Good day, everyone. My name is Stefan and I'll be your conference operator today. At this time, I'd like to welcome you to the Allegion Fourth Quarter and Full Year Earnings Call. [Operator Instructions] At this time, I'd like to turn the call over to Josh Pokrzywinski, Vice President of Investor Relations.

Thank you, Stefan. Good morning, everyone, and thank you for joining us for Allegion's Fourth Quarter 2025 Earnings Call. With me today are John Stone, President and Chief Executive Officer; and Mike Wagnes, Senior Vice President and Chief Financial Officer of Allegion. Our earnings release, which was issued earlier this morning, and the presentation, which we will refer to in today's call, are available on our website at investor.allegion.com. This call will be recorded and archived on our website. Please go to Slide 2. Statements made in today's call that are not historical facts are considered forward-looking statements and are made pursuant to the safe harbor provisions of federal securities law. Please see our most recent SEC filings for a description of some of the factors that may cause actual results to differ materially from our projections. The company assumes no obligation to update these forward-looking statements. Today's presentation and commentary include non-GAAP financial measures. Please refer to the reconciliation in the financial tables of our press release for further details. Please go to Slide 3, and I'll turn the call over to John.

Thanks, Josh. Good morning, everyone. Thanks for joining the call. Allegion delivered a strong year marked by high single-digit enterprise revenue growth, more than $600 million of accretive M&A and solid execution in a dynamic and inflationary environment. I'm proud of the Allegion team's performance in 2025. I see our results as a testament to the talent and dedication of our people, the strength of our brands and channel partnerships and our sound strategy as we deliver on our commitments to shareholders. As we enter 2026, our broad end market exposure supports continued growth led by Americas nonresidential. U.S. residential markets were softer than expected in the fourth quarter, and our outlook contemplates that residential remained soft in 2026. However, our team has a proven track record of execution across a variety of macro conditions. We're initiating fiscal year 2026 adjusted EPS guidance of $8.70 to $8.90 per share. I'll provide more detail on our outlook later in the call. Please go to Slide 4. Let's take a look at capital allocation for 2025, starting with our investments for organic growth. A core element of Allegion's portfolio strength is our brand's legacy of innovation. Brands like Schlage, Von Duprin and LCN invented their product categories a 100 years ago and are known as pioneers in our industry. Allegion is built on that legacy by expanding our offerings of mid-tier commercial product lines. Last September, we launched our Schlage Performance Series locks, providing more ways to win in the nonresidential aftermarket, alongside the mid-price point Von Duprin 70 Series exit devices that were released in 2024. These are complemented by our mid-tier offerings with LCN closers where we now have a full suite of commercial grade offering from the industry's leading brands at more price points to meet customers' needs. As you know, 2025 was an active year for acquisitions for the company with approximately $630 million of capital deployed. These acquisitions align to the strategy we outlined at our May Investor Day including additions to our core mechanical portfolio as well as electronics and complementary software solutions that meet end user needs for safety and convenience. As we enter 2026, the pipeline is active, and we remain disciplined to drive returns and continue positioning Allegion as a leading pure play in security and access. Allegion continues to be a dividend paying stock. In 2025, we paid $175 million in dividends to shareholders. Looking ahead to 2026, we've also just announced our 12th consecutive annual increase in dividends. While we did not repurchase shares in the fourth quarter, share repurchase was part of our capital allocation in 2025, totaling $80 million. At a minimum, we intend to offset the creep from share-based compensation. You can expect Allegion to be balanced, consistent and disciplined with capital deployment over time with a clear priority of investing for growth. Mike will now walk you through the fourth quarter financial results.

