Allegion plc Q1 2026 Earnings Call Transcript

Allegion plc (NYSE: ALLE) Q1 2026 Earnings Call dated Apr. 28, 2026

Presentation

Operator

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 Allegion’s First Quarter Earnings Call. All lines have been placed on-mute to prevent any background noise. After the speakers’ remarks, there’ll be a question-and-answer session. If you would like to ask a question during this time and if you’ve joined via the webinar, please use the raised hand icon which can be found at the bottom of your webinar application.

At this time, I’d like to turn the call over to Joby Coyle, Director of Investor Relations.

Jobi Coyle — Director of Investor Relations

Thank you, Stefan. Good morning, everyone. Thank you for joining us for Allegiant’s first-quarter 2026 earnings call. With me today are John Stone, President and Chief Executive Officer; and Mike, 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.alegion.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.

John H. Stone — President and Chief Executive Officer

Good morning, everyone. Thanks for joining us. The Allegiant team has remained agile in a volatile environment and stayed focused on serving our customers alongside our strong channel partners. In Q1, we delivered high single-digit revenue growth led by the Americas non-residential business and contributions from acquisitions. In the Americas, performance was in-line with our expectations we outlined back-in February. In our International segment, top-line growth was led by acquisitions, which are on-track.

However, our Q1 organic revenue growth and margins in international were negatively impacted by an ERP implementation in one of our legacy mechanical businesses. Production rates there have started to improve and we expect to recover the Q1 shortfall over the remainder of the year. As you’ll see on the next slide, Allegion remains committed to balanced, disciplined and consistent capital deployment. And finally, with respect to our outlook for the year, we are raising our reported revenue outlook to 6% to 8% to include the DCI acquisition, and we are affirming our outlook for organic revenue growth of 2% to 4% and adjusted earnings per share of $8.70 to $8.90.

Please go to Slide 4. Taking a look at capital allocation for the first-quarter, starting with our investments for organic growth. The latest example of this is our next-generation LCN senior swing series of auto operators for heavy use doors across healthcare, offices and other high-traffic environments. Easy to install and upkeep these automatic door operators self-adjust in Real-time to external pressures like wind, allowing smooth, safe and consistent operation while saving the building time, energy and maintenance calls.

Turning to acquisitions. Earlier in March, we closed the acquisition of DCI, a West Coast-based manufacturer of hollow metal doors and frames specializing in custom design and quick-ship capability. Historically, we’ve had to rely on our Cincinnati, Ohio manufacturing facility to serve customers on the West Coast, which extended lead times and drove higher freight costs compared to local suppliers. DCI makes us far more competitive on the West Coast, helping the totality of our Americas non-res business, not just our door offering as customers purchase complete door and hardware packages together.

DCI today has a low double-digit EBITDA margin, resulting in limited EPS accretion in the current fiscal year, but the strategic nature of this acquisition gives us significant improvement in serving our customers at a better cost position. I’m confident our execution and pricing discipline will drive higher profitability over-time and expect performance to improve moving forward. Moving to dividends, Allegiant paid $47 million in dividends in the quarter, consistent with the long-term framework we outlined at our Investor Day last year.

We repurchased $40 million of Allegiant shares in the first-quarter. Our Board also recently approved a new $500 million repurchase program. As we’ve said in the past, you can expect Allegion to be balanced, disciplined and consistent with capital deployment oriented towards profitable growth and driving long-term returns for shareholders, including share repurchase as appropriate. Mike will now walk you through the first-quarter results.

Mike Wagnes — Senior Vice President and Chief Financial Officer

Thanks, John, and good morning, everyone. Thank you for joining today’s call. Please go to Slide number 5. Revenue for the first-quarter was over $1 billion, an increase of 9.7% compared to 2025. Organic revenue increased 2.6% in the quarter, led by our Americas non-residential business. The enterprise organic revenue increase was driven by price realization, partially offset by volume declines. Q1 adjusted operating margin was 21.2%, down 150 basis-points compared to last year, partially driven by a combination of volume declines and mix. Pricing productivity, net of inflation and investment and inclusive of transactional FX were favorable by $5.3 million. However, this resulted in a 40 basis-point headwind to margin rate in the quarter. I’ll provide more details on revenue and margins within each of the regions.

