Allegion (ALLE) 25 Apr 242024 Q1 Earnings call transcript

Good morning, and welcome to the Allegion First Quarter 2024 Earnings Call [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Josh Pokrzywinski, Vice President of Investor Relations. Please go ahead.

Thank you, Drew. Good morning, everyone. us First joining Call. XXXX for you for Quarter Allegion's Earnings Thank Financial me President Senior Mike Chief Stone, are Vice of Chief and With John and and today Executive Officer; President officer Allegion. Wagnes,

which our was and which archived be today's this the to release, earnings investor.allegion.com. we available This issued refer on Our will are recorded website. at morning, on earlier and our presentation, website call, will in call

our considered X. to most materially Slide provisions SEC not Statements for these update differ made company statements from call may pursuant that some today's made are a are law. of description The recent Please harbor forward-looking to the in historical statements. see that factors to of to facts go forward-looking filings actual our obligation securities results no cause safe projections. are and Please of assumes the federal

presentation Today's the measures. refer details. in to include reconciliation further for the of release financial and commentary press tables Please financial non-GAAP our

go and Please to I'll call over to turn John. the X, Slide

best balanced in markets level, quarter and end the our high capabilities manufacturing in continues capital writing, the and Good Thanks the on spec team the team. a I'm QX of at partnerships serve for allocation. our to presentation. executing Allegion off XXXX, is in of remain some leverage made-to-order to start Institutional strong healthy course margins as briefly, our more these solid proud everyone. Josh. through we delivering of walk of highlights user our very to expected, expanding a morning, I'll will joining entire share us. Thanks, through and customers. We're top each and distribution

to dividends Controls we returned acquired in shareholders Boss and through As our Dorcas and and repurchases. previously announced, Door QX share cash

a Allegion's in we the year. for by and world, our performance seamless to performing a set you foundation February. We're provided of affirming XXXX safer QX outlook the has solid access in well, vision enabling Driven we're

X. Allegion and Slide balanced to consistent go capital deliver QX on and continues Please this. to our showcases allocation performance

for flagship growth, on nurturing invest of industry-first new to be our innovations building continue value legacy of to the relationships delivering partner We the strategic organic choice. and access and through brands

a improve simplify with lock In host alike. integration and experiences new and smart to help announced guest Airbnb Schlage March,

guest most app. guests now the Our and integration with smart need means unique U.S. with experience checkout directly removing in Airbnb to access family Host each listings automatically hosts Schlage the streamline to industry-leading Canada codes, the can for check-in the generated the the access process lock Airbnb manually and within create seamless provide can visitor. Encode with codes

checkout shared Airbnb are and dividend Schlage, the February, door. we a rest integration making on currently consecutive only company. Allegion also as reminder, this by be lock tenth continues peace of Airbnb lock, Schlage access are only keeping booking, them at in the checkout. check-in codes their adjustments Hosts while trip, can to guests of automatically deactivating control the needed app, increase. annual dividend-paying within with app brought their codes industry the with stock. And experience, mind in those guest our Access and which will automatically time easy after any The during the active of compatible having guests in make can announced for the update with another times smart a first the is our to smart

cash $XX to returned the this to amounted million For in shareholders. quarter, approximately

closed bolt-on in acquisitions. QX, X we Additionally,

channel Allegion a strong International. the During U.K., architectural which Boss call, and our in positioning February Controls supply business discussed we Door chain last while spec-driven flexible a increase in brings acquisition our us of the to earnings

locks European portfolio and another access in strikes markets, and sold strong of electric distributed control education manufacturer internationally a a Dorcas, Spain. In bringing our Dorcas' March, Their across of the with access verticals. acquired are investment quality International leading electromechanical solutions this presence based solutions strategic Allegion elements are including in is the systems care of there. business in integral health and into control and we

made $XX we quarter, million. repurchases share first the to approximately additional amounting in Lastly,

Overall, the here see balanced on you with allocation this I'm happy capital slide.

invest continue walk returning and through thoughts. We I'll in be growing financial back continue the to some quarter provide first to business Mike shareholders. core, will to the and cash now final continue you results,

go and morning, call. today's Slide you Please Thanks, Thank good to for joining John, #X. everyone.

margin the The team executed points, from for well EBITDA business X.X% solid recovered start adjusted and X.X% quarter, basis As in abnormally and driven interruptions. Adjusted on of shared, price in XX first inflation and increased and a operating XX chain volume excess performance QX deliver QX productivity investment. as which seasonality Organic the $XXX.X declines. margin revenue year team's respectively, to by expansion the prior by was challenging John of Revenue despite declined XX%. previous a the was margin first up supply comparable, quarter to to our a experienced decrease strong compared reflects XXXX. million, XXXX. XXXX

Volume and prior share other headwinds Adjusted of versus favorability. declines interest approximately $X.XX or and earnings per more offset $X.XX than tax year. and X.X% decreased the margin expansion

the enterprise I historical the XXXX overview to last revenue of QX versus more We details quarter, bringing cash before in by we Currency go Slide was QX norms. turning our decrease review last decline drove experienced favorability flow additional sheet seasonality business Organic I a the $XX.X million, XXXX XX.X% flow slide in available #X. reported our just total balance which a in declined tough will versus quarter year normal revenue. result our regions. here as later to and cash what provides a in results X.X% year. presentation. Please return the a on X.X%. respective This will acquisitions little our more quarterly represents Finally, was and mentioned. the to I provide the an returning of and to saw comparable to

