and certain borrowings may be subject to customary breakage costs. The Credit Agreement also contains customary mandatory prepayment provisions upon the occurrence of specified events, as well as excess cash flow sweep requirements for the Term Facility, beginning with the fiscal year ending on December 31, 2027.
The Revolving Facility contains financial covenants, which were first tested as of October 3, 2026, including a consolidated total net leverage ratio that steps down over time and a minimum consolidated interest ratio. There were no outstanding borrowings and no letters of credit issued under the Revolving Facility as of October 3, 2026. As of October 3, 2026, the Company was in compliance with all covenants.
The fair value of the Term Facility was estimated using observable market inputs for similar debt instruments and is classified as a Level 2 measurement in the fair value hierarchy. As of October 3, 2026, the fair value of the Term Facility was $605 million.
Allocated Resideo Debt
Prior to the Spin-Off, Resideo was the obligor of multiple third-party debt instruments, some of which the Company was also jointly and severally liable, while other third-party debt instruments transferred to the Company upon the completion of the Spin-Off as noted above. For the debt instruments that the Company was jointly and severally liable for, a portion of the Former Parent’s long-term debt and short-term debt was allocated to the Company as of December 31, 2025. The related interest expense and unamortized deferred financing costs on the debt was allocated to the Company for the periods presented prior to the Spin-Off. Given the lack of a contractual agreement for the Company to pay a specified amount to the Former Parent (i.e., its co-obligors), the allocation basis was determined based on what the Company would reasonably expect to pay on behalf of its co-obligors. No payments were made by the Company to third-party creditors, as payments historically were made by the Former Parent in each reporting period.
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The outstanding debt allocated to ADI from Resideo as of December 31, 2025 was as follows:
| December 31, 2025 | |||||||||||
| (in millions) | Allocated to ADI | Total Resideo | |||||||||
| $ | $ | ||||||||||
Variable rate A&R Term B Facility (1) | |||||||||||
| Gross debt | $ | $ | |||||||||
Less: current portion of long-term debt (2) | ( | ( | |||||||||
| Less: unamortized deferred financing costs | ( | ( | |||||||||
| Total long-term debt | $ | $ | |||||||||
(1)These outstanding debt obligations associated with this instrument did not transfer to ADI in connection with the Spin-Off; however, the historical debt balances were allocated to the Company in a manner intended to approximate the indebtedness incurred by the Company upon completion of the Spin-Off.
(2)Included within Accrued liabilities on the Unaudited Consolidated and Combined Condensed Balance Sheets.
A&R Credit Agreement of Resideo
In 2021, Resideo (“Borrower”) entered into a credit agreement with JPMorgan Chase Bank N.A. as administrative agent (the “A&R Credit Agreement”), which was most recently amended on June 4, 2026 (as amended, the “Second A&R Credit Agreement”). The Borrower entered into the Second A&R Credit Agreement in order to facilitate the Spin-Off as well as extend the revolver maturity to 2031.
As of December 31, 2025, the weighted average interest rate on the A&R Term B Facility, excluding the impact of the interest rate swaps, was 5.76 %.
Under the Second A&R Credit Agreement, the Borrower entered into a new senior secured revolving credit facility (the “A&R Revolving Credit Facility”), which refinanced in full the existing senior secured revolving credit facility (the “Original Revolver”) and provides for commitments in an aggregate principal amount of $500 million and a five-year term ending in June 2031. The Second A&R Credit Agreement also includes a senior secured term B loan facility (the “A&R Term B Facility”).
In connection with the completion of the Spin-Off, ADI and its subsidiaries that were obligors under the A&R Term B Facility and the A&R Revolving Credit Facility were released from their obligations under the Second A&R Credit Agreement.
Senior Unsecured Notes of Resideo
In August 2021, the Borrower issued $300 million in principal amount of 4.000 % Senior Notes due 2029 (“Senior Notes due 2029”).
In July 2024, the Borrower issued $600 million in aggregate principal of 6.500 % Senior Notes due 2032 (“Senior Notes due 2032”).
The Senior Notes due 2029 and Senior Notes due 2032 are senior unsecured obligations of the Borrower guaranteed by the Borrower's existing and future domestic subsidiaries.
In connection with the completion of the Spin-Off, the obligations of certain of our subsidiaries under the Senior Notes due 2029 and the Senior Notes due 2032 were automatically and unconditionally released.
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Interest Expense
For the three and nine months ended October 3, 2026, interest expense in connection with third-party debt was $18 million and $50 million, respectively. For the three and nine months ended September 27, 2025, interest expense in connection with third-party debt was $16 million and $25 million, respectively.
Prior to the Spin-Off, certain interest expense related to third-party debt was allocated to the Company, and the related cash interest payments were made by Resideo. Following the Spin-Off, interest expense reflects interest on third-party debt directly incurred by ADI.
Note 9. Indemnification Agreement
Prior to the Spin-Off on August 3, 2026, ADI was a subsidiary of Resideo. In connection with Resideo's separation from Honeywell in 2018, Resideo became an independently traded company as a result of a pro rata distribution of Resideo's common stock to the stockholders of Honeywell (the “Former Parent Spin-Off”). In connection with our Former Parent's Spin-Off from Honeywell, our Former Parent entered into an Indemnification Agreement pursuant to which our Former Parent had an obligation to make cash payments associated with Honeywell’s environmental liabilities which were capped at $140 million annually. Prior to the Former Parent entering into a definitive agreement with Honeywell to terminate the Indemnification Agreement, the Indemnification Agreement extended until the earlier of (1) December 31, 2043; or (2) December 31 of the third consecutive anniversary where the annual reimbursement obligation (including accrued amounts) has been less than $25 million.
Subsidiaries of the Company were jointly and severally liable for our Former Parent’s obligations for the Indemnification Agreement. As such, an allocated portion of our Former Parent's Indemnification Agreement expenses were presented within Indemnification Agreement expense in the Unaudited Consolidated and Combined Condensed Statements of Operations, as the Company was jointly and severally liable for such agreement until our Former Parent entered into an agreement with Honeywell in the third quarter of 2025 to terminate it as discussed under “Termination Agreement” below. Given the lack of a contractual agreement for the Company to pay a specified amount to the Former Parent (i.e., its co-obligors), the allocation basis was determined based on what the Company would reasonably expect to pay on behalf of its co-obligors. No payments were made by the Company to Honeywell as payments were made by the Former Parent historically and in each reporting period.
Termination Agreement
On July 30, 2025, Resideo entered into a definitive agreement with Honeywell to terminate the Indemnification Agreement (“Termination Agreement”). Our Former Parent made a pre-tax, one-time cash payment of $1,590 million to Honeywell, which occurred in the third quarter of 2025. In addition, our Former Parent also paid a regularly scheduled payment of $35 972 million in pre-tax expense in 2025. The liability in connection with the Indemnification Agreement was fully repaid and is not presented on the Unaudited Consolidated and Combined Condensed Balance Sheets.
As the subsidiaries of the Company were jointly and severally liable for our Former Parent’s obligations during the periods the obligations were outstanding, an allocated portion of the expense is presented within Indemnification agreement expense in the Unaudited Consolidated and Combined Condensed Statement of Operations as follows:
| Nine Months Ended | |||||||||||
| (in millions) | September 27, 2025 | ||||||||||
| Allocation to ADI | $ | ||||||||||
| Total Resideo | $ | ||||||||||
There was no
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Note 10. Restructuring
Note 11. Stock-Based Compensation Plans
Prior to the Spin-Off, ADI had no stock-based compensation plans; however, certain of our employees and non-employee directors were eligible to participate in Resideo's Stock Incentive Plan which consists of the Amended and Restated 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates and the 2018 Stock Incentive Plan for Non-Employee Directors of Resideo Technologies, Inc. which provided for the grant of stock options, stock appreciation rights, restricted stock units, restricted stock, and other stock-based awards.
In connection with the Spin-Off, the Company established the 2026 Stock Incentive Plan of ADI Global Distribution Inc. and its Affiliates (the “ADI Stock Plan”), which provides for the grant of stock-based awards to eligible employees and non-employee directors. The maximum number of shares of ADI common stock that may be issued under the ADI Stock Plan is 8,167,473 shares, subject to adjustment pursuant to the terms of the plan.
In connection with the Spin-Off, outstanding Resideo equity awards held by ADI employees were converted into awards of ADI common stock under the ADI Stock Plan using a conversion factor based on Resideo's closing stock price immediately prior to the Spin-Off and ADI's two-day volume-weighted average price for the first two trading days following the Spin-Off. The two-day volume-weighted average price was used to maintain the economic value before and after the Spin-Off. Approximately 2.8 million ADI restricted stock units (“RSUs”) and 212 thousand performance stock units (“PSUs”) were outstanding immediately following the conversion. The terms of the equity awards, including vesting schedules and performance periods, as applicable, generally remained unchanged. The conversion was accounted for as a modification under ASC 718, Compensation—Stock Compensation. Incremental compensation expense resulting from the conversion was immaterial and will be recognized over the remaining requisite service period of the applicable awards. RSUs generally vest ratably over three years and are subject to continued service through the applicable service dates.
Following the Spin-Off, the Company granted 91 thousand RSUs with a weighted average fair value of $26.60 .
For the three and nine months ended October 3, 2026, stock-based compensation expense was $7 million and $19 million, respectively. For the three and nine months ended September 27, 2025, stock-based compensation expense was $6 million and $20 million, respectively. Stock-based compensation expense is included in either Selling, general and administrative expenses or Restructuring expenses in the Unaudited Consolidated and Combined Condensed Statements of Operations based on the nature of the expense.
As of October 3, 2026, total unrecognized compensation expense related to unvested stock-based awards was $31 million, which is expected to be recognized over a weighted-average period of approximately 1.4 years.
