Earnings call transcript: Allegion’s Q2 2025 revenue tops $1 billion, EPS rises

Allegion (NYSE:ALLE) reported robust financial results for the second quarter of 2025, with revenue surpassing $1 billion, marking a 5.8% increase compared to the same period last year. The company’s adjusted earnings per share (EPS) rose by 4.1% to $2.04. The stock currently trades at $154.36, near its 52-week high of $156.10, reflecting strong investor confidence. According to InvestingPro data, Allegion has delivered an impressive 19.04% return year-to-date, supported by its GREAT financial health score of 3.07 out of 5.

Key Takeaways

• Allegion’s Q2 revenue exceeded $1 billion, a 5.8% year-over-year increase.
• Adjusted EPS climbed to $2.04, reflecting a 4.1% rise.
• The company announced four strategic acquisitions, expanding its product portfolio.
• Allegion raised its 2025 adjusted EPS outlook to $8.00-$8.15.
• The stock price rose by 5.11% following the earnings release.

Company Performance

Allegion’s performance in Q2 2025 demonstrated resilience, with significant revenue growth driven by strong demand in non-residential markets and strategic acquisitions. The company’s Americas segment reported a 6.6% revenue increase, while the international segment saw a 2.9% rise. Despite high interest rates affecting residential markets, Allegion maintained its competitive edge in institutional verticals such as healthcare and education.

Financial Highlights

• Revenue: Over $1 billion, up 5.8% year-over-year
• Adjusted EPS: $2.04, a 4.1% increase
• Adjusted operating margin: 23.7%, flat year-over-year
• Year-to-date available cash flow: $275.4 million, up 56.5%

Outlook & Guidance

Allegion has revised its 2025 adjusted EPS guidance to a range of $8.00 to $8.15, reflecting confidence in its growth trajectory. The company anticipates approximately $40 million in tariff surcharge revenue and expects mid-single-digit organic growth in the Americas. This outlook aligns with the company’s consistent dividend growth, which InvestingPro data shows has increased for 31 consecutive years, demonstrating strong commitment to shareholder returns. While international markets are projected to remain flat, the company’s strategic acquisitions are expected to be accretive to its 2026 EPS.

Executive Commentary

"Q2 was a strong quarter once again demonstrating the agility of our team, durability of our business and execution of our capital allocation strategy," stated John Stone, CEO of Allegion. He emphasized the company’s focus on leveraging its strong cash generation to return value to shareholders and pursue growth through accretive acquisitions.

Risks and Challenges

• High interest rates may continue to dampen residential market demand.
• Global economic uncertainties could impact international revenue streams.
• Integration of recent acquisitions poses operational challenges.
• Potential supply chain disruptions could affect production timelines.
• Competitive pressures from smaller industry players may influence market share.

Q&A

During the earnings call, analysts inquired about the potential impact of tariff-related pull-forward ordering, to which the company reported no evidence of such activity. Questions also focused on the sustainability of project activity across various end-user verticals, with management expressing confidence in continued strong demand. Margin expansion was attributed to the non-residential business mix, and the company reiterated its expectation for acquisitions to contribute positively to 2026 earnings.

Full transcript - Albemarle Corp (ALLE) Q2 2025:

Conference Operator: Good day, and welcome to the Allegion Second Quarter twenty twenty five Earnings Call. All participants will be in listen only mode. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Josh Pokowinski, Vice President of Investor Relations.

Please go ahead.

Josh Pokowinski, Vice President of Investor Relations, Allegion: Thanks, Jason. Good morning, everyone. Thank you for joining us for Allegion’s second quarter twenty twenty five earnings With me today are John Stone, President and Chief Executive Officer and Mike Wagnus, 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.allegian.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. 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 and I’ll turn the call over to John.

