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    ALLE
    Earnings call· Mar 2026(Q1 FY26)

    Allegion Q1 FY26 earnings call ALLE

    Apr 28, 2026 Source

    Executive summary

    Allegion Q1 FY26 — Strong Revenue Growth and Capital Deployment

    Allegion delivered strong Q1 revenue growth, driven by robust Americas nonresidential performance and strategic acquisitions, while navigating an ERP implementation challenge in its International segment. The company affirmed its organic revenue and adjusted EPS outlook, demonstrating commitment to balanced capital deployment and operational agility amidst inflationary pressures. Management expects to offset anticipated COGS headwinds through pricing and cost actions.

    Highlights

    5

    • Reported revenue increased 9.7% to over $1 billion in Q1 FY26.

    • Americas segment delivered 4.5% organic revenue growth, driven by nonresidential business.

    • Closed the acquisition of DCI, enhancing competitiveness on the West Coast for door and hardware packages.

    • Board approved a new $500 million share repurchase program.

    • Honored for the third consecutive year with the Gallup Exceptional Workplace Award.

    Concerns

    5

    • International segment organic revenue declined 5.3% due to an ERP implementation disruption.

    • Company-wide adjusted operating margin decreased 150 basis points to 21.2% in Q1 FY26.

    • Americas adjusted operating margins were down 110 basis points, impacted by volume declines, unfavorable mix, and acquisitions.

    • International adjusted operating income decreased 4.8% and margin declined 220 basis points.

    • Anticipate an incremental headwind of approximately 1% of COGS from tariffs and other inflation for FY26.

    Guidance & targets

    5
    CategoryTargetConfidence
    Reported Revenue Growth
    6% to 8%
    high materiality
    High
    Organic Revenue Growth
    2% to 4%
    high materiality
    High
    Adjusted Earnings Per Share
    $8.70 to $8.90
    high materiality
    High
    Available Cash Flow Conversion
    approximately 85% to 95%
    medium materiality
    High
    COGS Headwind Impact on Adjusted Operating Income and EPS
    neutral
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Americas
    Reported revenue growth driven by price realization in nonresidential business. Nonresidential demand remains healthy with strong spec activity. Residential business was flat due to soft markets. Adjusted operating margin impacted by volume declines, unfavorable mix, and acquisitions.
    Organic Revenue Growth: 4.5%Nonresidential Organic Growth: mid-single digitsResidential Growth: flatElectronics Revenue Growth: mid-single digitsAdjusted Operating Margin Change: -110 bps
    		$809.9 million6.9%—$227.4 million
    International
    Organic revenue decline primarily due to volume weaknesses in a legacy mechanical business caused by ERP implementation disruptions. Acquisitions and currency provided significant tailwinds to reported revenue. Adjusted operating margin impacted by operational inefficiencies and volume declines.
    Organic Revenue Growth: -5.3%Acquisitions Contribution to Revenue: 15.9%Currency Tailwind to Revenue: 10.9%Adjusted Operating Margin Change: -220 bps
    		$223.7 million21.5%—$17.9 million

    Operational metrics

    13
    Total Revenue
    $1 billionup 9.7%
    Q1 FY26

    Reported revenue for the quarter.

    Organic Revenue Growth
    2.6%
    Q1 FY26

    Enterprise organic revenue increase driven by price realization, partially offset by volume declines.

    Adjusted Operating Margin
    21.2%down 150 bps
    Q1 FY26

    Partially driven by volume declines and mix.

    Price and Productivity Net of Inflation and Investment
    $5.3 millionfavorable
    Q1 FY26

    Inclusive of transactional FX.

    Adjusted Earnings Per Share
    $1.80decreased $0.06 or 3.2%
    Q1 FY26

    EPS from acquisitions was more than offset by higher tax and interest and other.

    Available Cash Flow (YTD)
    $80.3 millionconsistent with prior year
    YTD Q1 FY26

    Year-to-date figure.

    Net Debt to Adjusted EBITDA
    1.7x
    Q1 FY26

    Healthy ratio supporting continued capital deployment.

    Dividends Paid
    $47 million
    Q1 FY26

    Consistent with long-term framework.

    Shares Repurchased
    $40 million
    Q1 FY26

    Amount repurchased in the first quarter.

    Share Repurchase Program Authorization
    $500 millionnew authorization
    Q1 FY26

    Recently approved by the Board.

    Americas Price and Productivity Net of Inflation and Investment
    $9.9 millionfavorable
    Q1 FY26

    Inclusive of transactional foreign currency.

    Americas Operating Margin Impact from Acquisitions
    40 bpsheadwind
    Q1 FY26

    Impact on margin rate.

    COGS Headwind from Tariffs and Inflation
    approximately 1%incremental headwind
    FY26

    Expected impact on COGS for the full year.

    Industry KPIs

    8
    MetricValueDetails
    Price costapproximately 1%%
    Order backlogsupports recovery
    Book to bill ratio—
    Data center hvac exposuregrowing nicely
    Organic operating leverage$5.3 millionUSD
    Service aftermarket attach—
    Order lead times placement horizonnot really
    Orders bookings growth by vertical—

    Orderbook & backlog

    1
    International Backlogsupports recoveryQ1 FY26

    Supports recovery of Q1 shortfall from ERP implementation over the remainder of the year.