Adjusted earnings per share of $1.80 decreased $0.06 or 3.2% versus the prior year. EPS from — from acquisitions was more than offset by higher tax and interest and other in the quarter. Finally, year-to-date available cash-flow was $80.3 million, consistent with the prior year. Please go to Slide number 6. Our Americas segment delivered revenue of $809.9 million, which was up 6.9% on a reported basis and up 4.5% on an organic basis. Our non-residential business increased mid-single digits organically, driven by price realization.

Demand for our non-res products remains healthy and spec activity continues to be strong. Our residential business was flat in the quarter with price realization offset by volume declines as residential markets remained soft. Electronics revenue was up mid-single digits for the quarter and we continue to see electronics as a long-term growth driver of the business. In addition, reported revenues increased 2.1 points of growth from acquisitions and a slight tailwind from foreign currency. Americas adjusted operating income of $227.4 million increased 2.9% versus the prior year.

Adjusted operating margins were down 110 basis-points in the quarter. Price and productivity net of inflation and investment and inclusive of transactional foreign currency was favorable by $9.9 million. However, this was a 30 basis-point headwind to margin rate. The transactional foreign currency headwind relates to the prior year benefit of $3 million that we disclosed in Q1 last year, driven by the Mexican peso. Operating margins were also impacted by acquisitions, which were a 40 basis-point headwind.

Additionally, volume declines and unfavorable mix were a headwind to margin rates. Please go to Slide number 7 our International segment delivered revenue of $223.7 million, which was up 21.5% on a reported basis and down 5.3% organically. Organic revenue declines were the result of volume weaknesses in our mechanical business, primarily related to the ERP disruptions John discussed earlier. This was partially offset by growth in electronics and price realization. Net acquisitions contributed 15.9% to segment revenue.

Currency was also a tailwind, positively impacted reported revenues by 10.9%. International adjusted operating income of $17.9 million decreased 4.8% versus the prior year period. Adjusted operating margin for the quarter decreased 220 basis-points. Price and productivity, net of inflation and investment was a 210 basis-point headwind, inclusive of operational inefficiencies associated with the ERP mentioned earlier. Additionally, volume declines were a headwind to margin rates, which was mostly offset by acquisitions.

Please go to Slide number eight and I will provide an overview of our cash-flow and our balance sheet. Year-to-date available cash-flow was $80.3 million, consistent with the prior year. For 2026, we still anticipate our ACF conversion will be approximately 85% to 95% of adjusted net income. Next, working capital as a percent of revenue increased in the first-quarter due to acquired working capital, which does not impact cash-flow. Finally, our balance sheet remains strong and our net-debt to adjusted EBITDA is at a healthy ratio of 1.7 times, which supports continued capital deployment.

I will now hand the call-back over to John.

John H. Stone — President and Chief Executive Officer

Thanks, Mike. Please go to Slide nine. 1/4 end-of-the year, we are affirming our organic revenue growth outlook of 2% to 4% and adjusted earnings per share outlook of $8.70 to $8.90. We are raising our reported revenue outlook by 1 point to 6% to 8% to include the acquisition of DCI. You can find more details on our outlook in the appendix. While our core demand assumptions are unchanged from our February call, I’ll provide some additional details on our view for the remainder of the year.

In the Americas, our markets are largely as we expected to start the year, but we’re experiencing higher inflation. Based on current conditions, we anticipate an incremental headwind of approximately 1% of COGS from tariffs and other inflation. We expect to offset this on a dollar basis through a combination of price and cost actions. However, given current volatility, we are not updating our organic growth assumptions to include any incremental price at this time, similar to our approach in the first-quarter of 2025.