John Stone, President and Chief Executive Officer, Allegion: Thanks, Josh. Good morning, everyone, and thanks for joining us. Q2 was a strong quarter once again demonstrating the agility of our team, durability of our business and execution of our capital allocation strategy. We also achieved an exciting milestone. This was Allegion’s first quarter of revenue in excess of 1,000,000,000 and we certainly don’t think it will be our last.

I’m very proud of our team’s performance. The high single digit Americas non res organic growth and continued segment margin expansion speaks to the resiliency of our business model, our broad end market exposure and the depth of our relationships with channel partners and end users. We continue to take advantage of our business’ strong cash generation, returning cash to shareholders and growing our business through accretive acquisitions that complement our core and create long term value. Midway through the year, our team’s strong execution and continued demand momentum in our core non res Americas market gives us confidence in our full year performance. We’re raising our 2025 full year outlook for adjusted earnings per share to $8 to $8.15 I’ll be back later to provide more color on our markets and the outlook.

Please go to slide four. Let’s take a look at capital allocation for the second quarter, starting with investments for organic growth. As you may have seen at our recent Investor Day in New York, our Simons Voss business continues to be a great success story for Allegion. A known pioneer in our industry, SimonsVoss is a leader in electronics, leveraging the global long term growth trends we see across security and access. Most recently, SimonsVoss has introduced a new portfolio of products called FortLocks, which is launching with some of our key Simons Voss customers this year.

FortLox is Allegion’s first battery less electronic cylinder, offering customers the high quality and ease of use that Simons Voss is known for and now without the need for a battery to power it. It’s an incredible evolution of Simon’s VOS technology that expands applications and market segments that we can serve. Turning to M and A. Since we spoke at Q1 earnings, Allegion has announced four additional acquisitions. NovaS closed in Q2, while Elletek, Gatewise and Waitwhile closed early in the third quarter.

I’ll spend some time on the next slide discussing these recent additions to the portfolio and how they support our long term growth strategy. Elysian continues to be a dividend paying stock and in the second quarter this amounted to $0.51 per share or approximately $44,000,000 And lastly, we made share repurchases in the quarter of approximately $40,000,000 We remain consistent to balanced we remain committed to balanced consistent capital allocation with a clear priority of investing for growth. Please go to slide five where I’ll discuss our recent acquisitions. These acquisition categories should look familiar to those of you who tuned in for Investor Day. At that meeting, we outlined a capital allocation strategy that takes advantage of Allegion’s demand generation model, channel and distribution strength and solid relationships.

This framework also includes growing our portfolio with additional electronics products as well as software and services that differentiate our hardware and security and access environments where Allegion has a right to win. Starting with additions to our mechanical portfolio, Allegion recently completed the acquisition of Trimco in The Americas, which we announced prior to Q1 earnings and NOVAS in the International segment. Both of these businesses leverage existing go to market channel strength in their respective geographies, while broadening the high quality hardware offerings we provide to our customers. Trimco expands our accessories portfolio in non res Americas markets, while Novavas adds to our residential offering in Australia. Moving to our electronics portfolio, Allegion closed our acquisition of Germany based Elletech in the third quarter adding to our international segment.

Similar to our existing electronics portfolio, Electec has an attractive growth profile in the high single to low double digit range with strong profitability. Electec’s readers and credentials bolster Allegion’s electronics portfolio globally including in The U. S. And expands our reach into new applications and customers. Lastly, we’ll continue to look to acquire complementary software and service businesses that differentiate our hardware and drive adoption in security and access environments where Allegion has a right to win.

Our two most recent July acquisitions highlight this. We added Gatewise, a software as a service provider that offers a modern and retrofit friendly gate entry system for multifamily communities. This business is a hand in glove fit with Allegion’s electronic locks and Zantra multifamily property access solution bringing together expanded perimeter security with unit and common area security. We also acquired Waitwhile, a leading software as a service provider that specializes in cloud based appointment scheduling and queue management. With Waitwhile, we can connect the virtual queue to secure and seamless physical access at the door in core non residential markets that we know well, ultimately providing the right access to the right people at the right time, all while streamlining operations for the building of the campus.

