管理層發言
Good day, everyone. My name is Stefan, and I will be your conference operator today. At this time, I would 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 speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time and if you have 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 would like to turn the call over to Joshua Pokrzywinski, Vice President of Investor Relations.
Thank you, Stefan. Good morning, everyone, and thank you for joining us for the fourth quarter 2025 earnings call. With me today are John H. Stone, President and Chief Executive Officer, and Michael J. Wagnes, Senior Vice President and Chief Financial Officer of Allegion plc. 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 investors.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. 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 will turn the call over to John.
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 $600,000,000 of accretive M&A, and solid execution in a dynamic and inflationary environment. I am 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 nonresidential. U.S. residential markets were softer than expected in the fourth quarter, and our outlook contemplates residential remains soft in 2026. However, our team has a proven track record of execution across a variety of macro conditions. We are initiating fiscal year 2026 adjusted EPS guidance of $8.70 to $8.90 per share. I will 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. 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 a hundred years ago and are known as pioneers in our industry. Allegion is 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 nonresidential aftermarket alongside the mid-price point Von Duprin 70 Series exit devices released in 2024. These are complemented by our mid-tier offerings with LCN closures. 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 $630,000,000 of capital deployed. These acquisitions aligned to the strategy we 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 $175,000,000 in dividends to shareholders. Looking ahead to 2026, we have also just announced our twelfth consecutive annual increase in dividends. While we did not repurchase shares in the fourth quarter, share repurchase was part of our capital allocation in 2025 totaling $80,000,000. 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. Michael will now walk you through the fourth quarter financial results.
Thanks, John, and good morning, everyone. Thanks for joining today's call. Please go to slide number five. As John shared, our fourth-quarter 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 nonresidential business. The organic revenue increase was driven by price realization partially offset by volume declines in our Americas residential and International businesses. Fourth-quarter adjusted operating margin was 22.4%, up 30 basis points compared to last year. Pricing and productivity exceeded inflation and investment by $12,000,000, driving 20 basis points of margin expansion in the quarter. Favorable mix also benefited margin rates. 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 $685,700,000, up 17.6% versus the prior year. I will provide more details on our balance sheet and cash flow a little later in the presentation. Please go to slide number six. Our Americas segment was resilient in the fourth quarter despite a weak quarter in residential markets. Revenue of $795,500,000 was up 6.1% on a reported basis and up 4.8% on an organic basis, led by our nonresidential business. Our nonresidential 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 remain 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 $216,200,000 increased 5.4% versus the prior year. Adjusted operating margin was down 30 basis points in the quarter. Pricing and productivity net of inflation and investment were a 30-basis-point headwind to margin rates in the quarter; however, they were 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 number seven. Our International segment delivered revenue of $237,700,000, which was up 21.5% on a reported basis and down 2.3% organically. Growth in our Electronic 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 $39,400,000 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. 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 eight, and I will provide an overview of our cash flow and balance sheet. Year-to-date available cash flow was $685,700,000, up over $100,000,000 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. 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. I will now hand the call back over to John.
Thanks, Mike. Please go to slide nine. 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 nonresidential markets similar to 2025 levels and this is supported by our spec-writing trends. A broad end-market exposure and large installed base make for a resilient business, one that is 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. 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 will 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 one point of foreign currency translation and two points of carryover contribution from M&A primarily on 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 nonresidential business. 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. Our adjusted EPS outlook is $8.70 to $8.90. This represents growth of approximately 8% at the midpoint inclusive of an approximate $0.10 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 nonresidential America, double-digit Electronics growth, and accretive capital deployment as we acquired good businesses in markets where we have a right to win. I am proud of the Allegion team and appreciative of our strong channel partners. With that, we will take your questions.
分析師問答
We will now move to the Q&A. For today's session, we will 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 have been called upon, please unmute yourself and begin to ask your question. We will be taking one question and one follow-up question only. Thank you. We will now pause for a moment to assemble the queue. Our first question will come from Joseph John O'Dea from Wells Fargo. Please unmute your line and ask your question.
Good morning. Can you hear me? Good morning. Can you start on the residential side in the fourth quarter? I think you touched on it being softer than anticipated. What did you see 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 then on the pricing side of things as well if there was any need to adjust price there based on the demand you have?