Please go to Slide #X.

basis Revenue QX. both results as volumes. On of pricing in lower approximately Americas operating down X-year a favorable grew business $XXX.X offset strong more than organic delivered million reported segment X.X% basis, XX% our on and was Americas Our organically. the

comp digits declined the inclusive that mid-single business, year XX%. prior nonresidential of against nearly Technologies, Access grew Our

soft with our digits impact our Demand to quarter remained and in business continue in strong. higher home the for single new rates electronics remained interest markets Americas sales. business low existing down Residential as

versus revenue of While period digits income was quarter electronics against a prior down due million low single XX% has our nearly adjusted to decreased X in comp, lower years. Americas the tough year grown last the operating business X.X% volumes. the $XXX.X over

margin to XXX and and adjusted expansion operating to and despite Overall, investments and basis efficiently, up points, the were XXX quarter driving of margin well lower price adjusted in and However, excess operate our Slide respectively. margins EBITDA productivity through team continues go #X. execute for inflation volumes. Please Americas

challenging soft end offset associated see X.X%, to was X.X% by tailwind macroeconomic $XXX.X acquisitions million adjusted respectively. on market environment. volumes the Revenue continues demand. realization up by segment was of International impacted decreased X.X% reported of lower were X% Currency basis operating a positively this versus $XX.X and more Price million a quarter, organically. International income prior and period. reported Our with revenue X.X% than year but a down

and and adjusted productive and declines lower XX for EBITDA year-on-year Adjusted Price basis operating rates. decreased respectively. resulted volume points, XX margin modest pressures, the margin in but tailwinds, quarter covering inflationary margin

Please go Slide #X. to

as at million, lead XXXX QX I current the benefited strong versus $XX.X down prior cash line with $XX.X As year. was million norms. earlier, more from reductions, historical year while mentioned came flow particularly supply year-to-date flow the is time in it available cash chain in

year. result as of a Next, the primarily driven of by timing higher percent working capital the receivables increased and prior within collections versus revenue as of revenue a quarter

debt our adjusted a to with ratio X.Xx, finished where of healthy we remains Finally, net consistent at EBITDA XXXX.

supports is flow cash strong our Our deployment. capital balance business generating sheet and continued

the call John. to back hand over now will I

go XX. to Please Mike. Slide Thanks,

want and we a some I did to of that Allegion's the we how the business in marketplace. moment believe to factors As win highlight last model quarter, we distinguish key spend

around to funded drivers, may continue long-term through year has particularly long-term bank and Issuance municipal market stable markets outside bond to see we its with for of We these XXXX. in commonly our steady referendums. core continues support cycles institutional traditional markets. in demand more financing as institutional election be our continued Bond progress favorable view largely issuance. growth issuance funded by Projects are demand

the a formula winning that from feel to We the expertise have right bringing Allegion of strongly into side. markets. depth we comes Moving attractive these

wins M&A shows value as acquired the over our frequently mechanical through Our XXXX, solutions capital team traditional proposition unlock care health value deploy in we play we our service access. this puts portfolio and sliding capability door and multiple have Technologies continue and as in security broaden a vertical and to in notched with top. Access pure has the This us hardware a strong the we

marked by was Allegion's go Slide XX. summary, execution. to In first quarter Please strong

full Allegiant Our It's team Exceptional that balanced dedication this X winner highly workplaces the affirming testament capital to competitive all noteworthy Workplace expanded month. Gallup the it's and as year earlier employees. to and outlook. of XXXX a and Allegion margins we're was most This XXXX Allegion allocation, share recognizes Award delivered award named engaged a our of XX,XXX-plus

responsibility of our living and serve for enabling a we're a ethical and grateful communities. this of live standards up the high Allegion's truly our making proud team world Our I'm success in accelerate advance safe, team. and be local of engagement, to you. we access to believes high-performing safer our in employee and By keep increasing values Allegion's employees vision part sustainably, our operate seamless progress to

Okay.

Q&A. Let's turn to

from [Operator with Barclays. Julian Instructions] question The first Mitchell comes

Mitchell's Matthew team is at Pan from This Julian Barclays.

might this first year? the about one, Just kind QX that is about reason of XX% different seasonality, of thinking be typically year's Any earnings. the

you theme was said say for I our normal return a that Thanks abnormal. When seasonality year, the year to last Matt. we question, about would think is

giving we individual don't guidance, quarters, individual you really as far know. like as As quarterly

have X history Like had have last the on the and X revenue the think where say, don't the more many middle maybe companies the some revenues deal normal. less. the ends being we I that just think past book with of with about quarters, months, as Think construction of more a summer in we summer the X as months industry, revenue. you that little year business, the our of would in

So you 'XX. in a normal general, to our But return back half to as what the think business more 'XX revenue first year little half. tends of in versus more a the in saw seasonality have than the of

