Allegion Q1 2026 Earnings Results & Report

Allegion EPS Results

• Actual EPS: $1.80
• Consensus EPS: $1.88
• Beat/Miss: Missed by -$0.08
• One Year Ago EPS: $1.86
• EPS Beat Rate: 6 of last 8 quarters

Allegion Revenue Results

• Actual Revenue: $1.03 billion
• Expected Revenue: $1.03 billion
• Beat/Miss: Beat by +$7.15 million
• YoY Revenue Growth: +9.70%

Allegion (NYSE:ALLE) (NYSE:ALLE) is a global security products and solutions company focused on protecting people and property. Its portfolio includes mechanical and electronic locks, access control systems, door closers, exit devices, door controls, and commercial doors and frames.

The company serves commercial, institutional, industrial, and residential customers through well-known brands including Schlage, Von Duprin, LCN, Steelcraft, Briton, and aptiQ. Its offerings range from traditional hardware to connected and electronic access solutions designed for offices, schools, healthcare facilities, multifamily properties, and homes.

Allegion was established as an independent public company in 2013 following its separation from Ingersoll Rand. Incorporated in Ireland and headquartered operationally in Carmel, Indiana, the company serves customers in North America, Europe, Asia-Pacific, and other international markets. John H. Stone serves as Allegion’s president and chief executive officer.

Allegion Q1 2026 Earnings Call Transcript

Key Takeaways

• Neutral Sentiment: Allegion reported Q1 revenue of just over $1 billion, up 9.7% reported / 2.6% organic, while adjusted operating margin fell 150 bps to 21.2% and adjusted EPS was $1.80 (down 3.2% YoY).
• Negative Sentiment: An ERP implementation in a legacy international mechanical business drove most of the International organic decline (‑5.3%) and a 220 bps margin hit, though management says production is improving and expects to recover the Q1 shortfall over the rest of 2026.
• Positive Sentiment: Allegion closed the DCI acquisition to bolster West Coast hollow-metal door capacity, raised reported revenue guidance to 6%–8% (to include DCI), and expects the deal to improve competitiveness and long‑term profitability despite limited near‑term EPS accretion.
• Positive Sentiment: Capital allocation remains shareholder friendly — $47M in dividends, $40M of repurchases in Q1, a newly approved $500M share repurchase program, and a healthy net debt/EBITDA of 1.7x supporting continued buybacks and bolt‑on M&A.

Presentation

[Operator]

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 Allegion's first quarter 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 Jobi Coyle, Director of Investor Relations.

[Jobi Coyle, Director of Investor Relations at Allegion]

Thank you, Stefan. Good morning, everyone. Thank you for joining us for Allegion's first quarter 2026 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 in 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 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. 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.

[Jobi Coyle, Director of Investor Relations at Allegion]

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 three. I'll turn the call over to John.

[John Stone, President and CEO at Allegion]

Good morning, everyone. Thanks for joining us. The Allegion team has remained agile in a volatile environment and stayed focused on serving our customers alongside our strong channel partners. In Q1, we delivered high single-digit revenue growth led by the Americas non-residential business and contributions from acquisitions. In the Americas, performance was in line with our expectations we outlined back in February. In our International segment, top-line growth was led by acquisitions which are on track. However, our Q1 organic revenue growth and margins in International were negatively impacted by an ERP implementation in one of our legacy mechanical businesses. Production rates there have started to improve, and we expect to recover the Q1 shortfall over the remainder of the year. As you'll see on the next slide, Allegion remains committed to balanced discipline and consistent capital deployment.

[John Stone, President and CEO at Allegion]

Finally, with respect to our outlook for the year, we are raising our reported revenue outlook to 6%-8% to include the DCI acquisition, and we are affirming our outlook for organic revenue growth of 2%-4% and adjusted earnings per share of $8.70-$8.90. Please go to slide four. Taking a look at capital allocation for the first quarter, starting with our investments for organic growth. The latest example of this is our next generation LCN Senior Swing series of auto operators for heavy use doors across healthcare, offices, and other high traffic environments. Easy to install and upkeep, these automatic door operators self-adjust in real time to external pressures like wind, allowing smooth, safe, and consistent operation while saving the building time, energy, and maintenance calls. Turning to acquisitions.

