ALLE - Earnings call transcript Q1 2022

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Operator

Good morning, and welcome to the Allegion First Quarter 2022 Earnings Call. All participants will be in listen-only mode. [Operator Instructions]. Please note this event is being recorded. I'd now like to turn the conference over to Tom Martineau, Vice President of Investor Relations and Treasurer. ahead. go Please

Tom Martineau

Officer, Good for Jason. me Thank for Officer Chief you are President Senior Thank Chief and first morning, quarter us Financial Executive and President Allegion's Petratis, Allegion. With Mike XXXX joining Wagnes, Dave Vice you, of Chairman, everyone. and earnings today call.

will filings facts historical refer archived to description issued turn the over and an the allotted. of that reenter of website not four call, caller today's Dave. are themselves no everyone our on I'll the pursuant securities details. our now projections. quarter of Today's results, to to limit the our then commentary release which Our measures. morning which further time go two to We the one may be in earnings non-GAAP was to financial statements Safe a tables factors results Mike to we to and the release, assumes company each presentation refer and presentation first cause one to to the Q&A, are our press statements. update to Please are these made and SEC ask to include Please and of investor.allegion.com. be This and from federal reconciliation the by website. and short followed are Q&A Please for and three. discuss call in our to at call slide obligation given this made for our follow-up like will Dave that forward-looking differ financial Please, on in for will would XXXX would session. earlier which and opportunity question go give queue. considered recorded forward-looking The we see will materially law. slides call some provisions Harbor today's Please actual available the recent most Statements like

Dave Petratis

morning. a strong And Good XXXX. us We joining and had demand Tom. remains our thank pricing accelerated. and today. growth to start market Thanks, solid organic for you Overall, action

on the Stanley a announced Friday of in for highly expected close third also We acquisition Technologies of year. Allegion, quarter Access which strategic to this business, the is acquisition the

we on of Americas, markets Residential the in as the demand within remain experienced segment. QX, During International robust Americas side SimonsVoss, as the strength Portable and stable. non-residential well Interflex, the Security in

to driven supply primarily growth We continued to have electronic not are last redesigns to going quarter, our on encouraging. made progress We and were in supply deliver continued good did revenue the due the the the constraints. alternative component by product to chain quarters, regard even fully sourcing supply impact able global further. to constraints, but to and chain meet demand similar strong in the chains two strength price. With challenges likely persist is demand latest lockdowns we expect China The in

material was cost, price at Looking of QX organic the in the continue from realization versus growth Price driver in experience accelerated high labor impacts cost, and inflationary and quarter. to freight. we

in commodity need pressures in further increases price residential effect additional for assess and announced have prices, spike inflationary recent increases we take the to QX we'll the With starting already continue. as non-residential markets, price and across

price offset the are and we to discussed aggressively for and year. further exceed As channels all inflation, across unprecedented we to in February, products expect price all in inflation pursuing we

business highlight Last, holding XXXX. and an Friday. to EPS we're our revenue experiencing. the reflect last for I We're review, providing in our share more outlook later We're want additional range, updated from on outlook price, outlook are We detail to further the prior offsetting higher our I'll presentation. on inflation the announcement raising the

right Stanley The is and a leader we asset the is from service Technology We a access acquire footprint. and all And our is the it an adding financial has Access with in our to progresses strong Black Decker. look category core agreement we for come to business Allegion business Technologies business to expansive our anticipated an strategic This and have and Access seamless team. & very profile QX. forward employees, them complementary the welcome Americas to of portfolio. joining focus, Close Allegion

basis to significant performance turn driven tough Now the segments Allegion quarter. $XXX let's price comparable quarter volume Please quarter more first points in that business saw of was first load QX increase a X. X.X% go Organic the highlighted drip to Americas a non-residential Allegion Americas volumes an had details. XXXX. residential growth large demand of robust as to Mike business X%. organic Revenue in revenue earlier. revenue channel business during was growth, realization to the by share the to down and the was decreased XXX detail International by X.X%. driven the year, compared operating of in for for moment. by attributed margin will Adjusted increase last on more last were year. million, The slide quarter a also

