Allegion plc (ALLE)

Overview

Organization

Allegion plc and its consolidated subsidiaries (“Allegion,” “the Company,” “we,” “our,” or “us”) are a leading global provider of security products and solutions operating in two segments: Allegion Americas and Allegion International. We sell a wide range of security products and solutions for end-users in commercial, institutional and residential facilities worldwide, including the education, healthcare, government, hospitality, retail, commercial office and single and multi-family residential markets. Our leading brands include CISA®, Interflex®, LCN®, Schlage®, SimonsVoss® and Von Duprin®.

Recent Developments

Business and Industry Trends and Outlook and Global Trade and Macroeconomic Environment

In the second quarter of 2026, we delivered low-double digit revenue growth compared to the same period in 2025, driven by volume growth, favorable pricing and the impact from recent acquisitions. Demand for electronic security products has also remained strong and continues to be a long-term growth driver.

On February 20, 2026, the U.S. Supreme Court ruled that certain tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) were invalid, and in March 2026, the U.S. Court of International Trade further ruled that importers that paid such tariffs are due refunds. In the second quarter of 2026, U.S. Customs and Border Protection launched a system to process IEEPA tariff refund claims, and we formally submitted claims for qualifying IEEPA tariff refunds. Refunds received related to those claims have not been significant. Although we may be entitled to additional refunds of previously paid IEEPA tariffs, the amount and timing of any such refunds remain uncertain, and as of June 30, 2026 we have not recorded any amounts for recoveries that have not been received. The global tariff landscape continues to shift, and we continue to monitor these developments and assess their potential impacts.

Following these rulings, new tariffs were imposed under other laws and on imports from more countries, in addition to existing non-IEEPA tariffs. Through the six months ended June 30, 2026, we have offset inflation due to tariffs with pricing actions. We continue to analyze the impact of changes in tariffs and what steps, if any, including pricing actions, we may take to mitigate the impact of the tariffs. We estimate we source approximately 20-25% of cost of goods sold (“COGS”) from Mexico, less than 5% of COGS from China, and 5-10% of COGS from all other non-U.S. countries. Existing or new tariffs could impact future demand.

Acquisitions

On March 2, 2026, we, through our subsidiaries, acquired 100% of Door Components, Inc. (“DCI”), a manufacturer of custom, quick ship hollow metal doors and frames for industrial, commercial and institutional markets based in the United States. DCI is reported in the Company’s Allegion Americas segment. The purchase consideration, net of cash acquired, was approximately $70 million. This acquisition was accounted for as a business combination and was funded with available cash on hand and borrowings under the Revolving Facility.

2026 Dividends and Share Repurchases

During the six months ended June 30, 2026, we paid dividends of $1.10 per ordinary share to shareholders.

On April 15, 2026, the Board replenished the funds available for the repurchase of the Company’s ordinary shares under its existing share repurchase program and, as a result, authorized the repurchase of a total amount of up to $500.0 million of the Company’s ordinary shares under the program. During the six months ended June 30, 2026, we repurchased approximately 1.2 million shares for $160.6 million.

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Results of Operations – Three months ended June 30

The discussions that follow describe the significant factors contributing to the changes in our results of operations for the periods presented and form the basis used by management to evaluate the financial performance of the business.

Net Revenues

Net revenues for the three months ended June 30, 2026, increased by 12.7%, or $129.5 million, compared with the same period in 2025, due to the following:

The increase in Net revenues was driven by higher volumes, improved pricing, the favorable impact from acquisitions, net of divestitures and favorable foreign currency exchange rate movements.

Pricing includes increases or decreases of price, including discounts, surcharges and/or other sales deductions, on our existing products and services. Volume includes increases or decreases of revenue due to changes in unit volume of existing products and services, as well as new products and services.

Operating Income/Margin

Operating income for the three months ended June 30, 2026, increased $35.0 million compared to the same period in 2025. Operating margin, which we define as Operating income as a percentage of total Net revenues, for the three months ended June 30, 2026, increased to 22.1% from 21.5% for the same period in 2025, due to the following:

The increase in Operating income was driven by favorable volume/product mix, pricing and productivity improvements in excess of inflation and investment spending and the favorable impact from acquisitions/divestitures. These increases were partially offset by higher acquisition, integration and restructuring expenses and unfavorable foreign currency exchange rate movements, inclusive of transactional foreign currency.

The increase in Operating margin was driven by favorable volume/product mix and pricing and productivity improvements in excess of inflation and investment spending. These increases were partially offset by higher acquisition, integration and

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restructuring expenses, unfavorable foreign currency exchange rate movements, inclusive of transactional foreign currency and the unfavorable impact on operating margin from acquisitions, net of divestitures.

