ADI Global Distribution outlined a multi-year restructuring plan aimed at shedding more than $80 million in annual run-rate costs by the end of 2027, while warning that gross margin will face roughly 80 basis points of headwind next year as tariff-related pricing benefits reverse.
The remarks came during a presentation at the Jefferies Global Industrials Conference on Thursday. CEO Rob Aarnes, who joined ADI in 2013, described the initiative — branded "One ADI" — as a consolidation effort spanning distribution centers, retail footprint, brand portfolios and IT infrastructure.
Distribution centers will be trimmed from 15 to 9, store locations from about 140 to 115, and exclusive brands from 22 to 12. The company is also consolidating three e-commerce sites — ADIglobal.com, SnapAV.com and SnapPartnerStore.com — into a single platform.
On the technology side, ADI plans to reduce its ERP systems from 16 at the time of the Snap One acquisition in mid-2024 down to eight currently, with a target of three by early 2028: one for the Americas, one for international operations and one for product development.
The ERP migration disrupted business in the second half of 2025, cutting revenue by approximately $60 million due to service delays, though daily sales averages have since recovered above pre-migration levels, according to management.
In 2025, gross margin improved by 40 basis points for the full year, with Q2 and Q3 showing an 80-basis-point gain driven largely by tariff-related price increases. A $20 million tariff refund was received in Q2 2026. Excluding that benefit, 2026 gross margin will bear about 80 basis points of headwind as the prior year's tariff pass-through reverses.
Looking ahead, Aarnes said gross margin improvement through 2028 is expected to total roughly 40 basis points, with most of the benefit skewed toward the later years of that period and described as non-linear.
Revenue growth guidance targets organic expansion of 4% to 6% annually through 2030. Commercial revenue, which accounts for roughly 70% of the mix, is expected to grow 5% to 6% per year, underpinned by technology upgrade cycles every three to four years rather than commercial construction activity. Residential AV, the remaining 30%, is projected to remain flat to slightly negative through 2027 and 2028.
Organic growth is being driven by a framework Aarnes termed "4321 equals 10%": 4% from market share gains, 3% from new products, 2% from new customers and 1% from GDP.
Snap One, acquired in August 2024, contributes approximately $800 million in annual revenue — $600 million to $700 million from residential AV — and carries roughly three times the margins of the base business. The division also produces about 400 new products annually.
E-commerce revenue reached about $1.4 billion, representing 30% of total sales and growing in the high single digits to double digits, with margins about two percentage points above the legacy business. The segment grew from roughly $150 million when ADI was spun out of Honeywell in October 2018.
Capital allocation priorities are led by deleveraging, with ADI targeting a move from roughly 3X net debt to EBITDA down to 2X. The company's debt-to-equity ratio stands at 0.24. Tuck-in acquisitions remain on the table, though Aarnes noted that tax-free spin structure restrictions limit major transformational M&A for about 18 to 24 months following the Resideo separation, which closed on August 4.
ADI trades at approximately 17 times trailing earnings with a market capitalization of roughly $9.1 billion. Free cash flow conversion has historically averaged 80% to 85% over the past decade.