Thanks, John, and good morning, everyone. Thanks for joining today's call. Please go to Slide #5. As John shared, our Q4 results reflect continued strong execution from the Allegion team, as we delivered high single-digit revenue growth for the enterprise. Revenue for the fourth quarter was over $1 billion, an increase of 9.3% compared to 2024. Organic revenue increased 3.3% in the quarter, led by our Americas nonresidential business. The organic revenue increase was driven by price realization, partially offset by volume declines in our Americas residential and international businesses. Q4 adjusted operating margin was 22.4%, up 30 basis points compared to last year. Price and productivity exceeded inflation and investment by $12 million, driving 20 basis points of margin expansion in the quarter. Favorable mix also benefited margin rates. Adjusted earnings per share of $1.94 increased $0.08 or 4.3% versus the prior year. Operational performance and accretive acquisitions contributed over 10 points of EPS growth. This was partially offset by higher tax. Finally, year-to-date available cash flow was strong at $685.7 million, up 17.6% versus the prior year. I'll provide more details on our balance sheet and cash flow a little later in the presentation. Please go to Slide #6. Our Americas segment was resilient in Q4 despite a weak quarter in residential markets. Revenue of $795.5 million was up 6.1% on a reported basis and up 4.8% on an organic basis, led by our nonresidential business. Our nonresidential business increased high single digits organically, driven by a combination of price and volume growth. Demand for our products remains healthy, supported by our broad end market exposure. Our residential business declined high single digits as favorable price was more than offset by volume declines as residential markets remain soft. Electronics revenue was up low double digits for the quarter…

Thanks, Mike. Please go to Slide 9. And before we discuss the 2026 outlook, I want to provide an overview of our key end market assumptions. In the Americas, we see continued volume growth in nonresidential markets, similar to 2025 levels, and this is supported by our spec writing trends. Our broad end market exposure and large installed base make for a resilient business model, one is less reliant on any single end market vertical to drive growth. We do expect a more modest price contribution, however, to reflect slightly lower inflation as compared to last year. If inflation were to remain higher, the business has proven our ability to manage inputs and drive the necessary pricing as you saw in 2025. Residential markets were weak throughout 2025, demand is likely to remain soft in 2026, and we expect Americas residential to be down slightly. For international, we see modest organic growth, primarily driven by our electronics businesses. We have been focused on improving portfolio quality in international through a combination of self-help and acquisitions, which we believe supports growth in markets that remain sluggish. Please go to Slide 10, and I'll discuss our outlook for 2026. We expect total Allegion revenue growth to be 5% to 7% and organic revenue growth to be 2% to 4%. Total growth includes approximately 1 point of foreign currency translation and 2 points of carryover contribution from M&A, primarily Allegion International. We expect organic growth of low to mid-single digits in the Americas from a combination of price and volume led by our nonresidential business. We expect electronics to outpace mechanical growth, consistent with our long-term performance and customer trends. In the International segment, our outlook assumes low single-digit growth led by electronics with largely stable mechanical markets. Our adjusted EPS outlook is $8.70 to $8.90. This represents growth of approximately 8% at the midpoint, inclusive of an approximate $0.10 headwind from a higher tax rate. You can find more details on our outlook slide and in the appendix. Please go to Slide 11. In summary, Allegion is executing at a high level while staying agile and steadily delivering on the long-term commitments we shared with you at our Investor Day. Our strong performance is led by an enduring business model in nonresidential Americas, double-digit electronics growth and accretive capital deployment as we acquire good businesses in markets where we have a right to win. I'm proud of the Allegion team and appreciative of our strong channel partners. With that, we'll take your questions.

[Operator Instructions] Our first question will come from John O'Dea from Wells Fargo.

Can you hear me?

Yes.

Yes.

Can we start on the resi side in the fourth quarter? I think you touched on it being kind of softer than anticipated. And so just what you saw develop over the course of the quarter, the degree to which that extends into the early part of this year? Whether that was more kind of destocking events or sell-through demand and what you saw on the pricing side of things as well, if there is any need to adjust price there based on the demand environment?