Both of these SaaS businesses have strong growth fundamentals and deliver recurring value to our customers in a way that differentiates and supports our electronic hardware business. Collectively, expect these acquisitions to be accretive to 2026 adjusted earnings per share and increase the long term growth potential of Allegion at attractive margins. Mike will now walk you through the second quarter financial results.

Mike Wagnus, Senior Vice President and Chief Financial Officer, Allegion: Thanks, John, and good morning, everyone. Thank you for joining today’s call. Please go to slide number six. As John shared, our Q2 results reflect continued strong execution from the Allegion team delivering another quarter with mid single digit top line growth. Revenue for the second quarter was over $1,000,000,000 an increase of 5.8% compared to 2024.

Organic revenue increased 3.2% in the quarter as a result of favorable price and volume led by our Americas non residential business where demand remained strong. Q2 adjusted operating margin was 23.7% flat to the prior year. Both our segments had margin expansion which was offset by increased corporate expenses primarily for incentive compensation. Volume leverage and mix were accretive to margins driven by our Americas non residential business. Price and productivity net of inflation and investment was a headwind in the quarter of $5,300,000 for the enterprise.

Adjusted earnings per share of $2.04 increased $08 or 4.1% versus the prior year. Operational performance and accretive capital deployment were more than offset by higher tax. Our Q2 tax rate was negatively impacted by discrete items. We still anticipate the full year tax rate to be in the range of 17 to 18%. Finally, year to date available cash flow was $275,400,000 which was up 56.5% as we continue to generate strong cash flow.

I’ll provide more details on the balance sheet and cash flow a little later in the presentation. Please go to slide number seven. This slide provides an overview of our quarterly revenue. I will review our Enterprise results here before turning to our respective regions. Organic revenue grew 3.2% in the quarter, which included volume growth of 06% and price realization of 2.6% as we are taking pricing actions to offset inflationary pressures.

Acquisitions drove 1.9 points of growth as both The Americas and international businesses benefited from acquired growth. Currency was a tailwind of zero point point bringing the total reported growth to 5.8% in the quarter. Please go to slide number eight. Our Americas segment delivered strong operating results in Q2. Revenue of $821,500,000 was up 6.6% on a reported basis and up 4.5% on an organic basis.

Organic growth included both favorable price and volume in the quarter. Reported revenue includes 2.1 points of growth from acquisitions. Pricing in our Americas business was 3% in the quarter. This includes a combination of core pricing actions and surcharge revenue as we cover inflation related to tariffs. Our non residential business increased high single digits organically as demand for our products remain healthy supported by our broad end market exposure.

Our residential business declined mid single digits in the quarter as markets remain soft in the current high interest rate environment. Electronics revenue was up low double digits and continues to be a long term growth driver for Allegion as we highlighted at our Investor Day in May. Americas adjusted operating income of $245,600,000 increased 8.6% versus the prior year. Adjusted operating margin was up 50 basis points as volume leverage and favorable mix from stronger non residential growth were accretive to margins. Price and productivity net of inflation and investment and inclusive of transactional FX were a tailwind to margin rates.

Similar to what we discussed on our Q1 call, we had a slight tailwind from transactional FX, primarily related to our Mexican operations where a portion of our local costs were favorably impacted by the sizable year over year decline in the peso compared to the U. S. Dollar. Please go to slide number nine. Our International segment delivered revenue of $200,500,000 which was up 2.9% on a reported basis and down 2.2% organically.

Our electronic businesses continue to grow organically, but were more than offset by pressure in the mechanical portfolio. Acquisitions contributed 1.1% to international revenue. Currency was also a tailwind positively impacted reported revenue by 4%. International adjusted operating income of $26,200,000 increased 11% versus the prior year. Adjusted operating margin for the quarter increased 100 basis points driven by favorable price and productivity net of inflation and investment as well as accretive acquisitions.

