Q1 2023 Allegion PLC Earnings Call
Good morning, and welcome to the Allegiant first quarter 2023 earnings call all participants will be in listen only mode.
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I would now like to turn the conference over to Tom Martineau.
<unk> President of Investor Relations and Treasurer. Please go ahead.
Thank you Andrea good morning, everyone. Thank you for joining us for allegiance first quarter 2023 earnings call.
With me today are John Stone, President and Chief Executive Officer, and Mike, While I guess senior Vice President and Chief Financial Officer of Allegiant.
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 day, the Leach and Dot Com. This call will be recorded and archived on our website.
Please go to slides two and three statements.
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 four and I'll turn the call over to John .
Thanks, Tom Good morning, everyone. Thanks for joining us today.
Allegiant delivered another quarter of outstanding operational performance, we reported revenue of roughly 27% up and adjusted EPS growth of nearly 40%.
Looking at our markets, we see ongoing robust demand in our North American nonresidential business, along with strong demand globally for our electronic solutions.
We're seeing improvement in electronics components availability and although supply is still short of demand Americas electronic solutions grew by more than 30% this quarter.
Residential markets remain rather soft in the quarter, particularly for the mechanical products and certain international markets also remain soft, particularly our global portable security business, which Mike will address in a few slides.
We expanded margins substantially up 290 basis points versus prior year.
This now represents the fourth quarter in a row of margin expansion for Allegiant as pricing momentum continues in efficiency and productivity are accelerating.
We remain committed to expanding margins for 2023 and beyond as you'll hear in our Investor Day next week.
We also realized significant improvement in cash flow year over year, driven by favorable earnings and better operating efficiencies.
We're raising our outlook for the year on revenue EPS and cash flow given strong Q1 execution resilient market demand in nonresidential segments, improving electronics availability amid the ongoing industry transformation to electronics smart hardware.
Please go to slide five.
Revenue for the first quarter was $923 million, an increase of 27, 6% compared to 22.
Organic growth of 15% was driven by favorable volume in the Americas, non residential business and strong price realization across the portfolio.
The access technologies acquisition contributed approximately 14% of total growth and currency impacts remained a headwind.
Adjusted operating margin and adjusted EBITDA margins in the first quarter increased by 290 basis points and 270 basis points respectively. The.
The increases were attributable to favorable price and productivity positive business mix and volume leverage associated with Americas nonresidential growth.
Excluding the acquisition of access technologies adjusted operating income margins were up 380 basis points.
Adjusted earnings per share of $1 58 increased 45 cents or approximately 40% versus the prior year strong operational performance more than offset the unfavorable impact of anticipated higher interest and tax expense.
As previously mentioned available cash flow was $46 7 million in the quarter up nearly 300% versus the prior year Michael.
Mike will now walk you through the financial results and I'll be back to discuss our updated 2023 outlook.
Thanks, John and good morning, everyone. Thank you for joining today's call. Please go to slide number six.
This slide reflects our earnings per share reconciliation for the first quarter.
For the first quarter of 2022 reported earnings per share was $1 five.
After eight cents of adjustments for the items noted on this slide 2022, adjusted EPS was $1 13.
Operational results were strong in the quarter, adding 46 cents per share, which drove approximately 40% growth. This was driven by double digit organic revenue growth favorable operating execution and positive business mix, which more than offset currency headwinds.
Acquisitions, and divestitures delivered 13 cents to earnings.
<unk> per share. This was primarily driven by access technologies, which continues to deliver strong results.
Interest expense reduced earnings per share by 11, driven by increased debt to finance the acquisition of access technologies.
And higher variable interest rates versus Q1 2022.
The higher year over year tax rate reduced earnings by <unk> <unk>.
This resulted in first quarter 2023, adjusted earnings per share of $1 58, an increase of 45 or 39, 8% compared to the prior year.
Lastly, as detailed on the page we have an <unk> 18 per share reduction from adjusted EPS to <unk> to arrive at reported EPS.
As we discussed in our last earnings call. This amount now includes an adjustment for all acquisition related amortization.
After giving effect to these items you arrive at first quarter 2023 reported earnings per share of $1 40.
Please go to slide number seven.
This slide depicts our revenue growth for the first quarter.
I will talk to the results in total on this slide and address the regions on their respective slides.
We delivered 15% organic growth driven by price realization across the portfolio and strong volume growth in the Americas non residential business.
Net acquisitions and divestitures contributed 14, 1% growth driven by access technologies.