Pricing and productivity in excess of inflation and investment spending includes the impact to both Operating income and Operating margin from pricing, as defined above, in addition to productivity, inflation and investment spending. Productivity represents improvements in unit costs of materials, cost reductions related to improvements to our manufacturing design and processes and reductions in selling and administrative expenses due to productivity projects. Inflation includes both unit costs for the current period compared to the average actual cost for the prior period, multiplied by current year volumes, and current period costs of ongoing selling and administrative functions compared to the same ongoing expenses in the prior period. Expenses related to increased head count for strategic initiatives, new facilities or other significant spending for strategic initiatives or new product and channel development, are captured in investment spending.

Volume/product mix represents the impact to both Operating income and Operating margin due to increases or decreases of revenue due to changes in unit volume, including new products and services, including the effect of changes in the mix of products and services sold on Cost of goods sold.

Interest Expense

Interest expense for the three months ended June 30, 2026, increased $0.2 million compared with the same period in 2025, primarily due to higher average outstanding indebtedness partially offset by lower weighted-average interest rates.

Other Expense (Income), net

The components of Other expense (income), net for the three months ended June 30 were as follows:

Net periodic pension and postretirement benefit cost, less service cost for the three months ended June 30, 2026 includes a one-time $3.7 million settlement charge related to a U.S. defined benefit pension plan.

Provision for Income Taxes

The effective income tax rates for the three months ended June 30, 2026 and 2025, were 19.0% and 20.3%, respectively. The decrease in the effective income tax rate compared to 2025 is primarily due to unfavorable discrete charges in the prior year and favorable discrete adjustments in the current year.

Results of Operations – Six months ended June 30, 2026

The discussions that follow describe the significant factors contributing to the changes in our results of operations for the periods presented and form the basis used by management to evaluate the financial performance of the business.

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Net Revenues

Net revenues for the six months ended June 30, 2026, increased by 11.3%, or $221.2 million, compared with the same period in 2025, due to the following:

The increase in Net revenues was driven by improved pricing, higher volumes, the favorable impact from acquisitions, net of divestitures and favorable foreign currency exchange rate movements.

Operating Income/Margin

Operating income for the six months ended June 30, 2026, increased $33.9 million compared to the same period in 2025. Operating margin, which we define as Operating income as a percentage of total Net revenues, for the six months ended June 30, 2026, decreased to 20.6% from 21.2% for the same

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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause a difference include, but are not limited to, those discussed under Part I, Item 1A. Risk Factors in this Annual Report on Form 10-K. The following section is qualified in its entirety by the more detailed information, including our consolidated financial statements and the notes thereto, which appears elsewhere in this Annual Report on Form 10-K.

Overview

Organization

We are a leading global provider of security products and solutions operating in two segments: Allegion Americas and Allegion International. We sell a wide range of security products and solutions for end-users in commercial, institutional and residential facilities worldwide, including the education, healthcare, government, hospitality, retail, commercial office and single and multi-family residential markets. Our leading brands include CISA®, Interflex®, LCN®, Schlage®, SimonsVoss® and Von Duprin®.

Recent Developments

Business and Industry Trends and Outlook and Global Trade and Macroeconomic Environment

In 2025, we delivered high-single digit revenue growth compared to 2024, driven by favorable pricing and volume growth, as well as the impact from acquisitions made during the year. Demand for electronic security products has also remained strong and continues to be a long-term growth driver.

Throughout 2025, the U.S. government announced tariffs on imports from several countries from which we manufacture and/or import products and components. In 2025, we offset inflation due to tariffs with pricing actions. We continue to analyze the impact of changes in tariffs and what, if any, steps, including pricing actions, we may take to mitigate the impact of the tariffs. We estimate we source approximately 20-25% of cost of goods sold ("COGS") from Mexico, less than 5% of COGS from China, and 5-10% of COGS from all other non-US countries. Additionally, this could impact future demand.

The demand trends and macroeconomic conditions discussed above and a number of other challenges and uncertainties that could affect our businesses are described under Part I, Item 1A, "Risk Factors."

2025 and 2024 Significant Events

Acquisitions

We have made several recent business acquisitions across our Allegion Americas and Allegion International segments. The acquisitions align with our strategy of expanding our mechanical and electronic product portfolios and adding complimentary software and services. This includes the acquisition of ELATEC, including Elatec GmbH and other group entities ("ELATEC") on July 1, 2025. ELATEC is a manufacturer of security and access technology based in Germany, and the acquisition helps expand our global electronics portfolio in attractive end markets while also increasing strategic relationships with channel partners.

The aggregate consideration, inclusive of contingent consideration and net of cash acquired, for all acquisitions completed in 2025 and 2024 was approximately $631.6 million and $147.2 million, respectively. Businesses acquired in 2025 generated $93.0 million of Net revenues since the acquisition dates, which is included within our Consolidated Statements of Comprehensive Income.