Lennox of follow-up. delays X worse then Got any construction in project about Does Allegion just X was commercial the months see any versus, talked delays on piece downbeat new it. pretty orders. some Otis market in nonresi ago? outlook and And or say, Americas project sort

Yes.

appreciate the question. John. So is this I

would we more has indicated, And is public of the where weighted I we market. just go see heavily type as to financing the prepared is remarks, rather Allegion's to we which, business towards institutional segment think back stable. some institutional, avenues

of kind would and is between business which of commercial our everything manufacturing, of if of office, kind space, would else, commercial multifamily and split include certainly which pockets pockets there weakness. the in data think centers, retail, strength warehouses, I And then are include

portfolio and and I that outlook think contemplating that's the broad we're for the gives that exposure end together the broad guide you the contemplating. comes we market XXXX, we're what have,

so pretty solid. look issuance if And actually good pretty QX, us gives that our which a strong institutional, at a stable. is feel had that year-over-year, you Bond outlook

specifics, do did project yes, hear through and delayed checks visit distributors you of terms out go get channel In get like we that. and and as this customers and about as you things,

way of much hear the in don't You cancellation.

a do is project little maybe on bit. hold You for a hear multifamily

segment weighted that. towards I'd business You heavily quite more some stable is hear right of do that say But institutional now. and our is

question comes Joe next with O'Dea The Wells Fargo. from

on look I you year-over-year what of in still digit just is of in remainder see showing strong growth? a you terms XX% change single to wanted electronics. plus Americas I The electronics demand a kind as of on Any think your expect to the like in there. the where and context basis? guess an ask comps demand for in comp, year, about year the Americas the quarter the stack on on of area to this year full downward So tough magnitude

you thanks for if -- question. Joe, about the think

electronics. or If you lines, guide with line product don't we share think I driver. a you, would What long-term growth about individual product

this basis, of double-digit long-term see a growth for can on CAGRs business single-digit electronics. to You high low delivering

challenges. chain Clearly, year, supply we catch-up previous last had some with associated

And that's think driver it electronics of that growth deliver saw, so growth over it long-term business, for think a the very years. provide tailwinds X us to you you frankly, was growth. When of above-market to going our robust as last

way And kind really just spec just we've maybe in you're markets. softness there's also there. characterizing that versus leading the then as end degree of some of of ground. And on of markets And seen what and that institutional the projects and we're could saw just and what seeing lead with be the aligns seeing and relates Dodge on the it. Momentum those especially some really in to in large backlog particular, Got related guess, and recently of what of of kind backlog your Not Momentum, some that, on to ABI Dodge things to the projects. I a sure related some softening activity the interested in indicators writing perspective you're it where that, indicators weighing in

so the because in stuff that's might of And bit times. little just long a coming lead be slower

observations indicators. anyway, kind lead on of So

John. is guess, I This I'll add Joe. comments, to Yes. comments, some your

watch They're into cautious are. just we not do. indicators read what I I'd signals, them or to and much be those. we positive negative are to lead they you much think got the too say good like always too

last XX seem end months, of commercial verticals. out to the XX we market other when has as and compared over the play some out visit think That does customers institutional distributors. like with get favorable the I in been to and

that maybe historically that is probably think extending with the some has out been. construction lead than you I up some labor out, it taking brought projects projects longer shortages, longer, jobs time

and In What do as is, institutional the an see we're quantifying again, terms impact people that. any and that's our again, we heavily I say where of right these would that to not is of or business -- in Dodge stable the Momentum markets weighted. indices,

like just on mentioned previous the mixed segment commercial of question. set verticals, And business, see of we you a the our

resi or about we've that as flat And good dramatic outlook, provided. to we to in changes mentioned, affirms think don't from And I our contemplate the tailwinds Our we is down. us. end those dramatic the business, year any outlook initial but for slightly any feel start markets,

Linzey Brett from Mizuho. comes question next The with

just just around strategic outcome has footprint outside U.S. Can tariffs. Allegion your regime? looks how This regions Brett. question we supply a you ability a I flex on enter the nimble don't is understanding more aggressive to election your and a tariff is for manufacturing talk the like, Costa we just Peter about just and Obviously, have but the what around know different should chain that

I'd XXXX of chain else a than resiliency, John. a is everybody of to did open we tariffs as learned this lessons of couple -- kind helpful of a lot me company not And in terms feel let our I XXXX. in over any Allegion supply just would Well, of better supply a ago. or chain. terms the with say our of like we course and about position have we years would lot

get administrations. part do, or Not confident regimes this going or of SKUs would capabilities supply quite say, of I'm make we where buy specifics like several regardless where chain of million of into part in in I or that the we managing But we or tariff made-to-order terms manufacturing, Allegion's to environment and this portfolio that.

would remarks. I to back and President over CEO, closing John Stone, to for session. turn question-and-answer our concludes any like conference This the

we you very reiterate, just a forward XXXX. solid thanks to be And much. next safe, quarter. we're to feel Well, again in everyone. Be connecting healthy, off look We start with to

has conference attending today's now concluded. Thank for The you presentation.

may disconnect. now You