Employee Stock Purchase Plan
Prior to the Spin-Off, certain employees of the Company participated in Resideo's Employee Stock Purchase Plan (the “Resideo ESPP”). The participation of the Company's employees in the Resideo ESPP was terminated prior to the Spin-Off.
In connection with the Spin-Off, the Company adopted the ADI Employee Stock Purchase Plan (the “ESPP”). The ESPP is intended to qualify under Section 423 of the Internal Revenue Code and permits eligible employees to purchase shares of the Company's common stock at a discount through payroll deductions during specified offering periods. The purchase price per share is equal to 90 % of the fair market value of the Company's common stock on the first or last day of the applicable offering period, whichever is lower.
Compensation expense related to the ESPP was not material for the three and nine months ended October 3, 2026.
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Note 12. Earnings (Loss) Per Common Share
Prior to the completion of the Spin-Off from Resideo, the Company had no 75,923,340 75,923,340
The reconciliation of the numerator and denominator used for the computation of basic and diluted earnings (loss) per common share follows:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| (in millions, except per share data) | October 3, 2026 | September 27, 2025 | October 3, 2026 | September 27, 2025 | |||||||||||||||||||
| Numerator for basic and diluted (loss) earnings per common share: | |||||||||||||||||||||||
| Net (loss) income | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
| Less: preferred stock dividends attributable to the period | ( | ( | |||||||||||||||||||||
| Net (loss) income available to common stockholders | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
| Denominator for basic and diluted (loss) earnings per common share: | |||||||||||||||||||||||
| Weighted average basic number of common shares outstanding | |||||||||||||||||||||||
| Plus: dilutive effect of common stock equivalents | |||||||||||||||||||||||
| Weighted average diluted number of common shares outstanding | |||||||||||||||||||||||
| (Loss) earnings per common share: | |||||||||||||||||||||||
| Basic | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
| Diluted | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
The following securities could potentially dilute basic earnings per share in future periods but were excluded from the calculation of diluted loss per common share because their effect would have been antidilutive for the periods presented. Restricted stock units are presented based on the weighted-average number of awards outstanding, and the Series A Preferred Stock is presented based on the weighted-average number of common shares issuable on an as-converted basis. Performance stock units are not included in the table below because the applicable performance condition would have resulted in no shares being issuable if the end of the reporting period were the end of the performance period.
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| (in millions) | October 3, 2026 | September 27, 2025 | October 3, 2026 | September 27, 2025 | |||||||||||||||||||
| Restricted stock units | |||||||||||||||||||||||
| Preferred stock | |||||||||||||||||||||||
Series A Preferred Stock
On August 3, 2026, in connection with the Separation of ADI from Resideo, ADI issued 150,000 shares of Series A Cumulative Convertible Participating Preferred Stock of ADI (“ADI Preferred Stock”) to Resideo, which Resideo delivered to the holders of Resideo preferred stock in exchange for a portion of their Resideo preferred stock. Following the exchange, 150,000 shares of Resideo preferred stock were cancelled, and ADI had 150,000 shares of ADI Preferred
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Stock outstanding. The ADI Preferred Stock is convertible perpetual participating preferred stock with an initial conversion price of $16.152 per share and accrues cumulative dividends at a rate of 7.00 % on the then current accumulated amount (initially, a liquidation preference of $1,000 per share of ADI Preferred Stock per annum, payable in cash or in kind through an increase to the accumulated amount of the ADI Preferred Stock). The ADI Preferred Stock votes together with the Company’s common stock on an as-converted basis and may be converted into common stock at the option of the holders at any time. As of October 3, 2026, cumulative undeclared dividends attributable to the Preferred Stock were $2 million. On October 15, 2026, the Company declared and paid a cash dividend of $2 million on the Preferred Stock.
From the consummation of the Spin-Off until August 3, 2028 (the “Lock-Up Period”), subject to certain exceptions, the holders of the ADI Preferred Stock are restricted from transferring to a non-affiliate the ADI Preferred Stock, any shares of common stock received upon conversion thereof or any shares of common stock owned by them as of immediately following the consummation of the Spin-Off. Following expiration or deemed expiration of the Lock-Up Period, the Company may convert all outstanding shares of ADI Preferred Stock if the trading price of its common stock exceeds 200 % of the then-effective conversion price for at least 20 of 30 consecutive trading days. Following the expiration or deemed expiration of the Lock-Up Period, the Company may also redeem all outstanding shares of ADI Preferred Stock for an aggregate redemption price generally equal to two times the accumulated amount, plus accrued and unpaid dividends. Upon a change in control, the Company may purchase all outstanding shares of ADI Preferred Stock at a price generally equal to 150 % of the accumulated amount, plus accrued and unpaid dividends.
The preferred stock is a participating security; therefore, we apply the two-class method in the calculation of basic and diluted earnings per share. Under this method, net income is allocated to common stockholders and participating preferred stockholders based on their respective rights to receive dividends as if all earnings for the period had been distributed. For purposes of computing earnings per share, net income (loss) available to common stockholders is adjusted for preferred dividends attributable to the period, whether or not such dividends have been declared. Losses are not allocated to the preferred stockholders given the holders are not contractually obligated to share in losses.
Note 13. Income Taxes
For interim periods, income tax is equal to the total of (1) year-to-date pretax income multiplied by the forecasted effective tax rate plus (2) tax expense items specific to the period. In situations where we expect to report losses and where we do not expect to receive tax benefits, we apply separate forecasted effective tax rates to those jurisdictions rather than including them in the consolidated forecasted effective tax rate.
For the three and nine months ended October 3, 2026, net tax expense was $2 million and $3 million, respectively. For the three and nine months ended September 27, 2025, net tax benefit from income taxes was $1 million and expense from income taxes was $9 million, respectively. Net tax expense consists primarily of interim period tax expense based on year-to-date pretax income multiplied by our forecasted effective tax rate. In addition to items specific to the period, our income tax rate is impacted by the mix of earnings across the jurisdictions in which we operate, non-deductible Indemnification agreement expense, stock-based compensation, transaction related expenses and goodwill impairment.
Cash Paid for Taxes
For the three and nine months ended October 3, 2026, cash paid for taxes, net of refunds was $1 million and $5 million, respectively. For the three and nine months ended September 27, 2025, cash paid for taxes, net of refunds was $1 million and $7 million, respectively.
Note 14. Commitments and Contingencies
Other Matters
We are subject to lawsuits, investigations and disputes arising out of the conduct of our business, including matters relating to commercial transactions, government contracts, product liability, acquisitions and divestitures, employee matters, intellectual property, and environmental, health and safety matters. We recognize a liability for any contingency that is
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probable of occurrence and reasonably estimable. We continually assess the likelihood of adverse judgments or outcomes in these matters, as well as potential ranges of possible losses, based on a careful analysis of each matter with the assistance of outside legal counsel and, if applicable, other experts. No such matters are material to our financial statements.
Warranties and Guarantees
In the normal course of business, we issue product warranties and product performance guarantees. We accrue for the estimated cost of product warranties and product performance guarantees based on contract terms and historical experience at the time of sale. Adjustments to initial obligations for warranties and guarantees are made as changes to the obligations become reasonably estimable. Product warranties and product performance guarantees are included in Accrued liabilities and Other liabilities on the Unaudited Consolidated and Combined Condensed Balance Sheets.
IEEPA Tariff Refund
In February 2026, the United States Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) on goods imported into the United States were unauthorized. Following this ruling, and effective on April 20, 2026, the United States Customs and Border Protection launched a platform for importers of record to submit IEEPA tariff refund requests.
The Company applied a gain contingency model in accordance with ASC 450-30, Gain Contingencies. Under this model, a gain contingency is not recognized until the gain is realized or realizable. During the three and nine months ended October 3, 2026, we recognized approximately $4 million and $24 million of IEEPA tariff refunds, which is included in Cost of goods sold on our Unaudited Consolidated and Combined Condensed Statements of Operations. We expect additional recoveries in future periods; however, uncertainties remain regarding the amount and timing of future collections. Therefore, we will recognize additional refunds when received.
Note 15. Related Party Transactions
Allocations of Corporate Costs
The Unaudited Consolidated and Combined Condensed Financial Statements reflect allocations of certain expenses from our Former Parent, including, but not limited to, costs related to corporate executives, finance, legal, audit, mergers and acquisitions, human resources, information technology, insurance, employee benefits, costs associated with the Spin-Off and other expenses that are either specifically identifiable or clearly applicable to the Company. The allocation methods used include relative percentage of segment operating income, headcount and other methods that considered the relative time spent based on internal resources. Management believes that the allocation methodologies used to allocate expenses to the Company were reasonable; however, the allocations may not be indicative of actual expenses that would have been incurred had we operated as an independent, publicly traded company for the periods prior to the Separation. Actual costs the Company may have incurred had it been a standalone company would depend on a number of factors, including the chosen organizational structure, whether functions were outsourced or performed by our employees and strategic decisions made in areas such as manufacturing, selling and marketing, research and development, information technology and infrastructure.
Amounts recorded in Selling, general and administrative expenses were $6 million and $37 million for the three and nine months ended October 3, 2026, respectively, and $12 million and $35 million for the three and nine months ended September 27, 2025, respectively. No costs were allocated after the Separation.
Amounts recorded in Transaction related expenses were $7 million and $33 million for the three and nine months ended October 3, 2026, respectively, and relate to costs incurred by our Former Parent prior to the Spin-Off. There were $2
Transactions with Former Parent
Prior to the Spin-Off, our intercompany arrangements between the Company and Former Parent were included in these Unaudited Consolidated and Combined Condensed Financial Statements and consisted of receivables and payables arising from trade transactions, as well as related party loan balances associated with the participation of certain of our subsidiaries in the Former Parent’s centralized cash management programs. Additionally, we had intercompany loans with the Former Parent and certain of its subsidiaries. Activity related to loans receivables and payables is presented in investing activities
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and financing activities, respectively, in the Unaudited Consolidated and Combined Condensed Statement of Cash Flows. Arrangements with the Former Parent were terminated in connection with the Spin-Off.