    Product announcements

    1
    ProductTypeDetails
    LCN Senior Swing series of auto operatorslaunch

    Deals & partnerships

    1
    DCIAcquisition of a West Coast-based manufacturer of hollow metal doors and frames, specializing in custom design and quick ship capability.

    Closed earlier in March. DCI makes Allegion more competitive on the West Coast, helping the totality of the Americas nonresidential business as customers purchase complete door and hardware packages together.

    Risks & headwinds

    5
    ERP Implementation DisruptionQ1 FY26

    International organic revenue declined 5.3%; International adjusted operating margin decreased 220 bps.

    Mitigation: Production rates have started to improve, and the Q1 shortfall is expected to be recovered over the remainder of the year, supported by existing orders and backlog.

    Inflationary Pressures and TariffsFull-year 2026

    Incremental headwind of approximately 1% of COGS.

    Mitigation: Expected to be offset on a dollar basis through a combination of price and cost actions, aiming for neutrality to 2026 adjusted operating income dollars and EPS.

    Volume Declines and Unfavorable MixQ1 FY26

    Contributed to 150 bps decrease in company-wide adjusted operating margin and 110 bps decrease in Americas adjusted operating margin.

    Mitigation: Management expects full-year nonresidential volume growth and for mix to even out over the course of the year for the Americas. Margin expansion is anticipated in the back half of the year.

    Soft Residential MarketsQ1 FY26

    Residential business was flat in Q1 FY26.

    Mitigation: Electronics growth in residential continues, and market share is holding up. Management continues to introduce new products in the electronics segment.

    Higher Tax and Interest ExpensesQ1 FY26

    Offset EPS from acquisitions.

    What to watch in Q2 FY26

    5

    International ERP Recovery

    Q2 FY26 and remainder of the year
    CurrentOrganic revenue down 5.3% in Q1 due to ERP issues.
    TargetImproved production rates and recovery of Q1 shortfall, leading to positive organic growth.

    Why it matters

    Verifying the recovery of the International segment's operational performance is crucial for achieving full-year organic revenue and margin targets.

    Production rates there have started to improve, and we expect to recover the Q1 shortfall over the remainder of the year.

    Q&A highlights

    5

    Asked about elongation of spec-to-order times, data center crowding out other projects, and details on the 1% COGS headwind from tariffs and inflation.

    Management stated spec activity is strong and broad-based, with no meaningful elongation in spec-to-order times. Data centers are not crowding out other projects in their space, though their data center business is growing nicely. The 1% COGS headwind is from a flurry of tariff changes (IEEPA, Section 122, Section 232) and fuel inflation, which will be offset by pricing actions (not yet in market) and cost actions to be neutral to adjusted operating income and EPS.

    “I'd say spec activity is strong in nonres, might go so far to even call it very strong in recent months. And I'd say it's broad-based. 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.”

    asked by Joseph O'Dea · answered by John Stone

    2 min read5 chapters

    Detailed Narrative

    01

    Americas Segment Performance and Market Dynamics

    The Americas segment reported strong performance, with 4.5% organic revenue growth driven by price realization in the nonresidential business. Spec activity in nonresidential markets remains strong and broad-based, with no significant elongation in the spec-to-order timeline. The residential business was flat due to soft market conditions, with price realization offsetting volume declines. Electronics revenue in the Americas grew mid-single digits, continuing to be a long-term growth driver for the business.

    02

    International Segment ERP Challenges and Recovery Plan

    The International segment experienced a 5.3% organic revenue decline and a 220 basis point decrease in adjusted operating margin, primarily due to an ERP implementation in a legacy mechanical business in Europe. This disruption impacted production rates and execution. Management expressed confidence in recovering the Q1 shortfall over the remainder of the year, citing existing customer orders and backlog. Electronics businesses in the International segment continue to be a source of strength.

    03

    Capital Allocation Strategy and DCI Acquisition

    Allegion maintained its balanced, disciplined, and consistent capital deployment strategy. This included $47 million in dividends and $40 million in share repurchases during the quarter. The Board also approved a new $500 million share repurchase program. The company closed the acquisition of DCI, a West Coast-based manufacturer of hollow metal doors and frames, which is expected to improve competitiveness and customer service, despite limited EPS accretion in the current fiscal year.

    04

    Inflationary Pressures and Mitigation Efforts

    The company anticipates an incremental headwind of approximately 1% of COGS for the full year 2026, stemming from tariffs (including Section 232 changes) and other inflation, particularly fuel. Management plans to offset this impact on a dollar basis through a combination of pricing actions (not yet reflected in organic growth guidance) and cost actions. The goal is to ensure this headwind is neutral to adjusted operating income dollars and EPS for the year.

    05

    Workplace Culture and Employee Engagement

    Allegion was recognized for the third consecutive year with the Gallup Exceptional Workplace Award, distinguishing it as one of only five companies to earn the award with distinction in 2026. This recognition highlights the company's highly engaged workplace culture, which management believes directly contributes to stronger results for customers, shareholders, and partners.

    AI-generated summary of the company’s earnings call. Not investment advice.