REZI Earnings Preview: Short Thesis Faces 10-K Test

The Core Question

Spruce Point Capital's January 27 short report targets 25-50% downside, citing cash flow deterioration, serial CFO turnover, and compensation manipulation. With leverage at 5.5x and OCF down 37%, will the 10-K filing validate or refute the short thesis?

Our five-lens analysis examined accounting integrity, funding fragility, capital deployment, governance, and regulatory exposure. Read the deep dive here.

Ensemble Forecast

Key Market

Q1 2026 OCF Below $120M

Probability

57%

Model Agreement

0.70

Notable disagreement

Our nine-model ensemble assigns 57% probability that Q1 2026 operating cash flow will fall below $120M — the lowest agreement (0.70) across all seven REZI markets. Opus models lean bearish (57-72%), weighting LTM average of ~$75M/quarter and $202M annual interest burden. Sonnet models are more optimistic (29-42%), expecting Honeywell's ~$70M annual supply benefit to materialize early. Tomorrow's FY 2025 OCF figure will indicate which camp is closer to reality. See all seven active markets on the REZI forecasting page.

10-K Scorecard — February 24

FY 2025 Operating Cash Flow

Bull: >$150MBear: <$120M

OCF declined 37% through Q3. Below $120M confirms Spruce Point's “cash flow deterioration” claim and escalates FUNDING_FRAGILITY. Above $150M suggests the Honeywell benefit is already flowing through.

Goodwill Impairment Test

Bull: No impairmentBear: Any write-down

Ensemble assigns 32% probability. The $23M inventory markdown and ADI brands collapse raise questions, but Opus models believe management will use GAAP latitude to defer. Any impairment would upgrade CAPITAL_DEPLOYMENT to DESTRUCTIVE.

ADI Exclusive Brands Growth (Q4)

Bull: >10%Bear: <5%

Growth collapsed from +32% (Q2 2025) to +3% (Q3 2025) — the sharpest sequential deceleration across our coverage. Q4 confirms whether this is a one-quarter anomaly or structural exhaustion of the First Alert integration.

Net Leverage Ratio

Bull: <5.0xBear: >5.5x

Leverage has nearly doubled from 3.3x at spin-off. Interest expense is up 56% YoY. Above 5.5x would increase our 48% covenant amendment probability; below 5.0x would suggest deleveraging is on track despite the acquisition integration.

CFO/CAO Stability

Bull: No changesBear: 5th departure

Four CFOs/CAOs since 2018. Our ensemble assigns 52% probability to another departure in 2026. Any announced change alongside the 10-K would confirm the governance instability pattern flagged by both Spruce Point and our Insider Investigator lens.

Current Assessment

Resideo is classified at “Higher Scrutiny” with medium confidence. CD&R's $288M+ accumulation provides a notable counterweight to the short thesis — sophisticated buyers rarely average into a broken story. However, OCF removed from bonus targets the year management missed by 29% ($425M target vs. $303M actual) warrants explanation. Read the full five-lens analysis. We will update within 24 hours of the February 24 earnings release.

Five-lens analysis covering accounting integrity, funding fragility, capital deployment, governance alignment, and regulatory exposure — plus seven active prediction markets

REZI Full Analysis REZI Forecasts