Yeah, Joe, thanks for the question. Certainly, residential in the Americas ended the year softer than we had contemplated. Residential throughout the year was a little choppy. We put up mid single-digit growth in the third quarter largely on the heels of a very successful new product launch, then a pretty soft fourth quarter. I would say 2026 started off better. But just looking at residential, it did end softer than we had contemplated. That is part of the reason we took a prudent assumption into 2026 that we would expect residential to be soft, and certainly should there be an uptick in that market, we are positioned well to capture upside. Regarding pricing, there was not any short-term reaction on pricing nor do I think that contributed to any of the demand softness. The last point is our channel does not hold a lot of inventory, so any inventory correction-type actions are usually very short lived.
Got it. And then on the Americas organic outlook, the low single-digit to mid single-digit, any color as we think about price and volume components of that? Is that a bit more price than volume, considering price carryover tailwind, and how do you think about volume progression over the course of the year? Is volume growth expected to get better, and is that a function of comps or anything that you are seeing in the spec activity that would suggest a little bit better demand environment as we go through 2026?
Yeah, Joe. So as you think about the Americas for 2026, we expect to see both price and volume growth, but as you suggested, more pricing than volume growth for the year. I do not like to give quarterly outlook, but I will unpack it qualitatively. Historically, revenue levels in Q1 are similar to Q4, and then we tend to have higher revenue in the middle two quarters. We expect the same seasonality where the middle two quarters are our largest quarters, and Q4 is a little less. So as you model this, that could help you qualitatively. In addition, you have to look at the prior-year comp as you think about pricing and margins. Consider how we finished in each quarter for 2025 as you think about that pricing impact for the next year. In 2025, we had not yet felt the inflationary impacts from tariffs in certain periods, so you did not have the pricing or the inflation in the same way. Hopefully that helps you as you think about unpacking the year from a top line perspective.
Our next question will come from Tomohiko Sano from JPMorgan. Please unmute your line and go ahead.
Good morning, everyone. Can you talk about how you maintained secular leading margins despite the higher cost, repricing, productivities, and acquisition synergies? Can you break down the contributions from each of these levers and which will be most important in 2026, please?
Tom, we put detailed information in our 10-K, so when you get a chance, you can review it for the fourth quarter and full year. At the enterprise level, we did get margin tailwind from pricing and productivity in excess of inflation and investment. There was a headwind in the Americas in 2025, which is a function of the math we discussed throughout the year. We also had slightly favorable mix, but the residential volume deleverage mitigated that in the Americas region. For 2026, you can back into full-year margin expansion. We have all the components at the enterprise level, and as you know, the Americas is our largest business; we cannot drive margin expansion without the Americas being in a similar range. As far as the components, I would expect pricing and productivity to be positive on a dollar basis and, from a rate basis, I would not expect that to be a headwind in 2026. We do have a first quarter where you have carryover impact from the prior year where tariffs and investments were not present, so that will weigh on margin rates early in the year. But for the full year, expect price and productivity to be positive on a dollar basis and not negative on a margin rate basis.
Thank you. And a follow-up on International markets. These markets are expected to see continued growth primarily from acquisitions and electronics. Can you provide more color on specific geographies, particularly Western Europe and Australia, and when you expect the demand recovery, please?
Tomo, we do see our Electronics businesses leading the way, which is primarily a Western Europe-based business, and within that, primarily the DACH region, though we are expanding pan-Europe. Those businesses performed very well in 2025, and we expect continued growth out of them in 2026. For Australia and New Zealand, end markets have not been great, so a little improvement there off of weak comps is possible, but we'll need to see how it develops. Largely, Mechanical markets remain a bit sluggish, and Electronics will lead the way for us, along with some carryover contribution from M&A.
Our next question will come from Brett Logan Linzey from Mizuho. Please unmute your line and ask your question.
Good morning. I 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. Can you talk about the pricing capture you expect this year on a net basis and what you are calibrating within the guidance framework?
Brett, our business uses a combination of surcharges and list price increases. We expect 2026 to have more list price increases. We will be agile if the environment changes, but our going-in assumption is that inflation will be a little less than in 2025, so total pricing will be a little less. I already discussed the rate benefit earlier. Overall, enterprise revenue and Americas revenue should have a bit more pricing than volume. If you model organic growth within the provided framework, you can estimate each component.
I appreciate that, Mike. And a follow-up on investments: the $9,000,000 tailwind in Q4 within Americas — is that just a function of the timing of some projects and some spending? How do we think about the investment allocation this year and if there is flexibility around that budget?