See Note 3 to the Consolidated Financial Statements for further information.

Financing Activities

On December 9, 2025, we amended and restated our unsecured revolving credit facility (the "Revolving Facility") which, among other things, increased the total commitment from $750.0 million to $1.0 billion, and extended the maturity from May 20, 2029 to May 20, 2030. We used borrowings under the Revolving Facility to repay our outstanding term loan, which was scheduled to mature in November 2026. Outstanding borrowings under the Revolving Facility were $190.6 million at December 31, 2025.

Dividends and Share Repurchases

During 2025, we paid quarterly dividends of $0.51 per ordinary share to shareholders on record as of March 14, 2025, June 13, 2025, September 15, 2025, and December 16, 2025, for a total of $175.3 million, and repurchased approximately 0.6 million ordinary shares for approximately $80.0 million.

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During 2024, we paid quarterly dividends of $0.48 per ordinary share to shareholders on record as of March 15, 2024, June 14, 2024, September 20, 2024, and December 17, 2024, for a total of $167.0 million, and repurchased approximately 1.6 million ordinary shares for approximately $220.0 million.

Results of Operations - For the years ended December 31

The discussions that follow describe the significant factors contributing to the changes in our results of operations for the years presented and form the basis used by management to evaluate the financial performance of the business. For a discussion of our results of operations for the year ended December 31, 2024, compared to the year ended December 31, 2023, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2024 Annual Report on Form 10-K filed with the SEC on February 18, 2025.

Net Revenues

Net revenues for the year ended December 31, 2025, increased by 7.8%, or $295.1 million, as compared to the year ended December 31, 2024, due to the following:

The increase in Net revenues was driven by improved pricing, favorable impact from acquisitions / divestitures, higher volumes and favorable foreign currency exchange rate movements.

Pricing includes increases or decreases of price, including discounts, surcharges and/or other sales deductions, on our existing products and services. Volume includes increases or decreases of revenue due to changes in unit volume of existing products and services, as well as new products and services.

Cost of Goods Sold

For the year ended December 31, 2025, Cost of goods sold as a percentage of Net revenues decreased to 54.8% from 55.8%, as compared to the year ended December 31, 2024, due to the following:

Cost of goods sold as a percentage of Net revenues decreased primarily due to favorable product mix, favorable foreign currency exchange rate movements, a year-over-year decrease in restructuring, integration, and acquisition expenses and pricing and productivity, which exceeded the impacts from inflation and investment spending.

Pricing and productivity in excess of inflation and investment spending includes the impact to Cost of goods sold from pricing, as defined above, in addition to productivity, inflation and investment spending. Productivity represents improvements in unit costs of materials and cost reductions related to improvements to our manufacturing design and processes. Inflation includes unit costs for the current period compared to the average actual cost for the prior period, multiplied by current year volumes. Expenses related to increased head count for strategic initiatives, new facilities or other significant spending for strategic

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initiatives or new product and channel development, are captured in investment spending. Volume/product mix represents the impact due to increases or decreases of revenue due to changes in unit volume, including new products and services, including the effect of changes in the mix of products and services sold on Cost of goods sold.

Selling and Administrative Expenses

For the year ended December 31, 2025, Selling and administrative expenses as a percentage of Net revenues increased to 24.1% from 23.5%, as compared to the year ended December 31, 2024, due to the following:

Selling and administrative expenses as a percentage of Net revenues increased due to inflation in excess of productivity and investment spending and a year-over-year increase in restructuring, integration, and acquisition expenses. These increases were partially offset by the favorable impact of higher volume leverage.

Volume leverage represents the contribution margin related to changes in sales volume, excluding the impact of price, productivity, mix and inflation. Expenses related to increased head count for strategic initiatives, new facilities or significant spending for strategic initiatives or new product and channel development, are captured in investment spending in the table above.

Operating Income/Margin

Operating income for the year ended December 31, 2025, increased $78.8 million as compared to the year ended December 31, 2024, and Operating margin increased to 21.1% from 20.7%, due to the following:

The increase in Operating income was driven by favorable volume/product mix, the favorable impact from acquisitions/divestitures, favorable foreign currency exchange rate movements, and pricing and productivity improvements in excess of inflation and investment spending. These increases were partially offset by higher restructuring, integration, and acquisition expenses.

The increase in Operating margin was driven by favorable volume/product mix, which was partially offset by lower operating margin from pricing and productivity in excess of inflation and investment spending and higher restructuring, integration and acquisition expenses.

Interest Expense

Interest expense for the year ended December 31, 2025, decreased $1.0 million as compared to the year ended December 31, 2024, primarily due to a lower weighted-average interest rate on our outstanding indebtedness.

Other Income, net

The components of Other income, net, for the years ended December 31 were as follows:

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