Most importantly, we expect this to be neutral to 2026 adjusted operating income dollars and earnings per share. For international, we expect to catch-up on production impacts from the ERP implementation during the remainder of the year, supported by existing orders and backlog in that business. Our core demand assumptions are similar to our prior outlook. And beyond the ERP catch-up, it’s also important to note that our electronics businesses are a source of strength in the International segment and we expect these to ramp seasonally through the year.

We have not experienced a notable demand impact from the effects of the conflict in Iran and our exposure to the Middle-East is negligible. For the organization, we’re committed to serving our customers while remaining agile in the current macro and input cost environment. Please go to Slide 10. In summary, Allegion delivered nearly 10% revenue growth in Q1 and deployed capital effectively for the benefit of our shareholders. Before turning to Q&A, there’s one more highlight from Q1 that I’m proud to share with you today.

Allegion was honored for the third consecutive year with the Gallup Exceptional Workplace Award. This recognizes our team for fostering one of the most engaged workplace cultures in the world and we are one of only five companies to earn this award with distinction in 2026. We know highly engaged teams deliver stronger results for our customers, our shareholders and our partners.

With that, we’ll take your questions.

Question & Answers

Operator

We will now begin the Q&A. For today’s session, we’ll be utilizing the raised hand feature. If you would like to ask a question, simply click on the raise hand button at the bottom of your screen. Once you’ve been called upon, please unmute yourself and begin to ask your question. Thank you. We’ll now pause for a moment to assemble the queue. Our first question will come from Joe O’Day with Wells Far Fargo Securities. Please unmute your line and go-ahead. Joe, please unmute your line and go-ahead. Okay, we’ll move on to our next question, which will be film. Oh, Joe, please go-ahead.

Joe O’Dea

Thank you. All right. Sorry about that, getting used to this new format. Good morning, everyone. Starting on the demand-side in Americas, it sounds like spec activity largely pacing as expected. But just interested in any color on the time from spec to order, if you’re seeing any elongation in that with respect to what you would normally see on-spec to order and what you’re currently seeing the degree to which kind of tariffs and other inflationary pressure is behind that. And then just related, we have heard some comments around kind of data center crowding out and inability to service other projects because of data centers drawing more activity and the degree to which you’re seeing any of that.

John H. Stone — President and Chief Executive Officer

Yeah, Joe, this is John. I’ll get started there. And I’d say, like we said in the prepared remarks, spec activity is strong in non-res. Might go so-far to even Call-IT very strong in recent months. And I’d say it’s broad-based. We’ve got a portfolio in a channel reach that affords us broad end-market exposure. So we’re seeing broad-based growth on the spec side. Channel checks with our largest customers support that view. And to the more detailed points of are we seeing elongation from spec to shovel-ready or doors being hung? Not really. I don’t think that environment hasn’t meaningfully changed. But that is a reason why we don’t disclose a whole bunch of detail because the line-of-sight from a spec to revenue for us really depends on the vertical and the project. You could imagine smaller projects or maybe multifamily office renovations for tenant improvements could be pretty quick.

Something like a very large hospital complex could take a couple of years. But suffice it to say, spec activity has been strong. Channel checks also we feel support our outlook. On the question about data centers crowding out other projects, I would feel like not in our space, do I see that really as an impact. That being said, I feel-good about the position — the competitive position we’ve carved-out for doors and door hardware and data centers and that — it’s a small part of our business, but it has been growing nicely.

Joe O’Dea

That’s helpful detail. And then on the tariff side and the 1% of COGS headwind that you talked about, just in terms of how you’re addressing that are surcharges already in the market? How much of this is price, how much of this is more kind of cost mitigation on your side? And is it primarily tied to the latest kind of tariff changes and the impact that it has from Mexico.

John H. Stone — President and Chief Executive Officer

Yeah, I think. So there’s been like the last many months there’s been a flurry of changes with respect to trade and tariff policy. You know, was declared unconstitutional, right on the heels of that, Section 122 was implemented. And soon after that there was a wide range of Section 232 changes. And when you net all of that out, along with some inflationary pressures on fuel in particular, we see an impact, a net impact of around a point of COGS. And think of the playbook we used a year-ago. Some pricing actions, it could be surcharges, it could be list price increases.