During the normal course of operations, the Company made inventory purchases from our Former Parent. During the three and nine months ended October 3, 2026, the Company purchased $13 million and $96 million of inventory from Former Parent, respectively, through the separation date. During the three and nine months ended September 27, 2025, the Company purchased $39 million and $133 million of inventory from Former Parent, respectively. Certain purchases were cash settled and presented net within Due to related parties - current on the Unaudited Consolidated and Combined Condensed Balance Sheets in the amount of $1 million as of December 31, 2025.
Our payable balance pursuant to the cash pooling arrangements, presented within Due to related parties - current on the Unaudited Consolidated and Combined Condensed Balance Sheets, was $67 million as of December 31, 2025. Cash pooling arrangements between the Company and Former Parent that were not anticipated to be cash settled are presented in Net Former Parent investment on the Unaudited Consolidated and Combined Condensed Balance Sheets and totaled $71 million as of December 31, 2025. Our receivable balance pursuant to the intercompany loans, presented net within Due from related parties - non-current on the Unaudited Consolidated and Combined Condensed Balance Sheets, was $13 million as of December 31, 2025.
The Company recognized related party interest expense and interest income from financing transactions with Former Parent. During the three and nine months ended October 3, 2026, the Company recognized an immaterial amount and $1 million of related party interest expense, respectively. During the three and nine months ended September 27, 2025, the Company recognized $1 million and $4 million of related party interest expense, respectively. During the three and nine months ended October 3, 2026, the Company recognized an immaterial amount and $1 million of related party interest income, respectively. During the three and nine months ended September 27, 2025, the Company recognized an immaterial amount and $2 million of related party interest income, respectively.
Net Transfers From (To) Former Parent
Net transfers from (to) Former Parent are included within financing activities in the Unaudited Consolidated and Combined Condensed Statements of Cash Flows and within Net Former Parent Investment on the Unaudited Consolidated and Combined Condensed Statements of Changes in Equity. This activity represents the net effect of transactions between the Company and Resideo.
The components of net transfers from (to) Former Parent are as follows:
| Nine Months Ended | |||||||||||||||||||||||
| (in millions) | October 3, 2026 | September 27, 2025 | |||||||||||||||||||||
| Net transfers from Former Parent as reflected in the Unaudited Consolidated and Combined Condensed Statements of Cash Flows | $ | $ | |||||||||||||||||||||
| Stock-based compensation expense | |||||||||||||||||||||||
| Allocation of depreciation & amortization | |||||||||||||||||||||||
| Allocation of third-party debt and cash flow hedges | ( | ||||||||||||||||||||||
| Other non-cash investing and financing activities | ( | ||||||||||||||||||||||
| Net transfers from/to Former Parent as reflected on the Unaudited Consolidated and Combined Condensed Statements of Changes in Equity | $ | $ | ( | ||||||||||||||||||||
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
This Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide a reader of our financial statements with a narrative from the perspective of management and is intended to help the reader understand the results of operations and financial condition of the Company. Our MD&A should be read in conjunction with our MD&A and combined financial statements included in the Company's Information Statement filed as an exhibit to the Company's Form 10-12B/A on July 1, 2026 (the “Information Statement”).
Forward-Looking Statements
Certain statements included in this Quarterly Report on Form 10-Q are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than historical factual information are forward-looking statements, including, without limitation, statements regarding: the Separation of the Company from Resideo, which was completed on August 3, 2026 (the “Separation” or the “Spin-Off”); expected future financial and operating performance of, and future opportunities for, the Company following the Separation; anticipated benefits of the Separation; the tax treatment of the Separation; our liquidity position or other financial measures; management’s plans and strategies for future operation; the effects of the Separation or the distribution on our business; growth, declines and other trends in markets we sell into, including the expected impact of trade and tariff policies; and any other statements that address events or developments that we intend or believe will or may occur in the future. Terminology such as “believe,” “anticipate,” “continue,” “will,” “should,” “could,” “intend,” “plan,” “expect,” “estimate,” “project,” “target,” “may,” “possible,” “potential,” “goal,” “forecast” and “positioned” and words and terms of similar substance or references to future periods are intended to identify forward-looking statements, although not all forward-looking statements are accompanied by such words.
Forward-looking statements are based on assumptions and assessments made by our management in light of their experience and perceptions of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including but not limited to the risks and uncertainties set forth under “Cautionary Statement Concerning Forward-Looking Statements,” “Risk Factors,” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” included in the Company's Information Statement and this Form 10-Q.
Forward-looking statements are not guarantees of future performance and actual results may differ materially from the results, developments and business decisions contemplated by the Company's forward-looking statements. Accordingly, you should not place undue reliance on any such forward-looking statement. Forward-looking statements speak only as of the date of the document or other communication in which they are made (or such earlier date as may be specified in such statement). ADI assumes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events and developments or otherwise. Important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements include:
•weakness in the economy, market trends and end markets, and other conditions affecting the profitability and financial stability of our customers, our supply chain and our logistics network;
•adverse macroeconomic and market conditions affecting our customers, including weakness in residential housing markets, inflation, interest rates and access to credit, and the resulting impacts on demand, order patterns and pricing;
•competitive markets and our ability to retain and expand our customer relationships;
•goodwill, intangible assets, or long-lived asset impairment charges, including the impairment charge we recorded in the quarter ended October 3, 2026;
•cybersecurity incidents, data privacy breaches and other information security events;
•risks associated with the use of artificial intelligence and other emerging technologies, including model performance, bias, data governance, intellectual property and evolving legal and regulatory frameworks;
•our ability to forecast demand and manage working capital, including inventory and product availability;
•disruptions, delays or cost increases in our supply chain and fulfillment operations, including our reliance on third-parties;
•the impacts of tariffs (including the amount and timing of any potential tariff refund), import and export restrictions, trade barriers, sanctions and related judicial or regulatory developments;
•risks related to our international operations, including political instability, changes in law, compliance obligations, and currency exchange rate fluctuations;
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•financial institution failures, defaults or other counterparty risks;
•harm to our brand, growth and expansion of our exclusive branded products, reputation or customer relationships resulting from product or service quality issues, recalls or negative publicity;
•risks associated with acquisitions and other strategic transactions, including our ability to identify, consummate and integrate acquisitions, realize expected benefits and manage integration-related costs and disruptions;
•the success of any new product introductions;
•failures or disruptions of our information technology systems and infrastructure;
•delays in the implementation and consolidation of certain ADI enterprise systems and websites, including as part of our One ADI and enterprise-resource planning activities;
•our ability to protect our intellectual property and defend against infringement or misappropriation claims;
•our ability to comply with, and changes in, applicable laws and regulations and related enforcement actions;
•the outcome from litigation, claims, investigations, government proceedings and enforcement actions;
•our ability to recruit and retain key personnel as a newly independent company;
•our limited operating history as a separate public company;
•Spin-Off-related costs, dis-synergies and business interruptions;
•indemnification and other obligations that may be owed between ADI and Resideo under the transaction agreements, and related disputes;
•the tax treatment of the Spin-Off and related transactions;
•Spin-Off related agreements that impose restrictions following the Spin-Off and limit our ability to raise capital, engage in certain corporate transactions or take other corporate actions;
•the risk that we may not achieve the anticipated benefits of the Spin-Off within the expected timeframe, or at all, including due to dis-synergies and Separation-related complexity;
•our post-Spin-Off indebtedness;
•restrictions in our debt agreements that may limit our operational and financial flexibility;
•the development of an active trading market for our common stock, and volatility in the market price and trading volume of our common stock following the Spin-Off;
•our failure to maintain effective internal controls over financial reporting or disclosure controls and procedures, which could reduce investor confidence and adversely affect our stock price;
•uncertainty regarding the amount and timing of any dividends;
•dilution to our stockholders from future equity issuances or other capital-raising transactions;
•the rights, preferences and terms of any preferred stock issued by ADI, including preferred shares issued to CD&R and the impact on our common stockholders;
•the influence of CD&R Group and its affiliates, including their equity interest and any board designation rights, and potential conflicts arising from such arrangements;
•actual or potential conflicts of interest involving our executive officers and directors arising from their equity ownership or other relationships with Resideo;
•the potential for competitive activities by Resideo;
•the allocation of assets and liabilities under the transaction agreements with Resideo;
•disputes with Resideo regarding the transaction agreements entered into as part of the Spin-Off, or other matters;
•anti-takeover provisions in our certificate of incorporation, bylaws and Delaware law, as well as exclusive forum provisions, which could discourage or delay a change of control;
•the risk that the combined post-Spin-Off value of our common stock and Resideo's common stock, if applicable, may not equal or exceed the pre-Spin-Off value, and that the market price of each may fluctuate independently;
•changes in our effective tax rate;
•failure to realize the expected benefits of any restructuring program or cost savings initiatives, including the consolidation of our distribution and store network;
•the use of critical accounting estimates and judgments; and
•other risks detailed under the caption “Risk Factors” in this Quarterly Report and under “Cautionary Statement Concerning Forward-Looking Statements,” “Risk Factors,” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” included in the Company's Information Statement.
Overview and Business Trends
ADI is a leading, global specialty distributor of professionally installed low-voltage products, including security and audio-visual (“AV”) solutions, serving commercial and residential markets through an omnichannel go-to-market platform. ADI sells primarily to professional installers, dealers and integrators. Within North America, ADI is the market-leading distributor in the professionally installed security, fire/life safety and audio-visual product categories. We offer over
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500,000 products from more than 1,000 suppliers across key specialty low-voltage categories with strong proximity to our customers with a large network of store locations.
Our omnichannel go-to-market platform is underpinned by a digital experience designed to deepen customer engagement and broaden our reach. We combine an extensive third-party product portfolio and deep supplier relationships with a growing suite of exclusive brands and software-based services. These exclusive brands and services are designed to help our customers build stronger businesses, differentiate our offerings and improve the end user experience.