Fee pressures continued to be a headwind primarily impacting our international segment, bringing the total reported growth to 27, 6% in the quarter.
Please go to slide number eight.
First quarter revenue for the Americas segment was $740 9 million up 42% on a reported basis and up 22, 6% organically.
During the first quarter price realizations remained strong offsetting ongoing inflationary pressures.
In nonresidential, we continued to see strong end market demand and volume growth, which benefited from the catch up of improved electronic component supply.
When coupled with price.
This drove organic growth to approximately 30%.
Our residential business was up mid single digits with favorable price offsetting lower volumes residential electronics volume growth was strong, but we continue to see weakness in end markets for mechanical products.
Electronics growth exceeded 30% for the quarter as we continued to see both improvements in our supply chain and strong demand backlogs for nonresidential electronic solutions remain elevated as we exit Q1 as demand is still limited by supply availability.
Additionally, we expect residential electronics demand to be more aligned to retail point of sale as we go forward.
We are pleased with the ongoing access technologies integrations and results. This business had pro forma revenue growth of approximately 15% versus Q1, 2022 and contributed nearly 20% to the Americas reported growth number.
We continue to see the benefits of our stable high growth service business that access technologies provides us and the business is performing as well as we anticipated when we purchased it.
Americas adjusted operating income of $198 1 million increased 59, 5% versus the prior year period, while adjusted operating margins and adjusted EBITDA margins for the quarter were up 290, and 260 basis points respectively.
Excluding access technologies, the Americas segment drove 500 basis point improvement in operating margins versus the prior year price and productivity in excess of inflation and investments volume leverage along with positive mix contributed to the margin improvement.
Please go to slide number nine.
First quarter revenue for Allegiant. The International segment was $182 1 million down nine 7% on a reported basis and down four 8% organically.
In the quarter solid price realization was more than offset by lower volumes, primarily associated with our portable securities business.
This business benefited from a COVID-19 related demand surge that extended into the first half of 2022. This resulted in the first half of 2023, having a more difficult comp as the market works its way back to a more normal cycle.
Notably the demand for electronics and software solutions remained strong in the lesion international.
In addition currency headwinds persisted this quarter and reduced reported revenues by four 4%.
International adjusted operating income of $19 7 million decreased 27% versus the prior year period.
Compared to 2022, adjusted operating margins and adjusted EBITDA margins declined 260, and 220 basis points respectively.
The margin decline was primarily driven by reduced volumes.
Please go to slide number 10.
Okay.
Year to date available cash flow for the first quarter came in at $46 7 million up $34 9 million versus the prior year.
This increase was driven by higher earnings and lower cash used for networking capital, partially offset by higher capital expenditures that were mostly related to our new manufacturing facility in Mexico, which is scheduled to come online in the second half of 2023.
Working capital as a percent of revenue increase versus the prior year. This is driven partially by the access technologies business, which was not owned in Q1 'twenty two.
Working capital has also increased from Q1 2022 as a result of investments in inventory we made in the second half of last year to increase our safety stock and protect our customers.
We saw a year over year and sequential improvement in inventory turns as we remain committed to manage our working capital working capital more efficiently and drive improvement.
The business continues to generate strong cash flow and the balance sheet continues to be in a healthy position.
I will now hand, it back over to John for an update on our full year 2023 outlook.
Thanks, Mike Please go to slide 11.
So we continue to expect strong electronics growth in the nonresidential market demand in the Americas remains robust gives.
Given the late cycle nature of our business. We expect this strength to continue through 2023.
As a result, we're raising our 2023 outlet for the Americas segment, where we expect organic growth to be between seven five to nine 5%.
We expect total growth inclusive of our access technologies acquisition to be between 15 and 17%.
We expect to see nonresidential organic growth to be up low double digits with favorability in both price and volume.
We still expect the residential business to be down with price, mostly offsetting volume declines which are expected to be in the low to mid single digit range.
Based on the strength, we saw in the second half of 2022 we expect stronger growth in the first half of 2023, which we believe may moderate later in the year against those tougher comparables.
There's no change in our outlook for the International segment, we expect revenue in that segment to be relatively flat and soft end markets.
All in for the company, we're raising our outlook and expect total revenue growth to be between 11, 5% to 13, 5% with organic revenue growth of five five to seven 5%.
Please go to slide 12.
Okay.
As a result of our favorable revenue outlook and strong operational execution, we're raising our adjusted EPS outlook for the year and believe it will be between $6 55 and $6.75.
