Allegion (NYSE:ALLE) Q4 2025 Earnings call February 17, 2026 08:00 AM ET Speaker6Good day, everyone. My name's Stefan, and I'll be your conference operator today. At this time, I'd like to welcome you to the Allegion fourth quarter and full year earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there'll be a question and answer session. If you would like to ask a question during this time, and if you've joined via the webinar, please use the Rais ...

Financial Data and Key Metrics Changes - Q2 revenue exceeded $1,000,000,000 for the first time, marking a 5.8% increase compared to 2024 [5][15] - Organic revenue grew by 3.2%, driven by favorable pricing and volume, particularly in the Americas non-residential business [16][18] - Adjusted earnings per share (EPS) for Q2 was $2.04, an increase of 4.1% year-over-year [17] - Year-to-date available cash flow reached approximately $275,400,000, up 56.5% compared to the previous year [24][25] Business Line Data and Key Metrics Changes - Americas segment revenue was $821,500,000, up 6.6% reported and 4.5% organically, with high single-digit growth in non-residential business [19][20] - Residential business saw a decline of mid-single digits due to a soft market environment [20] - Electronics revenue in the Americas increased by low double digits, continuing to be a long-term growth driver [21] Market Data and Key Metrics Changes - International segment revenue was $200,500,000, up 2.9% reported but down 2.2% organically, with acquisitions contributing 1.1% to revenue [22] - Currency fluctuations positively impacted reported revenue by 4% in the international segment [23] Company Strategy and Development Direction - The company is focused on capital allocation for growth, including organic investments and strategic acquisitions [7][10] - Recent acquisitions include Trimco, Elletech, Gatewise, and Waitwhile, aimed at enhancing the electronics portfolio and expanding market reach [11][13] - The company aims to leverage its strong cash generation to return value to shareholders while pursuing accretive acquisitions [6][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the full-year performance, raising the adjusted EPS outlook to $8 to $8.15 based on strong operational execution and demand in non-residential markets [6][29] - The non-residential markets, particularly institutional verticals, remain resilient, while residential markets are soft due to high interest rates [26][30] Other Important Information - The company announced the divestiture of its API business in Australia, expected to close in early August [24] - The balance sheet remains strong with a net debt to adjusted EBITDA ratio of 1.5 times [25] Q&A Session Summary Question: Activity levels in non-residential markets and tariff impacts - Management noted no evidence of pull-forward ordering due to tariffs, with project demand remaining strong [34][35] Question: Margin performance and pricing actions - Management indicated that pricing actions are expected to offset inflationary pressures, with a slight tailwind from transactional FX [37][40] Question: Market conditions and share gain - Management believes Allegion is gaining share, particularly at the expense of smaller competitors, due to better operational performance [52] Question: EPS guidance increase - The increase in EPS guidance is attributed to favorable FX impacts, strong first-half performance, and contributions from acquisitions [56][57] Question: International business outlook - The international segment is expected to remain flat, with the fourth quarter typically being the strongest [78] Question: Pricing and tariff surcharges - Management clarified that the tariff revenue is expected to be neutral at the EPS level, with surcharges adjusted to offset inflation [63][84]

Company Overview - Allegion's 2024 revenue reached $3.8 billion with a 24.4% adjusted EBITDA margin[27] - The company has over 12,000 full-time global employees, operates in 25+ countries, and has 1,000+ global active patents[26] - Americas account for 80% of revenue, while International contributes 20%[28] - Electronics represent 25% of revenue, Mechanical 68%, and Software & Services 7%[28] Growth Strategy - The company aims for 7%+ revenue growth, excluding FX, over the cycle[56] - Allegion targets bolt-on acquisitions to contribute 3+ points of annual acquired growth[60] - The company plans to deploy approximately $2 billion of available cash flow over the next 3 years[60] - From 2021 to 2024, Enterprise Adjusted EBITDA Margins increased by +280 bps[140] Electronics & Innovation - Electronics growth is expected to be ~30% HSD of 2024 revenue[150] - Electronics products have an average annual revenue outgrowth of ~2-2.5x ASP vs mechanical products at a similar margin rate[150] - Platforming efforts have led to over 45% reduction in development time[168]