I like to view price and productivity funding investments and inflation. Quarter to quarter that can move around, but in general, we will take necessary pricing actions and drive productivity to fund both. I expect that to be positive on a full-year basis. As mentioned earlier, Q1 has a tough comparable where the prior year did not have the inflation or the investment, so 2026 carries that. That will weigh on margin rates early in the year, but for the full year you can back into enterprise margin expansion. Remember the Americas will approximate that enterprise total as well from an expansion perspective.
Our next question will come from Robert Schultz with Baird. Please unmute your line and go ahead.
Thanks for taking the question. As you think about 2026, in the Americas, what are you assuming for institutional and commercial volume growth? Do you think they are similar, or do you expect outperformance in one of those verticals?
Bobby, when we think about our business, we would not want to give volume growth by specific nonresidential subverticals, so I do not want to dive into select verticals within the nonres market. I will refer you back to John's prepared remarks where he spoke about broad end-market exposure and our spec activity supporting the outlook. I just do not want to provide subvertical volume details.
Understood. And then on M&A, how does your pipeline look today, and are you seeing any increasing competition for deals now?
Good question. The pipeline is very active in both our International and Americas segments, largely in line with the strategic priorities we shared at Investor Day: core Mechanical portfolio, Electronics, and complementary software. The pipeline looks busy and encouraging. We remain disciplined, sticking to our strategy, focusing on where we have a competitive advantage and a right to win, and on shareholder returns.
Our next question will come from Andrew Obin with Bank of America. Please unmute your line and go ahead.
Hi. Good morning. You have been able to deliver consistent EPS growth in tough markets and chose to allocate a lot more capital to M&A this year. Given the markets have been sluggish, why did you choose M&A acceleration versus repurchasing Allegion stock? Can you share insights into how you and the board evaluated that decision?
Andrew, thanks for the question. We have a consistent view of capital allocation and review it each quarter. Our priority is profitable growth, which is why we invest in organic growth initiatives. We will continue to be a dividend-paying stock and expect the dividend to grow with earnings. We also have an open share repurchase authorization and used repurchase where appropriate. When there are attractive acquisition targets that fit our strategy, where we can integrate and drive accretive returns and synergies, we will pursue them. Expect Allegion to be balanced, disciplined, and consistent in capital allocation to drive shareholder returns.
Thank you. And maybe a little more color on markets growth. You highlighted the DACH region. How is the Interflex business doing and progress moving beyond the core German manufacturing base?
I'm thrilled you asked about Interflex. We are very proud of the Interflex team. It tends to ramp revenue and profitability as the year goes on; September can be slow and December much stronger. It has a blue-chip customer base. We've put resources in to grow the Flex and the plan solutions across Europe, and they had a strong year. They are delighting customers. We're finding ways to introduce AI into the software offerings to help customers get reports and data they need. They are growing nicely and we are excited about that business as we expand beyond the core German manufacturing base.
Our final question in the queue comes from Christopher M. Snyder with Morgan Stanley. Please unmute your line and ask your question.
Thank you. I wanted to ask about Americas margins. Q4 came in down year on year modestly. Did the Q4 decline result from residential volumes turning lower versus Q3? There still seemed to be tailwinds in the quarter between mix and productivity. Any other color unpacking the year-on-year margin for Americas in Q4?
Chris, you are thinking about it the right way. Residential in the fourth quarter was down high single digits. We had positive pricing, but volumes were worse, so that is a substantial volume decline. That delta explains the difference between Q3 and Q4. Q3 had mid single-digit growth, so you can see a 10 to 15 point delta between the two quarters, which explains the margin variance.
Thanks. And if we look past Q1 and think about Q2 to Q4, does the guide assume that Americas gets back to the target incremental margin rate once we have the tariff revenue in the comp?
If you think about the fundamentals, the core incrementals we outlined at Investor Day still hold after we get through Q1. Think of those core incrementals being strong once that tough comparable quarter is behind us. So as you think about the full year, margin expansion in the Americas remains consistent with what we discussed at Investor Day; we just need to get through Q1.
At this time, I see no callers in the queue. So I will hand the call back to John H. Stone for closing remarks.
Thanks very much. Thank you all for the great Q&A. We look forward to speaking with you on our Q1 earnings call in April. Be safe, be healthy.