Adjusted operational earnings are expected to increase approximately 13% to 16%.
Interest is still expected to be around a 24 cent per share headwind, reflecting a full year of acquisition related borrowings and increases to variable interest rates.
Tax still expect it to be a 20 cent headwind in other income is still expected to be around a 5% headwind.
Outlook continues to assume approximately <unk> 20 per share for costs related to restructuring and M&A and amortization expense related to acquired backlog. In addition, it excludes approximately <unk> 40 per share for acquired intangible asset amortization.
As a result reported EPS is now projected to be between $5 95 to $6.15.
Lastly, we're increasing our outlook on available cash flow for the year to be in the $480 million to $500 million range.
Please go to slide 13.
To summarize we see strength in our Americas, non residential business and our global electronic solutions continue to provide us with significant growth opportunities, both near and long term.
We're very pleased with the performance of our access technologies acquisition, the business is performing well and we love the synergies with our nonresidential.
We've expanded margins for the fourth quarter in a row and remain committed to doing so in moving forward.
We saw significant improvements in cash flow and it's worth mentioning again that we saw improvements in inventory turns in the first quarter of 2023 overall, we're off to a great start in 2023, our team is executing well and allegiance best days are still ahead of us.
Please go to slide 14, and before we turn the call over to Q&A I'd like to provide a final reminder, that you're all invited to join Mike and myself as well as other members of our executive team next week on Tuesday May the second for 2023, Investor and Analyst day at our Americas headquarters in Carmel, Indiana, There you'll have.
The opportunity to learn about our leadership team our strategy and our exciting work driving seamless access.
Formal presentations will be held 12 30 to $2 30 eastern time.
And those who attend in person will also get a pretty exciting too or through our technical center. Following the presentations. This is a really exciting time in our company's history. We're a few months away from turning 10 years old.
And our current executive team's first investor today together, we hope to see you there.
With that let's turn to Q&A.
We will now begin the question and answer session.
I ask the question you May Press Star then one on your telephone keypad.
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At any time your question has been addressed and you'd like to withdraw. Your question. Please press Star then two again, please limit yourself to one question and one brief follow up.
At this time, we will pause momentarily to assemble our roster.
The first question comes from Julian Mitchell with Barclays.
Please go ahead.
Hi, Good morning, maybe I'm just a first question around that nonresidential Americas.
Our outlook and sort of an update there. So how did you call out I think low double digit revenue growth assumed for non res. The Americas. This year, maybe help us understand kind of what's the the.
The split between price.
And volume versus your prior assumption.
And also.
It seems that Youll revenues, you're getting this big sort of boost from component supply issues easing.
And gave us some clarity perhaps about how you are looking at sort of the spec writing.
The order flow.
There's obviously a lot of investor consternation about commercial construction, so any signs of any change in customer appetite today.
Yeah, So Julian why don't I tackle the kind of the components of the guide and John can talk to the general business dynamics.
If you look at our non res business, we expect to see both revenue growth driven by price and volume.
As you know we've been committed to fight that inflationary pressure so pricing should be good for the full year you saw a good pricing in Q1.
And then as you look at a full year basis for volume.
We'll have growth, but not to the level you saw in Q1, obviously, we are running up against that tough comparable in the back half of the year. If you recall non res he grew.
30% and I think in the third quarter, and then greater than 25 million in the fourth quarter. So we do have a tougher comparable.
And then John you want to talk to the spec activity and other items yeah. Good morning, Julien. Thanks for thanks for the questions I think on the supply chain, you're exactly right component supply has been I would say steadily improving including on the electronic side.
And what we've been really happy to see is how quickly the allegiant team has essentially.
Essentially compounded every incremental improvement in the supply chain with better productivity better operating efficiency in the factory and our distribution channel sell through has been quite rapid.
Lead times have come down.
So happy to see that I would say you know if you look back to the prepared remarks, Mike had some comments around the electronics, particularly on the non res side of electronics still have elevated lead times still have elevated backlogs supply has improved quantity has improved its still not as linear as we would.
I'd like to see it a bit choppy in terms of deliveries.
But demand is still very strong very robust and <unk>.
Exciting future there.
And just the general activity I'd say, you know leading demand indicators.
To be eyes.
Dodge New starts Dodge construction index AIA consensus.
Still reading rather favorable honestly choppy, it's been mixed last few months.
But some of those indices are again tipping back favorable here and there.
For us we do see strong spec writing activity and that's that's a flywheel that terms all year every year and you know the time between.