[John Stone, President and CEO at Allegion]

Earlier in March, we closed the acquisition of DCI, a West Coast-based manufacturer of hollow metal doors and frames, specializing in custom design and quick ship capability. Historically, we've had to rely on our Cincinnati, Ohio, manufacturing facility to serve customers on the West Coast, which extended lead times and drove higher freight costs compared to local suppliers. DCI makes us far more competitive on the West Coast, helping the totality of our Americas non-res business, not just our door offering, as customers purchase complete door and hardware packages together. DCI today has a low double-digit EBITDA margin, resulting in limited EPS accretion in the current fiscal year. The strategic nature of this acquisition gives us significant improvement in serving our customers at a better cost position. I'm confident our execution and pricing discipline will drive higher profitability over time and expect performance to improve moving forward.

[John Stone, President and CEO at Allegion]

Moving to dividends. Allegion paid $47 million in dividends in the quarter, consistent with the long-term framework we outlined at our Investor Day last year. We repurchased $40 million of Allegion shares in the first quarter. Our board also recently approved a new $500 million repurchase program. As we've said in the past, you can expect Allegion to be balanced, disciplined, and consistent with capital deployment, oriented towards profitable growth and driving long-term returns for shareholders, including share repurchase as appropriate. Mike will now walk you through the first quarter results.

[Mike Wagnes, SVP and CFO at Allegion]

Thanks, John, good morning, everyone. Thank you for joining today's call. Please go to slide number five. Revenue for the first quarter was over $1 billion, an increase of 9.7% compared to 2025. Organic revenue increased 2.6% in the quarter, led by our Americas non-residential business. The enterprise organic revenue increase was driven by price realization, partially offset by volume declines. Q1 adjusted operating margin was 21.2%, down 150 basis points compared to last year, partially driven by a combination of volume declines and mix. Price and productivity, net of inflation and investment, and inclusive of transactional effects, were favorable by $5.3 million. This resulted in a 40 basis point headwind to margin rate in the quarter. I'll provide more details on revenue and margins within each of the regions.

[Mike Wagnes, SVP and CFO at Allegion]

Adjusted earnings per share of $1.80 decreased $0.06 or 3.2% versus the prior year. EPS from acquisitions was more than offset by higher tax and interest and other in the quarter. Finally, year-to-date available cash flow was $80.3 million, consistent with the prior year. Please go to slide six. Our Americas segment delivered revenue of $809.9 million, which was up 6.9% on a reported basis and up 4.5% on an organic basis. Our non-residential business increased mid-single digits organically, driven by price realization. Demand for our non-res products remains healthy, and spec activity continues to be strong. Our residential business was flat in the quarter, with price realization offset by volume declines as residential markets remained soft.

[Mike Wagnes, SVP and CFO at Allegion]

Electronics revenue was up mid-single digits for the quarter, and we continue to see electronics as a long-term growth driver of the business. Reported revenues increased 2.1 points of growth from acquisitions and a slight tailwind from foreign currency. Americas adjusted operating income of $227.4 million increased 2.9% versus the prior year. Adjusted operating margins were down 110 basis points in the quarter. Price and productivity, net of inflation and investment, and inclusive of transactional foreign currency, was favorable by $9.9 million. This was a 30 basis point headwind to margin rate. The transactional foreign currency headwind relates to the prior year benefit of $3 million that we disclosed in Q1 last year, driven by the Mexican peso.

[Mike Wagnes, SVP and CFO at Allegion]

Operating margins were also impacted by acquisitions, which were a 40 basis point headwind. Volume declines and unfavorable mix were a headwind to margin rates. Please go to slide number seven. Our international segment delivered revenue of $223.7 million, which was up 21.5% on a reported basis and down 5.3% organically. Organic revenue declines were the result of volume weaknesses in our mechanical business, primarily related to the ERP disruptions John discussed earlier. This was partially offset by growth in electronics and price realization. Net acquisitions contributed 15.9% to segment revenue. Currency was also a tailwind, positively impacted reported revenues by 10.9%. International adjusted operating income of $17.9 million decreased 4.8% versus the prior year period.

[Mike Wagnes, SVP and CFO at Allegion]

Adjusted operating margin for the quarter decreased 220 basis points. Price and productivity, net of inflation and investment, was a 210 basis point headwind, inclusive of operational inefficiencies associated with the ERP mentioned earlier. Additionally, volume declines were a headwind to margin rates, which was mostly offset by acquisitions. Please go to slide number eight, and I will provide an overview of our cash flow and our balance sheet. Year-to-date available cash flow was $80.3 million, consistent with the prior year. For 2026, we still anticipate our ACF conversion will be approximately 85%-95% of adjusted net income. Next, working capital as a % of revenue increased in the first quarter due to acquired working capital, which does not impact cash flow.

[Mike Wagnes, SVP and CFO at Allegion]

Finally, our balance sheet remains strong, and our net debt to adjusted EBITDA is at a healthy ratio of 1.7x, which supports continued capital deployment. I will now hand the call back over to John.