Our results are affected by macroeconomic and market conditions, including inflation, interest rates and conditions in the residential housing market. During the third quarter of 2026, residential demand weakened, which adversely affected sales volumes and product mix, particularly within our higher-margin exclusive brands. We expect residential demand to remain soft in the near term. Inflationary pressures also continue to affect our operating costs. We are taking actions to address these trends, including pricing and cost-saving initiatives, efforts to improve product and customer mix and initiatives to increase penetration of our exclusive brands.
The Company has one operating segment and one reportable segment, based upon the information used by our chief operating decision maker (“CODM”) in evaluating the performance of our business and allocating resources and capital. The Company’s CODM is its Chief Executive Officer.
Separation from Resideo Technologies, Inc.
On July 1, 2026, the Board of Directors of Resideo Technologies, Inc. (“Resideo” or “Former Parent”) approved the previously announced separation of Resideo's ADI Global Distribution business into an independent, publicly traded company through the pro rata distribution of all of the issued and outstanding common stock of ADI to Resideo's common stockholders (the “Separation” or “Spin-Off”).
In connection with the Separation, on August 3, 2026, the assets comprising the ADI businesses were contributed to ADI, a wholly-owned subsidiary of the Former Parent, and, as partial consideration for such contribution, we made a cash payment to Resideo in the amount of $900 million. In addition, the shares of ADI common stock held by Resideo were recapitalized into 76 million shares of ADI common stock. All per share amounts presented in the Unaudited Consolidated and Combined Condensed Financial Statements have been retroactively adjusted to give effect to this recapitalization.
On August 3, 2026, Resideo completed the Spin-Off through the pro rata distribution of 100% of the outstanding shares of ADI common stock to holders of Resideo common stock as of the close of business on July 20, 2026 (the “Record Date”). Each Resideo common stockholder as of the Record Date received one share of ADI common stock for every two shares of Resideo common stock held. Following the Separation, Resideo retained no ownership interest in ADI, and ADI became an independent, publicly traded company. ADI's common stock began regular way trading on the New York Stock Exchange under the ticker “ADIG” on August 4, 2026.
In connection with the Separation, ADI and Resideo entered into a Separation and Distribution Agreement, dated July 31, 2026 and certain ancillary agreements that govern our relationship following the Separation, including a transition services agreement, a tax matters agreement and an intellectual property matters agreement (the “Separation and Distribution Agreement”). Refer to the section titled “The Separation and Distribution” included in the Company's Information Statement for additional information.
Immediately following the Separation, Clayton, Dubilier & Rice, LLC (“CD&R”) (or any private equity fund managed or advised by CD&R or any general partner thereof, or any of their respective affiliates) (the “CD&R Group”) beneficially owned shares of ADI common stock and ADI preferred stock, which, taken together on an as-converted basis, represented approximately 19.69% of ADI's total voting power.
The Separation and Distribution Agreement provided for a cash adjustment based on the Company's cash balances as of the closing of the Spin-Off, with a target cash amount of $150 million. During the third quarter of 2026, we received approximately $20 million from Resideo in complete settlement of this adjustment.
We have established additional procedures and practices required of a standalone public company. As a result, we have incurred, and will continue to, incur additional one-time and non-recurring expenses consisting primarily of employee-related costs, costs to establish certain standalone functions and information technology systems and other transaction related expenses. Additionally, we have incurred, and will continue to incur, incremental costs that arise from becoming a standalone public company, including costs related to external reporting, internal audit, treasury, investor relations, board of directors and officers and stock administration, as well as costs from expanding the services of existing functions, such
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as information technology, finance, supply chain, human resources, legal, tax, facilities, branding, security, government relations, community outreach and insurance. In line with our long-term cost strategy, we will continue to evaluate operational cost improvement opportunities as a standalone company by utilizing our lean culture and innovative technologies to drive lower costs and increased productivity levels across our business and corporate functions.
Results of Operations
The following tables summarize our results of operations for the periods presented:
| Three Months Ended | |||||||||||||||||||||||
| (in millions, except percentages) | October 3, 2026 | September 27, 2025 | $ Change | % Change | |||||||||||||||||||
| Net revenue | $ | 1,306 | $ | 1,203 | $ | 103 | 8.6 | % | |||||||||||||||
| Cost of goods sold | 1,033 | 931 | 102 | 11.0 | % | ||||||||||||||||||
| Gross profit | 273 | 272 | 1 | 0.4 | % | ||||||||||||||||||
| Gross profit margin | 20.9 | % | 22.6 | % | (170) bps | ||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Selling, general and administrative expenses | 202 | 190 | 12 | 6.3 | % | ||||||||||||||||||
| Impairment of goodwill | 659 | – | 659 | N/A | |||||||||||||||||||
| Research and development expenses | 10 | 11 | (1) | (9.1) | % | ||||||||||||||||||
| Intangible asset amortization | 24 | 24 | – | – | % | ||||||||||||||||||
| Transaction related expenses | 12 | 5 | 7 | 140.0 | % | ||||||||||||||||||
| Restructuring expenses | – | 1 | (1) | (100.0) | % | ||||||||||||||||||
| Total operating expenses | 907 | 231 | 676 | 292.6 | % | ||||||||||||||||||
| (Loss) income from operations | (634) | 41 | (675) | (1646.3) | % | ||||||||||||||||||
| Other expense, net | 1 | 1 | – | – | % | ||||||||||||||||||
| Interest expense | 19 | 17 | 2 | 11.8 | % | ||||||||||||||||||
| Interest income | (1) | (2) | 1 | (50.0) | % | ||||||||||||||||||
| (Loss) income before taxes | (653) | 25 | (678) | (2712.0) | % | ||||||||||||||||||
| Provision for (benefit from) income taxes | 2 | (1) | 3 | (300.0) | % | ||||||||||||||||||
| Net (loss) income | $ | (655) | $ | 26 | (681) | (2619.2) | % | ||||||||||||||||
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| Nine Months Ended | |||||||||||||||||||||||
| (in millions, except percentages) | October 3, 2026 | September 27, 2025 | $ Change | % Change | |||||||||||||||||||
| Net revenue | $ | 3,798 | $ | 3,601 | $ | 197 | 5.5 | % | |||||||||||||||
| Cost of goods sold | 2,977 | 2,804 | 173 | 6.2 | % | ||||||||||||||||||
| Gross profit | 821 | 797 | 24 | 3.0 | % | ||||||||||||||||||
| Gross profit margin | 21.6 | % | 22.1 | % | (50) bps | ||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Selling, general and administrative expenses | 607 | 561 | 46 | 8.2 | % | ||||||||||||||||||
| Impairment of goodwill | 659 | – | 659 | N/A | |||||||||||||||||||
| Research and development expenses | 33 | 28 | 5 | 17.9 | % | ||||||||||||||||||
| Intangible asset amortization | 73 | 70 | 3 | 4.3 | % | ||||||||||||||||||
| Transaction related expenses | 38 | 9 | 29 | 322.2 | % | ||||||||||||||||||
| Restructuring expenses | 7 | 6 | 1 | 16.7 | % | ||||||||||||||||||
| Total operating expenses | 1,417 | 674 | 743 | 110.2 | % | ||||||||||||||||||
| (Loss) income from operations | (596) | 123 | (719) | (584.6) | % | ||||||||||||||||||
| Indemnification agreement expense | – | 364 | (364) | (100.0) | % | ||||||||||||||||||
| Other expense (income), net | 3 | (1) | 4 | (400.0) | % | ||||||||||||||||||
| Interest expense | 52 | 29 | 23 | 79.3 | % | ||||||||||||||||||
| Interest income | (4) | (6) | 2 | (33.3) | % | ||||||||||||||||||
| Loss before taxes | (647) | (263) | (384) | 146.0 | % | ||||||||||||||||||
| Provision for income taxes | 3 | 9 | (6) | (66.7) | % | ||||||||||||||||||
| Net loss | $ | (650) | $ | (272) | $ | (378) | 139.0 | % | |||||||||||||||
Net Revenue
Three months ended
Net revenue for the three months ended October 3, 2026 was $1,306 million, an increase of $103 million, or 8.6%, compared to the same period in 2025. The increase was primarily driven by higher sales volume of $71 million including the impact of the Americas ERP conversion on the prior-year period and incremental selling days in the current period, and $35 million from favorable price increases. This was partially offset by $2 million of unfavorable foreign currency exchange rates.
Nine months ended
Net revenue for the nine months ended October 3, 2026 was $3,798 million, an increase of $197 million, or 5.5%, compared to the same period in 2025. The increase was primarily driven by $113 million from favorable price increases, higher sales volume of $72 million including the impact of the Americas ERP conversion on the prior-year period and incremental selling days in the current period, and $16 million from favorable foreign currency exchange rates.
Gross Profit and Gross Profit Margin
Three months ended
Gross profit for the three months ended October 3, 2026 was $273 million, an increase of $1 million, or 0.4%, as compared to 2025, and gross margin was 20.9% for the three months ended October 3, 2026, down 170 basis points (“bps”) from the prior year period. The decrease in gross margin was primarily driven by unfavorable price and mix shift of 140 bps, temporary pricing benefit in the prior period ahead of tariffs impacting average cost of inventory to cost of goods sold of 70
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bps, higher freight, duty, and inventory related charges of 50 bps, partially offset by $4 million of tariff refunds, or 30 bps, and $8 million of benefit from Spin-Off related inventory adjustments, or 60 bps.
