ALLE

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How ALLE rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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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.
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 Dollar amounts in millions, except per share amounts 2025 % of Net revenues 2024 % of Net revenues Net revenues $ 4,067.3 $ 3,772.2 Cost of goods sold 2,229.0 54.8 % 2,103.7 55.8 % Selling and administrative expenses 978.8 24.1 % 887.8 23.5 % Operating income 859.5 21.1 % 780.7 20.7 % Interest expense 101.0 102.0 Other income, net (9.9) (20.1) Earnings before income taxes 768.4 698.8 Provision for income taxes 124.6 101.3 Net earnings 643.8 597.5 Diluted net earnings per ordinary share: $ 7.44 $ 6.82 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: Pricing 3.1 % Volume 1.0 % Acquisitions / divestitures 3.1 % Currency exchange rates 0.6 % Total 7.8 % The increase in Net revenues was driven by improved pricing, favorable impact from acquisitions / divestitures, higher volumes and favorable foreign currency exchange rate movements.
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: Pricing and productivity in excess of inflation and investment spending (0.1) % Volume / product mix (0.6) % Currency exchange rates (0.2) % Restructuring / integration / acquisition expenses (0.1) % Total (1.0) % 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.
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: Inflation in excess of productivity and investment spending 0.5 % Volume leverage (0.2) % Restructuring / integration / acquisition expenses 0.3 % Total 0.6 % 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.
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: In millions Operating Income Operating Margin December 31, 2024 $ 780.7 20.7 % Pricing and productivity in excess of inflation and investment spending 8.7 (0.4) % Volume / product mix 41.1 0.9 % Currency exchange rates 9.1 — % Acquisitions / divestitures 24.4 — % Restructuring / integration / acquisition expenses (4.5) (0.1) % December 31, 2025 $ 859.5 21.1 % 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: In millions 2025 2024 Interest income $ (12.0) $ (20.5) Currency translation loss 3.4 2.2 Earnings and gains from the sale of equity method investments, net (1.6) (1.1) Net periodic pension and postretirement benefit (income) cost, less service cost 1.0 (0.2) Other income (0.7) (0.5) Other income, net $ (9.9) $ (20.1) For the year ended December 31, 2025, Other income, net, decreased $10.2 million compared to 2024, primarily due to less interest income generated as a result of less cash on hand throughout the year due to the increase in acquisition activity.
Provision for Income Taxes For the year ended December 31, 2025, our effective tax rate was 16.2%, compared to 14.5% for the year ended December 31, 2024.
The increase in the effective income tax rate was primarily due to the unfavorable mix of income earned in higher tax rate jurisdictions and year over year changes in amounts recognized for uncertain tax positions and income tax credits, which were partially offset by the enactment of legislative changes.
These segments represent the level at which our chief operating decision maker ("CODM") reviews our financial performance and makes operating decisions.
Segment Results of Operations - For the years ended December 31 In millions 2025 2024 % Change Net revenues Allegion Americas $ 3,218.8 $ 3,012.4 6.9 % Allegion International 848.5 $ 759.8 11.7 % Total $ 4,067.3 $ 3,772.2 Segment operating income Allegion Americas $ 896.5 $ 816.2 9.8 % Allegion International 76.5 66.3 15.4 % Total $ 973.0 $ 882.5 Segment operating margin Allegion Americas 27.9 % 27.1 % Allegion International 9.0 % 8.7 % Allegion Americas Our Allegion Americas segment is a leading provider of security products, services and solutions throughout North America.
This segment’s primary brands are LCN, Schlage, Von Duprin and Stanley Access Technologies, which we utilize with permission in accordance with the terms of an agreement with STANLEY Black & Decker.
Net Revenues Net revenues for the year ended December 31, 2025, increased by 6.9%, or $206.4 million, as compared to the year ended December 31, 2024, due to the following: Pricing 3.6 % Volume 1.6 % Acquisitions 1.8 % Currency exchange rates (0.1) % Total 6.9 % The increase in Net revenues was driven by improved pricing, the favorable impact of acquisitions and higher volumes.
