Allegion plc

Previous wording

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

Current wording

Business and Industry Trends and Outlook

Previous wording

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.

Current wording

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

Previous wording

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.

Current wording

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. For the nine months ended September 30, 2026, Operating income includes a $19.9 million benefit related to refunds received and expected to be received for these claims. The impact of future IEEPA tariff refunds is not expected to be material.

Previous wording

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.

Current wording

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 nine months ended September 30, 2026, we have offset inflation due to tariffs with pricing actions. We continue to monitor the evolving global tariff landscape, analyze the potential impact and assess what steps, including pricing actions, we may take to mitigate the impact. Existing or new tariffs could impact future demand. 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.

Previous wording

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.

Current wording

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 $69.3 million. This acquisition was accounted for as a business combination and was funded with available cash on hand and borrowings under the Revolving Facility.

Previous wording

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

Current wording

During the nine months ended September 30, 2026, we paid dividends of $1.65 per ordinary share to shareholders and repurchased approximately 1.9 million shares for $280.3 million.

Previous wording

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:

Current wording

Operating income for the three months ended September 30, 2026, increased $50.8 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 September 30, 2026, increased to 24.3% from 21.8% for the same period in 2025, due to the following:

Previous wording

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 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.

Current wording

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

Previous wording

Interest expense for the six months ended June 30, 2026, decreased $0.3 million compared with the same period in 2025, primarily due to a lower weighted-average interest rate on our outstanding indebtedness.

Current wording

Interest expense for the three months ended September 30, 2026, decreased $2.4 million compared with the same period in 2025, primarily due to a lower weighted-average interest rate on our outstanding indebtedness.

Previous wording

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

Current wording

The components of Other income, net for the three months ended September 30 were as follows:

Previous wording

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.

Current wording

The effective income tax rates for the three months ended September 30, 2026 and 2025, were 17.5% and 9.8%, respectively. The increase in the effective income tax rate compared to 2025 is primarily due to favorable discrete charges in the prior year and the unfavorable mix of income earned in higher tax jurisdictions.

Previous wording

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 period in 2025, due to the following:

Current wording

Operating income for the nine months ended September 30, 2026, increased $84.7 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 nine months ended September 30, 2026, increased to 21.9% from 21.4% for the same period in 2025, due to the following:

Previous wording

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.

Current wording

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

Previous wording

The decrease in Operating margin was driven by higher acquisition, integration and 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. These decreases are partially offset by pricing and productivity improvements in excess of inflation and investment spending.

Current wording

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

Previous wording

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.

Current wording

Interest expense for the nine months ended September 30, 2026, decreased $2.7 million compared with the same period in 2025, primarily due to a lower weighted-average interest rate on our outstanding indebtedness.

Previous wording

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

Current wording

The components of Other income, net for the nine months ended September 30 were as follows:

Previous wording

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.

Current wording

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

Previous wording

The effective income tax rates for the six months ended June 30, 2026 and 2025, were 19.2% and 18.0%, respectively. The increase in the effective income tax rate compared to 2025 is primarily due to unfavorable year over year changes in the amounts recognized for uncertain tax positions and unfavorable mix of income earned in higher tax rate jurisdictions.

Current wording

The effective income tax rates for the nine months ended September 30, 2026 and 2025, were 18.5% and 15.1%, respectively. The increase in the effective income tax rate compared to 2025 is primarily due to favorable discrete charges in the prior year and the unfavorable mix of income earned in higher tax jurisdictions.

Previous wording

Segment operating income is the measure of profit and loss that our chief operating decision maker uses to evaluate the financial performance of the business and as the basis for resource allocation, performance reviews and compensation. For these reasons, we believe that Segment operating income represents the most relevant measure of Segment profit and loss. Our chief operating decision maker may exclude certain charges or gains, such as corporate charges and other special charges, to arrive at a Segment operating income that is a more meaningful measure of profit and loss upon which to base our operating decisions. We define Segment operating margin as Segment operating income as a percentage of the segment’s Net revenues.

