Q1 2024 Allegion PLC Earnings Call
Operator: Good morning, and welcome to the Allegion first quarter 2024 earnings call. All participants will be in listen only mode.
Good morning, and welcome to the Allegiant first quarter 'twenty 'twenty four earnings call all participants will be in listen only mode.
Operator: Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2. 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.
You need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two.
Please note this event is being recorded.
Speaker Change: I would now like to turn the conference over to Josh Vogel Winski, Vice President of Investor Relations. Please go ahead.
Joshua Charles Pokrzywinski: Good morning, everyone. Thank you for joining us for Allegian's first quarter 2024 earnings call. With me today are John Stone, President and Chief Executive Officer, and Mike Wagnes, Senior Vice President and Chief Financial Officer, of Allegian. Our earnings release, which was issued earlier this morning, and the presentation, which we will refer to in today's call, are available on our website at investor.allegion.com. This call will be recorded and archived on our website. Please go to slide two.
Speaker Change: Thank you drew.
Speaker Change: Good morning, everyone. Thank you for joining us for allegiance first quarter 2024 earnings call with me today are John Snow, President and Chief Executive Officer, and Mike Wagner, Senior Vice President and Chief Financial Officer of Alicia.
Speaker Change: Our earnings release, which was issued earlier this morning, and the presentation, which we will refer to on today's call are available on our website at Investor Dod Allegiant Dot Com. This call will be recorded and archived on our website.
Speaker Change: Please go to slide two.
Joshua Charles Pokrzywinski: 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 and the Financial Tables in our press release for further details; please go to slide three, and I'll turn the call over to John.
Speaker Change: Statements made in today's call that are not historical facts are considered forward looking statements 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.
Speaker Change: Today's presentation and commentary included.
Speaker Change: Include non-GAAP financial measures. Please refer to the reconciliation in the financial tables of our press release for further details.
Speaker Change: Please go to slide three and I'll turn the call over to Jonathan.
John H. Stone: Thanks, Josh. Good morning, everyone. Thanks for joining us. Allegion is off to a solid start in 2024, and I'm very proud of our entire team. I'll walk through some of the top Q1 highlights briefly, and we'll share more on each of these through the course of the presentation. Our team continues to leverage our capabilities and spec writing, made-to-order manufacturing, and strong distribution partnerships to best serve our end-user customers.
Jonathan: Thanks, Josh Good morning, everyone. Thanks for joining us Legion is off to a solid start in 2024 and I'm very proud of our entire team.
I'll walk through some of the top Q1 highlights briefly and we'll share more on each of these through the course of the presentation.
Jonathan: Institutional markets remained healthy as we expected our team continues to leverage our capabilities and spec writing made to order manufacturing and strong distribution partnerships to best serve our end user customers.
John H. Stone: We're executing at a high level, expanding margins in the quarter, and delivering balanced capital allocation. As previously announced, we acquired Boss Door Controls and DoorCosts in Q1 and returned cash to our shareholders through dividends and share repurchase. Driven by our vision of enabling seamless access in a safer world, Allegiant's Q1 performance has set a solid foundation for the year. We're performing well, and we're affirming the 2024 outlook we provided to you in February. Please go to slide four.
Jonathan: We're executing at a high level expanding margins in the quarter and delivering balanced capital allocation.
Jonathan: As previously announced we acquired boss door controls indoor costs in Q1, and return cash to our shareholders through dividends and share repurchases.
Jonathan: Driven by our vision of enabling seamless access and a safer world allegiance Q1 performance has set a solid foundation for the year, we're performing well and we're affirming the 'twenty 'twenty four outlook, we provided to you in February.
Jonathan: Please go to slide four.
John H. Stone: Allegion continues to deliver on balanced and consistent capital allocation, and our Q1 performance showcases this. We continue to invest in organic growth, building on the legacy of our flagship brands, delivering new value and access through industry-first innovations, and nurturing strategic relationships to be the partner of choice. In March, Schlage announced a new smart lock integration with Airbnb to help improve and simplify host and guest experiences alike. Our integration means most Airbnb hosts with listings in the U.S. and Canada can now provide a seamless access experience to guests with the industry-leading Schlage Encode SmartLock family directly within the Airbnb app.
