Q4 2025 Allegion PLC Earnings Call

February 17, 2026

Speaker #1: Good 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.

Speaker #1: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time,

Speaker #1: And if you've joined via the webinar, please use the raise hand icon, which can be found at the bottom of your webinar application. At this time, I'd like to turn the call over to Josh Pokrzywinski, Vice President of Investor Relations.

Speaker #2: Thank you, Stefan. Good morning, everyone, and thank you for joining us for Allegion's fourth quarter 2025 earnings call. With me today are John Stone, President and Chief Executive Officer, and Mike Wagnes, Senior Vice President and Chief Financial Officer of Allegion.

Speaker #2: Our earnings release, which was issued earlier this morning, and the presentation, which we will refer to in today's call, are available on our website at investor.allegion.com.

Speaker #2: This call will be recorded and archived on our website. Please go to slide two. Statements made in today's call that are not historical facts are considered forward-looking statements and are made pursuant to the Safe Harbor Provisions of Federal Securities Law.

Speaker #2: Please see our most recent SEC filings for a description of some of the factors that may cause actual results to differ materially from our projections.

Speaker #2: The company assumes no obligation to update these forward-looking statements. Today's presentation and commentary include non-GAAP financial measures. Please refer to the reconciliation and the financial tables of our press release for further details.

Speaker #2: Please go to slide three, and I'll turn the call over to John.

Speaker #3: Thanks, Josh. Good morning, everyone. Thanks for joining the call. Allegion delivered a strong year marked by high single-digit enterprise revenue growth, more than $600 million of accretive M&A, and solid execution in a dynamic and inflationary environment.

Speaker #3: I'm proud of the Allegion team's performance in 2025. I see our results as a testament to the talent and dedication of our people, the strength of our brand and channel partnerships, and our sound strategies to deliver on our commitments to shareholders.

Speaker #3: As we enter 2026, our broad end market exposure supports continued growth led by America's non-residential. U.S. residential markets were softer than expected in the fourth quarter, and our outlook contemplates that residential remains soft in 2026.

Speaker #3: However, our team has a proven track record of execution across a variety of macro conditions. We're initiating fiscal year 2026 adjusted EPS guidance of $8.70 to $8.90 per share.

Speaker #3: I'll provide more detail on our outlook later in the call. Please go to slide four. Let's take a look at capital allocation for 2025, starting with our investments for organic growth.

Speaker #3: A core element of Allegion's portfolio strength is our brands' legacy of innovation. Brands like Schlage, Von Duprin, and LCN invented their product categories 100 years ago and are known as pioneers in our industry.

Speaker #3: Allegion has built on that legacy by expanding our offerings of mid-tier commercial product lines. Last September, we launched our Slague Performance Series locks, providing more ways to win in the non-residential aftermarket, alongside the mid-price point Von Dupin 70 Series exit devices that were released in 2024.

Speaker #3: These are complemented by our mid-tier offerings with LCN closers, where we now have a full suite of commercial-grade offerings from the industry's leading brands at more price points to meet customers' needs.

Speaker #3: As you know, 2025 was an active year for acquisitions for the company with approximately $630 million of capital deployed. These acquisitions align to the strategy we aligned at our May Investor Day, including additions to our core mechanical portfolio, as well as electronics and complementary software solutions that meet end-user needs for safety and convenience.

Speaker #3: As we enter 2026, the pipeline is active, and we will remain disciplined to drive returns and continue positioning Allegion as a leading pure play in security and access.

Speaker #3: Allegion continues to be a dividend-paying stock in 2025. We paid $175 million in dividends to shareholders. Looking ahead to 2026, we've also just announced our 12th consecutive annual increase in dividends.

Speaker #3: We did not repurchase shares in the fourth quarter. Share repurchase was part of our capital allocation in 2025, totaling $80 million. At a minimum, we intend to offset the creep from share-based compensation.

Speaker #3: You can expect Allegion to be balanced, consistent, and disciplined with capital deployment over time, with a clear priority of investing for growth. Mike will now walk you through the fourth quarter financial results.

Speaker #2: Thanks, John. And good morning, everyone. Thanks for joining today's call. Please go to slide number five. As John shared, our Q4 results reflect continued strong execution from the Allegion team.

Speaker #2: As we delivered high single-digit revenue growth for the enterprise, revenue for the fourth quarter was over $1 billion—an increase of 9.3% compared to 2024.

Speaker #2: Organic revenue increased 3.3% in the quarter, led by our America's non-residential business. The organic revenue increase was driven by price realization, partially offset by volume declines in our America's residential and international businesses.

Speaker #2: Q4 adjusted operating margin was 22.4%, up 30 basis points compared to last year. Price and productivity exceeded inflation and investment by $12 million, driving 20 basis points of margin expansion in the quarter.

Joe O'Dea: Good day, everyone. My name is 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 raise hand icon, which can be found at the bottom of your webinar application. At this time, I'd like to turn the call over to Josh Pokrzywinski, Vice President of Investor Relations.

Speaker #2: Favorable mix also benefited margin rates. Adjusted earnings per share of $1.94 increased 8 cents, or 4.3%, versus the prior year. Operational performance and accretive acquisitions contributed over 10 points of EPS growth.

Speaker #2: This was partially offset by higher tax. Finally, year-to-date available cash flow was strong at $685.7 million, up 17.6% versus the prior year. I'll provide more details on our balance sheet and cash flow a little later in the presentation.

Speaker #2: Please go to slide number six. Our America segment was resilient in Q4, despite a weak quarter in residential markets. Revenue of $795.5 million was up 6.1% on a reported basis and up 4.8% on an organic basis.

Speaker #2: Led by our non-residential business. Our non-residential business increased high single digits organically, driven by a combination of price and volume growth. Demand for our products remains healthy, supported by our broad end market exposure.

Speaker #2: Our residential business declined high single digits, as favorable price was more than offset by volume declines, as residential markets remain soft. Electronics revenue was up low double digits for the quarter and for the full year 2025.

Speaker #2: And continues to be a long-term growth driver for Allegion. Additionally, reported revenues include 1.3 points of growth from acquisitions. America's adjusted operating income of $216.2 million increased 5.4% versus the prior year.

Speaker #2: Adjusted operating margin was down 30 basis points in the quarter. Price and productivity, net of inflation and investment, was a 30 basis point headwind to margin rates in the quarter.

Speaker #2: However, it was positive on a dollar basis, as we were able to offset higher inflation in a dynamic environment. Additionally, mix was favorable to margin rates and offset volume de-leverage in Residential.

Speaker #2: Please go to slide number seven. Our International segment delivered revenue of $237.7 million, which was up 21.5% on a reported basis and down 2.3% organically.

Speaker #2: Growth in our electronics businesses was more than offset by weaknesses in mechanical. Net acquisitions contributed 16 points to segment revenue. Currency was also a tailwind, positively impacting reported revenues by 7.8%.

Speaker #2: International adjusted operating income of $39.4 million increased 27.5% versus the prior year period. Adjusted operating margin for the quarter increased 90 basis points, driven by accretive acquisitions and favorable price and productivity net of inflation and investment.

Speaker #2: We continue to drive portfolio quality in the international segment through self-help, selective pruning of non-core assets, and adding high-performing businesses where we have a right to win.

Speaker #2: Please go to slide eight, and I will provide an overview of our cash flow and balance sheet. Year-to-date available cash flow was $685.7 million, up over $100 million versus the prior year.