inflationary COVID-XX of income to available reduced Lower million, pressures, $X.XX year-over-year share the Adjusted but versus is with tax most was was favorable caused flow line down requirements per driven $X.XX historical of our QX the pandemic. count. by for trends. challenge, versus at the growth in was a high approximately Year-to-date other working which cash came in of last year's offset number of lower XX share by year, XX% prior. basis due Last and operating productivity the $XX Incremental increase Continued partially or earnings investments income, future decreased decline. drove and decrease. points rate currency headwinds $X.XX capital

firmly the financials, continue discuss outlook. growth of momentum. and Access our through and you on XXXX for I'll I of to trend XXXX seamless electronic many to construction be and in now We for and the will access back adaption than more Mike expect walk add vision bullish markets ever, before, years. support to DIY stated our is relevant I've fuel remain Technology believe strategy As will the acquisition and

Mike Wagnes

Dave. slide per Thank reflects first This call. slide today's Thanks, earnings number share you everyone. the X. morning, good reconciliation for quarter. for our Please And to joining go

the Favorable pressures driven continue business $X.XX acquisition another access by fuel drive the inflation, reduction. share to in another This $X.XX unfavorable currency, share decrease expand quarter strategy. income first of for per share. per year-over-year adjusted of Adjusting share $X.XX other more Investment challenges and growth, chain the associated per rate the restructuring than count our Higher and and per the $X.XX and spending invest earnings or decreased to electronics quarter and compared share capabilities, of the earnings significant per share $X.XX. share $X.XX year. as expenses, results to had supply XXXX share was earnings charges by results per divestitures drove long-term earnings in on of drove related impact by reported per XXXX, $X.XX interest and was $X.XX, $X.XX reduced combination a which Operational of drag XX.X% we increased earnings offset share earnings impacts tax first of adjusted For per price. our XXXX with productivity favorable a the seamless prior to by $X.XX. earnings $X.XX,

Please slides. I'll of on share arrive gain of go After giving net items, for per regions at share acquisition per related performance a to reduction components reported non-operating Lastly, for we effect Allegion This these the quarter $X.XX a of the you the costs. XXXX the slide depicts our charges and earnings to cover quarter. on respective the their to the have first X. and total and $X.XX. revenue slide focus results restructuring

indicated, X.X% As organic revenue we by quarter, realization. growth in driven price the improved had first

and volume to business. Currency first than Allegion Americas Allegion to in offset headwind we number flat, essentially acquisitions, growth impact the see Although the strength total and divestitures company's non-residential quarter. X.X% go X. Please in the the was slide of did reported bringing the International more

impact First for grow realization. percent. price was up performance segment Americas to was for down improvements adjusted experience a delivered a residential mid-single adjusted organic expect quarter price helped $XXX.X $XXX.X the was segment margin and improved an to income was improvement continued and strong the prior-year basis. Residential points. to million price reported comparable of operating decreased against versus further volume on growth. inflationary significant through on period by channel as pressures, price to basis a X.X% year. which revenue load sequential quarter last the operating as investments our in, business we slide as digit driven for up digits. QX business had XXs see decrease up Non-residential and deleverage. The shortages as low-single basis The was we progress digits The Americas supply the realization. XXX the million, margin was both low-double productivity in non-residential be chain Please margin a revenue XX well. The dampen X.X% Americas point tough X. continued challenges go drove associated year's XXXX of Incremental component was low Electronics margins with down from and QX the shortages