They are not yet in the market and that’s why we’re not yet updating any organic revenue guide as a result. We’ll certainly announce that to the market, to our customers first as we work-through all of the details there. And as always, there’s an enormous amount of details to work-through on all the different trade policies. There are some cost actions that we’re taking. I think just normal hygiene for a company our size and that will contribute. So when you add it all-up, we expect to mitigate this on a dollar basis at the adjusted operating income line and net earnings per share.

Joe O’Dea

Thank you. Appreciate it.

Mike Wagnes — Senior Vice President and Chief Financial Officer

Jared, maybe I’ll just jump-in and add. If you think about the mix between price and cost, obviously, it’s going to come from more pricing than cost actions due to the size we discussed. But similar to last year, look for us to make sure that we’re driving that price and productivity to cover that inflation and investment. That’s something we’ve been talking to you for a number of years about.

Jobi Coyle — Director of Investor Relations

Understood. Thanks, Mike.

Operator

Thank you. Our next question will come from Tim Weiss with Robert W. Baird and Company. Please unmute your line and ask your question.

Tim Wojs

Hey guys, good morning. Maybe just the first question. I guess if I look at North-America margins, I was wondering if you could maybe just add a little bit of color on some of the mix puts and takes this quarter. I think it’s been a while since we’ve had kind of a negative mix impact in the bridge there. So maybe just add some color there as to what the drivers were and how you see that kind of playing out for the rest of the year?

Mike Wagnes — Senior Vice President and Chief Financial Officer

Yeah. Tim, so if I bring you back to-Q1 of last year, we had really strong volume leverage and positive mix. And what that was, it included mix within non-res. And specifically, our non-res business is so much more than just a lock. It’s the mix between the different businesses within non-res. This quarter was a little different than Q1 of last year. So it was some negative mix. If you think of the Americas and you take a step-back and think of the full-year, don’t look at — don’t expect to see a headwind for mix for the full-year for the Americas. You did have a headwind in Q1, but full-year, think of it like most years, mix kind of evens out over the course of the year for the Americas.

Tim Wojs

Okay. Okay. So it’s mostly — it’s mostly products — product mix within non-res.

Mike Wagnes — Senior Vice President and Chief Financial Officer

It’s product mix, yeah.

Tim Wojs

Okay. I got you. I understand. Okay. And then I guess how — to that, like how would you kind of expect margins in North-America to kind of sequence through the year? I guess that mix impact kind of drove it, I guess a little kind of weaker Q2 than Q1 than we thought. So just trying to understand kind of how we should expect margins in North-America to kind of pace this year? Like would you expect kind of a negative variance in Q2 as well? Just trying to think through those pieces.

Mike Wagnes — Senior Vice President and Chief Financial Officer

Yeah, as you think about, let’s talk just margin rate for the Americas. As you as you progress throughout the year, obviously, in Q2, we do have the peso impact from Q2 of last year. I’ll call that to your attention. We put that on the earnings deck of Q2 in ’25. But throughout the rest of the year, expect most of the expansion to come in the back-half of the year. Obviously, right? That’s not sponsor. Of the first one or lastly for each of the quarters, we got to now put in DCI. DCI is going to be a margin rate impact. You can think of it as 30 basis-points for a full-year. Q1 obviously only had one month of activity, the last 3/4, obviously, while three months. So those are the two items I would call-out. But if you think about margin expansion, think of it more in the back-half. And part of that is the comp that you’re going up against vis-a-vis 2025.

Tim Wojs

Okay. Good. That’s clear. Thanks guys. I’ll hop back-in queue.

Operator

Our next question will come from Tomo Sano with JPMorgan. Please unmute your line and go-ahead. Tomo, your line is unmuted. Please go-ahead.

Tomo Sano

Can you hear me?

John H. Stone — President and Chief Executive Officer

Yes.

