ADI Global Distribution Inc. — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net revenue for the quarter ended October 3, 2026, was $1,306 million, an 8.6% increase year-over-year from $1,203 million; nine-month revenue was $3,798 million compared to $3,601 million.
• Average daily sales increased 5% year-over-year, supported by two additional selling days in the current quarter.
• Gross margin was 20.9% in Q3 2026, down 170 basis points from 22.6% in Q3 2025; excluding tariff refunds and spin-off inventory adjustments, gross margin was 20.0%.
• Net loss was $655 million for the quarter, compared to net income of $26 million in the prior-year period; the loss included a $659 million non-cash goodwill impairment charge.
• Loss from operations was $634 million in Q3 2026, compared to income from operations of $41 million in Q3 2025.
• Adjusted Standalone EBITDA was $66 million (5.1% of net revenue) for the quarter, a 13% decrease from $76 million (6.3% of net revenue) in Q3 2025.
• Net cash provided by operating activities was $64 million for the quarter; nine-month net cash used in operating activities was $12 million.
• Cash and cash equivalents totaled $208 million as of October 3, 2026, up from $124 million at December 31, 2025.
• Long-term debt was $980 million as of October 3, 2026, down from $1,185 million at December 31, 2025.
• Goodwill decreased to $400 million from $1,066 million at December 31, 2025, reflecting the impairment charge.

Guidance and Future Outlook:

• Full-year 2026 net revenue guidance was lowered to a range of $4,910 million to $4,930 million, compared to $3,798 million for the first nine months.
• Full-year 2026 Non-GAAP Adjusted Standalone EBITDA guidance was lowered to a range of $230 million to $240 million, compared to $202 million for the first nine months.
• Fourth quarter 2026 net revenue is now projected between $1,112 million and $1,132 million.
• Fourth quarter 2026 Non-GAAP Adjusted Standalone EBITDA is projected between $28 million and $38 million.
• The revised outlook assumes continued demand and mix pressures, specifically weakness in Exclusive Brands, persist through the remainder of 2026.
• Management expects to exit 2026 with approximately $60 million in annualized gross cost savings and aims to achieve an $80 million objective by the end of 2027 on a run-rate basis.

Business Segments and Product Lines:

• Sales growth in security, professional audio-visual, fire and life safety, and data communications partially offset lower residential audio-visual sales.
• Residential audio-visual weakness was primarily attributed to continued weakness in the U.S. housing market.
• Exclusive Brands products faced continued residential market weakness affecting demand.
• A greater share of commercial sales from lower-margin national accounts and projects weighed on profitability.
• Research and development expenses decreased by $1 million due to people and operating expense reductions.
• Selling, general and administrative expenses increased by $12 million to $202 million, driven by higher facility costs, real estate and distribution center consolidation, and increased standalone costs for finance, legal, HR, and IT.

Market and Competitive Landscape:

• The company operates as a leading global specialty distributor of low-voltage products serving commercial and residential markets.
• ADI holds a market-leading position in North America for professionally installed security, fire/life safety, and residential audio-visual product categories.
• The company offers over 500,000 products from more than 1,000 suppliers.
• Gross margin decline was influenced by unfavorable customer and product mix and inventory-related charges.
• Tariff refunds and benefits from spin-off related inventory adjustments partially offset margin pressures.

Risks and Challenges:

• Continued weakness in the residential market and lower projected earnings and cash flows triggered the goodwill impairment.
• Declines in stock price and market capitalization contributed to the impairment assessment.
• Unfavorable product and customer mix continues to impact performance.
• Risks include the ability to achieve outlook, recognize cost savings, and optimize the portfolio and operational footprint.
• Potential disputes or obligations arising from agreements entered into with Resideo in connection with the spin-off.
• Risks related to tariffs imposed by the United States and other governments.
• Operational or other disruptions resulting from the completed separation from Resideo.

Management Commentary and Tone:

• Rob Aarnes, President and CEO, stated that third-quarter profitability was below expectations due to a challenging residential market and weaker-than-anticipated demand in Exclusive Brands.
• Management acknowledged that results fell short of standards and lowered the full-year outlook to reflect the Q3 shortfall and further weakness in Exclusive Brands in Q4.
• Management emphasized a focus on strengthening execution and improving performance in a challenging operating environment following the transition to an independent public company.
• The company is executing its "One ADI" transformation to integrate systems and simplify operations to support long-term growth.
• Management expressed confidence that leading market positions and a differentiated omnichannel model position ADI for long-term profitable growth and shareholder value creation.

Other Key Points:

• ADI completed its spin-off from Resideo Technologies, Inc. on August 3, 2026; prior period financials were derived from Resideo's accounting records on a carve-out basis.
• A $659 million non-cash goodwill impairment charge was recognized following an interim quantitative impairment assessment.
• The company has a $500 million fully undrawn revolving credit facility as of October 3, 2026.
• The company issued $988 million in long-term debt during the nine months ended October 3, 2026.
• A conference call and webcast were held on November 12, 2026, at 8:30 a.m. ET.
• The company is developing additional cost reductions beyond the $80 million objective to align the cost structure with current demand trends.