Speaker #2: Primarily driven by higher EBITDA. I am pleased with the cash flow performance in '25. For 2026, we anticipate our available cash flow conversion will be approximately $85 to $95% of adjusted income.

Speaker #2: Next, working capital as a percent of revenue increased in 2025 due to acquired working capital. Which is which does not impact cash flow. Finally, our balance sheet remains strong, and our net debt to adjusted EBITDA is at a healthy ratio of 1.6 times, which supports continued capital deployment.

Speaker #2: I will now hand the call back over to John.

Speaker #3: Thanks, Mike. Please go to slide nine. And before we discuss the 2026 outlook, I want to provide an overview of our key market assumptions.

Speaker #3: In the Americas, we see continued volume growth in non-residential markets, similar to 2025 levels. And this is supported by our spec writing trends. Our broad end market exposure and large installed base make for a resilient business model, one that's less reliant on any single end market vertical to drive growth.

Speaker #3: We do expect a more modest price contribution, however, to reflect slightly lower inflation as compared to last year. If inflation were to remain higher, the business has proven our ability to manage inputs and drive the necessary pricing, as you saw in 2025.

Speaker #3: Residential markets were weak throughout 2025. Demand is likely to remain soft in 2026, and we expect America's residential to be down slightly. Internationally, we see modest organic growth, primarily driven by our electronics businesses.

Speaker #3: We have been focused on improving portfolio quality in International through a combination of self-help and acquisitions, which we believe supports growth in markets that remain sluggish.

Speaker #3: Please go to slide 10, and I'll discuss our outlook for 2026. We expect total Allegion revenue growth to be 5 to 7%, and organic revenue growth to be 2 to 4%.

Speaker #3: Total growth includes approximately $1.4 million in currency translation and 2 points of carryover contribution from M&A, primarily in Allegion International. We expect organic growth of low to mid-single digits in the Americas from a combination of price and volume, led by our non-residential business.

Josh Pokrzywinski: Thank you, Stefan. Good morning, everyone, and thank you for joining us for Allegion's Q4 2025 Earnings Call. With me today are John Stone, President and Chief Executive Officer, and Mike Wagnes, Senior Vice President and Chief Financial Officer of Allegion. Our earnings release, which was issued earlier this morning, and the presentation, which we will refer to on today's call, are available on our website at investor.allegion.com. This call will be recorded and archived on our website. Please go to slide 2. Statements made in today's call that are not historical facts are considered forward-looking statements and are made pursuant to the safe harbor provisions of federal securities law. Please see our most recent SEC filings for a description of some of the factors that may cause actual results to differ materially from our projections. The company assumes no obligation to update these forward-looking statements.

Speaker #3: We expect electronics to outpace mechanical growth, consistent with our long-term performance and customer trends. In the international segment, our outlook assumes low single-digit growth, led by electronics, with largely stable mechanical markets.

Speaker #3: Our adjusted EPS outlook is $8.70 to $8.90. This represents growth of approximately 8% at the midpoint, inclusive of an approximate 10% headwind from a higher tax rate.

Speaker #3: You can find more details on our outlook slide and in the appendix. Please go to slide 11. In summary, Allegion is executing at a high level while staying agile and steadily delivering on the long-term commitments we shared with you at our investor day.

Josh Pokrzywinski: Today's presentation and commentary include non-GAAP financial measures. Please refer to the reconciliation in the financial tables of our press release for further details. Please go to slide 3, and I'll turn the call over to John.

Speaker #3: Our strong performance is led by an enduring business model in non-residential Americas, double-digit electronics growth, and accretive capital deployment as we acquired good businesses in markets where we have a right to win.

John H. Stone: Thanks, Josh. Good morning, everyone. Thanks for joining the call. Allegion delivered a strong year marked by high single-digit enterprise revenue growth, more than $600 million of accretive M&A, and solid execution in a dynamic and inflationary environment. I'm proud of the Allegion team's performance in 2025. I see our results as a testament to the talent and dedication of our people, the strength of our brands and channel partnerships, and our sound strategy as we deliver on our commitments to shareholders. As we enter 2026, our broad end market exposure supports continued growth, led by Americas non-residential. US residential markets were softer than expected in Q4, and our outlook contemplates that residential remains soft in 2026. However, our team has a proven track record of execution across a variety of macro conditions.

John Stone: Thanks, Josh. Good morning, everyone. Thanks for joining the call. Allegion delivered a strong year marked by high single-digit enterprise revenue growth, more than $600 million of accretive M&A, and solid execution in a dynamic and inflationary environment. I'm proud of the Allegion team's performance in 2025. I see our results as a testament to the talent and dedication of our people, the strength of our brands and channel partnerships, and our sound strategy as we deliver on our commitments to shareholders. As we enter 2026, our broad end market exposure supports continued growth, led by Americas non-residential. US residential markets were softer than expected in Q4, and our outlook contemplates that residential remains soft in 2026. However, our team has a proven track record of execution across a variety of macro conditions.

Speaker #3: I'm proud of the Allegion team and appreciative of our strong channel partners. With that, we'll take your questions.

Speaker #2: We will now move to the Q&A. For today's session, we'll be utilizing the Raise Hand feature. If you would like to ask a question, simply click on the Raise Hand button at the bottom of your screen.

Speaker #2: Once you've been called upon, please unmute yourself and begin to ask your question. We'll be taking one question and one follow-up question only. Thank you.

Speaker #2: We'll now pause for a moment to assemble the queue. Our first question will come from John O'Day from Wells Fargo. Please unmute your line and ask your question.

John H. Stone: We're initiating fiscal year 2026 Adjusted EPS guidance of $8.70 to $8.90 per share. I'll provide more detail on our outlook later in the call. Please go to slide 4. Let's take a look at capital allocation for 2025, starting with our investments for organic growth. A core element of Allegion's portfolio strength is our brand's legacy of innovation. Brands like Schlage, Von Duprin, and LCN invented their product categories 100 years ago and are known as pioneers in our industry. Allegion has built on that legacy by expanding our offerings of mid-tier commercial product lines. Last September, we launched our Schlage Performance Series locks, providing more ways to win in the non-residential aftermarket, alongside the mid-price point Von Duprin 70 Series exit devices that were released in 2024.

John Stone: We're initiating fiscal year 2026 Adjusted EPS guidance of $8.70 to $8.90 per share. I'll provide more detail on our outlook later in the call. Please go to slide 4. Let's take a look at capital allocation for 2025, starting with our investments for organic growth. A core element of Allegion's portfolio strength is our brand's legacy of innovation. Brands like Schlage, Von Duprin, and LCN invented their product categories 100 years ago and are known as pioneers in our industry. Allegion has built on that legacy by expanding our offerings of mid-tier commercial product lines. Last September, we launched our Schlage Performance Series locks, providing more ways to win in the non-residential aftermarket, alongside the mid-price point Von Duprin 70 Series exit devices that were released in 2024.

Speaker #4: Hi, good morning. Can you hear me? I do. Hey, good morning. Can we start on the ready side in the fourth quarter? I think you touched on it being kind of softer than anticipated.

Speaker #4: And so, just what you saw develop over the course of the quarter—the degree to which that extends into the early part of this year—whether that was more kind of destocking events or sell-through demand, and what you saw on the pricing side of things as well, if there was any need to adjust price there based on the demand environment.