Current wording

Segment operating income is the measure of profit or loss that our chief operating decision maker uses to evaluate the financial performance of the business and as the basis for resource allocation, performance reviews and compensation. For these reasons, we believe that Segment operating income represents the most relevant measure of Segment profit or loss. Our chief operating decision maker may exclude certain charges or gains, such as corporate charges and other special charges, to arrive at a Segment operating income that is a more meaningful measure of profit or loss upon which to base our operating decisions. We define Segment operating margin as Segment operating income as a percentage of the segment’s Net revenues.

Previous wording

Segment Results of Operations - For the three and six months ended June 30:

Current wording

Segment Results of Operations - For the three and nine months ended September 30:

Previous wording

Net revenues from non-residential products for the three months ended June 30, 2026, increased by a low-double digits percent compared to the same period in the prior year. These increases were driven by higher volumes, improved pricing and revenue from acquisitions. Net revenues from residential products for the three months ended June 30, 2026, increased by a high-single digits percent compared to the same period in the prior year. These increases were primarily driven by higher volumes and improved pricing.

Current wording

Net revenues from non-residential products for the three months ended September 30, 2026, increased by a low-teens percent compared to the same period in the prior year. These increases were driven by higher volumes, improved pricing and revenue from acquisitions. Net revenues from residential products for the three months ended September 30, 2026, increased by a mid-single digits percent compared to the same period in the prior year. These increases were primarily driven by improved pricing and revenue from acquisitions.

Previous wording

Growth in electronic security products and solutions is a metric that is actively monitored by management and a focus of our investors. Electronic products encompass both residential and non-residential solutions and include all electrified product categories including, but not limited to, electronic and electrified locks, access control systems and electronic and electrified door controls and systems and exit devices. For the three months ended June 30, 2026, Net revenues from the sale of electronic products in the Allegion Americas segment increased by a low-teens percent compared to the same period in the prior year. We expect continued growth in our electronic products in 2026.

Current wording

Growth in electronic security products and solutions is a metric that is actively monitored by management and a focus of our investors. Electronic products encompass both residential and non-residential solutions and include all electrified product categories including, but not limited to, electronic and electrified locks, access control systems and electronic and electrified door controls and systems and exit devices. For the three months ended September 30, 2026, Net revenues from the sale of electronic products increased by a low-double digit percent compared to the same period in the prior year. We expect continued growth in our electronic products in 2026.

Previous wording

Net revenues from non-residential products for the six months ended June 30, 2026, increased by a low-double digits percent compared to the same period in the prior year. These increases were driven by improved pricing, revenue from acquisitions, higher volumes and favorable foreign currency exchange rate movements. Net revenues from residential products for the six months ended June 30, 2026, increased by a mid-single digit percent compared to the same period in the prior year. These increases were primarily driven by improved pricing and higher volumes.

Current wording

Net revenues from non-residential products for the nine months ended September 30, 2026, increased by a low-double digits percent compared to the same period in the prior year. These increases were driven by improved pricing, higher volumes, revenue from acquisitions, and favorable foreign currency exchange rate movements. Net revenues from residential products for the nine months ended September 30, 2026, increased by a mid-single digit percent compared to the same period in the prior year. These increases were primarily driven by improved pricing, higher volumes and revenue from acquisitions.

Previous wording

Net revenues from the sale of electronic products for the six months ended June 30, 2026, increased by a high-single digits percent compared to the same period in the prior year. We expect continued growth in our electronic products in 2026.

Current wording

Net revenues from the sale of electronic products for the nine months ended September 30, 2026, increased by a high-single digits percent compared to the same period in the prior year. We expect continued growth in our electronic products in 2026.

Previous wording

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

Current wording

The increase in Segment operating income was driven by the favorable impact of tariff refunds, favorable volume/product mix, pricing and productivity in excess of inflation and investment spending, the favorable impact of recent acquisitions and lower acquisition, integration and restructuring expenses. These increases were partially offset by unfavorable foreign currency exchange rate movements, inclusive of transactional foreign currency.