These increases were partially offset by unfavorable foreign currency exchange rate movements.
Excluding Net revenues of businesses acquired in 2025, Net revenues from non-residential products grew by a high-single digits percent compared to the prior year, driven by increased pricing and higher volumes, and Net revenues from residential products decreased by a low-single digits percent compared to the prior year, driven by lower volumes, partially offset by increased pricing.

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Recent Developments Business and Industry Trends and Outlook In 2024, we delivered low-single-digit revenue growth in both our Allegion Americas and Allegion International segments, as well as operating margin expansion and strong cash flows from operations.
We continued to execute our strategy of balanced capital allocation, evidenced by our acquisition activity, dividends paid and shares repurchased throughout the year.
Within our Allegion Americas segment, both the non-residential and residential businesses grew by a low single-digits percent compared to the prior year.
Our Allegion International segment also grew by a low single-digits percent.
We experienced a softening of demand within certain businesses in our Allegion International segment.
Electronic security products and solutions revenue declined by a low single-digit percent in 2024, as comparisons to the prior year were impacted by supply chain dynamics.
We expect growth in global electronic security product and solutions to continue to outperform growth in mechanical products and solutions over the long-term, as end-users continue to adopt newer technologies in their facilities and homes.
We expect continued growth in 2025, and for the security products industry to benefit from increased concerns about safety and security and technology-driven innovation.
Global Trade and Macroeconomic Environment In February 2025, the US government announced tariffs on imports from Mexico, Canada and China, countries from which we manufacture and/or import products and components.
Subsequently, the tariffs on imports from Mexico and Canada were paused.
We are evaluating the potential impact of these actions and considering what, if any, steps, including pricing actions, we take to mitigate the impact of the tariffs.
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." 2024 and 2023 Significant Events Acquisitions On February 1, 2024, we, through our subsidiaries, acquired 100% of Boss Door Controls, a door solutions provider in the United Kingdom.
Boss Door Controls is reported in the Allegion International segment.
On March 4, 2024, we, through our subsidiaries, acquired 100% of Montajes electronicos Dorcas S.L.
Dorcas is reported in the Allegion International segment.
On June 3, 2024, we, through our subsidiaries, acquired 100% of Krieger Specialty Products, LLC ("Krieger"), a manufacturer of high-performance special purpose doors and windows based in the United States.
On June 10, 2024, we, through our subsidiaries, acquired 100% of Unicel Architectural Corp.
On October 18, 2024, we, through its subsidiaries, acquired 100% of SOSS Door Hardware ("SOSS"), a manufacturer of premium hinges and door hardware based primarily in the United States.
On January 3, 2023, we, through our subsidiaries, acquired plano. group ("plano"), a SaaS workforce management solution business based in Germany.
Plano is reported in our Allegion International segment. 2023 Impairment of Intangible Assets As discussed in Note 7 to the Consolidated Financial Statements, the results of our 2023 impairment test indicated that the estimated fair value of two indefinite-lived trade names in our International segment were determined to be less than book value.
Consequently, intangible asset impairment charges totaling $7.5 million were recorded in 2023 in our Allegion International segment.
The impairments related to declines in volumes which reduced the brands' expected future cash flows.
Financing Activities On May 20, 2024, we amended and restated our Credit Facilities which, among other things, (i) increased the total commitment on the Revolving Facility from $500.0 million to $750.0 million, (ii) extended the maturity of the Revolving Facility from November 18, 2026 to May 20, 2029, and (iii) transitioned the benchmark interest rate from the Bloomberg Short-Term Bank Yield Index (“BSBY”) to the Secured Overnight Financing Rate (“SOFR”) for the Credit Facilities.
On May 29, 2024, Allegion US Holding Company Inc.
("Allegion US Hold Co"), our wholly-owned subsidiary, issued $400.0 million principal amount of 5.600% Senior Notes due 2034 (the “5.600% Senior Notes”).
