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AP

Allegion plc (ALLE)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered double‑digit reported revenue growth to $1.070B (+10.7%) and adjusted EPS of $2.30 (+6.5% YoY), driven by Americas non‑residential demand, price realization, and accretive M&A; adjusted operating margin was 24.1% (−10 bps YoY) as higher corporate costs offset segment margin expansion .
  • Versus Wall Street consensus, Allegion modestly beat on revenue ($1.070B vs $1.050B*) and EPS ($2.30 vs $2.243*), while EBITDA was slightly below ($270.6M actual vs $276.5M*) [functions.GetEstimates].
  • Full‑year 2025 guidance was raised: reported revenue growth 7.0–8.0% (from 6.5–7.5%), GAAP EPS $7.45–$7.55 (from $7.25–$7.40), adjusted EPS $8.10–$8.20 (from $8.00–$8.15), and ACF conversion 85–95% (from 85–90%) .
  • Catalysts: continued electronics momentum (mid‑teens in Q3 commentary), strong spec activity underpinning non‑residential pipeline, tariff recovery via surcharges with price/productivity offset at OI/EPS, and ongoing portfolio upgrades/partnerships (e.g., Google Wallet resident key; Brivo integration) .

What Went Well and What Went Wrong

What Went Well

  • Americas non‑residential and residential both grew mid‑single digits organically; Americas adjusted operating margin expanded 40 bps to 29.9% on volume/mix and pricing tailwinds .
  • International reported revenue +22.5% (organic +3.6%) with adjusted margin +70 bps to 14.3%, aided by electronics growth, acquisitions, and FX tailwinds .
  • Management raised FY25 adjusted EPS to $8.10–$8.20 and maintained tax rate assumption (17–18%); CEO: “we’re raising our outlook for reported full-year 2025 revenue and adjusted EPS” .

What Went Wrong

  • Enterprise adjusted operating margin was flat-to-down (24.1% vs 24.2% YoY) due to higher corporate expenses despite segment margin expansion .
  • EBITDA modestly trailed consensus in Q3 (actual $270.6M vs $276.5M*), reflecting corporate expense headwinds and the margin rate effect of tariff recovery priced to be dollar neutral [functions.GetEstimates].
  • Residential demand remains soft; Q4 residential expected to track market (not repeat Q3 mid‑single digit growth from new e‑locks launch) .

Financial Results

Quarterly Trend – Revenue, EPS, Margins

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$941.9 $1,022.0 $1,070.2
GAAP Diluted EPS ($)$1.71 $1.85 $2.18
Adjusted EPS ($)$1.86 $2.04 $2.30
Operating Margin % (GAAP)20.9% 21.5% 21.8%
Adjusted Operating Margin %22.7% 23.7% 24.1%

Q3 2025 vs Prior Year and vs Estimates

MetricQ3 2024Q3 2025 Consensus*Q3 2025 Actual
Revenue ($USD Millions)$967.1 $1,050.2* [functions.GetEstimates]$1,070.2
GAAP Diluted EPS ($)$1.99 —$2.18
Adjusted EPS ($)$2.16 $2.243* [functions.GetEstimates]$2.30
EBITDA ($USD Millions)$271.0 (EBITDA) $276.5* [functions.GetEstimates]$270.6 (EBITDA)

Note: Values marked with * retrieved from S&P Global.

Segment Performance

MetricQ3 2024Q2 2025Q3 2025
Americas Net Revenues ($MM)$782.4 $821.5 $844.0
Americas Adjusted Op Margin %29.5% 29.9% 29.9%
International Net Revenues ($MM)$184.7 $200.5 $226.2
International Adjusted Op Margin %13.6% 13.1% 14.3%

KPIs and Balance/Cash

KPIQ1 2025Q2 2025Q3 2025
Adjusted EBITDA ($MM)$228.0 $258.1 $274.1
Available Cash Flow YTD ($MM)$83.4 $275.4 $485.2
Effective Tax Rate % (GAAP)15.4% 20.3% 9.8%
Adjusted Effective Tax Rate %16.1% 20.7% 14.9%
Interest Expense ($MM)$24.7 $24.6 $26.6
Cash & Equivalents ($MM)$494.5 $656.8 $302.7
Total Debt ($MM)$1,997.0 $2,067.2 $2,087.7

Non‑GAAP reconciliation items in Q3: $19.0M amortization of acquired intangibles and $4.6M restructuring/integration; tax adjustments included an $8.5M legislative change benefit .