Previous wording

The decrease in Segment operating margin was driven by the unfavorable impact on operating margin from recent acquisitions, unfavorable foreign currency exchange rate movements, inclusive of transactional foreign currency and higher acquisition, integration, and restructuring expenses. These decreases were partially offset by pricing and productivity improvements in excess of inflation and investment spending and favorable volume/product mix.

Current wording

The increase in Segment operating margin was driven by the favorable impact of tariff refunds, pricing and productivity improvements in excess of inflation and investment spending, favorable volume/product mix and lower acquisition, integration and restructuring expenses. These increases were partially offset by the unfavorable impact on operating margin from recent acquisitions and unfavorable foreign currency exchange rate movements, inclusive of transactional foreign currency.

Previous wording

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

Current wording

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

Previous wording

The increase in Segment 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 the unfavorable impact on operating margin from recent acquisitions, unfavorable foreign currency exchange rate movements, inclusive of transactional foreign currency and higher acquisition, integration, and restructuring expenses.

Current wording

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

Previous wording

The increase in Net revenues was driven by the favorable impact from acquisitions, net of divestitures, favorable foreign currency exchange rate movements and improved pricing. These increases were partially offset by lower volumes.

Current wording

The increase in Net revenues was driven by the favorable impact from acquisitions, net of divestitures, and improved pricing. These increases were partially offset by lower volumes primarily due to market conditions in Western Europe and unfavorable foreign currency exchange rate movements.

Previous wording

The increase in Net revenues was driven by the favorable impact from acquisitions, net of divestitures, favorable foreign currency exchange rate movements and improved pricing. These increases were partially offset by lower volumes.

Current wording

The increase in Net revenues was driven by the favorable impact from acquisitions, net of divestitures, favorable foreign currency exchange rate movements and improved pricing. These increases were partially offset by lower volumes primarily due to market conditions in Western Europe.

Previous wording

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

Current wording

The decrease in Segment operating income and Segment operating margin was driven by unfavorable volume/product mix, higher acquisition, integration and restructuring expenses and the unfavorable impact from foreign currency exchange rate movements. These decreases were partially offset by the favorable impact from recent acquisitions/divestitures and pricing and productivity in excess of inflation and investment spending.

Previous wording

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

Current wording

The decrease in Segment operating income and Segment operating margin was driven by the unfavorable impact from volume/product mix, higher acquisition, integration and restructuring expenses and inflation and investment spending in excess of pricing and productivity. These decreases were partially offset by the favorable impact from recent acquisitions/divestitures and the favorable impact from foreign currency exchange rate movements.

Previous wording

The following table reflects the major categories of cash flows for the six months ended June 30. For additional details, see the Condensed and Consolidated Statements of Cash Flows in the Condensed and Consolidated Financial Statements.

Current wording

The following table reflects the major categories of cash flows for the nine months ended September 30. For additional details, see the Condensed and Consolidated Statements of Cash Flows in the Condensed and Consolidated Financial Statements.

Previous wording

Operating Activities: Net cash provided by operating activities during the six months ended June 30, 2026, decreased $14.5 million compared to the same period in 2025, primarily due to increases in working capital partially offset by higher net earnings.

Current wording

Operating Activities: Net cash provided by operating activities during the nine months ended September 30, 2026, increased $60.3 million compared to the same period in 2025, primarily due to higher net earnings.

Previous wording

Investing Activities: Net cash used in investing activities during the six months ended June 30, 2026, increased $30.6 million compared to the same period in 2025, primarily due to higher cash used for acquisitions.

Current wording

Investing Activities: Net cash used in investing activities during the nine months ended September 30, 2026, decreased $471.1 million compared to the same period in 2025, primarily due to lower cash used for acquisitions. Net cash used in investing activities for the nine months ended September 30, 2026 includes a $40.0 million investment in Ambient.ai, an agentic physical security company.

Previous wording

Financing Activities: Net cash used in financing activities during the six months ended June 30, 2026, increased $118.7 million compared to the same period in 2025, primarily due to higher repurchases of ordinary shares and lower net proceeds from debt.

Current wording

Financing Activities: Net cash used in financing activities during the nine months ended September 30, 2026, increased $272.8 million compared to the same period in 2025, primarily due to higher repurchases of ordinary shares and lower net proceeds from debt.