Nine months ended
Gross profit for the nine months ended October 3, 2026 was $821 million, an increase of $24 million, or 3.0%, as compared to 2025, and gross margin was 21.6% for the nine months ended October 3, 2026, down 50 bps from the prior year period. The decrease in gross margin was primarily driven by unfavorable price and mix shift of 50 bps, temporary pricing benefit in the prior period ahead of tariffs impacting average cost of inventory to cost of goods sold of 40 bps, and higher duty, freight, and inventory related charges of 40 bps, primarily offset by the favorable impact from tariff refunds of $24 million, or 60 bps, and $8 million of benefit from Spin-Off related inventory adjustments, or 20 bps.
Selling, General and Administrative Expenses
Three months ended
Selling, general and administrative expenses for the three months ended October 3, 2026 were $202 million, an increase of $12 million, or 6.3%, as compared to the same period in 2025. The increase was primarily driven by $7 million of facility and other costs associated with consolidating our real estate footprint and operating the distribution centers, $6 million of merit and cost inflation impacts, $3 million of investments in third-party spend in the business, and $4 million of increases in finance, legal, human resources, information technology, and other standalone costs as compared to allocated cost in the prior period. The increase was partially offset by $9 million of operating expense reductions.
Nine months ended
Selling, general and administrative expenses for the nine months ended October 3, 2026 were $607 million, an increase of $46 million, or 8.2%, as compared to the same period in 2025. The increase was driven mainly by $17 million of facility and other costs associated with consolidating our real estate footprint and operating the distribution centers, $17 million of merit and cost inflation impacts, $12 million of increases in finance, legal, human resources, information technology, and other standalone costs as compared to allocated cost in the prior period, as well as $17 million from investments in third-party spend, increases in bad debt expense, incremental days in the current period, and unfavorable foreign currency exchange rates. The increase was partially offset by $21 million of people and operating expense reductions.
Research and Development Expenses
Three months ended
Research and development expenses for the three months ended October 3, 2026 were $10 million, a decrease of $1 million, or 9.1%, compared to the same period in 2025. The decrease was primarily due to people and operating expense reductions.
Nine months ended
Research and development expenses for the nine months ended October 3, 2026 were $33 million, an increase of $5 million, or 17.9%, compared to the same period in 2025. The increase was primarily due to incremental costs incurred to develop and introduce new products into the market partially offset by people and operating expense reductions.
Impairment of Goodwill
Three and nine months ended
Impairment of goodwill of $659 million represents a non-cash goodwill impairment charge recognized during the three months ended October 3, 2026 as a result of an interim quantitative goodwill impairment assessment. We performed the interim assessment after concluding that a triggering event had occurred, based on continued weakness in the residential market impacting demand for our exclusive brand products, unfavorable product and customer mix shifts, the resulting change in our near-term outlook and reduced projected future cash flows, and declines in our stock price and market capitalization. The impairment did not impact our cash flows or liquidity or our compliance with the financial covenants
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under the Credit Agreement. Refer to Note 5. Goodwill and Other Intangible Assets, net, of the Notes to the Unaudited Consolidated and Combined Condensed Financial Statements for additional information.
Intangible Asset Amortization
Three months ended
Intangible asset amortization for both the three months ended October 3, 2026 and September 27, 2025 was $24 million.
Nine months ended
Intangible asset amortization for the nine months ended October 3, 2026 was $73 million, an increase of $3 million as compared to the same period in 2025, primarily due to an increase in capitalized software.
Transaction Related Expenses
Three months ended
Transaction related expenses for the three months ended October 3, 2026 were $12 million, an increase of $7 million as compared to the same period in 2025. The increase was primarily due to $10 million of expenses incurred in connection with the Spin-Off, including third-party advisory, consulting, legal and other incremental separation-related costs, offset by a $3 million decrease in expenses related to integration costs incurred for the Snap One acquisition in the three months ended September 27, 2025.
Nine months ended
Transaction related expenses for the nine months ended October 3, 2026 were $38 million, an increase of $29 million as compared to the same period in 2025. The increase was primarily due to $36 million of expenses incurred in connection with the Spin-Off, including third-party advisory, consulting, legal and other incremental separation-related costs, offset by a $7 million decrease in expenses related to integration costs incurred for the Snap One acquisition in the nine months ended September 27, 2025.
Restructuring Expenses
Three months ended
Restructuring expenses for the three months ended October 3, 2026 decreased $1 million compared to the same period in 2025.
Nine months ended
Restructuring expenses for the nine months ended October 3, 2026 were $7 million, an increase of $1 million as compared to the same period in 2025. The increase was due to restructuring actions taken to better align our cost structure with our strategic objectives, improve operating efficiency and optimize our operating footprint.
Indemnification Agreement Expense
Nine months ended
We incurred no Indemnification Agreement expense for the nine months ended October 3, 2026, a decrease of $364 million compared to the same period in 2025. The decrease was driven by Resideo's termination of the Indemnification
29
Agreement with Honeywell in 2025. Refer to Note 9. Indemnification Agreement, of the Notes to the Unaudited Consolidated and Combined Condensed Financial Statements for additional information.
Interest Expense
Three months ended
Interest expense for the three months ended October 3, 2026 was $19 million, an increase of $2 million compared to 2025. The change was due to higher interest rates on the Company's long-term debt incurred in connection with the Spin-Off. Refer to Note 8. Long-Term Debt, of the Notes to the Unaudited Consolidated and Combined Condensed Financial Statements for additional information.
Nine months ended
Interest expense for the nine months ended October 3, 2026 was $52 million, an increase of $23 million compared to 2025. The change was due to higher interest rates on the Company's long-term debt incurred in connection with the Spin-Off, an increase in the total long-term debt held by Resideo through additional borrowings related to the termination of the Indemnification Agreement, and the resulting increase in the allocated debt and associated interest expense to the Company. Refer to Note 8. Long-Term Debt of the Notes to the Unaudited Consolidated and Combined Condensed Financial Statements, for additional information.
Interest Income
Three months ended
Interest income for the three months ended October 3, 2026 was $1 million, a decrease of $1 million compared to 2025.
Nine months ended
Interest income for the nine months ended October 3, 2026 was $4 million, a decrease of $2 million compared to 2025.
Provision for Income Taxes
Three and nine months ended
The Company's effective income tax rate was (0.3)% and (0.5)% for the three and nine months ended October 3, 2026, respectively, compared to (4)% for both the three and nine months ended September 27, 2025, which reflected income tax expense recorded on pre-tax losses for all comparative periods. The change in the effective tax rate for the three and nine months ended October 3, 2026 compared to the same periods in 2025 is primarily driven by the absence of nondeductible Indemnification Agreement expense in 2026, and increases in deductible stock-based compensation, transaction related expenses and goodwill impairment.
Income tax expense was $2 million and $3 million during the three and nine months ended October 3, 2026, compared to a net tax benefit of $1 million and an income tax expense of $9 million during the three and nine months ended September 27, 2025.
Non-GAAP Financial Measures
In addition to our financial results as prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), we evaluate our operating performance using certain financial measures, including Adjusted EBITDA and Adjusted EBITDA margin, that are not defined by, or prepared in accordance with, GAAP. We refer to these measures as “non-GAAP” financial measures. These non-GAAP financial measures are supplemental measures of our performance that we believe help investors to better understand our financial condition and operating results and to analyze business trends by providing measures which management uses to evaluate operating performance. We use these non-GAAP financial measures, in addition to the corresponding GAAP financial measures, as important supplemental measures of our operating performance that exclude non-cash and other disclosed items that we believe are not indicative of our underlying business, core operating results and the overall health of our company. We believe the use of such non-GAAP financial measures assists investors in understanding the ongoing operating performance of the Company by presenting the
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financial results between periods on a more comparable basis. These non-GAAP measures should be considered only as supplements to, and should not be considered in isolation or used as a substitute for, financial information prepared in accordance with GAAP. We further believe that providing this information assists our investors in understanding our operating performance and the methodology used by management to evaluate and measure such performance. In conjunction with our GAAP results, we use these non-GAAP measures to assess business performance, particularly when comparing performance to past periods. As such, we believe these measures are useful for investors because they facilitate a comparison of financial results from period to period.
Management recognizes that these non-GAAP financial measures have limitations, including that they may be calculated differently by other companies or may be used under different circumstances or for different purposes, thereby affecting their comparability from company to company. In order to compensate for these and the other limitations discussed below, management does not consider these measures in isolation from, or as alternatives to, the comparable financial measures determined in accordance with GAAP. Readers should review the reconciliations below and should not rely on any single financial measure to evaluate our business. The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures follow.
We believe that Adjusted EBITDA and Adjusted EBITDA margin, which are adjusted to exclude the effects of unique and/or non-cash items that are not closely associated with ongoing operations, provide management and investors with meaningful measures of our performance that increase the period-to-period comparability by highlighting the results from ongoing operations and the underlying profitability factors. We define Adjusted EBITDA margin as Adjusted EBITDA as a percentage of net revenue. We believe Adjusted EBITDA and Adjusted EBITDA margin provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations without the effect of charges that do not relate to the core operations of our business, such as the impact of the goodwill impairment, restructuring charges, transaction related expenses, the Indemnification Agreement and foreign currency impacts, as these activities can obscure underlying trends.
We believe these measures provide additional insight into how our businesses are performing by excluding certain disclosed items that we believe are not representative of our underlying business and operating performance. However, Adjusted EBITDA and Adjusted EBITDA margin should not be construed as inferring that our future results will be unaffected by the items for which the measures adjust.