[John Stone, President and CEO at Allegion]

Thanks, Mike. Please go to slide nine. One quarter into the year, we are affirming our organic revenue growth outlook of 2%-4% and adjusted earnings per share outlook of $8.70-$8.90. We are raising our reported revenue outlook by 1 point to 6%-8% to include the acquisition of DCI. You can find more details on our outlook in the appendix. While our core demand assumptions are unchanged from our February call, I'll provide some additional details on our view for the remainder of the year. In the Americas, our markets are largely as we expected to start the year, but we're experiencing higher inflation. Based on current conditions, we anticipate an incremental headwind of approximately 1% of COGS from tariffs and other inflation.

[John Stone, President and CEO at Allegion]

We expect to offset this on a dollar basis through a combination of price and cost actions. However, given current volatility, we are not updating our organic growth assumptions to include any incremental price at this time, similar to our approach in the first quarter of 2025. Most importantly, we expect this to be neutral to 2026 adjusted operating income dollars and earnings per share. For international, we expect to catch up on production impacts from the ERP implementation during the remainder of the year, supported by existing orders and backlog in that business. Our core demand assumptions are similar to our prior outlook, and beyond the ERP catch up, it's also important to note that our electronics businesses are a source of strength in the international segment, and we expect these to ramp seasonally through the year.

[John Stone, President and CEO at Allegion]

We have not experienced a notable demand impact from the effects of the conflict in Iran, and our exposure to the Middle East is negligible. For the organization, we're committed to serving our customers while remaining agile in the current macro and input cost environment. Please go to slide 10. In summary, Allegion delivered nearly 10% revenue growth in Q1 and deployed capital effectively for the benefit of our shareholders. Before turning to Q&A, there's one more highlight from Q1 that I'm proud to share with you today. Allegion was honored for the third consecutive year with the Gallup Exceptional Workplace Award. This recognizes our team for fostering one of the most engaged workplace cultures in the world, and we are one of only five companies to earn this award with distinction in 2026.

[John Stone, President and CEO at Allegion]

We know highly engaged teams deliver stronger results for our customers, our shareholders, and our partners. With that, we'll take your questions.

[Operator]

We will now begin 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. Thank you. We'll now pause for a moment to assemble the queue. Our first question will come from Joe O'Dea with Wells Fargo Securities. Please unmute your line and go ahead. Joe, please unmute your line and go ahead. Okay, we'll move on to our next question.

[Joe O'Dea, Senior Equity Analyst at Wells Fargo Securities]

Hi, can you hear me?

[Operator]

Oh, Joe, please go ahead. Thank you.

[Joe O'Dea, Senior Equity Analyst at Wells Fargo Securities]

All right. Sorry about that. Getting used to this new format. Good morning, everyone. Starting on the demand side in Americas, it sounds like spec activity largely pacing as expected. But just interested in any color on the time from spec to order, if you're seeing any elongation in that with respect to what you would normally see on spec to order, and what you're currently seeing, the degree to which kinda tariffs and other inflationary pressures is behind that. Then just related, we have heard, you know, some comments around kinda data center crowding out and inability to service other projects because of data centers drawing more activity and the degree to which you're seeing any of that.

[John Stone, President and CEO at Allegion]

Yeah. Joe, this is John. I'll get started there. I'd say, like we said in the prepared remarks, spec activity is strong in non-res. Might go so far to even call it very strong in recent months. I'd say it's broad-based. You know, we've got a portfolio and a channel reach that affords us broad end market exposure, so we're seeing broad-based growth on the spec side. Channel checks with our largest customers support that view. To the more detailed points of are we seeing elongation from spec to, you know, shovel-ready or doors being hung? Not really. I don't think that environment hasn't meaningfully changed.

[John Stone, President and CEO at Allegion]

That is a reason why we don't disclose a whole bunch of detail because the line of sight from a spec to revenue for us really depends on the vertical and the project. You could imagine, you know, smaller projects or multifamily office renovations for tenant improvements could be pretty quick. Something like a very large hospital complex could take a couple of years. Suffice it to say, spec activity has been strong. Channel checks also, we feel support our outlook. On the question about data centers crowding out other projects, I would feel like not in our space do I see that really as an impact.

[John Stone, President and CEO at Allegion]

That being said, you know, I feel good about the position, the competitive position we've carved out for doors and door hardware in data centers, and that it's a small part of our business, but it has been growing nicely.