Speaker #4: Yeah, Jill, thanks for the question. I think, certainly, ready in the Americas end of the year was softer than we had contemplated. And honestly, ready throughout the year was a little choppy, let's say.

John H. Stone: These are complemented by our mid-tier offerings with LCN Closers, where we now have a full suite of commercial-grade offerings from the industry's leading brands at more price points to meet customers' needs. As you know, 2025 was an active year for acquisitions for the company, with approximately $630 million of capital deployed. These acquisitions align to the strategy we had outlined at our May Investor Day, including additions to our core mechanical portfolio, as well as electronics and complementary software solutions that meet end-user needs for safety and convenience. As we enter 2026, the pipeline is active, and we will remain disciplined to drive returns and continue positioning Allegion as a leading pure play in security and access. Allegion continues to be a dividend-paying stock. In 2025, we paid $175 million in dividends to shareholders.

John Stone: These are complemented by our mid-tier offerings with LCN Closers, where we now have a full suite of commercial-grade offerings from the industry's leading brands at more price points to meet customers' needs. As you know, 2025 was an active year for acquisitions for the company, with approximately $630 million of capital deployed. These acquisitions align to the strategy we had outlined at our May Investor Day, including additions to our core mechanical portfolio, as well as electronics and complementary software solutions that meet end-user needs for safety and convenience. As we enter 2026, the pipeline is active, and we will remain disciplined to drive returns and continue positioning Allegion as a leading pure play in security and access. Allegion continues to be a dividend-paying stock. In 2025, we paid $175 million in dividends to shareholders.

Speaker #4: We put up mid-single digit growth in the third quarter, really largely on the heels of a very successful new product launch. And then a pretty soft Q4.

Speaker #4: I would say, yeah, 26 started off better. Let's just say. But just looking at ready, it did end softer than we had contemplated. And I think that's part of the things that just caused us to at least take what we think is a very prudent assumption into 2026.

Speaker #4: That we would expect, ready to be soft. And certainly, should there be an uptick in that market, we're positioned very well to capture upside there.

Speaker #4: I would say, with your question around pricing, there wasn't any short-term reaction on pricing, nor do I think that contributed to any of the demand softness.

John H. Stone: Looking ahead to 2026, we've also just announced our 12th consecutive annual increase in dividends. While we did not repurchase shares in Q4, share repurchase was part of our capital allocation in 2025, totaling $80 million. At a minimum, we intend to offset the creep from share-based compensation. You can expect Allegion to be balanced, consistent, and disciplined with capital deployment over time, with a clear priority of investing for growth. Mike will now walk you through the Q4 financial results.

John Stone: Looking ahead to 2026, we've also just announced our 12th consecutive annual increase in dividends. While we did not repurchase shares in Q4, share repurchase was part of our capital allocation in 2025, totaling $80 million. At a minimum, we intend to offset the creep from share-based compensation. You can expect Allegion to be balanced, consistent, and disciplined with capital deployment over time, with a clear priority of investing for growth. Mike will now walk you through the Q4 financial results.

Speaker #4: The last point would be our channel doesn't hold a lot of inventory, and so any inventory correction-type actions are usually very short-lived. Got it.

Speaker #4: And then, on the Americas, organic outlook and the low single-digit, mid-single-digit—just any color as we think about kind of price and volume components of that?

Speaker #4: Is that a little bit more price than volume? Price carryover, tailwind, and then how you think about that volume progression over the course of the year—is the volume growth expected to get better, and is that a function of comps or anything that you're seeing in the spec activity that would suggest a little bit better demand environment as we go through 2026?

Mike Wagnes: Thanks, John, and good morning, everyone. Thanks, thanks for joining today's call. Please go to slide number 5. As John shared, our Q4 results reflect continued strong execution from the Allegion team as we delivered high single-digit revenue growth for the enterprise. Revenue for the fourth quarter was over $1 billion, an increase of 9.3% compared to 2024. Organic revenue increased 3.3% in the quarter, led by our Americas non-residential business. The organic revenue increase was driven by price realization, partially offset by volume declines in our Americas residential, and international businesses. Q4 adjusted operating margin was 22.4%, up 30 basis points compared to last year. Price and productivity exceeded inflation and investment by $12 million, driving 20 basis points of margin expansion in the quarter. Favorable mix also benefited margin rates.

Speaker #3: Yeah, Jill, so thanks for the question. I would say, as you think about Americas for '26, we expect to see both price and volume growth.

Speaker #3: But as you suggested, more pricing than volume growth for the year. Don't like to give quarterly outlook, but I'd be happy to kind of unpack it qualitatively for you.

Speaker #3: As you know, the Americas, as you start the year in Q1, revenue levels are similar to the revenue in Q4 in total, historically. And then from there, we tend to have higher revenue in the middle two quarters.

Mike Wagnes: Adjusted earnings per share of $1.94 increased $0.08, or 4.3% versus the prior year. Operational performance and accretive acquisitions contributed over 10 points of EPS growth. This was partially offset by higher tax. Finally, year-to-date available cash flow was strong at $685.7 million, up 17.6% versus the prior year. I'll provide more details on our balance sheet and cash flow a little later in the presentation. Please go to slide 6. Our Americas segment was resilient in Q4, despite a weak quarter in residential markets. Revenue of $795.5 million was up 6.1% on a reported basis and up 4.8% on an organic basis, led by our non-residential business.

Speaker #3: We expect that same seasonality where the middle two quarters are the largest quarters, and obviously, Q4 is a little less. So as you model this, I think that could help you qualitatively. In addition, you do have to look at the prior year comp as you think about pricing and margins, for that matter.

Speaker #3: You have to consider how we finished in each quarter for 2025 as you think about that pricing impact for next year. Obviously, Q1 of '25, we hadn't yet felt the inflationary impacts from tariffs.

Speaker #3: So, you didn't have the pricing or the inflation. So, hopefully, that helps you as you think about unpacking the year from a top line.

Speaker #4: It does. Thanks, Mike.

Speaker #2: Thank you. Our next question will come from Tamahiko Sano from JPMorgan. Please unmute your line and go ahead.

Mike Wagnes: Our non-residential business increased high single digits organically, driven by a combination of price and volume growth. Demand for our products remains healthy, supported by our broad end market exposure. Our residential business declined high single digits as favorable price was more than offset by volume declines, as residential markets remained soft. Electronics revenue was up low double digits for the quarter and for the full year 2025, and continues to be a long-term growth driver for Allegion. Additionally, reported revenues include 1.3 points of growth from acquisitions. Americas adjusted operating income of $216.2 million increased 5.4% versus the prior year. Adjusted operating margin was down 30 basis points in the quarter. Price and productivity, net of inflation and investment, was a 30 basis point headwind to margin rates in the quarter.

Speaker #5: Good morning, everyone.

Speaker #4: Good morning.

Speaker #5: Thank you for taking my questions. So, you maintain sector-leading margins despite the higher costs through pricing, productivities, and acquisition synergies. Can you break down the contributions from each of these levers, and which will be most important in 2026, please?

Speaker #3: Yeah, Tomo, we put all that information in our 10-K. So, when you get a chance, you can look at it for the fourth quarter and full year—I guess the full year is in the K.

Speaker #3: I'll share—obviously, on the enterprise level, we did get some margin tailwind from that price and productivity in excess of inflation and investment. There was a headwind in the Americas.