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Adjusted EBITDA and Adjusted EBITDA margin
The following table provides a reconciliation of net (loss) income and net (loss) income margin, the most closely comparable GAAP financial measures, to Adjusted EBITDA and Adjusted EBITDA margin:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| (in millions, except percentages) | October 3, 2026 | September 27, 2025 | October 3, 2026 | September 27, 2025 | |||||||||||||||||||
| Net revenue | $ | 1,306 | $ | 1,203 | $ | 3,798 | $ | 3,601 | |||||||||||||||
| Net (loss) income | $ | (655) | $ | 26 | $ | (650) | $ | (272) | |||||||||||||||
| Net (loss) income margin | (50.2) | % | 2.2 | % | (17.1) | % | (7.6) | % | |||||||||||||||
| Provision for (benefit from) income taxes | 2 | (1) | 3 | 9 | |||||||||||||||||||
| (Loss) income before taxes | (653) | 25 | (647) | (263) | |||||||||||||||||||
| Impairment of goodwill | 659 | – | 659 | – | |||||||||||||||||||
| Depreciation and amortization | 30 | 29 | 89 | 86 | |||||||||||||||||||
| Interest expense | 19 | 17 | 52 | 29 | |||||||||||||||||||
| Interest income | (1) | (2) | (4) | (6) | |||||||||||||||||||
Indemnification Agreement expense (1) | – | – | – | 364 | |||||||||||||||||||
Stock-based compensation expense (2) | 7 | 6 | 19 | 18 | |||||||||||||||||||
Restructuring expenses (3) | – | 1 | 7 | 6 | |||||||||||||||||||
Transaction related expenses (4) | 12 | 5 | 38 | 9 | |||||||||||||||||||
Spin-Off inventory basis adjustment (5) | (8) | – | (8) | – | |||||||||||||||||||
Other (6) | 1 | 1 | 3 | (1) | |||||||||||||||||||
| Adjusted EBITDA | $ | 66 | $ | 82 | $ | 208 | $ | 242 | |||||||||||||||
| Adjusted EBITDA margin | 5.1 | % | 6.8 | % | 5.5 | % | 6.7 | % | |||||||||||||||
(1)Consists of charges associated with the Indemnification Agreement that were allocated to the Unaudited Consolidated and Combined Condensed Financial Statements. Refer to Note 9. Indemnification Agreement, of the Notes to the Unaudited Consolidated and Combined Condensed Financial Statements for additional information.
(2)Represents non-cash compensation expenses recognized for stock-based compensation arrangements.
(3)Consists of non-recurring charges associated with restructuring initiatives. Refer to Note 10. Restructuring, of the Notes to the Unaudited Consolidated and Combined Condensed Financial Statements for additional information.
(4)For the three and nine months ended October 3, 2026, represents $12 million and $38 million of transaction costs related to the Spin-Off. For the three months ended September 27, 2025, represents $3 million of Snap One integration costs and $2 million of transaction costs related to the Spin-Off. For the nine months ended September 27, 2025, represents $7 million of Snap One integration costs and $2 million of transaction costs related to the Spin-Off.
(5)Represents the benefit to cost of goods sold associated with inventory held at the Spin-Off that was previously purchased from Resideo and reflected in historical intercompany profit eliminations. The Company excludes this benefit from Adjusted EBITDA as the related inventory is sold.
(6)Represents amounts included in Other expense (income), net reported on the Unaudited Consolidated and Combined Condensed Statements of Operations.
Liquidity and Capital Resources
As of October 3, 2026, we had $208 million of cash and cash equivalents. Our liquidity is primarily dependent on our ability to continue to generate positive cash flows from operations, supplemented by external sources of capital as needed.
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The cash reflected on our Unaudited Consolidated and Combined Condensed Balance Sheets represents cash accounts legally owned by our subsidiaries and comprises both (a) bank accounts held by local jurisdictions that do not participate in centralized cash pooling arrangements, as well as (b) bank accounts that participate in centralized cash pooling arrangements and are owned by our subsidiaries.
Historically, Resideo had provided cash management and other treasury services to us, the effect of which was presented as Due from related parties – current, Due to related parties – current, Due from related parties – non-current, Due to related parties – non-current and Net Former Parent investment on the Unaudited Consolidated and Combined Condensed Balance Sheets. As a result of completing the Spin-Off, we ceased participating in Resideo’s cash pooling process, effectively settling any outstanding related party loan arrangements and our cash and cash equivalents are now held and used solely for our own operations. As a result, our capital structure, long-term commitments and sources of liquidity changed meaningfully from our historical practices.
Our future capital requirements will depend on many factors, including the rate of sales growth, market acceptance of our products, the timing and extent of research and development projects, potential acquisitions of companies or technologies, and the expansion of our sales and marketing activities. We may enter into acquisitions or strategic arrangements in the future, which also could require us to seek additional equity or debt financing. In connection with the Spin-Off, we entered into new financing arrangements and issued shares of ADI Preferred Stock which includes an obligation to pay regular dividends (in cash or in-kind) to the holders of the ADI Preferred Stock. Fulfilling our obligations to pay dividends or the exercise of any optional redemption rights with respect to the outstanding ADI Preferred Stock could, if paid in cash, impact our liquidity and reduce the amount of cash available for working capital, capital expenditures, growth opportunities, acquisitions and other general corporate purposes. We believe our existing cash held as of the Spin-Off, cash flows generated from operations and access to capital markets and financing facilities will provide adequate resources to meet the needs of our current and planned operations.
To the extent our current liquidity is insufficient to fund future activities, we may need to raise additional funds, such as refinancing or securing new secured or unsecured debt, issuing common or preferred equity, disposing of certain assets to fund our operations, and/or accessing other public or private sources of capital. If we raise additional funds by issuing equity securities, the ownership of our existing stockholders will be diluted. The incurrence of additional debt financing would result in debt service obligations, and any future instruments governing such debt could provide for operating and financial covenants that could restrict our operations.
With respect to long-term debt facilities remaining with Resideo and the Indemnification Agreement liability, the Company had not historically made cash payments to third parties as such payments were made by Resideo and there is no expectation or requirement for the Company to be obligated to make payments of this nature in the future as the Indemnification Agreement (including the guarantee provided by the Company) was terminated in the third quarter of 2025 and, in the case of the long-term debt facilities remaining with Resideo, ADI is no longer an obligor or guarantor with respect to these obligations upon completion of the Spin-Off.
Upon the completion of the Spin-Off, the Company used the aggregate proceeds received from the Senior Notes due 2034 and the Term Facility to make a one-time distribution payment of $900 million to Resideo in the form of a dividend. In connection with the cash adjustment provisions contemplated under the Separation and Distribution Agreement, the Company subsequently received approximately $20 million from Resideo. Following completion of these transactions, the Company had approximately $150 million of cash and cash equivalents.
Senior Notes due 2034
On June 30, 2026, ADI Escrow Issuer LLC (the “Escrow Issuer”), a direct, wholly-owned subsidiary of ADI and an indirect, wholly-owned subsidiary of our Former Parent, completed an offering of $400 million aggregate principal of the Escrow Issuer’s 7.125% Senior Notes due 2034 (“Senior Notes due 2034”). The Senior Notes due 2034 were issued pursuant to an Indenture, dated June 30, 2026 (the “Indenture”), between the Escrow Issuer and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). The proceeds from the offering of the Senior Notes due 2034 were used as part of the financing for the Spin-Off.
In connection with the completion of the Spin-Off on August 3, 2026, and with the satisfaction of the Escrow Release Conditions (as defined in the Indenture), Escrow Issuer merged with and into ADI Global Distribution Funding LLC (“ADI Funding”), a direct wholly-owned subsidiary of ADI, and ADI Funding assumed the obligations of Escrow Issuer under the
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Indenture and the Senior Notes due 2034. In addition, ADI and certain of ADI's other subsidiaries (collectively, the “Guarantors”) guaranteed ADI Funding's obligations under the Indenture and the Senior Notes due 2034.
The Senior Notes due 2034 mature on July 15, 2034 and bear interest at an annual rate of 7.125%, payable semi-annually on January 15 and July 15 of each year, commencing January 15, 2027. The Senior Notes due 2034 are redeemable prior to July 15, 2029 at a make-whole redemption price (with a limited equity-funded redemption option for up to 40% of the principal at 107.125%), and become callable at specified redemption prices thereafter in accordance with the Indenture. Following the escrow release on August 3, 2026, the Indenture limits ADI's ability and the ability of its restricted subsidiaries to incur or guarantee additional indebtedness; pay dividends or distributions on, or redeem or repurchase capital stock and make other restricted payments; make investments; consummate certain asset sales; engage in certain transactions with affiliates; grant or assume certain liens; and consolidate, merge, or transfer all or substantially all of ADI's assets. Additionally, upon certain events constituting a change of control, the holders of the Senior Notes due 2034 will have the right to have their Senior Notes due 2034 repurchased at a purchase price equal to 101% of their principal amount plus accrued and unpaid interest, to (but not including) the date of purchase.
The Indenture provides for customary events of default, which, if any of them occurs, may cause the principal and accrued interest on the Senior Notes due 2034 to become, or to be declared, due and payable on an accelerated basis.
The fair value of the Senior Notes due 2034 was estimated using quoted market prices for the same or similar debt issuances, which is a Level 2 measurement in the fair value hierarchy. As of October 3, 2026, the fair value of the Senior Notes due 2034 was $394 million.
Credit Agreement of ADI
On July 1, 2026, ADI Funding entered into a senior secured Credit Agreement (the “Credit Agreement”) with the lenders and issuing banks party thereto and JPMorgan Chase Bank, N.A., as administrative agent. The Credit Agreement provides for (i) term loans in an aggregate principal amount of $600 million (the “Term Facility”) and (ii) revolving credit commitments in an aggregate initial principal amount of $500 million (the “Revolving Facility” and, together with the Term Facility, the “Credit Facilities”). With the completion of the Spin-Off, on August 3, 2026, the Company borrowed $600 million under the Term Facility portion of the Credit Agreement and borrowings became available under the five-year $500 million Revolving Facility. No amounts have been drawn under the Revolving Facility. Borrowings under the Credit Facilities bear an interest rate, at the Company's option at either a base rate or the Secured Overnight Financing Rate (“SOFR”), in each case, plus an applicable margin. The applicable margin on borrowings under the Revolving Facility varies based on ADI’s consolidated total net leverage ratio. The Term Facility requires quarterly amortization payments of 0.25% commencing the first full quarter after the Spin-Off. As of October 3, 2026, the effective interest rate on the Term Facility was 6.7%.