[Joe O'Dea, Senior Equity Analyst at Wells Fargo Securities]

That's helpful detail. On the tariff side and the 1% of COGS headwind that you talked about, just in terms of, you know, how you're addressing that. Are surcharges already in the market? You know, how much of this is price? How much of this is more kinda cost mitigation on your side? Is it primarily tied to, you know, the latest kinda tariff changes and the impact that it has from Mexico?

[John Stone, President and CEO at Allegion]

Like the last many months, there's been a flurry of changes with respect to trade and tariff policy. You know, IEPA was declared unconstitutional. Right on the heels of that, Section 122 was implemented. Soon after that, there was a wide range of Section 232 changes. When you net all of that out, along with some inflationary pressures on fuel in particular, we see an impact, a net impact of around 1 point of COGS. Think of the playbook we used a year ago. Some pricing actions, it could be surcharges, it could be list price increases. They are not yet in the market, and that's why we're not yet updating any organic revenue guide as a result.

[John Stone, President and CEO at Allegion]

We'll certainly announce that, to the market, to our customers, first, as we work through all of the details there. As always, there's an enormous amount of details.

[John Stone, President and CEO at Allegion]

To work through on all the different trade policies. There are some cost actions that we're taking. I think just normal hygiene for a company our size, and that will contribute. When you add it all up, we expect to mitigate this on a dollar basis at the adjusted operating income line and net earnings per share.

[Joe O'Dea, Senior Equity Analyst at Wells Fargo Securities]

Thank you. Appreciate it.

[Mike Wagnes, SVP and CFO at Allegion]

Joe, maybe I'll just jump in and add. If you think about the mix between price and cost, obviously it's gonna come from more pricing than cost actions due to the size we discussed. Similar to last year, look for us to make sure that we're driving that price and productivity to cover that inflation and investment. That's something we've been talking to you for a number of years about.

[Joe O'Dea, Senior Equity Analyst at Wells Fargo Securities]

Understood. Thanks, Mike.

[Operator]

Thank you. Our next question will come from Tim Wojs with Robert W. Baird & Co. Please unmute your line and ask your question.

[Tim Wojs, Senior Research Analyst at Robert W. Baird & Co.]

Hey, guys. Good, good morning. Maybe just the first question. You know, I guess if I look at North America margins, I was wondering if you could maybe just add a little bit of color on some of the mix puts and takes, you know, this quarter. I think it's been a while since we've had kind of a negative mix impact in the bridge there. Maybe just add some color there as to what the drivers were and how you see that kind of playing out for the rest of the year.

[Mike Wagnes, SVP and CFO at Allegion]

Tim, if I bring you back to Q1 of last year, we had really strong volume leverage and positive mix. What that was, it included mix within non-res. Specifically, our non-res business is so much more than just a lock. It's the mix between the different businesses within non-res. This quarter was a little different than Q1 of last year, it was some negative mix. If you think of the Americas and you take a step back and think of the full year, don't expect to see a headwind for mix for the full year for the Americas. You did have a headwind in Q1. Full year, think of it like most years. Mix kind of evens out over the course of a year for the Americas.

[Tim Wojs, Senior Research Analyst at Robert W. Baird & Co.]

Okay. It's mostly product mix on, you know.

[Mike Wagnes, SVP and CFO at Allegion]

It's product mix, yeah.

[Tim Wojs, Senior Research Analyst at Robert W. Baird & Co.]

Okay. I gotcha. I understand. Okay. I guess how, you know, to that, like, how would you kind of expect margins in North America to kind of sequence through the year? I guess that mix impact kind of drove it, you know, I guess a little kind of weaker Q1 than we thought. just trying to understand kind of how we should expect margins in North America to kind of pace this year. Like would you expect?

[Mike Wagnes, SVP and CFO at Allegion]

Yeah

[Tim Wojs, Senior Research Analyst at Robert W. Baird & Co.]

kind of a, you know, a negative variance in Q2 as well? Just trying to think through those pieces.

[Mike Wagnes, SVP and CFO at Allegion]

As you think about, let's talk just margin rate for the Americas. As you progress throughout the year, obviously in Q2, we do have the peso impact from Q2 of last year. I'll call that to your attention. We put that on the earnings deck of Q2 in 2025. Throughout the rest of the year, expect most of the expansion to come in the back half of the year. We'll get better sequentially. You could think of the second quarter as improving from where it was in Q1 versus the prior year. The Q3 and Q4 is where you really start to see the margin expansion. For full year, I'll just add, don't forget, obviously, for each of the quarters, we gotta now put in DCI. DCI is gonna be a margin rate impact.

[Mike Wagnes, SVP and CFO at Allegion]

You could think of it as 30 basis points for a full year. Q1 obviously only had 1 month of activity. The last three quarters obviously will have three months. Those are the two items I would call out. If you think about margin expansion, think of it more in the back half, and part of that is the comp that you're going up against vis-à-vis 2025.