Earlier in July, we agreed to divest our API business, a small non core locksmithing operation in Australia, which we expect to close in early August. The API business had approximately $6,000,000 of revenue in the first half of twenty twenty five. Please go to slide number 10 and I will provide an overview of our cash flow and our balance sheet. Year to date available cash flow was approximately $275,000,000 up nearly $100,000,000 versus last year. This increase is driven by higher earnings, lower capital expenditures and improvements in working capital.

I’m pleased with the strong cash generation in 2025. Next, working capital as a percent of revenue improved as we continue to effectively convert earnings to cash. Finally, our balance sheet remains strong and our net debt to adjusted EBITDA is at a healthy ratio of 1.5 times. Our balance sheet I’m sorry, our balance our business continues to generate strong cash flow and our balance sheet supports continued capital deployment. I will now hand the call back over to John.

Thank you, Mike. Please go

John Stone, President and Chief Executive Officer, Allegion: to slide 11 and I’ll share our updated outlook. Starting with The Americas, the non residential markets, particularly institutional verticals remain resilient and Elysian is performing very well in the aftermarket. Our spec activity has grown steadily over 2024 and year to date 2025 driven by broad end market exposure and supports our outlook. Residential markets have been soft thus far in 2025 with interest rates as the key swing factor. We are increasing our organic outlook for The Americas to mid single digits due to strength in the non residential business as well as the inclusion of surcharge revenue from tariffs.

International markets have been largely unchanged year to date and we continue to expect roughly flat organic performance. However, we are updating the outlook for completed acquisitions as well as foreign currency changes resulting from the weaker U. S. Dollar. We now estimate approximately $40,000,000 of tariff surcharge revenue in the outlook.

And as I noted earlier, this is included in our organic revenue outlook in The Americas. We continue to expect tariffs to be neutral at the EPS level as we shared with you in Q1. As a result, we’re raising our 2025 adjusted EPS outlook to $8 to $8.15 based on our strong operational execution thus far in the year, continued strong demand in non residential, accretive acquisitions announced to date and updated foreign exchange rates. You can find additional details as well as below the line model items in the appendix. Please go to slide 12.

In summary, I feel Allegion is executing at a very high level while staying agile and steadily delivering on the long term commitments we shared with you at our Investor Day. We’ve delivered strong performance 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 very proud of our team’s performance in this dynamic environment, which gives us the confidence to raise our EPS outlook for the year. With that, we’ll take your questions.

Conference Operator: Thank you. We will now begin the question and answer session. And our first question comes from Joe O’Dea from Wells Fargo. Please go ahead.

Joe O’Dea, Analyst, Wells Fargo: Hi, good morning. Thanks for taking my question. Just a little bit of a two part question in terms of activity levels in nonres in Americas. First, just with the overall tariff backdrop, any signs of pull forward that you saw in the quarter to get ahead of some of the pricing? And then just bigger picture, you touched on specification activity that’s up year to date.

Just what you saw in Q2 versus Q1? Any indications of elevated uncertainty and impacts on specification activity?

John Stone, President and Chief Executive Officer, Allegion: Yes. Joe, this is John. That’s I think both really good really timely questions. And in terms of any abnormal ordering or pull ahead because of tariffs, I would say no. We look for that.

We watch that. We monitor sell through very closely and there’s no evidence of that on the non res side. Project demand, project work for our customers and their customers is humming along pretty well. So we don’t see evidence of pull ahead. On the spec activity, like we shared last couple of quarters, specs spec riding accelerated through 2024.

That momentum has continued year to date 2025. And I would say, continues to be strong, continues to grow and very much supports the outlook. There’s new tariff news just about every week. But I think the project activity in non res is humming along pretty well.