SimonsVoss, than versus to XXXX than solid a The million XX. year. was available XX.X% cash and decrease the prior-year tends generated period. the and a International well segment driven as revenue contributing driven exceeding first in modest The primarily amount increased as which strength adjusted of million, trends The $XXX.X operating $XX.X to typical also increase position. at growth go spending. slide driven unfavorable the cash in sheet working continues points solid spike organic International operating came line is remain as Interflex historical capital. use investment flat for to The growth quarter which realization up cash by primarily million expected business flow a last flow offset effective inflation, to strong The the committed the quarter of basis flows $XX.X was have to period. by in Securities divestitures. was was year's balance of and strong of more working the currency point price increased XX for million margin year business and was with was growth. prior-year first organic quarter capital the in to be X.X% due Adjusted quarter in businesses. and currency to efficient the by more continues quarter organic Global segment an First healthy Year-to-date basis compared available $XX first more to Last to in million, is cash flow COVID. the due of in and lower the XX.X%. of cash for our we to organic by The needs generate and headwind saw The income productivity basis. $XX.X to leverage, margins and Portable price as volume on offset XXX Please by

to We over Technologies will of full-year during short-term now expect remainder use Stanley hand it I year back to on taken cash to to the acquisition the down of complete pay debt our XXXX outlook. the Access excess generated update an on for Dave the business.

Dave Petratis

continues XX. driving under-supply Americas you, indicators All to will of Thank market decade Please the to go be residential specifications slide positive is growth continue the in be be the over Non-residential and The the level robust. a Mike. segment. strong. institutional and continues of residential demand homes in number factor last are business to to stable leading

in saw products realization pursuing QX. and and improvement aggressive all in price in been have channels in price We substantial

to have in increases price go starting effect We in additional QX. announced

better expect we half. in the the Given supply performance revenue the be the still second in to first half continued challenges, than chain

raising continue With XX.X% by remained place, in XXXX. in be outlook have total Global and as now and the price Security we are to segment headwinds markets are these experienced Germanic In growth. will realization, solid, as Currency sequential in XX% improvement revenue in up total reduce Allegion The Portable well. are Americas those our business. inorganic we led parameters also to aggressively projecting price in International the pursuing International, markets to

not growth raising outlook are X.X%. Allegion, XX%. with growth and to the X.X% number to for All impacts we are does of increase Access growth acquisition. to raising to price organic increases outlook total to for to any X.X% Please by primarily to Stanley note XX. International, in, to X% total include a Allegion our important X.X% X% These range outlook Technology to to we're outlook go the X%, driven of this higher realization. For slide revenue total revenue from revenue It's organic prior updated

realization has assume provided rate the is revenue The with the ranges is increased The continues count $X.XX improvements, For assumption Reported price approximately prior EPS, by earnings additional we leading be last expected are the $X.XX share to call. EPS to million. assumption holding is offset full-year inflationary and operational share impact $X.XX higher unfavorable approximately the tax from during count an EPS $X.XX to as outlook. range per our by XX% adjusted the cost. XX.X of the updated hold EPS a to share to of to outlook offset to been adjusted of us higher

Our to being to outlook flow slide it's to is for cash go $XXX and million. projected raised XX. available million $XXX be now Please

to Q&A, more about go of want talk business. the I we to Access a bit our Technologies Before acquisition

customers, website unlocks For Friday's combination archived and this want you benefits listen we security saw expands those missed to conference distributors for invite visit our It's values of you the employees, and that the in and webcast. a who presence our markets our greater have strategic I highly to in call, acquisition. shareholders. I to repeat

that will in In and our will that drives products growth, offerings. strong as expertise, complementary and profile, enhance a will revenue solutions, create geographic service balance a providing and access, leadership stronger Americas Please and and institutional distribution return, gain we the access markets sheet, strong relationships go for streams. consistent new will specification Access proposition allocation, entrance opportunities XX. Allegion. enhance further customer Allegion's and verticals disciplined stronger of cash with egress We Allegion architectural Cross-selling solutions. value. well complementary service more capital its and mutual and through expand additional new our flow Along will in we user end as from expand Allegion financial with Technology bolster slide breadth resources and control it shareholder and room believe significantly opportunities penetrate business networks will value value significant ongoing to and create business market a automatic