Guidance Changes

MetricPeriodPrevious Guidance (7/24/25)Current Guidance (10/23/25)Change
Reported Revenue Growth (%)FY 20256.5%–7.5% 7.0%–8.0% Raised
Organic Revenue Growth (%)FY 20253.5%–4.5% 3.5%–4.5% Maintained
GAAP EPS ($)FY 2025$7.25–$7.40 $7.45–$7.55 Raised
Adjusted EPS ($)FY 2025$8.00–$8.15 $8.10–$8.20 Raised
Adjusted Effective Tax Rate (%)FY 2025~17%–18% ~17%–18% Maintained
Avg Diluted Shares (MM)FY 2025~86.5 ~86.5 Maintained
Available Cash Flow Conversion (%)FY 202585%–90% 85%–95% Raised
Tariff Cost Assumption ($MM)FY 2025~40 (effective July 22) ~40 (includes Aug 18 scope expansion) Clarified
Dividend per Share ($)Quarterly$0.51 (Sep declared) $0.51 paid in Q3 (~$44M) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Non‑res Americas demand & spec activitySpec writing accelerated in 2024; continued growth YTD; aftermarket strong Spec activity “continued to grow” and supports 2026 outlook; institutional verticals resilient Steady positive
Tariffs & pricing/productivityPrice/productivity to be neutral for year; surcharge flexibility; lag timing ~$40M surcharge recovery; pricing ~4.6% Americas; PPII tailwind; offset tariffs at OI/EPS Managed neutrality
Residential demand & electronicsResidential soft; electronics up low double‑digits; new products slated Q3 residential mid‑single digit helped by new e‑locks; Q4 expected to track soft market; electronics up mid‑teens Mixed; product‑led pockets of strength
International portfolio & M&AFlattish organic; seasonally stronger Q4; accretive deals (Elitech) Reported +22.5%; margin +70 bps; acquisitions accretive; electronics strong Improving mix/margins
Capital deployment & pipelineMultiple bolt‑ons (Trimco, Novas, Lemaar); pipeline active across mechanical, electronics, SaaS ~$600M YTD acquisitions; pipeline strong; disciplined multiples (HSD mech, higher for electronics/software) Ongoing accretive M&A
Technology initiativesNew product launches (Schlage Arrive; Sense Pro UWB) Google Wallet resident key (Zentra); Brivo real‑time Wi‑Fi lock integration; Performance Series locks Advancing connected/access ecosystem

Management Commentary

  • CEO: “double-digit revenue growth for the enterprise and continued segment margin expansion speak to the resiliency of our model…we’re raising our outlook for reported full-year 2025 revenue and adjusted EPS” .
  • CFO: “Adjusted operating margin was 24.1%…both our segments had margin expansion, which was offset by higher corporate expenses…price and productivity, net of inflation and investment, was a tailwind of $2.2 million” .
  • CEO on tariffs/pricing: “we expect to offset tariffs at the operating profit and EPS level…primarily through pricing actions” .
  • CEO on spec writing: “spec activity has continued to grow in 2025…supports our outlook…we still see organic growth in non-res Americas” .
  • CFO on balance sheet: “net debt to adjusted EBITDA is at a healthy ratio of 1.8 times” .

Q&A Highlights

  • Non‑res verticals/spec pipeline: Management cited healthy channel backlogs and broad spec activity (education, multifamily, data centers), supporting continued non‑res growth .
  • Tariffs, pricing fatigue: Team sees industry‑wide price realization; non‑res demand “humming along pretty well”; prepared to cover inflation with price/productivity without fatigue evidence .
  • Residential outlook: Q4 residential expected to align with soft market; Q3 uplift was product‑driven (Arrive lock) rather than trend change .
  • Margin cadence: Segment margins expanding; corporate expenses drove enterprise rate flat/down; long‑term incremental margins ~35% targeted with detail to come in February .
  • M&A multiples/integration: Mechanical assets at high single‑digit EBITDA multiples; electronics/software higher; all assets integrating with revenue/cost synergies .

Estimates Context

MetricQ1 2025 ActualQ1 2025 Consensus*Q2 2025 ActualQ2 2025 Consensus*Q3 2025 ActualQ3 2025 Consensus*
Revenue ($USD Millions)$941.9 $920.8* [functions.GetEstimates]$1,022.0 $999.4* [functions.GetEstimates]$1,070.2 $1,050.2* [functions.GetEstimates]
Adjusted EPS ($)$1.86 $1.673* [functions.GetEstimates]$2.04 $1.987* [functions.GetEstimates]$2.30 $2.243* [functions.GetEstimates]
EBITDA ($USD Millions)$228.0 (Adj) $215.6* [functions.GetEstimates]$258.1 (Adj) $252.2* [functions.GetEstimates]$270.6 (EBITDA) $276.5* [functions.GetEstimates]

Note: Values marked with * retrieved from S&P Global.

Implications: Street likely nudges FY25 revenue/EPS slightly higher given Q3 beats and raised guidance; EBITDA expectations may reconcile for corporate expense run‑rate and tariff dollar‑neutral margin effects .

Key Takeaways for Investors

  • Allegion’s Q3 was operationally strong with a clean beat on revenue and EPS; margin rate modestly constrained by corporate expense comps but segment margins improved, supporting quality of earnings .
  • Non‑residential Americas remains the growth engine, underpinned by robust spec activity and aftermarket demand; this supports near‑term revenue visibility into Q4/early 2026 .
  • Tariff/surcharge dynamics are being managed to dollar neutrality at OI/EPS; expect margin rate optics to reflect math (numerator/denominator) rather than underlying profitability deterioration .
  • Electronics and connected solutions are key secular drivers (Google Wallet resident key; Brivo real‑time Wi‑Fi locks), enhancing mix and strategic positioning in multifamily and commercial .
  • International mix improvement and accretive acquisitions (e.g., Elitech, UAP, Brisant) are lifting reported growth and margins, albeit slightly dilutive to enterprise rates near term .
  • Cash generation is robust; ACF conversion raised to 85–95%; balance sheet healthy (net debt/Adj EBITDA 1.8x), enabling continued disciplined M&A and shareholder returns .
  • Near‑term trading: Positive reaction bias on beat/raise and electronics narrative; watch Q4 residential cadence, corporate expense normalization, and any tariff policy changes as potential volatility drivers .