[Tim Wojs, Senior Research Analyst at Robert W. Baird & Co.]

Okay. Good. That's clear. Thanks, guys. I'll hop back in queue.

[Mike Wagnes, SVP and CFO at Allegion]

Sure.

[Operator]

Our next question will come from Tomo Sano with JPMorgan. Please unmute your line and go ahead. Tomo, your line is unmuted. Please go ahead.

[Tomo Sano, Equity Analyst at JPMorgan]

Hello, can you hear me?

[Mike Wagnes, SVP and CFO at Allegion]

Yes.

[Tomo Sano, Equity Analyst at JPMorgan]

Okay. Thank you for taking my questions. In first quarter, the Americas electronics business was at mid-single digits, which is a little step down from the double-digit growth seen in a Q4. Could you provide more breakdown of volume versus price contributions for Q1 and any color on what drove the decelerations? Do you anticipate any changes in a growth perspectives after 2Q, please?

[Mike Wagnes, SVP and CFO at Allegion]

Yeah, Tomo, if you think about non-res, we said in the prepared remarks, non-res was driven by price realization. Just to remind you, Q1 of last year, really strong volume growth in non-residential. You could think of that at the higher end of mid-single digit volume growth for non-res last year. This year, obviously a little less, when you think of volumes. Full year for non-res, expect to see volume growth for the full year in non-residential. I think that remains a strong market for us, like we talked about. I think Q1 in non-res, if you think about volumes, part of that is just the comp in the prior year.

[John Stone, President and CEO at Allegion]

Tomo, this is John. On the electronic side, yeah, mid-single growth this quarter. Look, a year ago it was double digit, very strong. I think when we look over the cycle, if you will, we still see electronics being a long-term growth driver for Allegion. The adoption rates are still increasing and growing. I think, you know, that is providing that point of outgrowth that we expect to achieve. Still feel good about our position in electronics. We're still rolling out new products and I think still stand firm that that's a long-term growth driver for the company.

[Tomo Sano, Equity Analyst at JPMorgan]

Thank you, John and Mike. Just one follow-up. There was a commentary that ERP implementation and legacy mechanical business were key headwinds for the international segment in Q1. Were there any execution challenges associated with these factors? How do you view the prospects for recovery in international operations from second quarter, please?

[John Stone, President and CEO at Allegion]

Yeah, it's a very timely question, Tomo. Yeah, the ERP implementation was limited to one of our legacy mechanical businesses in Europe. While we haven't sized that exact amount, it does explain most of the organic revenue and margin decline in the quarter. I would say, since I've been here in Allegion, we've done a lot of ERP implementations. It's a core part of just investing in the core business, and we've had a lot of very old systems to update. This was one of them. We've never had to talk about this before. Every other ERP implementation has gone very well. This one we've just had a lot of struggles with. As I said in the prepared remarks, very recently, our production rates are getting back on track.

[John Stone, President and CEO at Allegion]

It's not a demand issue either. The customer orders are there, the backlog is there. It's our execution that needs to improve, and I think it is improving. I do have confidence we will recover the Q1 shortfall over the course of the year.

[Tomo Sano, Equity Analyst at JPMorgan]

Thank you very much.

[John Stone, President and CEO at Allegion]

Thank you.

[Operator]

Our next question will come from Jeffrey Sprague with Vertical Research Partners LLC. Please unmute your line and ask your question.

[Jeffrey Sprague, Managing Partner at Vertical Research Partners LLC]

Hey, thanks. Good morning, everyone. Hey, John. Just picking up on the ERP. Are there any other implementations that you're planning for this year? Are you done upgrading what you wanna do in Europe? Also just to comment on catching up. You know, I've seen companies before have these snafus, and they don't catch it up, right? 'Cause you failed to deliver, so somebody else, you know, filled that void. You know, you can get back to run rate, but maybe not lose or regain what you lost. Maybe just a little bit more context on that.

[John Stone, President and CEO at Allegion]

Yeah. Jeff, those are very salient points and something we're watching very carefully. I would say we have been holding on to the customer orders. We still have more inbound customer orders. We do have a backlog that supports our commentary. Our execution is improving. I do feel confident that we'll recover this Q1 shortfall over the balance of the year. It won't all happen like immediately, but it'll happen over the balance of the year. I think, as I mentioned, we've done a bunch of these implementations over my tenure here at Allegion. We do have more in the works. There are more businesses that do need these system upgrades, and I don't anticipate we're gonna have a problem like this again.