Joe O’Dea, Analyst, Wells Fargo: Perfect. And then I wanted to touch on Americas margin. Was really good in Q1 and then saw sequential growth off of that. Can you talk about the timing of price cost with tariffs? Because I think the framework was that could be a little bit of a headwind in Q2 and then a little bit better in the back half of the year if that’s still the case for the lower tariff amount.

And then just unpack the mix that you saw in the quarter, the degree to which some of that doesn’t continue into the back half or if that’s broadly kind of nonres mix that’s favorable?

Mike Wagnus, Senior Vice President and Chief Financial Officer, Allegion: Yes. Joe, if you think about tariffs, when we met on the Q1 call, we originally had an estimate out there of $80,000,000 and we said there would be about a month lag. Overall tariffs are about half of that because the trade regulations have changed, right? So we’ve updated our assumptions to that $40,000,000 for 2025. That month lag is still relevant.

So you could think of that as $5,000,000 a month. So if you think about for us that’s about a quarter of our total tariff revenue we expect to recover in the second quarter with the remaining amount being rest of the year. That helps you understand how to kind of model that on the top line. And obviously when you think about fall through we would offset that at the operating income level on a neutral basis as we’ve been discussing for some time. The second piece related to mix, I’ll kind of send you over to our 10 Q where we outline the components of our operating income and margin bridge.

You’ll see we had favorable mix in the second quarter and the first half. And that is primarily the result of the non residential growing as well as it is, right? Non residential is a stronger more profitable business than the residential. If you think of rest of year, I would say it would be imprudent to assume in the outlook that level of margin expansion. So I wouldn’t say we’ve included it.

But I would say we do expect non residential to grow to be the driver of growth in the back half of the year as well. That’s the market that’s really humminous as John mentioned.

Joe O’Dea, Analyst, Wells Fargo: Understood. Thank you.

Conference Operator: The next question comes from Jeff Sprague from Vertical Research. Please go ahead.

Jeff Sprague, Analyst, Vertical Research: Hey, thanks. Good morning. Also just wanted and I didn’t get a chance to look at the queue yet Mike, so I’ll do that. But just thinking about some of these moving pieces, right? I would imagine deals are negative to margin rate and price cost parity on surcharge is negative to margin rate.

So is that uplift in solid looking margin performance all mix? Is there some other kind of cost actions that are supporting that?

Mike Wagnus, Senior Vice President and Chief Financial Officer, Allegion: Yes. On the enterprise level, obviously the segment margin performance in the second quarter was positive. You have the offset in corporate as I mentioned. In the case of The Americas which I think is where you’re going.

Jeff Sprague, Analyst, Vertical Research: Yes. That’s where I’m going.

Mike Wagnus, Senior Vice President and Chief Financial Officer, Allegion: Yes. You see that strong incrementals driven by mix. We did cover price and productivity, did cover the inflation and the investments and a slight tailwind from the transactional FX, which I talked about on the first quarter. So I think you have to remember that as well. And then as far as acquisitions, you got to look at them by regions.

They are accretive in international and they’re not enough to really call out either way for The Americas in the first half.

Jeff Sprague, Analyst, Vertical Research: I see. Great. Thanks. And then John just back to kind of market conditions, you are kind of later cycle. I mean it sounds like from the spec activity though that stuff entering the pipeline is still reasonably positive.

How do you and I know we kind of talked about this before, but how do you square that relative to the weak ABI and these folks like Sherwin Williams missing and things like that? I mean, do you think you’re gaining share or is there just some other dynamic at play here?

John Stone, President and Chief Executive Officer, Allegion: Yes. Jeff it’s a good question. I think there’s lots of factors going into that. I think ABI has been rather depressed for pretty much my entire tenure here with Allegion. And I think the snapback in demand from the pandemic followed by labor shortages followed by rapid inflation just really disrupted some of these more traditional leading indicators.