Tomo Sano

Okay. Thank you for taking my questions. In first-quarter, the Americas electronics business was up mid-single digits, which is a little step-down from the double-digit growth seen in Q4. Could you provide more breakdown of volume versus price contributions for Q1? And any color on what drove the decelerations? And do you anticipate any changes in a growth perspectives after 2Q, please?

Mike Wagnes — Senior Vice President and Chief Financial Officer

Yeah,, if you think about non-res, we said in the prepared remarks, non-res was driven by price realization. Just to remind you, Q1 of last year, really strong volume growth in non-residential. You can think of that at the higher-end of mid-single digit volume growth for non-res last year. So this year, obviously a little less when you think of volumes. Full-year for non-res, expect to see volume growth for the full-year in non-residential. I think that remains a strong market for us like we talked about. And so I think Q1 and non-res, if you think about volumes, part of that is just the comp in the prior year.

John H. Stone — President and Chief Executive Officer

And, this is John. On the electronics side, yeah, mid-single growth this quarter. Look, a year-ago, it was double-digit, very strong. I think when we still — when we look over the cycle, if you will, we still see electronics being a long-term growth driver for Allegiant. The adoption rates are still increasing and growing. And I think is providing that point of outgrowth that we expect to achieve. So still feel-good about our position in electronics. We’re still rolling out new products and I think still stand firm that that’s a long-term growth driver for the company.

Tomo Sano

Yeah. Thank you, Joe and Mike. Just one follow-up. There was a commentary that ERP implementation and legacy mechanical business were key headwinds for the international segment in Q1. Were there any execution challenges associated with these factors? How do you view the prospects for recovery in international operations from second-quarter, please?

John H. Stone — President and Chief Executive Officer

Yeah, it’s a very timely question, Tomo. And yeah, the ERP implementation was limited to one of our legacy mechanical businesses in Europe. And so while we haven’t sized that exact amount, it does explain most of the organic revenue and margin decline in the quarter [Technical Issues].

Unidentified Participant

47% 48% of EPS in the first-half. Should we think this year is maybe more like mid-40s, but because of that America’s margin pressure and ERP headwind.

Mike Wagnes — Senior Vice President and Chief Financial Officer

Yeah, Julien. As you know, we don’t really give quarterly guidance, right? So if I give first-half, second-half, I’m giving an EPS for Q2. I’ll just share just a little more from what I said earlier. In the Americas, I wouldn’t expect a big headwind to margin rates year-on-year in the second-quarter. I just don’t expect to see much expansion there, right? So you could think of it as not expansionary.

For international, international, I think it’s fair to say second-quarter a little softer versus last year-on margin rates. And similar to-Q1 we talked about, the sequential improvement versus Q1 of ’26 will be similar to the sequential improvement you saw in ’25. And then you start to see it recover some. If you think of the Americas though, think of it more — a little more margin expansion in the back-half of the year. This is not a massive margin expansion delta, it’s more margin expansion in back-half and you know what Q1 was.

Unidentified Participant

That’s helpful. Thanks very much, Mike. And then just on the kind of PPI, you had that 40 bps margin headwind in the first-quarter kind of total company. How are you thinking about that sort of play-out over the balance of the year? I think when I’m thinking about sort of total margins, you’ve got a volume improvement to margin rate in the back-half from easier sort of volume comps. So that helps with that margin step-up in the second-half. But just wondering kind of any puts and takes on PPI, how is kind of pricing playing out and competition and that type of thing, please?

Mike Wagnes — Senior Vice President and Chief Financial Officer

Yeah. So obviously, you saw the headwinds in Q1. If I — if I break it out between the two businesses, similar to what you would expect in margin rates, Americas expect to see for the full-year, right, our full-year PPI expect to see some margin expansion there, dollar positive. International is going to be a little tougher this year. So at an enterprise-level, I expect the total company to be roughly around the Americas for the full-year, a little more in the back-half than first-half, obviously, Q1 was poor. Second-quarter, certainly better than what you saw in the first-quarter. And then think about the core business, we expect this business to get back to that core incrementals we outlined at Investor Day, right, the core ex-acquisitions and currency of that 35% plus as you think of our business for the remainder of the year.