more promise capabilities this Technologies revenue create Allegion believe leader North acquisition adding believe and strategy for business is the service our the will electronic portfolio category a be the to that at take many for I of expands Access sheet fundamentals, entrance and acquisition, our grow allocation questions. good Americas supports Allegion's current welcome and provides businesses. there business value will addressing will and in to complements solution segment. maintain your brings Mike the profile. us. the core the world. are specification balanced to balance market right shareholders. adding we strategic opportunity of connected Allegion We're in value It financial a to and markets people also deliver comprehensive look business strong strong investment ways our opportunities. financial happy access that, capital We're a strengthen and business acquisition for the of family. seamless priority and It innovation acquisition we with creating a service solutions, that. to access, value its that seamless believe The and Allegion As flow are We we and on A Access our our a create for and a with gap disciplined With capabilities, portfolio We're a continue flexibility Technology to expertise core Ultimately, to a to excited clear shareholders. be synergy having supports automatic and top will incremental and cash American Allegion

Operator

Instructions]. [Operator

Baird. from Wojs Timothy from comes question first Our

Timothy Wojs

kind you're as on of seeing jump backlog about a are through just kind year, to Let's cadence about the of think from a you kind just and you perspective. quarter. the the thinking of little talk in of perspective to for to bit Maybe order revenue might How maybe what I'm timelines maybe the half and what building back some you're risks XXXX. you've any timeline from the year the into construction that that got elongate revenue of the a understand trying kind just building visibility shift and an

Dave Petratis

we I've robust. you I And business, about construction extremely orders, feel forward extremely that in order robust. think institutional get activity, as around think last the weeks, terms of also as the the business, the across in traveling country, few that incoming commercial activity especially been path

as says, you've going at to stronger When of second difficult product last the remain I even under think the institutional, rates. extremely got chains across year. I door. the in beginning go in we our half bang my the it supply million out nation, X.X we're to would to higher interest but I little And Residential say bit. improved have we upcycle, last with the the which I age year commercial, out through we're we're of says about res. the from think get pressure, decade. look as res, it a to think going X.X of macroeconomics, under-supply was think about And then, As about probably terms the continue shows I million, to in housing think

good I overall about So, feel very demand.

that think see. quarters going about and I six out to four then we'll

Timothy Wojs

prior Mike, back kind in the to quarter the in any given difference EPS first think that of the that half. or I there to is of kind I was today it are Is weighted just kind XX% similar? think guidance, you of cadence, on the where just

Mike Wagnes

Tim, of move XX% start. the say as at beginning got it, decent from the to Right? you year. would think that a about we it off that doesn't said materially we I

okay stronger original maybe was than the assumption or quarter First assumed.

two, in the year. could but it we move beginning it's so, a that And or that the percent of XX% roughly or so around gave

Timothy Wojs

dollar Is to the cost of any for kind change price basis the on a there assumptions year?

Mike Wagnes

our the price line, guide is our EPS is look fighting that the raise you say pressures. the top guide would raised because inflationary on I realization that guide, we at didn't as on the

to beginning in going than percentage will the there we a year. the so, of higher price And be assumed

raise to said that's the in the guide. of we going higher by year, roughly XX/XX, be if the beginning of So, the

that to to at XX% be you're looking XX%. So, going

Operator

Walsh question Credit next comes Our from John Suisse. from

John Walsh

quarter. Nice

Just wanted understand kind guidance. the to the change in of sales

driven like to higher, it price, tough. you sounds that So, confidence being but given supply gave take it's of kind the were still by what chains

the the China get kind strong impacts. understand the backlog, COVID what confidence you'll have higher to have of able gave but top that parts hit a of you need robust is really you You I the you be to and demand kind that line.