Jonathan: Allegiant continues to deliver on balanced and consistent capital allocation and our Q1 performance showcases. This we continue to invest for organic growth building on the legacy of our flagship brands delivering new value and access to industry first innovations and nurturing strategic relationship.
Jonathan: To be the partner of choice.
Jonathan: In March slag announced a new smart lock integration with Airbnb to help improve and simplify hosting guest experiences alike.
Jonathan: Our integration means most airbnb hosts with listings in the U S and Canada can now provide a seamless access experience to guests with the industry, leading Slagging code smart locks family directly within the Airbnb App.
John H. Stone: Hosts can streamline the check-in and check-out process with automatically generated guest access codes, removing the need to manually create unique codes for each visitor. Access codes are shared with guests at the time of booking, and those codes are only active during their trip, automatically deactivating after checkout. Hosts can make any needed adjustments to their guest check-in and check-out times in the Airbnb app, which will automatically update the smart lock, keeping them in control of the access experience, while guests can rest easy with the peace of mind brought by having Schlage on the door. Smart Lock integration within the Airbnb app is currently only compatible with Schlage, making this another industry first for our company.
Jonathan: It's constrained line the check in and checkout process with automatically generated guest access codes, removing the need to manually create unique codes for each visitor.
Jonathan: Access codes are shared with guests at the time of booking and those codes are only active during their trip automatically deactivating. After checkout hosts can make any needed adjustments to their guest check in and check out times and the Airbnb App, which will automatically update the smart lock keeping them in control of the access experience well guests can rest easy with a piece of my.
Jonathan: <unk> brought by having slag on the door.
Jonathan: The smart lock integration within the Airbnb App is currently only compatible with slave making this another industry first for our company.
John H. Stone: Allegion also continues to be a dividend-paying stock, and as a reminder, in February, we announced our 10th consecutive annual dividend increase. For the quarter, this amounted to approximately $42 million in cash returned to shareholders. Additionally, in Q1, we closed two bolt-on acquisitions. During our last earnings call, we discussed the February acquisition of Boss Door Controls in the UK, which brings a strong architectural channel and a flexible supply chain while positioning us to increase our spec-driven business in Allegion International. In March, we acquired Dorcas, a leading manufacturer of electromechanical access control solutions based in Spain. Dorcas solutions are distributed and sold internationally with a strong presence across European markets, including in the education and healthcare verticals.
Jonathan: Allegiant also continues to be a dividend paying stock and as a reminder, in February we announced our 10th consecutive annual dividend increase for the quarter. This amounted to approximately 42 million in cash returned to shareholders.
Additionally in Q1, we closed two bolt on acquisitions during our last earnings call. We discussed the February acquisition of boss door controls in the U K, which brings a strong architectural channel and a flexible supply chain, while positioning us to increase our spec driven business and Elysian International and.
Jonathan: In March we acquired door costs, a leading manufacturer of electro mechanical access control solutions based in Spain.
Jonathan: <unk> solutions are distributed and sold internationally with a strong presence across European markets, including in the education and health care verticals there.
John H. Stone: Their electric strikes and locks are integral elements of access control systems, and bringing this business into Allegion International is another strategic investment in the quality of our portfolio there. Lastly, in the first quarter, we made additional share repurchases amounting to approximately $40 million. Overall, I'm happy with the balanced capital allocation you see here on this slide. We continue to invest in the core, continue growing the business, and continue returning cash to shareholders. Mike will now walk you through the first quarter financial results, and I'll be back to provide some final thoughts.
Jonathan: <unk> electric strikes and lots are integral elements of access control systems and bringing this business into Allegiant International is another strategic investment and the quality of our portfolio there.
Jonathan: Lastly, in the first quarter, we made additional share repurchases amounting to approximately $40 million.
Jonathan: Overall, I'm happy with the balanced capital allocation you see here on this slide we continue to invest in the core continue growing the business and continue returning cash to shareholders.
Jonathan: Mike will now walk you through first quarter financial results and I'll be back to provide some final thoughts.