Mike Wagnes: However, it was positive on a dollar basis as we were able to offset higher inflation in a dynamic environment. Additionally, mix was favorable to margin rates and offset volume deleverage in residential. Please go to slide 7. Our international segment delivered revenue of $237.7 million, which was up 21.5% on a reported basis and down 2.3% organically. Growth in our electronics businesses was more than offset by weaknesses in mechanical. Net acquisitions contributed 16 points to segment revenue. Currency was also a tailwind, positively impacting reported revenues by 7.8%. International adjusted operating income of $39.4 million increased 27.5% versus the prior year period. Adjusted operating margin for the quarter increased 90 basis points, driven by accretive acquisitions and favorable price, and productivity, net of inflation, and investment.

Speaker #3: That's a function of the tyranny of the math we've been talking about all year long. We also had some slightly we had favorable mix, but the residential volume de-leverage we experienced kind of mitigated that in the Americas region as we highlighted.

Speaker #3: As you think about 2026, you could back into the full-year margin expansion. We give all the components at the enterprise level. As you know, the Americas is our largest business, and we can't drive the enterprise margin expansion without the Americas being in a similar zip code.

Speaker #3: So it kind of provides you at least a framework for the Americas as well. And then as far as the components, I would expect to have pricing and productivity in excess of inflation and investment on a dollar basis.

Speaker #3: And from a rate basis, I wouldn't expect that to be a headwind in 2026. It was obviously in the Americas in '25. We do have that first quarter where you have that carryover impact, that last quarter, as I mentioned in the previous answer.

Mike Wagnes: We continue to drive portfolio quality in the international segment through self-help, selective pruning of non-core assets, and adding high-performing businesses where we have a right to win. Please go to slide 8, and I will provide an overview of our cash flow and balance sheet. Year-to-date available cash flow was $685.7 million, up over $100 million versus the prior year, primarily driven by higher EBITDA. I am pleased with the cash flow performance in 2025. For 2026, we anticipate our available cash flow conversion will be approximately 85% to 95% of adjusted net income. Next, working capital as a percent of revenue increased in 2025 due to acquired working capital, which does not impact cash flow.

Speaker #3: But for the full year, expect price and productivity to be positive on a dollar basis, and certainly not negative on a margin rate basis.

Speaker #5: Thank you, Mike. And a follow-up on international markets: So these markets are expected to see continued, slightly diminished growth, primarily from acquisition and electronics.

Speaker #5: So, can you provide more color on specific geographies—particularly Western Europe and Australia? And when do you expect the demand recovery, please?

Speaker #3: Yeah, Tomo, this is John. Appreciate that. And I think, yeah, we do see our electronics businesses leading the way. That is primarily a Western Europe-based business.

Mike Wagnes: Finally, our balance sheet remains strong, and our net debt to adjusted EBITDA is at a healthy ratio of 1.6x, which supports continued capital deployment. I will now hand the call back over to John.

Speaker #3: And then within that, primarily a DAC region businesses. But we are expanding pan-Europe with that. And those businesses perform very well in 2025. And we expect continued growth out of them in '26.

John H. Stone: Thanks, Mike. Please go to slide 9. Before we discuss the 2026 outlook, I want to provide an overview of our key end market assumptions. In the Americas, we see continued volume growth in non-residential markets similar to 2025 levels, and this is supported by our spec writing trends. Our broad end market exposure and large installed base make for a resilient business model, one that's less reliant on any single end market vertical to drive growth. We do expect a more modest price contribution, however, to reflect slightly lower inflation as compared to last year. If inflation were to remain higher, the business has proven our ability to manage inputs and drive the necessary pricing, as you saw in 2025. Residential markets were weak throughout 2025. Demand is likely to remain soft in 2026, and we expect Americas residential to be down slightly.

John Stone: Thanks, Mike. Please go to slide 9. Before we discuss the 2026 outlook, I want to provide an overview of our key end market assumptions. In the Americas, we see continued volume growth in non-residential markets similar to 2025 levels, and this is supported by our spec writing trends. Our broad end market exposure and large installed base make for a resilient business model, one that's less reliant on any single end market vertical to drive growth. We do expect a more modest price contribution, however, to reflect slightly lower inflation as compared to last year. If inflation were to remain higher, the business has proven our ability to manage inputs and drive the necessary pricing, as you saw in 2025. Residential markets were weak throughout 2025. Demand is likely to remain soft in 2026, and we expect Americas residential to be down slightly.

Speaker #3: I'd say Australia, New Zealand, and markets haven't been great. And so a little bit of improvement there off of pretty weak comps, I think, is not totally out of the question.

Speaker #3: We'll have to see. And then, largely, I would just say mechanical markets remain a little sluggish, like we said in the prepared remarks. Electronics will lead the way for us, along with, again, some carryover contribution from M&A.

Speaker #5: Thank you, John.

Speaker #2: Our next question will come from Brett Lindsey from Mizuho. Please unmute your line and ask your question. Brett, please unmute your line and ask your question.

John H. Stone: For international, we see modest organic growth, primarily driven by our electronics businesses. We have been focused on improving portfolio quality in international through a combination of self-help and acquisitions, which we believe supports growth in markets that remain sluggish. Please go to slide 10, and I'll discuss our outlook for 2026. We expect total Allegion revenue growth to be 5% to 7% and organic revenue growth to be 2% to 4%. Total growth includes approximately 1 point of foreign currency translation and 2 points of carryover contribution from M&A, primarily in Allegion International. We expect organic growth of low to mid single digits in the Americas from a combination of price and volume led by our non-residential business. We expect electronics to outpace mechanical growth, consistent with our long-term performance and customer trends.

John Stone: For international, we see modest organic growth, primarily driven by our electronics businesses. We have been focused on improving portfolio quality in international through a combination of self-help and acquisitions, which we believe supports growth in markets that remain sluggish. Please go to slide 10, and I'll discuss our outlook for 2026. We expect total Allegion revenue growth to be 5% to 7% and organic revenue growth to be 2% to 4%. Total growth includes approximately 1 point of foreign currency translation and 2 points of carryover contribution from M&A, primarily in Allegion International. We expect organic growth of low to mid single digits in the Americas from a combination of price and volume led by our non-residential business. We expect electronics to outpace mechanical growth, consistent with our long-term performance and customer trends.

Speaker #2: Okay, we'll move on to Robert.

Speaker #6: Good morning. Sorry about that. So, yeah, I just want to come back to the pricing dynamics for this year. It looks like the industry implemented a conversion of the surcharge to list, and then some incremental list above that.

Speaker #6: Maybe just talk about the pricing capture you expect this year on a net basis, and what you're calibrating within the guidance framework.

Speaker #3: Yeah, Brett, so obviously our industry does do, as you know, a combination of some surcharges—mostly list price increases. We expect 2026 to be increases.

Speaker #3: Obviously, we'll be agile and deal with the environment. We've learned a lot over the last few years that if things change, we'll just adjust accordingly.