Mike Wagnes

think We've so really we you our feel – as strong. about already. the announced increases those price, John,

QX. With stronger in they're we exited overall the even than marketplace. So, to market when respect the demand,

And to bringing gained QX, So non-residential. on new suppliers quarter. in Those demand qualify strong work base. actions in supply activities and in real additional market to taken lastly, first then the traction we've have

And so, half that that the we'll more year, of get we from can volume additional does back in give us get confidence out. that, suppliers additional the supply

Dave Petratis

I have inputs particular exposure, think confidence. I'd leaves well. freight rise it's second modestly. year, some modestly, has some COVID in to I got really it not the implications. add We've And its availability, redesign, element. our improved Versus the And in lockdowns qualifying second suppliers That the electronics of on major. China, last say business, in has to but as has half our labor mechanical improved will the the strengthened

forward our stronger. we'll As guide, across about based we better and that's think availability even going be If board, on gets the allocations. chip

John Walsh

will just see guess I kind the that's level the were just to Obviously, what before Americas know could some or total however the year it? pieces higher incremental the help Allegion like I inflation we calibrate be and Americas But on to you thinking within just with either volume recovery. of talk for margins or through. you'd mix we passed getting should of maybe moving margins, about you're thinking than have the normal better thinking

Mike Wagnes

what we'll the improvement quarter, margin sequentially, as saw versus really to the about improvements year. start sequential see back that expansion in QX, you quarter you expect think half, such to prior see that fourth John, versus the each you

raising model raises pressures. denominator it. without in offset you So, but sequential in half. to expansion because the the then price amount, that margin improvement calc the the inflationary the a And dollar it it, take account driving and just back into profit numerator then, there's when it from offsets from substantial that We're

Operator

from Julian from next Mitchell question comes Barclays. Our

Julian Mitchell

You Shaffer have from team. on Julian Matthew Mitchell's

that is mentioned the cadence pricing cost beat inflation in XXXX. you price the Can talk differential to So, to of expected you guys quarters? maybe remaining the through

Mike Wagnes

we information were We think negative. you in first the that As provide our slightly of XX-Q. quarter,

total. in the So, say, But, you'll region by in $X in XX-Q see it our first underwater million and quarter.

think being of and substantial QX inflation in progress to excess of productivity price in and then you closer or that QX As price excess year, throughout the QX of and inflation. breakeven-ish the

as the the positive year then better half. back So, significantly and gets progresses in

Julian Mitchell

a low-single being was for Americas up after me. XXXX. QX Just weak in digits pretty follow-up Electronics in

for expectation growth XXXX electronics. the curious for Just is

Mike Wagnes

electronics We the the mentioned. be ability rates, in about don't provide improvement saw The you will to first performance as growth The demand QX, is limited substantial versus mechanical. think get what individual from if But you demand supply. quarter, our by there. the you

we I revenue, And easier just last into it's better back that against take do account of it you say, So, our that had half, understanding those saw fourth in in the the comp for year. total when the back consider comparables would half guide in you what quarter. than we

Operator

question comes next Longbow David MacGregor from Our Research. from

Joseph Nolan

is Joe for David MacGregor. on Nolan This

channel the residential And about been talk Are always business, down difficult what business? you you On I'm able to in. in were mid-single that did get to it's revenues aware pricing a units then digits. mentioned

could that's into of increase channel. the trending is just you how about recent if talk So, price in the how gone terms

Mike Wagnes

From you at not have unit see non-res. price the did total because resi a the mentioned earlier units be than price we strong realization. positive can perspective it that less then, we business, a If as look quarter, positive as the had you our would little for growth that realization

the and into in to More residential price quarter. has effect the been importantly, marketplace goes second forward, taken moving we've in to drive that actions announced

to better the quarter price expect and realization XXXX. through we second in see So, onward

Joseph Nolan

on in timing, just update content, size size, order activity, just spec projects, of give your you trends the writing Can that stuff? sort an of