Previous wording

The Revolving Facility matures on May 20, 2030 and provides aggregate commitments of up to $1.0 billion, which includes up to $100.0 million for the issuance of letters of credit. As of June 30, 2026, we had outstanding borrowings of $240.6 million and letters of credit of $25.3 million.

Current wording

The Revolving Facility matures on May 20, 2030 and provides aggregate commitments of up to $1.0 billion, which includes up to $100.0 million for the issuance of letters of credit. As of September 30, 2026, we had outstanding borrowings of $240.9 million and letters of credit of $25.3 million. On October 1, 2026, the Company borrowed an additional $40.0 million on the Revolving Facility which was used for the acquisition of Overly.

Previous wording

Outstanding borrowings under the Revolving Facility accrue interest, at our option, equal to either: (i) a Secured Overnight Financing Rate (“SOFR”) plus an applicable margin or (ii) a base rate plus the applicable margin. The applicable margin ranges from 0.875% to 1.375% depending on our credit ratings. At June 30, 2026, our outstanding borrowings under the Revolving Facility accrued interest at SOFR plus a margin of 1.125%, resulting in an interest rate of 4.753%. The Revolving Facility also contains negative and affirmative covenants and events of default that, among other things, limit or restrict our ability to enter into certain transactions. In addition, the Revolving Facility requires us to comply with a maximum leverage ratio as defined in the credit agreement. As of June 30, 2026, we were in compliance with all applicable covenants under the credit agreement.

Current wording

Outstanding borrowings under the Revolving Facility accrue interest, at our option, equal to either: (i) a Secured Overnight Financing Rate (“SOFR”) plus an applicable margin or (ii) a base rate plus the applicable margin. The applicable margin ranges from 0.875% to 1.375% depending on our credit ratings. At September 30, 2026, our outstanding borrowings under the Revolving Facility accrued interest at SOFR plus a margin of 1.125%, resulting in an interest rate of 4.939%. The Revolving Facility also contains negative and affirmative covenants and events of default that, among other things, limit or restrict our ability to enter into certain transactions. In addition, the Revolving Facility requires us to comply with a maximum leverage ratio as defined in the credit agreement. As of September 30, 2026, we were in compliance with all applicable covenants under the credit agreement.

Previous wording

As of June 30, 2026, we also have $400.0 million outstanding of 3.550% Senior Notes due 2027 (the “3.550% Senior Notes”), $600.0 million outstanding of 5.411% Senior Notes due 2032 (the “5.411% Senior Notes”), $400.0 million outstanding of 5.600% Senior Notes due 2034 (the “5.600% Senior Notes”), and $400.0 million outstanding of 3.500% Senior Notes due 2029 (the “3.500% Senior Notes,” and all four senior notes collectively, the “Senior Notes”). The 3.550% Senior Notes and 3.500% Senior Notes both require semi-annual interest payments on April 1 and October 1 of each year and mature on October 1, 2027 and October 1, 2029, respectively. The 5.411% Senior Notes require semi-annual interest payments on January 1 and July 1 of each year and mature on July 1, 2032. The 5.600% Senior Notes require semi-annual interest payments on May 29 and November 29 of each year and mature on May 29, 2034.

Current wording

As of September 30, 2026, we also have $400.0 million outstanding of 3.550% Senior Notes due 2027 (the “3.550% Senior Notes”), $600.0 million outstanding of 5.411% Senior Notes due 2032 (the “5.411% Senior Notes”), $400.0 million outstanding of 5.600% Senior Notes due 2034 (the “5.600% Senior Notes”), and $400.0 million outstanding of 3.500% Senior Notes due 2029 (the “3.500% Senior Notes,” and all four senior notes collectively, the “Senior Notes”). The 3.550% Senior Notes and

Previous wording

Management believes there have been no significant changes during the six months ended June 30, 2026, to the items we disclosed as our critical accounting policies in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2025.

Current wording

Management believes there have been no significant changes during the nine months ended September 30, 2026, to the items we disclosed as our critical accounting policies in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2025.