John H. Stone: In the international segment, our outlook assumes low single-digit growth led by electronics, with largely stable mechanical markets. Our adjusted EPS outlook is $8.70 to $8.90. This represents growth of approximately 8% at the midpoint, inclusive of an approximate 10-cent headwind from a higher tax rate. You can find more details on our outlook slide and in the appendix. Please go to slide 11. In summary, Allegion is executing at a high level while staying agile and steadily delivering on the long-term commitments we shared with you at our Investor Day. Our strong performance is led by an enduring business model in non-residential Americas, double-digit electronics growth, and accretive capital deployment as we acquire good businesses in markets where we have a right to win. I'm proud of the Allegion team and appreciative of our strong channel partners.

John Stone: In the international segment, our outlook assumes low single-digit growth led by electronics, with largely stable mechanical markets. Our adjusted EPS outlook is $8.70 to $8.90. This represents growth of approximately 8% at the midpoint, inclusive of an approximate 10-cent headwind from a higher tax rate. You can find more details on our outlook slide and in the appendix. Please go to slide 11. In summary, Allegion is executing at a high level while staying agile and steadily delivering on the long-term commitments we shared with you at our Investor Day. Our strong performance is led by an enduring business model in non-residential Americas, double-digit electronics growth, and accretive capital deployment as we acquire good businesses in markets where we have a right to win. I'm proud of the Allegion team and appreciative of our strong channel partners.

Speaker #3: But our going-in assumption is that inflation will be a little less than what you saw in 2025. So, therefore, we'll get a little less pricing in total, as we mentioned in the prepared remarks.

Speaker #3: And I already talked about the rate benefit of that in a previous question. And then, total revenue enterprise and Americas, just expect a little more pricing than volume.

Speaker #3: And then, if you get the organic within the framework we provided, you can kind of have an idea of each component.

Speaker #6: I appreciate that, Mike. And then maybe just a follow-up on investments. The $9 million tailwind in 4Q within America. Is that just a function of the timing of some projects and some spending?

Speaker #6: And then, how do we think about the investment allocation this year? And is there some flexibility around that budgeting?

John H. Stone: With that, we'll take your questions.

John Stone: With that, we'll take your questions.

Operator: ... We will now move to the Q&A. For today's session, we'll be utilizing the Raise Hand feature. If you would like to ask a question, simply click on the Raise Hand button at the bottom of your screen. Once you've been called upon, please unmute yourself and begin to ask your question. We'll be taking one question and one follow-up question only. Thank you. We'll now pause for a moment to assemble the queue. Our first question will come from John O'Dea from Wells Fargo. Please unmute your line and ask your question.

Speaker #3: Yeah, well, as I like to look at it, I like to look at it in a combination of price and productivity—it has to fund the investments and the inflation.

Speaker #3: We've been talking about that for a few years. Quarter to quarter, that can move around a little. But I would say, in general, think of it as we're going to take the necessary pricing actions and drive productivity to fund both.

Speaker #3: And as I mentioned earlier, I do expect that to be a positive on a full-year basis. Obviously, as I mentioned as well, Q1, we do have that tough comparable in the prior year where you didn't have the inflation or the investment.

Joe O'Dea: Hi, good morning. Can you hear me?

Speaker #3: So the first quarter of '26, you do have the carryover of that last quarter where you didn't have inflation investment. So that will weigh on margin rates but full year, you can back into the enterprise, margin expansion, and just remember that the Americas will approximate that enterprise total as well from an expansion perspective.

Mike Wagnes: Yep. Hi, John.

John Stone: Yep. Hi, John.

Joe O'Dea: Hey, good morning. Can we start on the resi side in Q4? I think it touched on it being kind of softer than anticipated, and so just what you saw develop over the course of the quarter, the degree to which that extends into the early part of this year, whether that was more kind of destocking events or sell-through demands, and what you saw on the pricing side of things as well, if there was any need to adjust price there based on the demand environment.

Speaker #6: Appreciate the detail, pass it on.

Speaker #2: Our next question will come from Robert Schultz with Baird. Please unmute your line and go ahead.

Mike Wagnes: Yeah. Joe, thanks, thanks for the question. I think certainly, resi in the Americas ended the year softer than we had contemplated, and honestly, resi throughout the year was a little choppy, let's say. You know, we put up mid-single digit growth in Q3, really largely on the heels of a very successful new product launch, and then a pretty soft Q4. I would say, yeah, 2026 has started off better, let's just say. But just looking at resi, it did end softer than we had contemplated. And I think that's part of the things that just cause us to at least take what we think is a very prudent assumption into 2026, that we would expect resi to be soft.

John Stone: Yeah. Joe, thanks, thanks for the question. I think certainly, resi in the Americas ended the year softer than we had contemplated, and honestly, resi throughout the year was a little choppy, let's say. You know, we put up mid-single digit growth in Q3, really largely on the heels of a very successful new product launch, and then a pretty soft Q4. I would say, yeah, 2026 has started off better, let's just say. But just looking at resi, it did end softer than we had contemplated. And I think that's part of the things that just cause us to at least take what we think is a very prudent assumption into 2026, that we would expect resi to be soft.

Speaker #7: Hey, guys. Thanks for taking the question. Maybe as you think about '26, in the Americas, what are you assuming for institutional and commercial volume growth?

Speaker #7: Do you think they're pretty similar? Would you expect outperformance in one of those verticals?

Speaker #3: Bobby, I really, when we think about our business, we wouldn't want to give volume growth non-res versus res, so I certainly don't want to dive into select verticals within the non-res market.

Speaker #3: I just kind of refer you back to John's prepared remarks, where he talked about that broad end market exposure, and just understanding our business—our outlook supported by our spec activity as well.

Speaker #3: But I really don't want to give subvertical details of volume.

Speaker #7: Understood. And then just on M&A, how does your pipeline look today? And are you seeing any increase in competition for deals now?

Mike Wagnes: And certainly should there be an uptick in that market, we're positioned very well to capture upside there. I would say with your question around pricing, no, there wasn't any short-term reaction on pricing, nor do I think that contributed to any of the demand softness. The last point would be, our channel doesn't hold a lot of inventory, and so any inventory correction type actions are usually very short-lived.

John Stone: And certainly should there be an uptick in that market, we're positioned very well to capture upside there. I would say with your question around pricing, no, there wasn't any short-term reaction on pricing, nor do I think that contributed to any of the demand softness. The last point would be, our channel doesn't hold a lot of inventory, and so any inventory correction type actions are usually very short-lived.

Speaker #3: Yeah, it's a good question. This is John. Pipeline is very active, I would say, in both our International and our Americas segments, and largely in line with the strategic overlay we shared with you at our Investor Day last May in terms of core mechanical portfolio, electronics, and even complementary software.

Speaker #3: So, I think the pipeline is busy. I think there's a very encouraging outlook. And with all that being said, you can still count on us to be quite disciplined.

Joe O'Dea: Got it. And then on the Americas organic outlook and the low single digit, mid single digit, just any color as we think about kind of price and volume components of that, is that a little bit more price than volume, price carryover tailwind? And then how you think about that volume progression over the course of the year, is the volume growth expected to get better, and is that a function of comps or anything that you're seeing in the spec activity that would suggest a little bit better demand environment as we go through 2026?

Speaker #3: And making sure we're sticking very close to our strategy, understanding where we've got competitive advantage, right to play, and a right to win. And very much focused on our shareholder returns.

Speaker #7: Got it. Thank you.

Speaker #2: Our next question will come from Andrew Oban with Bank of America. Please unmute your line and go ahead.

Speaker #8: I guess good morning. Hi.

Speaker #3: Good morning, Andrew.