Unidentified Participant

That’s very helpful. Thank you.

Operator

Your next question will come from Joe Ritchie with Goldman Sachs. Please go-ahead okay Joe your line is unmuted. Please go-ahead. Okay, we’ll try Alexand go-ahead, Joe. Oh there you got me.

Joe Ritchie

Okay, great. Thanks guys. Sorry, struggling with the perhaps maybe not doing this on my iPad next time. No worries Joe around the international segment, right? This is this is a segment that historically you’ve tried to scale via acquisition. I recognize that you had the issues with ERP this quarter and that impacted it. But I’m curious like as you kind of think about like does it make sense for Allegion to have an international presence. The domestic business is doing so well. Is there — is there — does it ever make sense for it to be more of a domestic-centric company and maybe it’s just too difficult to scale the business internationally.

John H. Stone — President and Chief Executive Officer

Yeah, I think probably Q1 earnings call is not the time to have such a conversation, Jill, but I would say one business with an ERP challenge that we haven’t had before driving a miss, I don’t think such extreme conversations are necessary right now. I’d say we’ve been very pleased with the growth we’ve seen in international.

We’ve been very pleased with the portfolio improvements we’ve seen in international. The market conditions have been rather soft, but our teams have performed well. And one, what I consider temporary blip on the legacy mechanical side with this ERP implementation, we’re going to overcome that. I have confidence there. It’s not a demand issue. We’ve got some operating performance that needs to improve and we’ll improve it.

Joe Ritchie

Fair enough. And then I guess just a follow-on is just around capital deployment. Just given kind of like the start to the year from a share perspective. I’m just wondering like how you’re thinking about buyback versus M&A at this point?

John H. Stone — President and Chief Executive Officer

Yeah. It’s a great question, Joe. And I think as you saw in Q1, we did repurchase $40 million worth of shares. And you saw that our Board authorized a $500 million share repurchase program. So I think that being said, our expectation and your expectation of us should be balanced, disciplined and consistent capital deployment for the benefit of our shareholders. And certainly, we understand where we’re trading right now. And I’d say on-top of that, our M&A pipeline is active with good-quality bolt-on acquisitions. So I would say expect us to do both for the benefit of our shareholders.

Joe Ritchie

Okay, great. Thank you.

Operator

Thank you. If you would like to ask a question, simply click on the raise hand button at the bottom of your screen. Once you’ve been called upon, please unmute yourself and begin to ask your question. Our next question will come from Raife Jad Rosi. Please unmute your line and ask your question.

Unidentified Participant

Thank you. Good morning. Thanks for taking my question. I just wanted to follow-up on the electronics growth in the quarter, just the mid-single digit, I think in the 4th-quarter, it was low doubles and what you did through 2025, if I remember right. You’re calling out like a tougher comp there. How should we think about that growth through 2026 and maybe just a little bit more color around the deceleration.

Mike Wagnes — Senior Vice President and Chief Financial Officer

Yeah, I have to apologize when I answered that previous question, I struggled to hear the question I answered about the non-res business, so I apologize. With respect to electronics, electronics was really strong for us last year, right? And it was strong each of the four quarters. I expect to see electronics to be a long-term driver of growth for us. We keep on talking about this including Investor Day. Quarter-to-quarter it can move around a little, but if you think about electronics for us, think of it as, hey, this is going to be the accelerated growth driver. And over the course of the year, it tends to outgrow the mechanical. We expect that to be the case for 2026 as well.

Unidentified Participant

Yeah. Okay. That’s helpful. And then just on the 1% of the incremental inflation on COGS. Is there any way to parse out how much is tariffs or like incremental 232 versus just broader metals inflation and anything else? And then just the — you’ve had a lot of success historically offsetting with price. How do we think about the cadence of that through the year? Like how much of a lag is there between when you start to see the inflation versus when you can raise price? Thank you.