[Jeffrey Sprague, Managing Partner at Vertical Research Partners LLC]

Could you just maybe address also Europe in a little more detail, right? Not a lot of direct Middle East exposure, but, you know, Europe's probably most prone to seeing collateral economic damage first from what's going on. Is there any, you know, visible change in tone there, business trajectory, orders, any, you know, just kind of ear to the ground, what you're seeing real time in those markets?

[John Stone, President and CEO at Allegion]

It's a good question. I'd say consistent with our prepared remarks, the demand has shaped up about the way we saw it shaping up when we introduced the guide back in February. The big miss was again, our own challenge with that ERP. I'd say our electronics businesses in Europe are still performing well. Our acquisitions in Europe are basically right on track. Feel good about those elements. Like in general, markets are still not super strong. Agree they are more directly impacted by the two active conflicts. I think market demand is about how we saw it at the February guide.

[Jeffrey Sprague, Managing Partner at Vertical Research Partners LLC]

Okay, great. Thank you for the color.

[John Stone, President and CEO at Allegion]

Thank you.

[Operator]

Our next question will come from Joe Ritchie with Goldman Sachs. Please unmute your line and ask your question. Joe, please unmute your line and ask your question. Okay, we'll circle back to Joe. Our next question will come from Julian Mitchell with Barclays Equity Research. Please unmute your line and ask your question.

[Julian Mitchell, Managing Director of Multi-Industry Equity Research at Barclays]

Hi, good morning. Maybe, just based off the commentary around the Americas margins being down year-over-year in Q2, and also the fact that the international catch up on ERP isn't all coming in the quarter of Q2. Should we expect that this year is a bit more back-end loaded than normal in terms of kind of first half, second half EPS contribution? I think in recent years, you have been sort of 47%, 48% of EPS in the first half. Should we think this year is maybe more like mid-40s because of that Americas margin pressure and ERP headwind?

[Mike Wagnes, SVP and CFO at Allegion]

Julian, as you know, we don't really give quarterly guidance, right? If I give first half, second half, I'm giving an EPS for Q2. I'll just share just a little more from what I said earlier. In the Americas, I wouldn't expect, you know, big headwinds on margin rates year on year in the second quarter. I just don't expect to see much expansion there, right? You could think of it as not expansionary. For international, I think it's fair to say, second quarter, a little softer versus last year on margin rates. Similar to Q1, we talked about the sequential improvement versus Q1 of 2026 will be similar to the sequential improvement you saw in 2025. You start to see it recover some.

[Mike Wagnes, SVP and CFO at Allegion]

If you think of the Americas, though, think of it more a little more margin expansion in the back half of the year. This is not a massive margin expansion delta. It's more margin expansion in back half, and you know what Q1 was.

[Julian Mitchell, Managing Director of Multi-Industry Equity Research at Barclays]

That's helpful. Thanks very much, Mike. Then just on the kind of PPI, you know, you had that 40 basis points margin headwind in the first quarter kind of total company. How are you thinking about that sort of play out over the balance of the year? You know, I think when I'm thinking about sort of total margins, you've got a volume improvement to margin rate in the back half from easier sort of volume comps. That helps with that margin step up in the second half. Just wondering kind of any puts and takes on PPI, you know, how is kind of pricing playing out and competition and that type of thing please?

[Mike Wagnes, SVP and CFO at Allegion]

Obviously, you saw the headwinds in Q1. If I break it out between the two businesses, similar to what you would expect in margin rates, Americas, expect to see for the full year, right, our full year PPI expect to see some margin expansion there, dollar positive. International is gonna be a little tougher this year, so at an enterprise level, I expect the total company to be roughly around the Americas for the full year. A little more in the back half than first half, obviously. Q1 was poor. Second quarter, certainly better than what you saw in the first quarter. Then think about the core business. We expect this business to get back to that core incrementals we outlined at Investor Day, right?

[Mike Wagnes, SVP and CFO at Allegion]

The core ex acquisitions and currency of that 35% plus as you think of our business for the remainder of the year.

[Julian Mitchell, Managing Director of Multi-Industry Equity Research at Barclays]

That's very helpful. Thank you.

[Mike Wagnes, SVP and CFO at Allegion]

Thanks, Julian.

[Operator]

Our next question will come from Joe Ritchie with Goldman Sachs. Please go ahead. Joe, your line is unmuted. Please go ahead. Okay, we'll try Alexander. Oh, go ahead, Joe.

[Joe Ritchie, Managing Director at Goldman Sachs]

Yeah. Oh, there you got me. Okay, great. Thanks, guys. Sorry, struggling with the. Perhaps maybe not doing this on my iPad next time.