And I think you had a dynamic to where construction backlog remained pretty high. Projects were delayed because of labor. So that long tail got a little bit longer on an individual project basis even. And then you’ve got where a lot of projects went through the planning phase, went through the design phase and hit pause waiting for some interest rate relief. You see now today Jeff you’ve got segments that have been depressed for a long time like commercial office actually showing little signs of growth here and there particularly in major metro areas where you’re seeing tenant turnover, tenant fit out starting to come back in places where it was really flat lined.

I think you’ve got a mix of end user verticals where some might be depressed, some might be up. The institutional as we highlighted health care education in particular have been hanging in there very well. A lot of work in both of those verticals both from the spec activity and from the project work. So I think institutional has remained quite positive. Data centers of course growing very nicely.

It is small for us, but growing nicely. And so you add all that together and we’re still seeing high single digit organic growth in non res Americas. I do feel that Allegion is finding our way to gain some share probably at the expense of the smaller players in the industry not so much our largest competitor. And that’s just due to better supply chain performance, better operational performance in the factories, so we can really get out and compete for some more of the discretionary work. But all in all, I’d say project work remains very healthy.

Jeff Sprague, Analyst, Vertical Research: Great. Thanks. I’ll leave it there. Appreciate it.

Conference Operator: And the next question comes from Julian Mitchell from Barclays. Please go ahead.

Julian Mitchell, Analyst, Barclays: Hi, good morning. Maybe first off, I just wanted to try and understand that slide 18 is kind of very useful. Maybe if you could help us with kind of that EPS guide raise $0.30 plus or so versus a few months ago, Which is sort of the biggest pieces there sort of moved around? And maybe just clarify for us what’s embedded now for FX effects versus previous?

Mike Wagnus, Senior Vice President and Chief Financial Officer, Allegion: Yes. Thanks for the question, Julien. First on the FX, obviously there’s been a big swing in currency rates hitting our international business the largest. You see it impacting top line. FX will fall to the bottom line based on normal translational impact.

So you can calculate that, but that is impacting EPS. In addition, we put in the acquisitions on the EPS side, right? And you can calculate what year to date is. We put that in the previous page. And you see the full year on the page of $0.15 to $0.2 So you have an idea between FX and acquisitions, the increase of the raise associated with both of those.

The last item, obviously the first half performance has been quite strong. So that’s been a big driver in our operational income operating income number you see there on the first bar. So those three items are the big drivers of the EPS raise. This was not an EPS raise where it’s all back end loaded. It’s those three big items that are driving the majority of it.

Julian Mitchell, Analyst, Barclays: That’s helpful. Thank you. And maybe just on the more sort of operational part of it, homing in on that for a second. You’ve got a slight acceleration, I suppose, in organic sales growth dialed in for the second half versus the first half performance, and that’s really in The Americas. Maybe sort of flesh out to what extent that’s kind of price versus volume driven or something in non res versus res?

Any sense of kind of why that second half is a little bit stronger than the first half?

Mike Wagnus, Senior Vice President and Chief Financial Officer, Allegion: Yes. I would say on the tariff piece, the biggest item is what I discussed earlier. It’s now included in the outlook and you have three quarters of that $40,000,000 in the back half versus only one quarter in the first half. So that’s a big driver of it. You could think of that driving the full year outlook of $40,000,000 that’s a point plus as you think about The Americas.

And then as far as other accelerations, I would just say non residential continues to be strong and we expect that to be the driver of growth in the back half for us.

Julian Mitchell, Analyst, Barclays: Great. Thank you.

Conference Operator: And the next question comes from Brett Linzey from Mizuho. Please go ahead.

Brett Linzey, Analyst, Mizuho: Hey, good morning. Congrats on the quarter. Thanks, Brett. I wanted to revisit the organic sales outlook one more time here. So the $40,000,000 surcharge and the revenue contribution, I guess how did that compare relative to the original expectation on a netting basis?

Were there any surcharge rollbacks you had to do on the de escalation? And then or do you think you’re pretty well covered for the balance of the year?