Mike Wagnes — Senior Vice President and Chief Financial Officer

Yeah. If you think of our business, we try to manage all cost inputs. So when we talk about it, we talk about pricing and productivity has to cover that inflation in those incremental investments. I tend not to give details by each subsection. Just think of it as a total cost inflation number we provided. And then as far as lags, I would say, historically, there is a little lag between pricing and inflation, meaning the inflation. It could be a little sooner, but it’s not enough where I would Call-IT to your attention to change it much. What you tend to find is the cost inflation comes, but it sits on the balance sheet until it gets sold and flush through COGS. So it’s not that dissimilar historically. We’ll continue to monitor it. And if as there’s updates throughout the year, we’ll just provide you more details.

Unidentified Participant

Great. Thank you.

Operator

Our last question will come from Alexander Vergo with ISI Evercore. Please unmute your line and go-ahead.

Alexander Virgo

Yeah, thanks very much for taking the question. I wondered if you could just dig a little bit more into the ERP impact. Just what was it that surprised you? What was it that went wrong? And I guess of pricing that will end-up coming through there. Thanks very much.

John H. Stone — President and Chief Executive Officer

Yeah, good question. So on the ERP, again, it’s just a case of a legacy system been in-place and highly customized over 25, 30 years, people got very accustomed to it. New workflows just slowed us down in this legacy mechanical business and people are adjusting to it, people are adapting to it, people are learning and getting better with the new system. And again, as we’ve turned the chapter into 2Q, I do see our production rates are improving. Our demand still supports the outlook. Customer orders, backlog still support the recovery and our operating performance is giving us confidence that we will recover the Q1 shortfall over the balance of the year. Then shifting over to electronics on the supply-chain, certainly with the conflict in the Middle-East, we’ve been watching component supply chains very carefully. Haven’t yet seen any major disruption. And I do feel as a company, we’re better-positioned with respect to electronics supply-chain than we were back-in the pandemic time-frame.

Alexander Virgo

Great. Thanks very much.

Operator

Next question will come from David McGregor with Longbow Research. Please unmute your line and ask your question.

David MacGregor

Good morning, everyone. I guess I wanted to begin with — hey, good morning. I just want to go back to the mix question and it was asked earlier and just in the Americas business, how much of the margin pressures are you think resulting from the introduction of more value-oriented products like the Performance Series and the Von Duper 70 and those products?

Mike Wagnes — Senior Vice President and Chief Financial Officer

I don’t think it’s that, David. It’s really the mix. This isn’t a case where someone is trading down. This is the mix between the various businesses that we have. And so it’s not a case where you’re trading from a high-price point to a mid-price point offering. It’s more of the mix between the various product lines that we — that we offer.

David MacGregor

So you’re not seeing any change in terms of how these jobs are being expect in terms of more value orientation.

Mike Wagnes — Senior Vice President and Chief Financial Officer

No, I would not say that’s the case at all.

David MacGregor

Okay. All right. Thanks for that. And just a follow-up, I guess on the residential business, are you confident that you held market-share in that business this quarter? And I guess what are the strategic options available to you to maybe affect a stronger position versus some of the secular trends?

John H. Stone — President and Chief Executive Officer

Yeah. I think, David, on the resi side, for a while now, we’ve been dealing with just a relatively soft end-market. We’ve still seen electronics growth. In resi, I think that has been a positive for us and continue to introduce new products in the electronics segment. As you’ve heard from, I think a lot of companies, new-build is very soft. Aftermarket is probably just treading water. And so overall, the market remains a little bit soft. I think in terms of our share, all the indicators that we watch on point-of-sale and other things would indicate, yeah, our market-share is definitely holding up.

David MacGregor

Thanks very much. Good luck.

Operator

At this time, I see no callers in the queue. So I’ll now hand back to the CEO, Jon Stone for closing remarks.

John H. Stone — President and Chief Executive Officer

Well, thank you all very much for the Q&A and attending the call today. We look-forward to connecting with you on our Q2 earnings call-in July. Be safe, be healthy.