Will REZI file Form 10 for ADI spin-off by end of H1 2026?

Management reaffirmation on Q4 earnings call is the strongest positive signal — it crosses the first upgrade trigger from the original context. CFO Carlet's retention eliminates the CFO-departure downgrade risk that weighed on the original 55%. Leverage at 3.9x vs. 4.0x covenant means lenders have little basis to block debt allocation. However, the market question asks specifically about H1 2026 (by July 1), while management committed only to H2 2026 *distribution*. A Form 10 filed in July or August 2026 would satisfy the distribution timeline but miss this market. With 4 months remaining and no specific filing progress update on the earnings call, there is meaningful probability that REZI files Form 10 in Q3 2026 rather than Q2. Nebraska lawsuit liability assignment remains unresolved and adds complexity to the filing. The 0.1x covenant headroom (3.9x vs. 4.0x) is thin enough that lender negotiations over debt allocation could extend into Q3. Net: upgrade from 55% but not dramatically — filing on schedule is probable, but 'H1' vs. 'early H2' is genuinely uncertain.

The Form 10 preparation process requires: (1) carve-out audited financials for ADI as standalone entity, (2) debt allocation negotiated and documented with lenders, (3) Nebraska lawsuit liability assignment resolved or disclosed, (4) SEC review process (typically 30 days after initial filing). The 4 months from now to July 1 is tight for this sequence, especially given that as of the Q4 call, no Form 10 preparation progress was disclosed. Management reaffirmation of H2 distribution is meaningful but not the same as committing to H1 Form 10 filing. CD&R's aggressive buying ($288M across 6 tranches) is a positive signal on transaction execution — PE sponsors with deep M&A experience have pricing power in these negotiations. However, the ADI exclusive brands deceleration to +2% may require management to reforecast standalone ADI projections included in the Form 10, adding preparation time. Upgrade justified but a 60-65% range reflects genuine filing timing ambiguity.

Comparative base rate analysis: spin-off Form 10 filings from announcement to initial filing average 8-12 months for complex transactions. REZI announced July 30, 2025; H1 2026 filing would be 8-11 months post-announcement — within historical range. The three key execution risks from the original context have each partially resolved: (1) CFO stability — Carlet retained; (2) lender concerns — 3.9x leverage is workable; (3) ADI performance deterioration — confirmed but not catastrophic (organic +3%). The Nebraska lawsuit is the primary remaining wildcard — if the AG is seeking injunctive relief tied to the spin structure, Form 10 filing could be blocked or delayed pending resolution. The earnings call silence on the lawsuit (no mention, no update) is ambiguous: either it is being managed quietly or it is not yet material. Given the sum of evidence — reaffirmation, CFO retention, improved leverage picture, strong execution track record on Snap One — the probability of H1 filing is moderately above even odds. Landing at 0.63.

The Q4 earnings update delivers a meaningful set of positive signals for this market. Management reaffirmed H2 2026 separation — the original context listed this explicitly as an upgrade trigger. CFO Carlet's retention eliminates the Form 10 certification risk that was flagged as a key downgrade scenario. The leverage correction to 3.9x is particularly important: lender approval for debt allocation was identified as a key gating item, and at 3.9x vs. 4.0x covenant, lenders are receiving a deal that keeps them within covenant compliance. The $75M synergy achievement 18 months ahead of schedule is a strong behavioral signal about management's ability to execute complex transactions on time. Balancing these positives: ADI exclusive brands deceleration is confirmed (not improving), the Nebraska lawsuit remains unresolved, and no Form 10 preparation progress was disclosed on the call. Given the 4-month window and the requirement that filing precede distribution by 30-60 days, H1 filing appears more likely than not for a company that has demonstrated above-average execution. Probability: 0.67.