In addition, on August 3, 2026, the Guarantors, other than ADI, entered into supplements to the guarantee agreement and collateral agreement related to the Credit Agreement pursuant to which such Guarantors provided guarantees of our obligations under the Credit Agreement and the related documents and pledges of their respective assets, subject to certain exceptions, to secure their respective obligations in each case in a manner consistent with the requirements of the Credit Agreement.
The Term Facility will mature, and the term loans thereunder will be required to be repaid, seven years after the Spin-Off, subject to certain extension rights in the discretion of each lender. The Revolving Facility will mature, and all borrowings thereunder will be required to be repaid, five years after the Spin-Off, with certain extension rights in the discretion of each lender. Borrowings under the Term Facility may not be re-borrowed once repaid. Voluntary prepayments of borrowings may generally be made without premium or penalty, except for a 1% premium on certain repricing transactions involving the Term Facility in the first six months following the Spin-Off, and certain borrowings may be subject to customary breakage costs. The Credit Agreement also contains customary mandatory prepayment provisions upon the occurrence of specified events, as well as excess cash flow sweep requirements for the Term Facility, beginning with the fiscal year ending on December 31, 2027.
The Revolving Facility contains financial covenants, which were first tested as of October 3, 2026, including a consolidated total net leverage ratio that steps down over time and a minimum consolidated interest ratio. There were no outstanding borrowings and no letters of credit issued under the Revolving Facility as of October 3, 2026. As of October 3, 2026, the Company was in compliance with all covenants.
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The fair value of the Term Facility was estimated using observable market inputs for similar debt instruments and is classified as a Level 2 measurement in the fair value hierarchy. As of October 3, 2026, the fair value of the Term Facility was $605 million.
Allocated Resideo Debt
Prior to the Spin-Off, Resideo was the obligor of multiple third-party debt instruments, for some of which the Company was also jointly and severally liable, while other third-party debt instruments transferred to the Company upon the completion of the Spin-Off. For the debt instruments that the Company was jointly and severally liable for, a portion of the Former Parent’s long-term debt and short-term debt was allocated to the Company as of December 31, 2025. The related interest expense and unamortized deferred financing costs on the debt was allocated to the Company for the periods presented prior to the Spin-Off. Given the lack of a contractual agreement for the Company to pay a specified amount to the Former Parent (i.e., its co-obligors), the allocation basis was determined based on what the Company would reasonably expect to pay on behalf of its co-obligors. No payments were made by the Company to third-party creditors, as payments historically were made by the Former Parent in each reporting period.
Refer to Note 8. Long-Term Debt, of the Notes to the Unaudited Consolidated and Combined Condensed Financial Statements for additional information.
Indemnification Agreement
Resideo separated from Honeywell in 2018, becoming an independent, publicly traded company as a result of the Former Parent's Spin-Off. In connection with our Former Parent's Spin-Off, Resideo entered into the Indemnification Agreement for which we were jointly and severally liable along with other subsidiaries of Resideo until the termination thereof in the third quarter of 2025. Accordingly, a portion of Resideo’s historical obligations under the agreement, and the resulting termination discussed below, had been allocated to us for the periods presented. The related expenses were also allocated to us for the periods presented. The portion of Resideo’s obligation and related items allocated to us was based on what we would have reasonably expected to pay on behalf of our co-obligors. Refer to Note 9. Indemnification Agreement, of the Notes to the Unaudited Consolidated and Combined Condensed Financial Statements for additional information.
Indemnification Agreement expenses were presented within Indemnification agreement expense in the Unaudited Consolidated and Combined Condensed Statements of Operations. The Indemnification Agreement was terminated in the third quarter of 2025.
Cash Flow Summary
Our cash flows from operating, investing, and financing activities for the nine months ended October 3, 2026 and September 27, 2025, as reflected in the Unaudited Consolidated and Combined Condensed Financial Statements are summarized as follows:
| Nine Months Ended | |||||||||||||||||
| (in millions) | October 3, 2026 | September 27, 2025 | $ Change | ||||||||||||||
| Cash provided by (used in): | |||||||||||||||||
| Operating activities | $ | (12) | $ | (616) | $ | 604 | |||||||||||
| Investing activities | (22) | (50) | 28 | ||||||||||||||
| Financing activities | 116 | 616 | (500) | ||||||||||||||
| Effect of exchange rate changes on cash | 2 | 6 | (4) | ||||||||||||||
| Net increase (decrease) in cash and cash equivalents | $ | 84 | $ | (44) | $ | 128 | |||||||||||
Operating Activities
Net cash used in operating activities for the nine months ended October 3, 2026 was $12 million, a decrease of $604 million, compared to $616 million of net cash used in operating activities in the same period of 2025. The $604 million decrease in the use of cash was primarily driven by higher non-cash adjustments of $669 million and a $313 million favorable change in working capital which were partially offset by a decrease in net income of $378 million. The favorable change in non-cash adjustments was primarily driven by the $659 million impairment of goodwill. The favorable change in
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working capital primarily related to the $270 million termination of the Indemnification Agreement liability, $62 million from accounts payable due to the timing of supplier payments and $22 million from lower cash used for inventory, partially offset by $44 million unfavorable change in accounts receivable due to the timing of cash receipts.
Investing Activities
Net cash used in investing activities for the nine months ended October 3, 2026 was $22 million, a decrease of $28 million, compared to the $50 million of net cash used in investing activities in the same period of 2025. The $28 million decrease was primarily driven by a $26 million increase in proceeds from related party loan arrangements.
Financing Activities
Net cash provided by financing activities for the nine months ended October 3, 2026 was $116 million, a decrease of $500 million compared to $616 million of net cash provided by financing activities in the same period of 2025. The $500 million decrease was primarily driven by the $900 million dividend distribution to Former Parent in connection with the Spin-Off, a $523 million decrease in Net transfers to Former Parent, and a $60 million increase in net cash outflows due to related parties due to cash pooling arrangements which were partially offset by $988 million of net proceeds from the Senior Notes due 2034 and the Term Facility.
Contractual Obligations and Probable Liability Payments
In addition to our long-term debt discussed above, our material cash requirements include the following contractual obligations:
Operating Leases
We have operating lease arrangements for the majority of our stores, distribution centers, offices, engineering sites, automobiles, and certain equipment. As of October 3, 2026, we had operating lease payment obligations of $259 million, with $41 million payable within 12 months.
Purchase Obligations
On occasion, we enter into purchase obligations with certain vendors. During the three months ended October 3, 2026, we entered into a new agreement that includes minimum product purchase commitments, resulting in additional purchase obligations of approximately $207 million. As of October 3, 2026, our total purchase obligations were $243 million, of which approximately $155 million is expected to be paid within the next 12 months, with the remainder expected to be paid thereafter.
As of October 3, 2026, we have additional operating leases that have not yet commenced. The total undiscounted future lease payments for these leases were $23 million.
Off-Balance Sheet Arrangements
We do not engage in any off-balance sheet financial arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, net revenue or expenses, results of operations, liquidity, capital expenditures, or capital resources.
Critical Accounting Estimates
Our Unaudited Consolidated and Combined Condensed Financial Statements are prepared in accordance with GAAP and pursuant to the regulations of the SEC and are based in part on the application of significant accounting policies, many of which require us to make estimates and assumptions. Application of critical accounting estimates requires management’s significant judgments and involves a significant level of estimation uncertainty and have had, or are reasonably likely to have, a material impact on our financial condition and results of operations. We review our estimates and assumptions on an ongoing basis and reflect changes as appropriate when additional information becomes available. Except as described below, there have been no significant changes to the Company's critical accounting estimates described in the Company's Information Statement.
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Goodwill
As described in Note 5. Goodwill and Other Intangible Assets, net, during the third quarter of 2026 we concluded that a triggering event had occurred and performed an interim quantitative goodwill impairment assessment of our single reporting unit, which resulted in a non-cash impairment charge of $659 million. We estimated the fair value of our reporting unit using an equal weighting of an income approach and a market approach, which required significant judgment and incorporated assumptions regarding projected future cash flows, including revised near-term revenue and operating margin expectations, the discount rate and the terminal growth rate. The discount rate reflects the risks inherent in the projected future cash flows, including macroeconomic and industry-specific factors. The market approach incorporated valuation multiples derived from guideline public companies selected based on their comparability to the Company. The fair value estimate was classified within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs. If our operating results or projections decline further, if our stock price or market capitalization declines, or if the discount rate increases, we may be required to record additional impairment charges.
Other Matters
Litigation and Indemnification Agreement
Refer to Note 9. Indemnification Agreement and Note 14. Commitments and Contingencies, of the Notes to the Unaudited Consolidated and Combined Condensed Financial Statements for additional information.
Recent Accounting Pronouncements
Refer to Note 2. Summary of Significant Accounting Policies, of the Notes to the Unaudited Consolidated and Combined Condensed Financial Statements for additional information.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk from foreign currency exchange rates, commodity prices and interest rates, which could affect operating results, financial position, and cash flows. We manage our exposure to these market risks through our regular operating and financing activities.
Interest Rate Risk
We are exposed to interest rate risk through fluctuations in interest rates on our debt obligations. As of October 3, 2026, we had $600 million under the Term Facility portion of the Credit Agreement that was subject to variable interest rates. As a result, increases in interest rates could increase the cost of servicing our debt and could materially reduce our profitability and cash flows. We seek to manage exposure to adverse interest rate changes through our normal operating and financing activities.
A hypothetical 100 bps increase in interest rates on our variable-rate debt obligations as of October 3, 2026 would increase our annual interest expense by approximately $6 million. From time to time, we may use interest rate hedging instruments to manage our exposure to interest rate risk; however, we had no such arrangements outstanding as of October 3, 2026.