Mike Wagnes: Yeah, Joe, so thanks for the question. I would say, as you think about Americas for 2026, we expect to see both price and volume growth, but as you suggested, more pricing than volume growth for the year. Don't like to give quarterly outlook, but I'd be happy to kind of unpack it qualitatively for you. As you know, the Americas, as you start the year in Q1, revenue levels are similar to the revenue in Q4 in total, historically. And then from there, we tend to have higher revenue in the middle two quarters. We expect that same seasonality where the middle two quarters are our largest quarters, and obviously Q4, a little less. So, as you model this, I think that could help you qualitatively.

Speaker #8: Just a question on, I guess, M&A and capital allocation. I mean, the markets have been sort of sluggish for a while. You guys have been able to deliver consistent EPS growth in pretty tough markets.

Speaker #8: You chose to allocate a lot more capital to M&A this year. I'm just wondering, given that you are laying a foundation, why don't you think that Allegion stock is a better sort of use of cash?

Speaker #8: Why don't you think your own stock is the best value out there? And just maybe give us some insights into how you and the board have gone through the thought process where you sort of chose M&A acceleration versus Allegion stock this year.

Speaker #8: Thank you.

Speaker #3: Yeah, Andrew, this is John. Appreciate the question. And I think that's why we have taken the time to put together a very consistent view of capital allocation across all of the different areas in our quarterly earnings deck as just a standard piece that we speak to.

Mike Wagnes: In addition, you do have to look at the prior year comp as you think about, you know, pricing and margins for that matter. You have to consider how we finished in each quarter for 2025, as you think about that pricing impact for the next year. Obviously, Q1 of 25, we hadn't yet felt the inflationary impact from tariffs, so you didn't have the pricing or the inflation. So, hopefully that helps you as you think about unpacking the year from a top line.

Speaker #3: And so, I'd say the priority is towards profitable growth. And that's why we'll take time each quarter—this quarter too—talking about some highlights around investing for organic growth.

Speaker #3: That is the top priority for our use of cash. And then, as you look to what are the other elements of it, we're a dividend-paying stock.

Joe O'Dea: It does. Thanks, Mike.

Operator: Thank you. Our next question will come from Tomohiko Sano from JP Morgan. Please unmute your line and go ahead.

Speaker #3: We will continue to be a dividend-paying stock. You can expect that dividend to grow commensurate with our earnings growth. And then again, an orientation towards profitable growth.

Tomohiko Sano: Good morning, everyone.

Mike Wagnes: Morning.

Tomohiko Sano: Thank you for taking my questions. So you maintained sector-leading margins despite the higher costs through pricing, productivities, and acquisition synergies. Can you break down the contributions from each of these levers, and which will be most important in 2026, please?

Speaker #3: And so, yeah, as we started the year, we did have some share repurchase. We do have an open authorization with our board, and as that's the right decision at the right time, when the conditions are there, we can do that.

Speaker #3: And we have a supportive board there. When we have very attractive acquisition targets that we can bolt on and integrate into an existing business unit structure and drive synergies and drive accretive returns to the shareholders, we're going to do that.

Mike Wagnes: Yeah, Tomo, we, we put all that information in our 10-K, so when you get a chance, you can, you can look at it for the fourth quarter and full year. I guess the full year is in the 10-K. I'll share, obviously, on the enterprise level, we did get some margin tailwind from that, price and productivity in excess of inflation and investment. There was a headwind in the Americas. That's a function of the tyranny of the math we've been talking about all year long. We also had some slightly, you know, we had favorable mix, but the residential volume deleverage we experienced kind of mitigated that in the Americas region, as we highlighted. As you think about 2026, you can back into the full year margin expansion.

Speaker #3: And so, I thought what you saw in really the last two years is this whole theme of: expect Allegion to be balanced and disciplined and consistent with our capital allocation to drive shareholder returns.

Speaker #8: Yeah, thank you. And maybe a little bit more color on international markets growth. You sort of highlighted DACC. How is the Interflex business doing, and maybe a little bit more color on what's happening in AXA?

Speaker #8: Thanks so much.

Speaker #3: Yeah, I'm thrilled that you asked that question, Andrew. I'm so proud of our Interflex team. It's kind of an interesting business. It tends to kind of ramp up its revenue and profitability as the year goes on.

Mike Wagnes: You know, we give all the components at the enterprise level. As you know, the Americas is our largest business, and we can't drive the enterprise margin expansion without the Americas being in a similar zip code. So it kind of provides you at least a framework for the Americas as well. And then as far as the components, I would expect to have pricing and productivity in excess of inflation and investment on a dollar basis. And from a rate basis, I wouldn't expect that to be a headwind in 2026. It was obviously in the Americas in 2025. We do have that Q1 where you have that carryover impact, that last quarter, as I mentioned in the previous answer.

Speaker #3: So, January is kind of slow, and December looks great, right? It's just kind of an interesting business that way. Blue chip customer base, we've put in resources to grow the Interflex and the Plano solutions.

Speaker #3: Across Europe, doing very well. They had a bang-up year. They're really delighted in their customers. We're finding ways to get AI into the software offerings just to help our customers get all the reports and the data that they need.

Speaker #3: And they're growing very, very nicely. Just super proud of that business.

Speaker #8: It will make some progress moving beyond the core sort of German manufacturing base?

Speaker #3: Absolutely.

Speaker #8: Thanks so much.

Speaker #3: Thank you.

Speaker #2: Our final question in the queue comes from Chris Snyder with Morgan Stanley. Please unmute your line and ask your question.

Mike Wagnes: But for the full year, expect price and productivity to be positive on a dollar basis and certainly not negative on a margin rate basis.

Speaker #9: Thank you. Hopefully, everyone can hear me. I wanted to ask about America's margins. Q4 came in down year-on-year modestly, and I understand that, obviously, zero-margin revenue via tariffs is a headwind.

Tomohiko Sano: Thank you, Mike. A follow-up on international markets. These markets are expected to see continued sluggishness, with growth primarily from acquisition and electronics. Can you provide more color on specific geographies, particularly Western Europe and Australia, and when you expect the demand recovery, please?

Speaker #9: But that doesn't seem all that dissimilar from Q2 and Q3 when you guys were growing margins. So did that is the Q4 decline just a function of Resy volumes turning lower versus Q3?

John H. Stone: Yeah, Tommo, this is John. Appreciate that. And I think, yeah, we do see our electronics businesses leading the way. That is primarily a Western Europe-based business, and then within that, primarily a DACH region businesses. But we are expanding pan-Europe with that. And those businesses performed very well in 2025, and we expect continued growth out of them in 2026. I'd say Australia, New Zealand end markets haven't been great. And you know, so a little bit of improvement there off of pretty weak comps, I think is not totally out of the question. We'll have to see. And then largely, I would just say mechanical markets remaining a little sluggish, like we said in the prepared remarks.

John Stone: Yeah, Tommo, this is John. Appreciate that. And I think, yeah, we do see our electronics businesses leading the way. That is primarily a Western Europe-based business, and then within that, primarily a DACH region businesses. But we are expanding pan-Europe with that. And those businesses performed very well in 2025, and we expect continued growth out of them in 2026. I'd say Australia, New Zealand end markets haven't been great. And you know, so a little bit of improvement there off of pretty weak comps, I think is not totally out of the question. We'll have to see. And then largely, I would just say mechanical markets remaining a little sluggish, like we said in the prepared remarks.