Engaging with the architect riding a specification and turning that into revenue that can sometimes be 18 to 24 months, even but the spec engine is always running in and right now it's running very hard.
When you think about quoting bidding et cetera at that activity is quite robust as well. So again, we feel good about the nonresidential we feel good about our position in the non res business through 2023.
Okay.
Thanks, very much and you did have a very good tailwind in the Americas from.
That sort of line price and productivity versus inflation and investment spend I think it was over 300 points in the first quarter.
As a margin tailwind.
So maybe you know as we think about the balance of the year, how does that how you know how quickly does that tailwind shrink it.
Should it still be a tailwind overall.
In the fourth quarter or is it more kind of back to neutral bad just just trying to understand some of those moving pieces and what you're guiding for margins. This year. Yes. So if you look at margins for the year expect our margins to be up say 50 to 100 basis points full year.
And.
And every year moving forward look for us to drive that margin expansion, you'll hear this at Investor Day next week, we're going to be driving margin expansion.
Moving forward and we're committed to doing so.
If you look at price productivity inflation investments.
That is a big tailwind in Q1, we do have an easier comp in Q1, obviously Q3 and four it's more challenging comp.
I would just add we expect that to be positive on a dollar basis.
In the back half of the year, we expect margin expansion.
For the full year as I mentioned earlier.
And.
As you think about our business.
We are driving the necessary pricing actions to fight the inflationary pressures we.
We fell a little behind let's say in 'twenty, one and early 'twenty two we've taken the necessary actions to ensure that that doesn't happen again.
That's great. Thank you. Thanks.
Thanks Julien.
The next question comes from Joe Ritchie with Goldman Sachs. Please go ahead.
Hey, guys good morning, Hey, Joe.
So can we maybe just following on that on that pricing discussion look it's been it's been great to see particularly in the Americas business here, you've had double digit pricing now for three quarters in a row.
Just curious like <unk>.
Have you put additional price increases through for this year and then like how how do you see pricing specifically in Americas.
Progressing as the year as the year goes along.
Hey, Joe Thanks for the question.
If you think about our Americas business, starting late 'twenty, one and all of 'twenty. Two we've put in a substantial amount of pricing actions, we are starting to comp up against those pricing actions in 'twenty three so as you move through the year the realization percentage will be less.
Highest in the first quarter and then less as you proceed through the year.
You're still going to sell the product at a higher value, but the incremental price realization percent will come down.
We do expect our pricing.
To be very sticky as you remember our nonresidential business, we do list price adjustments they tend to stick.
So we feel good about our pricing, but the magnitude will do.
As you think about the year.
I guess, maybe maybe just provide a little bit more color on how youre thinking about the potential risk of a slowdown associated with.
Middle market banking concerns.
And when you when you would potentially see that in your business and what the leading indicators are that youre looking at.
Yeah. Joe This is John that's a good question, it's top of mind for everyone. I would say again, if you think about Allegiant business model. We are late cycle, we are a bit heavily weighted to the institutional segment.
<unk> tends to have sources of financing like bond referendums public finance or these mega projects with with large bank finance. So there's there's part of the business that maybe is not all that is susceptible to the regional banks and certainly a lot of the business is susceptible to a regional bank lending.
Credit conditions so.
Could that become an issue of course are we seeing a big impact right now no we're not.
Again think about engaging with the architect writing specifications.
Classic pull strategy to pull the product through the channel the timing from stack to project initiation to win doors and door hardware. It goes into building can be 12 to 18 24 months.
And so <unk>.
<unk> that have been started tend to get completed and I think we're seeing that right now.
Makes a lot of sense. Thank you.
The next question comes from Jeff Sprague with vertical research partners. Please go ahead.
Hey, Thank you good morning.
Hi, Jeff Hi, Good morning, My question actually kind of picks up a little bit on some of that last point John .
Can you ask.
Actually see kind of stimulus flowing into those institutional markets or kind.
Kind of anything else that gives you maybe more visibility than you would typically have at this point in time.
Yes, that's a good question and I think it's always tricky to see when we sell through distribution.
You're not quite sure the source of the project the source of the financing.
Where we are.
Anyway I'd say.
Youll see stimulus and.
Airport terminal renewals that was a big part of the the infrastructure and jobs Act.
You know there's funding go into higher Ed to the emergency relief fund back from the Covid days to help with contactless touchless, which goes very well into a seamless access and electronic locks and credentials et cetera.