Mike Wagnus, Senior Vice President and Chief Financial Officer, Allegion: Yes. We actually have updated our surcharge not only in our estimates to you, but even the announcements to our channel partners and customers. So as this moves, these surcharges allow us to be flexible and agile to our customer base. And Brent continue to think of it as neutral. We’re going to drive the surcharge to offset the inflationary pressures.

And I think as you saw in the first quarter that price productivity inflation investment for The Americas was pretty close to that. So it was breakeven. So look for us to continue to drive that to offset it at the enterprise level such that when you think of the full year also expect PPII to be breakeven to slightly positive at the enterprise level.

Brett Linzey, Analyst, Mizuho: Okay, great. And then just on the acquisition side, so four additional here encouraging to see. I know your long term framework target the three points of annual acquired growth. Certainly running ahead here, I guess as you look at the scope and the size of the pipeline, was there some pull forward on deals you thought you had a shot on or should we think of it as maybe a little bit upside to that target as we look out over the next twelve to twenty four months?

John Stone, President and Chief Executive Officer, Allegion: This is John, Brett. Appreciate the question. And I’d say each acquisition takes on a life of its own. Certainly, we had several acquisitions that came to the point of closure in a pretty tight time window. But if you just take a look at Elletech, I mean, that’s a company we’ve had our eye on for a long time.

And so really excited to bring that into the portfolio here. Very excited to have them on the team. I think our pipeline remains active in both of our segments in international and in The Americas. It remains active in mechanical as well as electronic products. So it looks very good.

I think our team is performing very well. I think our integration muscle, our synergy capture is accelerating. And I think this will be a source of continued profitable growth for the company.

Joe Nolan, Analyst, Longbow Research: All right.

Brett Linzey, Analyst, Mizuho: Great. Thanks for the insight.

Conference Operator: Thank you. And our next question comes from David MacGregor from Longbow Research. Please go ahead.

Joe Nolan, Analyst, Longbow Research: Hi, good morning. This is Joe Nolan on for David. Hi, Joe. Hi. I was just going to ask, pricecosts remain modestly positive in the quarter.

Just your view into the second half and what you’re seeing with some of the different cost buckets, if you could talk through some of those? Thanks.

Mike Wagnus, Senior Vice President and Chief Financial Officer, Allegion: Yes. Thanks for the question. As I mentioned earlier, obviously there’s going to be more tariffs coming which we’re going to offset with the associated revenue. And then as you think about pricing actions, look for us to continue to take, right, the necessary actions to cover inflationary pressures. I try not to get into the details of providing an outlook for any one individual item, but rather just say look for us in totality to cover that by a combination of pricing and productivity covering the cost pressure.

Joe Nolan, Analyst, Longbow Research: Got it. And then non res strong outlook into the second half. Just with the tariff surcharges, have you seen any sort of demand elasticity related to that? Or it doesn’t sound so much like it, but just wanted to check on that.

John Stone, President and Chief Executive Officer, Allegion: It’s a fair question. And I’d say no. Project activity in the non res space has been strong. Demand has been good. As a business we operate predominantly in a short lead time made to order environment book and ship kind of business.

Our customers operate in a similar manner and that’s really the dynamic today. So I think project work continues on and have not seen that elasticity impact that you asked about.

Joe Nolan, Analyst, Longbow Research: Great. Thank you.

Conference Operator: And the next question comes from Tomo Sano from JPMorgan. Please go ahead.

Tomo Sano, Analyst, JPMorgan: Hi, good morning everyone. Good morning. Thank you. So I’d like to ask you about the international business for the second half outlook especially. So you had volume decline 3.2%.

Any changes that you see from the past two quarters? And how do you see the flattish market outlook in full year basis? Any things that we should look at in the second half for this business please?