Foreign Currency Exchange Rate Risk
We are exposed to market risks from changes in currency exchange rates. While we primarily transact with customers and suppliers in the U.S. dollar, we also transact in foreign currencies, including the British Pound, Canadian Dollar, Euro, Mexican Peso, Indian Rupee and Czech Koruna. These exposures may impact total assets, liabilities, future earnings and/or operating cash flows. Our exposure to market risk for changes in foreign currency exchange rates emerges from transactions arising from international trade, foreign currency denominated monetary assets and liabilities and international financing activities between subsidiaries. We rely primarily on natural offsets to address our exposures and may supplement this approach from time to time by entering into hedging contracts. As of October 3, 2026, we have no outstanding foreign currency hedging arrangements.
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Commodity Price Risk
While we are exposed to commodity price risk, we attempt to pass through significant changes in component and raw material costs to our customers based on the contractual terms of our arrangements. In limited situations, we may not be fully compensated for such changes in costs.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our CEO and CFO have concluded that as of October 3, 2026, our disclosure controls and procedures are effective to ensure information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. Because there are inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud have been or will be detected.
Changes in Internal Control Over Financial Reporting
Prior to August 3, 2026, the Company relied on certain material processes over financial reporting provided by Resideo. In connection with the Spin-Off, we have implemented, and continue to implement, processes and controls to perform functions previously performed by Resideo, including financial reporting, treasury, stock administration, payroll, legal, IT and internal audit. Except as described above, there have not been any changes in our internal control over financial reporting during the quarter ended October 3, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. Other Information
Item 1. Legal Proceedings
Refer to Note 14. Commitments and Contingencies, of the Notes to the Unaudited Consolidated and Combined Condensed Financial Statements for additional information.
Item 1A. Risk Factors
As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors previously disclosed in the Information Statement under the section titled “Risk Factors,” which is incorporated by reference herein, except that the Spin-Off has now been completed and set forth below is an update to the risk factor previously disclosed in the Information Statement and captioned “If our goodwill, other intangible assets and long-lived assets become impaired, we may be required to record a significant charge to earnings.” For a discussion of these risk factors, refer to the section titled “Risk Factors” in our Information Statement. Any of these risk factors could materially adversely affect our business, financial condition, results of operations or cash flows. We may disclose changes to these risk factors or additional risk factors from time to time in future filings with the SEC.
If our goodwill, other intangible assets and long-lived assets become impaired, we may be required to record a significant charge to earnings.
We test, at least annually, the carrying value of goodwill for impairment, as discussed in Note 7. Goodwill and Other Intangible Assets, net to the audited combined financial statements and Note 5. Goodwill and Other Intangible Assets, net to the unaudited interim condensed consolidated and combined financial statements included elsewhere in this Form 10-Q. We review other intangible assets and long-lived assets for impairment whenever events or circumstances indicate that the
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carrying amount of the assets may not be recoverable. The estimates and assumptions about future results of operations and cash flows made in connection with the impairment testing could differ from future actual results. If the assumptions used in our analysis are not realized or if there was an adverse change in facts and circumstances, an impairment expense may need to be recorded. If the fair value of our reporting units falls below their carrying amounts because of reduced operating performance, market declines, changes in the discount rate or other conditions, expenses for impairment may be necessary. Any such expenses may have a material negative impact on our results of operations. During the three months ended October 3, 2026, we recognized a non-cash goodwill impairment charge of $659 million following an interim quantitative impairment assessment that was triggered by continued weakness in the residential market, unfavorable product and customer mix shifts, a change in our near-term outlook and declines in our stock price and market capitalization. If our operating results or projections decline further, if our stock price or market capitalization declines, or if the discount rate increases, we may be required to record additional impairment charges.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Items 2(a) and (b) are not applicable as there have been no unregistered sales of equity securities.
c) Purchases of Equity Securities by the Issuer
The shares of common stock withheld to satisfy tax withholding obligations may be deemed purchases of such shares required to be disclosed pursuant to this Item 2.
| Period | Total Number of Shares Purchased (in thousands) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (in thousands) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) | ||||||||||
| July 5, 2026 - August 1, 2026 | – | $ | – | – | $ | – | ||||||||
| August 2, 2026 - August 29, 2026 | 22 | $ | 23.73 | – | $ | – | ||||||||
| August 30, 2026 - October 3, 2026 | – | $ | – | – | $ | – | ||||||||
Item 5. Other Information
Rule 10b5-1 Trading Arrangements
During the quarter ended October 3, 2026, no officer or director (as defined in Rule 16a-1(f) of the Exchange Act) adopted terminated
14a-8 Stockholder Proposals for the 2027 Annual Meeting
We expect to hold our 2027 annual meeting of stockholders (the “2027 Annual Meeting”), which will be our first annual meeting as an independent, publicly traded company, in early June 2027. Stockholders of the Company who wish to present a proposal for inclusion in the Company’s proxy statement for the 2027 Annual Meeting pursuant to Rule 14a-8 under the Securities Exchange Act of 1934 (“Rule 14a-8”) must ensure the proposal is received by the Secretary of the Company at 275 Broadhollow Rd., Suite 400, Melville, New York, no later than 5 p.m. Eastern Time on December 23, 2026. Rule 14a-8 proposals must also comply with the requirements of Rule 14a-8 and other applicable laws in order to be eligible for inclusion in the Company’s proxy statement for the 2027 Annual Meeting.
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Item 6. Exhibits
| Incorporated by Reference | |||||||||||||||||||||||
| Exhibit Number | Exhibit Description | Form | File Number: | Exhibit No. | Filing Date | Filed or Furnished Herewith | |||||||||||||||||
| 8-K | 001-43281 | 2.1 | 8/4/2026 | ||||||||||||||||||||
| 8-K | 001-43281 | 3.1 | 8/4/2026 | ||||||||||||||||||||
| 8-K | 001-43281 | 3.2 | 8/4/2026 | ||||||||||||||||||||
| 8-K | 001-43281 | 3.3 | 8/4/2026 | ||||||||||||||||||||
| 10-12B/A | 001-43281 | 4.1 | 7/1/2026 | ||||||||||||||||||||
| 10-12B/A | 001-43281 | 4.1 | 7/1/2026 | ||||||||||||||||||||
| 8-K | 001-43281 | 4.1 | 8/4/2026 | ||||||||||||||||||||
| 10-12B/A | 001-43281 | 10.22 | 7/1/2026 | ||||||||||||||||||||
| S-8 | 333-298128 | 99.1 | 8/7/2026 | ||||||||||||||||||||
10.3+ | S-8 | 333-298128 | 99.3 | 8/7/2026 | |||||||||||||||||||
| S-8 | 333-298128 | 99.2 | 8/7/2026 | ||||||||||||||||||||
10.5+ | S-8 | 333-298128 | 99.4 | 8/7/2026 | |||||||||||||||||||
10.6+ | S-8 | 333-298128 | 99.5 | 8/7/2026 | |||||||||||||||||||
10.7+ | S-8 | 333-298128 | 99.6 | 8/7/2026 | |||||||||||||||||||
10.8+ | S-8 | 333-298128 | 99.7 | 8/7/2026 | |||||||||||||||||||
10.9+ | S-8 | 333-298128 | 99.8 | 8/7/2026 | |||||||||||||||||||
10.10 | 8-K | 001-43281 | 10.1 | 8/4/2026 | |||||||||||||||||||
10.11 | 8-K | 001-43281 | 10.2 | 8/4/2026 | |||||||||||||||||||
40
10.12 | 8-K | 001-43281 | 10.3 | 8/4/2026 | |||||||||||||||||||
10.13 | 8-K | 001-43281 | 10.4 | 8/4/2026 | |||||||||||||||||||
10.14 | 8-K | 001-43281 | 10.5 | 8/4/2026 | |||||||||||||||||||
10.15 | 8-K | 001-43281 | 10.6 | 8/4/2026 | |||||||||||||||||||
| X | |||||||||||||||||||||||
| X | |||||||||||||||||||||||
| X | |||||||||||||||||||||||
| X | |||||||||||||||||||||||
| 101.INS | Inline XBRL Instance Document | X | |||||||||||||||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema | X | |||||||||||||||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase | X | |||||||||||||||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase | X | |||||||||||||||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase | X | |||||||||||||||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase | X | |||||||||||||||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | X | |||||||||||||||||||||
+ Indicates management contracts or compensatory plans or arrangements
41
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ADI Global Distribution Inc. | ||||||||
Date: November 12, 2026 | By: | /s/ Michael Carlet | ||||||
| Michael Carlet Executive Vice President and Chief Financial Officer (Principal Financial Officer) | ||||||||
Date: November 12, 2026 | By: | /s/ Nicole Stevens | ||||||
| Nicole Stevens Senior Vice President and Chief Accounting Officer (Principal Accounting Officer) | ||||||||
42
Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Robert Aarnes, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of ADI Global Distribution Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 12, 2026 | By: | /s/ Robert Aarnes | ||||||
| Robert Aarnes | ||||||||
| President and Chief Executive Officer | ||||||||
Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Michael Carlet, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of ADI Global Distribution Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 12, 2026 | By: | /s/ Michael Carlet | ||||||
| Michael Carlet | ||||||||
| Executive Vice President and Chief Financial Officer | ||||||||
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of ADI Global Distribution Inc. (the “Company”) on Form 10-Q for the period ended October 3, 2026 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert Aarnes, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: November 12, 2026 | By: | /s/ Robert Aarnes | ||||||
| Robert Aarnes | ||||||||
| President and Chief Executive Officer | ||||||||
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of ADI Global Distribution Inc. (the “Company”) on Form 10-Q for the period ended October 3, 2026 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael Carlet, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: November 12, 2026 | By: | /s/ Michael Carlet | ||||||
| Michael Carlet | ||||||||
| Executive Vice President and Chief Financial Officer | ||||||||