So I think certainly that's flowing I think theres still stimulus dollars left those tend to take a long time to work their way through the system.
You know I would say again that the leading indicators for non res industries still read positive.
Our spec writing activity is quite robust are quoting bidding activity in the channel is still robust.
And given the fact that mechanical supply chain has improved we're back to book and ship or back to made to order there.
Sell through on the channel has been pretty strong and so I think at least now we would just still continue to reiterate we feel good about non res through 2023.
Great and then.
Not to steal the Thunder from next week, but.
People walking out of their next week.
If they took away one thing from the meeting.
That maybe they didn't know or understand about allegiant or it was important.
Important to accentuate what would that be.
Yeah.
Appreciate the prelude to that question Jeff.
It's good I would say, let's hold the the fireworks around the strategy and the technology and all of that for now what I'm really excited about is getting all of you over here you can come in and see what we're doing see what we're all about and get some more time with this new leadership team. That's that's important to US. We just appreciate the chance to spend some time.
And share with you what we're working on.
Great. Thanks, a lot.
The next question comes from Joe O'dea with Wells Fargo. Please go ahead.
Hi, good morning.
No.
I wanted to start on Americas margin, excluding access tech this looks like a I think maybe the strongest first quarter ever.
And it seems like a faster recovery in those margins than you anticipated earlier. This year. So could you talk a little bit about the factors that contributed to that this quarter.
And I think then moving forward anything.
Unusual about the quarter that will persist as we continue to move through the year.
Yeah, Joe if you look at the first quarter, we had an extremely strong nonresidential revenue quarter. As you know that is our strongest margin business. So we had positive mix there.
And a very elevated revenue number versus what we were in the previous Q1. So we had both combinations working in our favor.
As we move through the year. The one item I do want to highlight we are ramping up that new manufacturing facility in Mexico.
Q1 doesn't have any real cost there, but as we move through the year. There is investment in startup costs that are going to be a headwind to margin right.
That's in the assumed guide and obviously, we're going to be conservative when you think about startup costs of the new plant. So that we're adequately prudent in that in that guidance, but in general I would say the factors that drives margin expansion the productivity that is.
<unk> from what it was last year, the pricing actions, which we feel good about I think the activity. We're driving is sustainable and should be a long term margin expansion driver for the business.
And maybe just a clarifying point on that I think given seasonality the first quarter margin tends to be one of the lower of the year, but given the sort of Mexico factory considerations is it still reasonable to think about just kind of volume seasonality, where we would see margins improve.
Or are those costs such that we wouldn't.
Yes, I would say if you think about the margin percentage in Q1 historically less.
However, if you look at that dollar amount of revenue for commercial you would not have the same size of margin uplift Delta versus Q1, then maybe historically you've seen.
And then the.
The investments thinking the investment for the plan you could see.
10, 20 basis points.
Full year impact.
<unk>.
From that level of investment.
Yeah, I would add I think looking at Allegiant historic seasonality both for volumes, and then obviously, resulting margins and operating leverage and whatnot.
Given how the supply chain disruptions of late 'twenty, one early 'twenty two.
Somewhat moved sales volume from one quarter to the next I think we got to be a little bit careful on applying.
Just direct historic seasonality, but that being said, we feel confident in the guide and feel confident that we're in a position to continue to expand margins like Mike said 50 to 100 bps and continue to do that in future years as well.
Joe just to clarify that number for the plant that would be closer to the 20 to 20 basis points.
Got it.
And then John maybe on your point, just as we think about sort of the backlog that you have to burn and you have supply chain, improving but on top of it sounds like sort of underlying demand conditions remain pretty healthy and so you know how do we sort of combine all those factors as we do think about seasonality and we would think.
As you go into the middle of the year you do improve.
Given what should be a pretty solid backlog and this underlying demand, but just wanted to make sure that.
Think about those.
Those factors all correctly.
Yeah, I think that's why we took the organic growth guide up the total growth guide up the EPS guide up yet we do feel like we got off to a really good start we do feel that non res demand is robust.
And I think again.
Quarter to quarter looks different just because of the comps last year, but full year, but we feel good about the guidance.
Great. Thanks, a lot.
The next question comes from David Macgregor with Longbow Research. Please go ahead.
Yes, good morning, everyone. Congratulations on the results great quarter.
I wanted to ask you about I wanted to ask about pricing in the in the non res business and specifically in your spec writing business. Because this is a business that.
At least as I understand it doesn't rely as much on MSRP as much as it's a negotiated price.