Speaker #9: Because it still seems like there was a lot of tailwinds in the quarter between mix. And then the productivity seems quite positive as well.

Speaker #9: So just any other kind of color unpacking the year-on-year margins for Americas in Q4. Thank you.

Speaker #3: Yeah, Chris, you're thinking about it the right way. If you look at residential in the fourth quarter, down high single digits and we did as I mentioned in the prepared remarks had some positive pricing.

Speaker #3: So when you think about volume, volumes were even worse than the total residential. So that's a pretty substantial volume decline that's the delta when you think of Q3 versus Q4.

Speaker #3: Q3, right, you're growing mid-single. And so that's a 15-point plus or close to that, 10 to 15 depending on your rounding works. Delta between the two quarters.

John H. Stone: And electronics will lead the way for us, along with again, some carryover contribution from M&A.

John Stone: And electronics will lead the way for us, along with again, some carryover contribution from M&A.

Speaker #3: And that explains why the margins were different.

Tomohiko Sano: Thank you, John.

Operator: Our next question will come from Brett Lindsey, from Mizuho. Please unmute your line and ask your question. Brett, please unmute your line and ask your question. Okay, we'll move on to-

Speaker #9: Thank you. I appreciate that. And then I know you've kind of flagged a couple of times that Q1 has this tough margin comp and we can certainly see that.

Speaker #9: But I guess if we look past Q1 and kind of think about Q2 to Q4, does the guide assume that Americas kind of gets back to that target 35 or so incremental margin rate Q2 to Q4, once we have all the tariff revenue and the comp?

Brett Linzey: Good morning. Hey, good morning. Sorry about that. So yeah, I just want to come back to the pricing dynamics for this year. So it looks like the industry implemented a conversion of the surcharge to list and then some incremental list above that. Maybe just talk about the pricing capture you expect this year on a net basis and what you're calibrating within the guidance framework.

Speaker #9: Thank you.

Speaker #3: Yeah, if you think about the fundamentals of the business, right, that core incrementals we laid out in investor day, after we get through Q1, that's still holds.

Speaker #3: Think of those core incrementals being strong once we get through that Q1. So, as you think about the full year, margin expansion in the Americas—like I mentioned earlier—we just have that one more quarter we need to get through.

Mike Wagnes: Yeah, Brett. So obviously, our industry does do, as you know, a combination of some surcharges, mostly list price increases. We expect 2026 to be more list price price increases. Obviously, we'll be agile and deal with the environment. We've learned a lot over the last few years, that if things change, we'll just adjust accordingly. But our going-in assumption is that inflation will be a little less than what you saw in 2025, so therefore, we'll get a little less pricing in total, as we mentioned in the prepared remarks. And I already talked about the rate benefit of that in a previous question. And then total revenue, enterprise and Americas, just expect a little more pricing than volume.

Speaker #3: But the business fundamentals remain sound and consistent with what we talked about in investor day where we can leverage that volume once we get through this last quarter of that deteriorating of the math.

Speaker #9: Thank you. I appreciate all the help. Have a great rest of the day.

Speaker #3: Thanks, Chris.

Speaker #2: At this time, I see no callers in the queue. So I'll hand the call back to John Stone for closing remarks.

Speaker #8: Thanks very much. Thank you all for the great Q&A. We look forward to connecting with you on our Q1 earnings call in April. Be safe, be healthy.

Mike Wagnes: Then if you get the organic within the framework we provided, you know, you can kind of have an idea of each component.

Brett Linzey: I appreciate that, Mike. And, and then maybe just a follow-up on investments. So you had the, the $9 million tailwind in Q4 within Americas. Is that just a function of the, the timing of some, some projects and some spending? And then how do we think about the investment allocation this year, and if there's some flexibility around that budgeting?

Mike Wagnes: Yeah, well, as I like to look at it, I like to look at it in combination of price and productivity has to fund the investments and the inflation. We've been talking about that a few years. Quarter to quarter, that can move around a little, but I would say in general, think of it as we're going to take the necessary pricing actions and drive productivity to fund both. And as I mentioned earlier, I do expect that to be a positive on a full year basis. Obviously, as I mentioned as well, Q1, we do have that tough comparable in the prior year, where you didn't have the inflation or the investment. So Q1 of 2026, you do have the carryover of that last quarter where you didn't have inflation investment, so that will weigh on margin rates.

Mike Wagnes: But full year, you can back into the enterprise margin expansion, and just remember that the Americas will approximate that, enterprise total as well from an expansion perspective. Appreciate the detail. Pass it on.

Operator: Our next question will come from Robert Schultz with Baird. Please unmute your line and go ahead.

Robert Schultz: Hey, guys. Thanks for taking the question. Maybe as you think about 2026, in the Americas, what are you assuming for institutional and commercial volume growth? Do you think they're pretty similar, or do you expect outperformance in one of those verticals?

Mike Wagnes: You know, Bobby, I really, when we think about our business, we wouldn't want to give volume growth non-res versus res, so I certainly don't wanna dive into select verticals within the non-res market. I'll just kind of refer you back to John's prepared remarks, where he talked about that broad end market exposure and just understanding our business, our outlook, supported by our spec activity as well. But I really don't wanna give subvertical details of volume.

Robert Schultz: Understood. And then just on M&A, how does your pipeline look today, and are you seeing any increase in competition for deals now?

John H. Stone: Yeah, it's a good question. This is John. Pipeline is very active, I would say, in both our international and our Americas segments, and largely in line with the strategic overlay we shared with you at Investor Day last May, in terms of core mechanical portfolio, electronics, and even complementary software. So I think pipeline is busy. I think there's... It's a very encouraging outlook, and with all that being said, you can still count on us to be quite disciplined and making sure we're sticking very close to our strategy, understanding where we've got competitive advantage, right to play and a right to win, and very much focused on our shareholder returns.

John Stone: Yeah, it's a good question. This is John. Pipeline is very active, I would say, in both our international and our Americas segments, and largely in line with the strategic overlay we shared with you at Investor Day last May, in terms of core mechanical portfolio, electronics, and even complementary software. So I think pipeline is busy. I think there's... It's a very encouraging outlook, and with all that being said, you can still count on us to be quite disciplined and making sure we're sticking very close to our strategy, understanding where we've got competitive advantage, right to play and a right to win, and very much focused on our shareholder returns.

Robert Schultz: Got it. Thank you.

Operator: Our next question will come from Andrew O'Brien with Bank of America. Please unmute your line and go ahead.

Andrew O'Brien: Hi, guys. Good morning.

Andrew Obin: Hi, guys. Good morning.

John H. Stone: Hi.

John Stone: Hi.

Mike Wagnes: Good morning, Andrew.

Andrew O'Brien: Just a question on, I guess M&A and capital allocation. I mean, you know, the markets have been sort of sluggish for a while. You guys have been able to deliver consistent EPS growth, in pretty tough markets. You know, you chose to allocate a lot more capital to M&A this year. I'm just wondering, given that you are laying a foundation, why don't you think that Allegion stock is a better sort of use of cash? Why don't you think your own stock is the best value out there? And just maybe give us some insights how you and the board have gone through this thought process, where you sort of chose M&A acceleration versus Allegion stock this year. Thank you.

