Allegion Plc Q1 FY2025 earnings call

• Q1 was a strong start, with Allegion team executing well. Schlage unveiled new products like the Sense Pro smart deadbolt and Arrive Smart WiFi Deadbolt. Closed three bolt-on acquisitions in 2025. Announced eleventh consecutive dividend increase and $40 million share repurchases in Q1. Q1 revenue was $941.9 million, up 5.4% y-o-y. Adjusted earnings per share $1.86, up 20% y-o-y. Available cash flow $83.4 million, up nearly 250% y-o-y. Organic revenue grew 4% with 2.2 points from acquisitions. Americas segment organic growth included price and volume, International segment organic growth 0.9% with acquisitions as tailwind. Reiterated 2025 full-year EPS outlook of $7.65 to $7.85. Anticipated full-year tax rate 17% - 18%. Nonresidential markets resilient, residential market soft due to Q4 pull ahead and market uncertainty. Tariff costs estimated at ~$80 million in 2025, offset by pricing actions. Won Gallup Exceptional Workplace Award for second consecutive year. Upcoming Investor and Analyst Day in New York.

Americas Segment

• Revenue of $757.8 million, up 6.8% on a reported basis and 4.9% organically. Organic growth included favorable price and volume. Reported revenue includes 2.3 points of growth from acquisitions and a slight currency headwind. Nonresidential business increased high single digits organically. Residential business declined mid-single digits. Electronics revenue was up low double digits. Americas adjusted operating income of $220.9 million increased 12% versus prior year, with adjusted operating margin up 130 basis points.

International Segment

• Revenue of $104.1 million, down 0.3% on a reported basis and up 0.9% organically. Acquisitions positively impacted reported revenues by 1.8%, while currency was a headwind. International adjusted operating income of $18.8 million decreased 2.6% versus prior year period, with adjusted operating margins decreasing 20 basis points.

• Reiterated 2025 full-year adjusted earnings per share outlook of $7.65 to $7.85. - Anticipated full-year tax rate in range of 17% to 18%, with first half rate similar to second half. - Estimated tariff costs of approximately $80 million in 2025, expected to be offset at operating profit and EPS level via pricing actions. - Not updating revenue outlook for tariff and foreign exchange assumptions, but potential upside to revenue outlook if current tariff-related pricing actions and foreign exchange rates persist.

• Volatility in tariffs and foreign exchange rates, which could impact revenue and profit. - Residential market affected by stronger Q4 and uncertainty on tariffs and interest rates. - International market affected by local economic and policy conditions. - Potential supply chain risks.

Q: Joe Ritchie from Goldman Sachs asked about tariff progression, pricing actions and their dynamics, and non-res growth and pull ahead.

A: Mike Wagnes said tariffs went into effect early April, pricing actions announced in April with a month-ish lag in Q2 impact. John Stone said they'll remain agile and committed to covering tariff costs at OI and EPS level. John Stone also noted non-res is a book and ship business with short lead times, and no large pull ahead evidence seen yet.

Q: Timothy Wojs from Baird asked about institutional market CapEx priorities and supply chain relative to competitors.

A: John Stone said institutional verticals like healthcare and education are resilient, with late cycle nature supporting outlook. On supply chain, residential side mostly imports under USMCA compliant, reducing China exposure with new plant in Mexico, and non-res side impression is largest competitor has similar footprint, some smaller competitors more import heavy.

Q: Jeffrey Sprague from Vertical Research asked about specifications as a leading indicator and margin rate progression.

A: John Stone said specifications are a good internal indicator but not linear quarter to quarter. Mike Wagnes said they offset tariffs at dollar basis at OI and EPS level, and margin rate impact is considered with that in mind.

Q: Joe O'Dea from Wells Fargo asked about Q2 expectation setting, go to market and distribution.

A: Mike Wagnes said to consider full year first and month-ish lag in price cost. John Stone said Allegion has fine field sales and marketing team, non-res is book and ship business with short lead times, and no large inventory build evidence seen on non-res side yet.

Q: Brett Linzey from Mizuho asked about pricing timing, magnitude, and mechanics between list price and surcharge.

A: Mike Wagnes said they announced pricing based on tariffs in place today. John Stone said they'll remain agile, monitor tariff environment, and are confident in reiterating the guide.

Q: Julian Mitchell from Mizuho asked about residential market replacement demand, market share, and profit outlook.

A: John Stone said residential market still soft due to high mortgage rates, tariff uncertainty, etc. Mike Wagnes said price and productivity net of inflation and investment is expected to be neutral for the year.

Q: Christopher Snyder from Morgan Stanley asked about guide mechanics, project paralysis, and market impact.

A: Mike Wagnes said revenue guide doesn't assume tariff-related price action uplift but operating profit guide does. John Stone said interest rates rising caused some project paralysis, with hope for projects to move forward as rates come down.

Q: Andrew Obin from Bank of America asked about recession concerns, momentum in channel, and Europe market.

A: John Stone said non-res had good momentum exiting 2024 and continuing into 2025. In Europe, Germany had political upheaval impact, Italy team doing well with market share gain, but just reiterating the full year guide.