The delta context resolves the most significant uncertainty that held the original prediction at 55%: lender concern. At 3.9x actual leverage (vs. the Spruce Point 5.5x figure used previously), lenders have no covenant-breach concern from the current debt load. 2026 guided leverage of 3.3-3.5x suggests debt will be comfortable post-separation regardless of how it is allocated. This substantially reduces the probability of lender-driven delay. CFO retention is a secondary but meaningful positive. Against these positives: the 0.65 level reflects that Form 10 filing requires active execution — drafting carve-out financials, coordinating with lenders on allocation, managing the Nebraska lawsuit disclosure, and SEC review. The earnings call provided no specific Form 10 preparation update, which in an ideal case we would expect given the H1 2026 timeline. Companies typically provide quarterly spin-off progress updates once the process is active; the absence of granular updates suggests either early stage prep or deliberate nondisclosure. Net assessment: more likely than not but moderate uncertainty remains.

Weighing the delta against the base case: the original 55% reflected genuine uncertainty about (1) lender approval, (2) CFO stability, (3) ADI performance deterioration, and (4) Nebraska lawsuit. Post-Q4 update: (1) lender approval risk is substantially reduced by 3.9x leverage correction — most important factor; (2) CFO stability risk eliminated by Carlet retention; (3) ADI deterioration confirmed but not catastrophic (+3% organic); (4) Nebraska lawsuit unresolved. The net of these updates is a 10-12 point upgrade from 55% to the mid-60s. The remaining uncertainty — primarily Nebraska lawsuit timing and the ambiguity between 'H1 Form 10' vs. 'H2 distribution' — keeps this below 70%. The market question is more specific (H1 filing by July 1) than the company's commitment (H2 distribution); there is a meaningful scenario where the filing happens in July or August and misses this market while the spin-off otherwise proceeds on schedule. Probability: 0.66.

Management reaffirmed the H2 2026 separation timeline on the Q4 earnings call with record FY2025 results. For a Form 10 to support H2 2026 distribution, it must be filed in H1 2026. Management's explicit reaffirmation of the timeline on a public earnings call creates significant accountability — walking this back would require material disclosure. The leverage picture is dramatically improved: 3.9x vs. the 5.5x figure that generated concern in the original context. Lenders are clearly comfortable at 3.9x given the covenant is 4.0x and they already approved it. CFO Carlet remaining removes the key person risk for Form 10 preparation and certification. Snap One synergies 18 months ahead of schedule demonstrates this management team executes. Nebraska lawsuit has not escalated. The combination of explicit timeline reaffirmation, improved financial position, and demonstrated execution capability suggests high probability of on-schedule H1 Form 10 filing.

The strongest indicators are now aligned: management reaffirmed the timeline, financial results are record-level, leverage is within comfortable covenant bounds, the CFO is stable. The original concerns that held the estimate at 55% have largely resolved. A management team with a PE sponsor (CD&R at $288M invested) does not miss H2 2026 separation without extreme cause — PE timeline pressure is real and CD&R's investment thesis likely depends on the spin. CD&R's repeated buying through 2025 signals high conviction that the transaction will execute. The 0.70 level reflects that a small residual probability remains around Nebraska lawsuit complexity and the inherent uncertainty in complex regulatory filing processes. ADI standalone deceleration is a modest headwind to Form 10 preparation clarity but not a blocking issue.

The delta context is uniformly positive relative to the factors that created uncertainty in the original prediction. The original prediction context explicitly listed 'Company reaffirms H2 2026 distribution target' as an upgrade trigger — this trigger has now fired. The original context also listed 'CFO or CAO departure announced' as a downgrade trigger — this risk did not materialize. Leverage at 3.9x resolves the lender approval uncertainty that was the most quantifiable risk factor. The $75M Snap One synergy achievement is important not just as a financial metric but as a behavioral signal — REZI management delivered complex operational integration ahead of schedule, which is directly analogous to the Form 10 filing execution challenge. The path to YES requires continued execution over 4 months; the path to NO requires a new negative event (lawsuit escalation, management departure, strategic reconsideration). Given clean execution track record and no new negative signals, the probability of YES is above 70%.