Dave Petratis

to continues be robust. spec would writing I activity say

at You can look the ABI.

is of a good the projects for I and and strength areas, into range Allegion. the which XX. these, hospital the with medical the size march we're good good, really ABI like our get was in strength seeing think the in activity say reflects I'd bookings. order of incoming but a Can't is I at think

Operator

Our comes Rutenberg Brian from from Capital. next question Imperial

Brian Rutenberg

quarter. Great

So bit versus little a to operating like on break I'd things gross down margins.

expect down from margins were margins first and from down Is points then second gross to hundred fourth gross you to quarter quarter obviously Do what increase quarter? quarter So, progress year-over-year. you're that per couple and basis saying?

Mike Wagnes

of I if about about talked would say, Yeah, that in excess inflation think margin, pricing you that's gross we the in the XX-Q.

As we you general, improve think the in year. about margins, they'll as get throughout

So, we the throughout the see gross and both operating improve we XXXX. move should as

Brian Rutenberg

on also we'll line there's top So, from that or profit. SG&A increased be to improvement see basis, the with operating gross the and leverage just sequentially because lower more going

Mike Wagnes

As QX, leverage QX, back that you you in of year, QX, base. the growth half get the SG&A significant

margins. does the that So, help operating also

Dave Petratis

a this we is thing beautiful go nicely. Volume second quite And very as business leverage business. in half, through the the

Operator

Andrew The America. of from Bank comes Obin from next question

Unidentified Participant

in past Obin's Andrew shutdowns from mentioned I understand on have Russia-Ukraine sort of impacts them, the supply China seeing you the [ph] worsening and from you that chain from but COVID-related the you're Abrams Sabrina month, team. expecting have You conflict? been

Dave Petratis

little I'd been pricing the effect with that And of say to there raw adapt Russia. materials. I'd we'll we have price. to has bigger say very exposure

about it's As certainly China, we think serious.

in think we've in there, geographic production through work not capabilities us April. affected exposure the not us well. And to but to be position but totally have We able I are got that. immune, adaptability has it We're

Unidentified Participant

remainder inflation. the I in revenue maintaining strong about Are guess year? on the and I'm I curious, range other had be that a you're besides the headwinds any But you guide beat inflation the should EPS and there we EPS that of guide. thinking understand in maintaining XQ guys are raising

Mike Wagnes

are completed that start we to just quarter. got first year. Feel the where to three about to the good we go. think out quarters nice a We've got we As today, we

we makes a loaded we As back feel us to off start a Getting EPS about range. plan. hitting had very better our even half good us year, the started

Operator

turn like session. queue. Petratis closing more concludes question-and-answer to David our would There are over the in no the This remarks. questions back conference for I to any

Dave Petratis

off heard To Demand today, to wrap indicators main leading you XXXX. positive. our are remains start up solid in got and themes robust Allegion a

events but to could that We continue unique chain challenges to through in Pressure in China not it Allegion, persist. components is in It's macroeconomic supply of chains. global the Inflation electronic does improvement of continues. work expected supply affect the us. to some delay

channels equation you we're We in cost business safe year. the products the last, family welcome to positive products. back have price day. to and we'll excited get are aggressively portfolio Allegion all and Thank And Stanley's to a producing this and and price Technology Access of

Operator

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

disconnect. now may You

Tom Martineau	Vice President, Investor Relations and Treasurer
Dave Petratis	Chairman, President and Chief Executive Officer
Mike Wagnes	Senior Vice President and Chief Financial Officer
Timothy Wojs	Robert W. Baird & Company
John Walsh	Credit Suisse Securities (USA) LLC
Matthew Shaffer	Barclays Equity Research
Joseph Nolan	Longbow Research
Brian Rutenberg	Imperial Capital, LLC (Research)

Allegion (ALLE) 26 Apr 222022 Q1 Earnings call transcript