Obviously very strong price realization there is it just a more competitively rational space right now.
And thats really facilitating the price realization or.
Maybe just talk about what you're seeing competitively in that spec writing space.
Yeah, David if you're thinking about the non res business.
New construction tends to be quoted work where it is bid.
Historically, it is an industry where everyone competes on value. We're the market leaders I should say compete on value not price.
So.
As there is inflation market participants drive pricing actions to cover to cover inflationary pressure.
Pressures and since there is a higher inflationary pressure, we're able to get more pricing.
But the key takeaway on this industry is everyone competes on value, it's not a race to the bottom on pricing in the nonresidential business. It tends to be a very complex configured offering.
And that allows everyone to compete on the value of their portfolio.
Okay.
Yes, I mean, I think that's always been the case it just seems like right now it's a more rational space.
Yeah.
Maybe maybe you're just enough business to go around that everybody's.
What are you just have to compete quite as hard.
But I don't know if you can comment that mattered.
I'd, just say for us in our perspective, I don't want to talk about anyone else is.
The inflationary pressures that we felt the last two years.
And the pricing is catching up to some of those pressures and so.
You really have to look at it over the last few years and we've been able to mitigate some of those pricing I'm sorry, the inflationary pressures that we felt.
End of 'twenty, one 'twenty, two and into early 'twenty three.
Okay, Great second question just on the distribution channel.
In terms of the sort of the commercial two step distributors distributors are they restocking at this point was that was that it was contributing dynamic this quarter.
Yes, we do.
Field visits all the time and I think you know.
Again, let's let's divide this a bit between electronic products and mechanical products. So on mechanical products. Most of our lead times would be back to a normal level, which puts us in our distribution channel and kind of a made to order book and ship type model and so.
Destocking restocking is not really a dynamic we see in the majority of the channel.
And some of the two step some of the large wholesalers, perhaps but I think the evidence that we have seen in the anecdotal evidence at least as.
Demand is pretty robust.
Sell through is pretty rapid.
And you know again as lead times normalized ordering behavior adjust and adapt back to that more normal lead time. There are some of our electronic products are commercial electronic products like like we said still L.
<unk> lead times elevated backlogs and that you know, we're just working hard with our supply base and our Redesigns and new suppliers are coming on board just to catch up to demand in and get that part of the business back into this this book and ship normal lead times space. We're just we're not quite there yet.
Got it thanks very much.
The next question comes from Brian <unk> with Imperial capital. Please go ahead.
Yes. Thank you very much let me talk a little bit about pricing plans for the rest of the year and what you have built into your guidance. It sounds like there's less pricing increases trying to read the tea leaves here in the second half of 2023 and your guidance is that correct.
We would always announce a price increase to the channel before we would on an earnings call I would just say if you look at our pricing.
And you try to model it for the back half of the year you got to just take a look at how much price started to accelerate.
Two three and four last year, which is driving some of the reduction in the overall realization, but it is important to note.
Selling the product at the same price so its not like youre selling it for less.
Value, it's just the incremental realization percentage will decline versus a more challenging comparable.
Okay.
And then my next question is about Q2, I know you don't normally comment specifically on a quarter.
But maybe you can give us a bigger than a breadbox smaller than a tractor trailer kind of guidance in the second quarter.
In terms of versus Q1 should we be seen revenues and gross margins at relatively similar labor level excuse me to Q1 and Q2.
Yes really not.
Don't really want to give specifics on a quarter per se, but a full year. The only thing I would say is Q1, obviously, a little higher than historically, we would do in the first quarter, but I wouldn't anticipate.
<unk> model, something where the summer season is significantly less than.
During Q1, we still have summers that tend to be.
Pretty strong.
Alright, Thank you very much.
Uh huh.
This concludes our question and answer session.
And at this time I would like to turn the conference back over to John Stone, President and CEO for any closing remarks.
Okay, well thanks, everyone for joining thank you for your questions and again, we'd like to reiterate our invitation to all of you for for next week's Investor and Analyst Day Hope to see you all here in person both for our management presentations and the tour through the Tech Center very excited about that.
And just to summarize <unk> continued to see strength in Americas, non res and global electronic solutions.
Very pleased very happy with the access technologies acquisition and how that is starting to perform.
Very happy and remain committed about our margin expansion and we will continue that into the future improvements in cash flow and just overall I am really proud of the entire allegiant team.
And our distribution partners to get us off to such a great start in 2023.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
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