Yes. Joe, thanks for the question. I think certainly, resi in the Americas ended the year softer than we had contemplated. And honestly, resi throughout the year, was a little choppy, let's say. We put up mid-single-digit growth in the third quarter, really largely on the heels of a very successful new product launch and then a pretty soft Q4. I would say, yes, '26 started off better. Let's just say -- but just looking at resi, it did end softer than we had contemplated. And I think that's part of the things that just caused us to at least take what we think is a very prudent assumption into 2026 that we would expect resi to be soft. And certainly, should there be an uptick in that market, we're positioned very well to capture upside there. I would say with your question around pricing, now there wasn't any short-term reaction on pricing nor do I think that contributed to any of the demand softness. The last point would be our channel doesn't hold a lot of inventory. And so any inventory correction type actions are usually very short-lived.

Got it. And then on the Americas organic outlook and the low single digit, mid-single digit. Just any color as we think about price and volume components of that? Is that a little bit more price than volume, the price carryover tailwind. And then how you think about that volume progression over the course of the year? Is the volume growth expected to get better? And is that a function of comps or anything that you're seeing in the spec activity that would suggest a little bit better demand environment as we go through 2026.

Yes, Joe. So thanks for the question. I would say, as you think about Americas for '26, we expect to see both price and volume growth. But as you suggested, more pricing than volume growth for the year. Don't like to give quarterly outlook, but I'd be happy to kind of unpack it qualitatively for you. As you know, the Americas -- as you start the year in Q1, revenue levels are similar to the revenue in Q4 in total, historically. And then from there, we tend to have higher revenue in the middle 2 quarters. We expect that same seasonality where the middle 2 quarters are our largest quarters. And obviously, Q4 a little less. So as you model this, I think that could help you qualitatively. In addition, you do have to look at the prior year comp as you think about pricing and margins for that matter. You have to consider how we finished in each quarter for 2025 as you think about that pricing impact for the next year. Obviously, Q1 of '25, we hadn't yet felt the inflationary impacts from tariffs, so you didn't have the pricing or the inflation. So hopefully, that helps you as you think about unpacking the year from a top line.

Our next question will come from Tomohiko Sano from JPMorgan.

So you maintained sector-leading margins despite the higher cost through pricing productivities and acquisition synergies. Can you break down the contributions from each of these levers and which will be most important in 2026, please?

Yes. Tomo, we put all that information in our 10-K. So when you get a chance, you can look at it for the fourth quarter and full year, I guess, the full year is in the K. I'll share, obviously, on the enterprise level, we did get some margin tailwind from that pricing productivity in excess of inflation and investment. There was a headwind in the Americas. That's a function of the [ tyranny of the math ] we've been talking about all year long. We also had some slightly -- we had favorable mix, but the residential volume deleverage we experienced kind of mitigated that in the Americas region as we highlighted. As you think about 2026, you get back into the full year margin expansion. We give all the components at the enterprise level. As you know, the Americas is our largest business, and we can't drive the enterprise margin expansion without the Americas being in the similar ZIP code. So it kind of provides you at least a framework for the Americas as well. And then as far as the components, I would expect to have pricing and productivity in excess of inflation and investment on a dollar basis. And from a rate basis, I wouldn't expect that to be a headwind in 2026. It was obviously in the Americas in '25. We do have that first quarter where you have that carryover impact that last quarter, as I mentioned in the previous answer. But for the full year, expect price and productivity to be positive on a dollar basis and certainly not negative on a margin rate basis.

And a follow-up on international markets. So these markets are expected to see continued sluggishness with growth primarily from acquisition in electronics. So can you provide more color on specific geographies, particularly Western Europe and Australia and when you expect the demand recovery, please?

Yes, Tomo, this is John. I appreciate that. And I think, yes, we do see our electronics businesses leading the way. That is primarily a Western Europe base business. And then within that, primarily a DACH region businesses, but we are expanding Pan-Europe with that. And those businesses performed very well in 2025, and we expect continued growth out of them in '26. I'd say Australia and New Zealand, end markets haven't been great. And so a little bit of improvement there off of pretty weak comps, I think is not totally out of the question. We'll have to see. And then largely, I would just say mechanical markets remaining a little sluggish, like we said in the prepared remarks, and electronics will lead the way for us, along with, again, some carryover contribution from M&A.