Mike Wagnus, Senior Vice President and Chief Financial Officer, Allegion: Yes. I would just I know you’ve been following us a little less than maybe others on the call. So if you think of our business, our fourth quarter tends to be our strongest business. So as you think about modeling this, just take a look at the historic quarterly phasing for seasonality. And then with respect to the outlook, I would say still rethink the year is around flat.

We talked about that Q1 on our outlook and at the beginning of the year and still expect full year to be roughly around that flat organic outlook. Obviously, we have the benefit of currency rates and acquisitions, which you need to make sure you take into account and we give that detail as well.

Tomo Sano, Analyst, JPMorgan: Yes. That’s very helpful. Thank you. And just follow-up on the margin side on international business. So in terms of the recent acquisitions accreted to margins, how should we think about the levels of the margins from the recent acquisition into 2026 for international business?

If you have some thoughts of like how it’s actually exciting in terms of the margin side of synergies please?

Mike Wagnus, Senior Vice President and Chief Financial Officer, Allegion: Yes. The biggest acquisition obviously Elletech that is margin accretive for international. We gave some details when we put out the earnings release where you can calculate that and see that you’re thinking mid-20s percent, which is certainly accretive to international on that business. So as I think about margin rates on M and A for international, think of it as accretive to the margin rate.

Tomo Sano, Analyst, JPMorgan: All right. Thank you very much. That’s all.

John Stone, President and Chief Executive Officer, Allegion: Thanks, Tomol.

Conference Operator: And our next question comes from Chris Snyder from Morgan Stanley. Please go ahead.

Josh Pokowinski, Vice President of Investor Relations, Allegion0: Thank you. I just wanted to ask on price. I think the company in April was pushing surcharges for about $80,000,000 of tariffs. Obviously, guys are kind of now putting that number at $40,000,000 So like is Q3 price effectively lower than Q2 price? I think Q2 came in at plus 3% because of that rollback.

Just any thoughts on that price trajectory intra quarter Q2 and then as we kind of go into the back half?

Mike Wagnus, Senior Vice President and Chief Financial Officer, Allegion: No. If you think about our tariff, think of 25% of the full year. So 25% of the $40,000,000 will be in the second quarter and then the remaining 75% will be pretty evenly even over the last six months of the year. So that can kind of give you an idea of the tariff revenue.

Josh Pokowinski, Vice President of Investor Relations, Allegion0: Okay. So the company wasn’t really realizing price on that on the surcharges at the $80,000,000 level in Q2?

Mike Wagnus, Senior Vice President and Chief Financial Officer, Allegion: Yes. Let me kind of walk this back for you, Chris. We came out with the $80,000,000 Shortly thereafter, the government changed their policy on what tariffs were and we immediately adjusted what we went to the marketplace and adjusted the surcharge. Think of it as number one, we’re going to offset it on a dollar basis and then I gave you the components for you to model it throughout the year.

Josh Pokowinski, Vice President of Investor Relations, Allegion0: Thank you. Thank you. I appreciate that. And then, so if we kind of look at the guide, I guess it’s up 150 bps at the midpoint, 4% organic from 2.5% organic. Price is one point of that the $40,000,000 And then I guess they’re just like modestly better volumes in some other piece of the business.

I guess where do you guys see the volumes getting better versus prior? Thank you.

Mike Wagnus, Senior Vice President and Chief Financial Officer, Allegion: I think it’s fair to say non residential. As you think about this versus the beginning of the year, our non residential business in The Americas is performing quite well even better than we expected.

Josh Pokowinski, Vice President of Investor Relations, Allegion0: Thank you. I appreciate that.

Conference Operator: This concludes our question and answer session. I would like to turn the conference back over to John Stone for any closing remarks.

John Stone, President and Chief Executive Officer, Allegion: Thanks very much for the engagement and the questions. Again, would just reiterate, I feel that Allegion is performing very well executing at a high level and steadily delivering on the commitments we made to you at our Investor Day. Thank you very much.

Conference Operator: Conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.