The 5.600% Senior Notes require semi-annual interest payments on May 29 and November 29, and mature on May 29, 2034.
Net proceeds from the 5.600% Senior Notes were used to repay the $400.0 million outstanding on our 3.200% Senior Notes due 2024 (the "3.200% Senior Notes") on October 1, 2024.
We incurred and deferred a total of $7.6 million of discounts and financing costs associated with amending and restating our Credit Facilities and issuing our 5.600% Senior Notes, which is being amortized to Interest expense over their respective terms.
Dividends and Share Repurchases 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.
During 2023, we paid quarterly dividends of $0.45 per ordinary share to shareholders on record as of March 15, 2023, June 15, 2023, September 18, 2023, and December 18, 2023, for a total of $158.7 million, and repurchased approximately 0.5 million ordinary shares for approximately $59.9 million.
Results of Operations - For the years ended December 31 Dollar amounts in millions, except per share amounts 2024 % of Net revenues 2023 % of Net revenues Net revenues $ 3,772.2 $ 3,650.8 Cost of goods sold 2,103.7 55.8 % 2,069.3 56.7 % Selling and administrative expenses 887.8 23.5 % 865.6 23.7 % Impairment of intangible assets — — % 7.5 0.2 % Operating income 780.7 20.7 % 708.4 19.4 % Interest expense 102.0 93.1 Other income, net (20.1) (1.9) Earnings before income taxes 698.8 617.2 Provision for income taxes 101.3 76.6 Net earnings 597.5 540.6 Less: Net earnings attributable to noncontrolling interests — 0.2 Net earnings attributable to Allegion plc $ 597.5 $ 540.4 Diluted net earnings per ordinary share attributable to Allegion plc ordinary shareholders: $ 6.82 $ 6.12 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, 2023, compared to the year ended December 31, 2022, see “Part II, Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2023 Annual Report on Form 10-K filed with the SEC on February 20, 2024.
Net Revenues Net revenues for the year ended December 31, 2024, increased by 3.3%, or $121.4 million, as compared to the year ended December 31, 2023, due to the following: Pricing 2.4 % Volume (0.3) % Acquisitions 1.3 % Currency exchange rates (0.1) % Total 3.3 % The increase in Net revenues was driven by improved pricing and the impact from acquisitions made during the year.
These increases were partially offset by lower volumes and unfavo rable foreign currency exchange rate movements.
Cost of Goods Sold For the year ended December 31, 2024, Cost of goods sold as a percentage of Net revenues decreased to 55.8% from 56.7%, as compared to the year ended December 31, 2023, due to the following: Pricing and productivity in excess of inflation and investment spending (0.8) % Volume / product mix (0.1) % Acquisitions 0.1 % Currency exchange rates (0.1) % Total (0.9) % Cost of goods sold as a percentage of Net revenues decreased primarily due to pricing and productivity, which exceeded the impacts from inflation and investment spending, favorable product mix and favorable foreign currency exchange rate movements.
These decreases were partially offset by the impacts to gross margin associated with our acquired businesses.
Pricing and productivity in excess of inflation and investment spending includes the impact to Costs of goods sold from pricing, as defined above, in addition to productivity, inflation and investment spending.
Selling and Administrative Expenses For the year ended December 31, 2024, Selling and administrative expenses as a percentage of Net revenues decreased to 23.5% from 23.7%, as compared to the year ended December 31, 2023, due to the following: Inflation in excess of productivity and investment spending 0.1 % Volume leverage 0.1 % Acquisitions (0.1) % Restructuring / integration / acquisition expenses (0.3) % Total (0.2) % Selling and administrative expenses as a percentage of Net revenues decreased due to a year-over-year decrease in restructuring, integration, and acquisition expenses and the beneficial impacts from current and prior year acquisition activity.
These decreases were partially offset by inflation in excess of productivity and investment spending, as well as the unfavorable impact of lower volumes.

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