Our next question will come from Brett Linzey from Mizuho. Okay. We'll move on to...

Sorry about that. So yes, I just want to come back to the pricing dynamics for this year. So it looks like the industry implemented a conversion of the surcharge to list and then some incremental list above that. Maybe just talk about the pricing capture you expect this year on a net basis and what you're calibrating within the guidance framework?

Yes, Brett. So obviously, our industry does do, as you know, a combination of some surcharges, mostly list price increases. We expect 2026 to be more list price increases. Obviously, we'll be agile and deal with the environment. We've learned a lot over the last few years that if things change, we'll just adjust accordingly. But our going-in assumption is that inflation will be a little less than what you saw in 2025. So therefore, we'll get a little less pricing in total, as we mentioned on the -- in the prepared remarks. And I already talked about the rate benefit of that in the previous question. And then total revenue, enterprise and Americas, just expect a little more pricing than volume. And then if you get the organic within the framework we provided, you can kind of have an idea of each component.

I appreciate that, Mike. And then maybe just a follow-up on investments. The $9 million tailwind in 4Q within Americas, is that just a function of the timing of some projects and some spending? And then how do we think about the investment allocation this year and if there's some flexibility around that budget?

Yes. Well, as I like to look at it, I'd like to look at it in combination of price and productivity has to fund the investments and the inflation. We've been talking about that a few years. Quarter-to-quarter, that can move around a little, but I would say, in general, think of it as we're going to take the necessary pricing actions and drive productivity to fund both. And as I mentioned earlier, I do expect that to be a positive on a full year basis. Obviously, as I mentioned as well, Q1, we do have that tough comparable in the prior year where you didn't have the inflation or the investment. So the first quarter of '26, you do have the carryover of that last quarter where you didn't have the inflation investments. So that will weigh on margin rates. But full year, you can back into the enterprise margin expansion. And just remember that the Americas will approximate that enterprise total as well from an expansion perspective.

Our next question will come from Robert Schultz with Baird.

Maybe as you think about '26 in the Americas, what are you assuming for institutional and commercial volume growth? Do you think they're pretty similar? Or do you expect outperformance in one of those verticals?

Bobby, I really -- when we think about our business, we wouldn't want to give volume growth nonres versus res. So I certainly don't want to dive into select verticals within the nonres market. I'll just kind of refer you back to John's prepared remarks, where he talked about that broad end market exposure and just understanding our business, our outlook supported by our spec activity as well. But I really don't want to give subvertical details of volume.

Understood. And then just on M&A, how does your pipeline look today? And are you seeing any increase in competition for deals now?

Yes, it's a good question. This is John. Pipeline is very active, I would say, in both our international and our Americas segments. And largely in line with the strategic overlay we shared with you at our Investor Day last May in terms of core mechanical portfolio, electronics, and even complementary software. So I think pipeline is busy. I think there's -- it's a very encouraging outlook. And with all that being said, you can still count on us to be quite disciplined. And making sure we're sticking very close to our strategy, understanding where we've got, competitive advantage, right to play and a right to win and very much focused on our shareholder returns.

Our next question will come from Andrew Obin with Bank of America.

Just a question on, I guess, M&A and capital allocation. I mean, the markets have been sort of sluggish for a while. You guys have been able to deliver consistent EPS growth in pretty tough markets. You chose to allocate a lot more capital to M&A this year. I'm just wondering, given that you are laying a foundation, why don't you think that Allegion stock is a better sort of use of cash. Why don't you think your own stock is the best value out there? And just maybe give us some insights how you and the Board have gone through the thought process where you sort of chose M&A acceleration versus Allegion stock this year?