Andrew Obin: Just a question on, I guess M&A and capital allocation. I mean, you know, the markets have been sort of sluggish for a while. You guys have been able to deliver consistent EPS growth, in pretty tough markets. You know, you chose to allocate a lot more capital to M&A this year. I'm just wondering, given that you are laying a foundation, why don't you think that Allegion stock is a better sort of use of cash? Why don't you think your own stock is the best value out there? And just maybe give us some insights how you and the board have gone through this thought process, where you sort of chose M&A acceleration versus Allegion stock this year. Thank you.

John H. Stone: Yeah, Andrew, this is John. Appreciate the question, and, you know, I think that's why we have taken the time to put together a very consistent view of capital allocation across all of the different areas in our quarterly earnings deck as just a standard piece that we speak to. And so, you know, I'd say the priority is towards profitable growth, and that's why we'll take time each quarter, this quarter too, talking about some highlights around investing for organic growth. That is the top priority for our use of cash. And then as you look to what are the other elements of it, we're a dividend-paying stock. We will continue to be a dividend-paying stock. You can expect that dividend to grow commensurate with our earnings growth.

John Stone: Yeah, Andrew, this is John. Appreciate the question, and, you know, I think that's why we have taken the time to put together a very consistent view of capital allocation across all of the different areas in our quarterly earnings deck as just a standard piece that we speak to. And so, you know, I'd say the priority is towards profitable growth, and that's why we'll take time each quarter, this quarter too, talking about some highlights around investing for organic growth. That is the top priority for our use of cash. And then as you look to what are the other elements of it, we're a dividend-paying stock. We will continue to be a dividend-paying stock. You can expect that dividend to grow commensurate with our earnings growth.

John H. Stone: And then, again, an orientation towards profitable growth, and so, yeah, as we started the year, we did have some share repurchase. We do have an open authorization with our board, and as that's the right decision at the right time, when the conditions are there, we can do that, and we have a supportive board there. When we have very attractive acquisition targets that we can bolt on and integrate into an existing business unit structure and drive synergies and drive accretive returns to the shareholders, we're gonna do that. And so I thought what you saw in really the last two years is this whole theme of expect Allegion to be balanced and disciplined and consistent with our capital allocation to drive shareholder returns.

John Stone: And then, again, an orientation towards profitable growth, and so, yeah, as we started the year, we did have some share repurchase. We do have an open authorization with our board, and as that's the right decision at the right time, when the conditions are there, we can do that, and we have a supportive board there. When we have very attractive acquisition targets that we can bolt on and integrate into an existing business unit structure and drive synergies and drive accretive returns to the shareholders, we're gonna do that. And so I thought what you saw in really the last two years is this whole theme of expect Allegion to be balanced and disciplined and consistent with our capital allocation to drive shareholder returns.

Andrew O'Brien: Thank you. And maybe a little bit more color on international markets growth. You know, you sort of highlighted DACH. How is Interflex business doing, and maybe a little bit more color, what's happening in Asia. Thanks so much.

Andrew Obin: Thank you. And maybe a little bit more color on international markets growth. You know, you sort of highlighted DACH. How is Interflex business doing, and maybe a little bit more color, what's happening in Asia. Thanks so much.

John H. Stone: I'm thrilled that you asked that question, Andrew. I'm so proud of our Interflex team. You know, it's kind of an interesting business. It tends to kind of ramp up its revenue and profitability as the year goes on. So, you know, January is kind of slow, and December looks great, right? It's just kind of an interesting business that way. Blue-chip customer base, we've put in resources to grow the Interflex and the plano solutions across Europe. Doing very well. They had a bang-up year. They're really delighting their customers. We're finding ways to get AI into the software offerings, just to help our customers get all the reports and the data that they need. And they're growing very, very nicely. Just super proud of that business.

John Stone: I'm thrilled that you asked that question, Andrew. I'm so proud of our Interflex team. You know, it's kind of an interesting business. It tends to kind of ramp up its revenue and profitability as the year goes on. So, you know, January is kind of slow, and December looks great, right? It's just kind of an interesting business that way. Blue-chip customer base, we've put in resources to grow the Interflex and the plano solutions across Europe. Doing very well. They had a bang-up year. They're really delighting their customers. We're finding ways to get AI into the software offerings, just to help our customers get all the reports and the data that they need. And they're growing very, very nicely. Just super proud of that business.

Andrew O'Brien: So we're making progress moving it beyond the core sort of German manufacturing base?

Andrew Obin: So we're making progress moving it beyond the core sort of German manufacturing base?

John H. Stone: Absolutely.

John Stone: Absolutely.

Andrew O'Brien: Thanks so much.

Andrew Obin: Thanks so much.

John H. Stone: Thank you.

John Stone: Thank you.

Operator: Our final question in the queue comes from Chris Snyder with Morgan Stanley. Please unmute your line and ask your question.

Chris Snyder: Thank you. Hopefully everyone can hear me. I wanted to ask around Americas margins. You know, Q4 came in down year-on-year modestly. You know, and I understand that obviously, you know, margin, you know, zero margin revenue via tariffs is a headwind, but that doesn't seem all that dissimilar from Q2 and Q3 when you guys were growing margins. So, you know, is the Q4 decline just a function of resi volumes turning lower versus Q3? Because it still seems like there was a lot of tailwinds in the quarter between mix and the productivity, which seems quite positive as well. So just any other, you know, kind of color unpacking the year-on-year margins for Americas in Q4. Thank you.

Mike Wagnes: Yeah, Chris, you're thinking about it the right way. If you, if you look at residential in Q4, down high single digits, and we did, as I, I mentioned in the prepared remarks, had some positive pricing. So when you think about volume, volumes were even worse than the, the total residential. So that's a pretty substantial volume decline. That's the delta when you think of Q3 versus Q4. Q3, right, you're growing mid-single, and so that's a 15-point plus or close to that, 10 to 15, depending on how your rounding works, delta between the two quarters, and that explains why the margins were different.

Chris Snyder: Thank you. I appreciate that. And then, you know, I know you, you've kind of flagged a couple times that, you know, Q1 has this tough margin comp, and we can certainly see that. But I guess if we look past Q1 and, you know, kind of think about Q2 to Q4, does the guide assume that Americas kind of gets back to that, you know, target 35 or so incremental margin rate, you know, Q2 to Q4 once we have all the tariff revenue in the comp? Thank you.

Mike Wagnes: Yeah. If you think about the fundamentals of the business, right? That core incrementals we laid out in Investor Day, after we get through Q1, that still holds. Think of that core incrementals being strong once we get through that Q1. So as you think about the full year, margin expansion in the Americas, like I mentioned earlier, we just had that one more quarter we need to get through. But the business fundamentals remain sound and consistent with what we talked about in Investor Day, where we can leverage that volume once we get through this last quarter of the tyranny of the math.

Chris Snyder: Thank you. I appreciate all the help. Have a great rest of the day.

Mike Wagnes: Thanks, Chris.

Operator: At this time, I see no callers in the queue, so I'll hand the call back to John Stone for closing remarks.

Mike Wagnes: Thanks very much. Thank you all for the great Q&A. We look forward to connecting with you on our Q1 earnings call in April. Be safe. Be healthy.

John Stone: Thanks very much. Thank you all for the great Q&A. We look forward to connecting with you on our Q1 earnings call in April. Be safe. Be healthy.

Q4 2025 Allegion PLC Earnings Call

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