[Mike Wagnes, SVP and CFO at Allegion]

No worries, Joe.

[Joe Ritchie, Managing Director at Goldman Sachs]

Yep. Being around just the international segment, right? This is a segment that historically you've tried to scale via acquisition. Recognize that you had the issues with ERP this quarter, and that impacted it. But I'm curious, like, as you kinda think about, like, does it make sense, you know, for Allegion to have an international presence? The domestic business is doing so well. Does it ever make sense for it to be more of a domestic-centric company and, you know, maybe it's just too difficult to scale the business internationally?

[John Stone, President and CEO at Allegion]

Yeah. I think probably Q1 earnings call is not the time to have such a conversation, Joe. I would say one business with an ERP challenge that we haven't had before driving a miss, I don't think such extreme conversations are necessary right now. I'd say we've been very pleased with the growth we've seen in international. We've been very pleased with the portfolio improvements we've seen in international. The market conditions have been rather soft, our teams have performed well. One, what I consider temporary blip on the legacy mechanical side with this ERP implementation, we're gonna overcome that. I have confidence there. It's not a demand issue. We've got some operating performance that needs to improve, and we'll improve it.

[Joe Ritchie, Managing Director at Goldman Sachs]

Fair enough. I guess just the follow-on is just around capital deployment. Just given, you know, kind of like the start to the year from a share perspective, I'm just wondering, like, how you're thinking about buyback versus an M&A at this point?

[Mike Wagnes, SVP and CFO at Allegion]

Yeah, it's a great question, Joe, and I think, as you saw in Q1, we did repurchase $40 million worth of shares, and you saw that our board authorized a $500 million share repurchase program. I think, that being said, you know, our expectation and your expectation of us should be balanced, disciplined, and consistent capital deployment for the benefit of our shareholders. Certainly we understand where we're trading right now. I'd say on top of that, our M&A pipeline is active with good quality bolt-on acquisitions. I would say expect us to do both for the benefit of our shareholders.

[Joe Ritchie, Managing Director at Goldman Sachs]

Okay, great. Thank you.

[Operator]

Thank you. 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. Our next question will come from Rafe Jadrosich. Please unmute your line and ask your question.

[Rafe Jadrosich, Managing Director at Bank of America]

Hi, good morning. Thanks for taking my question.

[Mike Wagnes, SVP and CFO at Allegion]

Morning.

[Rafe Jadrosich, Managing Director at Bank of America]

I just wanted to follow up on the electronics growth in the quarter. Just the mid-single digit, I think in the fourth quarter it was low doubles, which is what you did through 2025, if I remember right. You're calling out like a tougher comp there. How should we think about that growth through 2026? Maybe just a little bit more color around the deceleration.

[Mike Wagnes, SVP and CFO at Allegion]

I have to apologize. When I answered that previous question, I struggled to hear the question I answered about the non-res business. I apologize. With respect to electronics was really strong for us last year, right? It was strong each of the four quarters. I expect to see electronics to be a long-term driver of growth for us. We keep on talking about this, including Investor Day. Quarter to quarter can move around a little, but if you think about electronics for us, think of it as, "Hey, this is gonna be the accelerated growth driver." Over the course of a year, it tends to outgrow the mechanical. We expect that to be the case for 2026 as well.

[Rafe Jadrosich, Managing Director at Bank of America]

Okay. That's helpful. Just on the 1% of like incremental inflation on COGS, is there any way to parse out how much is tariffs, or like incremental Section 232 versus just broader metals inflation and anything else? Just you've had a lot of success historically offsetting with price. How do we think about the cadence of that through the year? How like how much of a lag is there between when you start to see the inflation versus when you can raise price? Thank you.

[Mike Wagnes, SVP and CFO at Allegion]

If you think of our business, we try to manage all cost inputs. When we talk about it, we talk about pricing and productivity has to cover that inflation and those incremental investments. I tend not to give details by each subsection. Just think of it as a total cost inflation number we provided. As far as lags, I would say historically there is a little lag between pricing and inflation, meaning the inflation could be a little sooner, but it's not enough where I would call it to your attention to change it much. What you tend to find is, the cost inflation comes, but it sits on the balance sheet until it gets sold and flushed through COGS. It's not that dissimilar historically.

[Mike Wagnes, SVP and CFO at Allegion]

We'll continue to monitor it, and if, you know, as there's updates throughout the year, we'll just provide you more details.

[Rafe Jadrosich, Managing Director at Bank of America]

Great. Thank you.

[Operator]

Our last question will come from Alexander Virgo with Evercore ISI. Please unmute your line and go ahead.