Yes, Andrew, this is John. I appreciate the question. And I think that's why we have taken the time to put together a very consistent view of capital allocation across all of the different areas in our quarterly earnings deck as just a standard piece that we speak to. And so, I'd say, the priority is towards profitable growth. And that's why we'll take time each quarter, this quarter, too, talking about some highlights around investing for organic growth. That is the top priority for our use of cash. And then as you look to what are the other elements of it, we're a dividend paying stock. We will continue to be a dividend paying stock. You can expect that dividend to grow commensurate with our earnings growth. And then again, an orientation towards profitable growth. And so yes, as we started the year, we did have some share repurchase. We do have an open authorization with our board. And as that's the right decision at the right time when the conditions are there, we can do that. And we have a supportive board there. When we have very attractive acquisition targets that we can bolt on and integrate into an existing business unit structure and drive synergies and drive accretive returns to the shareholders, we're going to do that. And so I thought what you saw in really the last 2 years, is this whole theme of, expect Allegion to be balanced and disciplined and consistent with our capital allocation to drive shareholder returns.

And maybe a little bit more color on international markets growth. You sort of highlighted DACH. How is Interflex business doing? And maybe a little bit more color what's happening in AXA?

I'm thrilled that you asked that question, Andrew. I'm so proud of our Interflex team. It's kind of an interesting business. It tends to kind of ramp up its revenue and profitability as the year goes on. So January is kind of slow and December looks great, right? It's just kind of an interesting business that way. Blue-chip customer base, we've put in resources to grow the Interflex and the plano Solutions across Europe, doing very well. They had a bang-up year. They're really delighting their customers. We're finding ways to get AI into the software offerings just to help our customers get all the reports and the data that they need, and they're growing very, very nicely, just super proud of that business.

So we're making progress moving in beyond the core sort of German manufacturing base?

Absolutely.

Our final question in the queue comes from Chris Snyder with Morgan Stanley.

Hopefully, everyone can hear me. I wanted to ask around Americas margins. Q4 came in down year-on-year modestly. I understand that, obviously, margin -- 0 margin revenue via tariffs is a headwind. But that doesn't seem all that dissimilar from Q2 and Q3 when you guys were growing margins. So did that -- is the Q4 decline just a function of resi volumes turning lower versus Q3 because it still seems like there was a lot of tailwinds in the quarter between mix. And then the productivity seems quite positive as well. So just any other kind of color unpacking the year-on-year margins for Americas in Q4?

Yes, Chris, you're thinking about it the right way. If you look at residential in the fourth quarter, down high single digits. And we did, as I mentioned in the prepared remarks, had some positive pricing. So when you think about volume, volumes were even worse than the total residential. So that's a pretty substantial volume decline. That's the delta when you think of Q3 versus Q4. Q3, right, you're growing mid-single and so that's a 15-point plus or close to that 10% to 15% depending on your rounding works, delta between the 2 quarters, and that explains why the margins were different.

I appreciate that. And then I know you've kind of flagged a couple of times that Q1 has this tough margin comp and we can certainly see that. But I guess if we look past Q1 and kind of think about Q2 to Q4, does the guide assume that Americas kind of get back to that target 35% or so incremental margin rate Q2 to Q4 once we have all the tariff revenue and the comp?

Yes. If you think about the fundamentals of the business, right, that core incrementals we laid out at Investor Day. After we get through Q1, that still holds. Think of that core incrementals being strong once we get through that Q1. So as you think about the full year, margin expansion in the Americas, like I mentioned earlier, we just had that one more quarter we need to get through. But the business fundamentals remain sound and consistent with what we talked about at Investor Day where we can leverage that volume once we get through this last quarter of that [ tyranny of the math ].

At this time, I see no callers in the queue. So I'll hand the call back to John Stone for closing remarks.

Thanks very much. Thank you all for the great Q&A. We look forward to connecting with you on our Q1 earnings call in April. Be safe, be healthy.