[Alexander Virgo, Senior Managing Director at Evercore ISI]

Thanks very much for taking the question. I wondered if you could just dig a little bit more into the ERP impact. Just what was it that surprised you? What was it that went wrong? I guess, yeah, appreciate your point that you've implemented many of these in the past and not had to talk about them before. What is it that you're taking away from this to ensure it doesn't happen again? Then if I could just follow up on the electronics side of things, are you happy that you can get what you need from the perspective of chips and supply chain?

[Alexander Virgo, Senior Managing Director at Evercore ISI]

Do you have enough buffer, or is it just a case of pricing that will end up coming through there? Thanks very much.

[John Stone, President and CEO at Allegion]

Good question. On the ERP, again, it's just a case of a legacy system, been in place and highly customized over 25, 30 years. People got very accustomed to it. New workflows just slowed us down in this legacy mechanical business. People are adjusting to it, people are adapting to it, people are learning and getting better with the new system. Again, as we've turned the chapter into 2Q, I do see our production rates are improving.

[John Stone, President and CEO at Allegion]

Our demand still supports the outlook. Customer orders, backlog still support the recovery. Our operating performance is giving us confidence that we will recover the Q1 shortfall over the balance of the year. Shifting over to electronics on the supply chain, certainly with the conflict in the Middle East, we've been watching component supply chains very carefully. Haven't yet seen any major disruption. I do feel as a company we're better positioned with respect to electronic supply chain than we were back in the pandemic timeframe.

[Alexander Virgo, Senior Managing Director at Evercore ISI]

Great. Thanks very much.

[Operator]

Our next question will come from David MacGregor with Longbow Research. Please unmute your line and ask your question.

[David MacGregor, Senior Analyst at Longbow Research]

Yes. Good morning, everyone.

[John Stone, President and CEO at Allegion]

Morning.

[David MacGregor, Senior Analyst at Longbow Research]

I guess I wanted to begin with. Hey, good morning.

[John Stone, President and CEO at Allegion]

Good morning.

[David MacGregor, Senior Analyst at Longbow Research]

I did wanna go back to the mix question and it was asked earlier, and just in the Americas business, how much of the margin pressures are, you think, resulting from the introduction of more value-oriented products like the Performance Series and the Von Duprin 70 and those products?

[John Stone, President and CEO at Allegion]

I don't think it's that, David. It's really the mix. This isn't a case where someone's trading down. This is the mix between the various businesses that we have. So it's not a case where you're trading from a high price point to a mid price point offering. It's more the mix between the various product lines that we offer.

[David MacGregor, Senior Analyst at Longbow Research]

You're not seeing any change in terms of how these jobs are being specced in terms of more value orientation?

[John Stone, President and CEO at Allegion]

No, I would not say that's the case at all.

[David MacGregor, Senior Analyst at Longbow Research]

Okay. All right. Thanks for that. Just follow up, I guess, on the residential business, you know, are you confident that you held market share in that business this quarter? I guess, what are the strategic options available to you to maybe affect a stronger position versus some of the secular trends?

[John Stone, President and CEO at Allegion]

Yeah. I think, David, on the resi side, you know, for a while now we've been dealing with just a relatively soft end market. We've still seen electronics growth in resi. I think that has been a positive for us, and continue to introduce new products in the electronic segment. As, as you've heard from, I think a lot of companies, new build is very soft. Aftermarket is probably just treading waters. Overall, the market remains a little bit soft. I think in terms of our share, all the indicators that we watch on point of sale and other things would indicate, yeah, our market share is definitely holding up.

[David MacGregor, Senior Analyst at Longbow Research]

Thanks very much. Good luck.

[Operator]

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

[John Stone, President and CEO at Allegion]

Well, thank you all very much for the Q&A and attending the call today. We look forward to connecting with you on our Q2 earnings call in July. Be safe, be healthy.

Participants

Executives

• Jobi Coyle, Director of Investor Relations
• John Stone, President and CEO
• Mike Wagnes, SVP and CFO

Analysts

• Alexander Virgo, Senior Managing Director at Evercore ISI
• David MacGregor, Senior Analyst at Longbow Research
• Jeffrey Sprague, Managing Partner at Vertical Research Partners LLC
• Joe O'Dea, Senior Equity Analyst at Wells Fargo Securities
• Joe Ritchie, Managing Director at Goldman Sachs
• Julian Mitchell, Managing Director of Multi-Industry Equity Research at Barclays
• Rafe Jadrosich, Managing Director at Bank of America
• Tim Wojs, Senior Research Analyst at Robert W. Baird & Co.
• Tomo Sano, Equity Analyst at JPMorgan