Michael Wagnes: Thanks, John. And good morning, everyone.
Michael Wagnes: Thanks, John and good morning, everyone. Thank you for joining today's call. Please go to slide number five.
Michael Wagnes: Thank you for joining today's call. Please go to slide number five. As John shared, our team's Q1 performance reflects a solid start to 2024. Revenue for the first quarter was $893.9 million, a decrease of 3.2% compared to 2023. Organic revenue declined 3.6% on a challenging prior year comparable, which was up 15%. Q1 2023 experienced abnormally strong seasonality as the business recovered from a previous supply chain interruption. The Adjusted Operating Margin and Adjusted EBITDA Margin increased by 40 and 50 basis points, respectively, in the first quarter, driven by price and productivity and an excess of inflation and investment.
Michael Wagnes: As John shared our team's Q1 performance reflects a solid start to 2024.
Revenue for the first quarter was $893 9 million a decrease of three 2% compared to 2023.
Michael Wagnes: Organic revenue declined three 6% on a challenging prior year comparable which was up 15%.
Michael Wagnes: Q1, 2023 experienced abnormally strong seasonality as the business recovered from previous supply chain interruptions.
Michael Wagnes: Adjusted operating margin and adjusted EBITDA margin increased by 40, and 50 basis points, respectively in the first quarter.
Michael Wagnes: Driven by price and productivity in excess of inflation and investment.
Michael Wagnes: The team executed well to deliver margin expansion despite the volume decline. Adjusted earnings per share of $1.55 decreased 3 cents, or approximately 1.9% versus the prior year. However, buying declines in tax headwinds more than offset margin expansion and interest and other favorability.
Michael Wagnes: The team executed well to deliver margin expansion despite the volume declines.
Michael Wagnes: Adjusted earnings per share of $1 55 decreased <unk>.
Michael Wagnes: We're approximately one 9% versus the prior year.
Michael Wagnes: Volume declines and tax headwinds more than offset margin expansion and interest in other favorability.
Michael Wagnes: Finally, Q1 2024 available cash flow was $23.9 million, which was a 48.8% decrease versus last year and represents a return to historical norms. I will provide more details on our cash flow and balance sheet a little later in the presentation. Please go to slide number 6.
Michael Wagnes: Finally, Q1 2024 available cash flow was $23 9 million, which was a 48, 8% decrease versus last year and represents a return to historical norms.
Michael Wagnes: I will provide more details on our cash flow and balance sheet a little later in the presentation.
Michael Wagnes: Please go to slide number six.
Michael Wagnes: This slide provides an overview of our quarterly revenue. I will review our enterprise results here before turning to our respective regions. Organic revenue declined in the quarter by 3.6% as a result of the tough comparable I just mentioned. However, we saw the business returning to more normal seasonality in Q1 2024 versus what we experienced last year. Currency and acquisitions drove additional favorability in the quarter, bringing the total reported decline to 3.2%. Please go to slide number seven.
Michael Wagnes: This slide provides an overview of our quarterly revenue I will review our enterprise results here before turning to our respective regions.
Michael Wagnes: Organic revenue declined in the quarter by three 6% as a result of the tough comparable I just mentioned.
Michael Wagnes: We saw the business returning to more normal seasonality in Q1 2024 versus what we experienced last year.
Michael Wagnes: Currency and acquisitions drove additional favorability in the quarter, bringing the total reported declined to three 2%.
Michael Wagnes: Please go to slide number seven.
Michael Wagnes: Yeah.
Michael Wagnes: Our America segment delivered strong operating results in Q1. Revenue of $709.3 million was down 4.3% on both a reported and an inorganic basis. Its favorable pricing more than offset lower volume. On a two-year basis, our America's business grew approximately 17% organically. Our non-residential business, inclusive of access technologies, declined mid-single digits against a prior comp that grew nearly 30%. Residential markets remain soft, with our business down low single digits in the quarter as higher interest rates continue to impact new and existing home sales. Demand for electronics in our America's business remains strong.
Michael Wagnes: Our Americas segment delivered strong operating results in Q1 revenue of $709 3 million was down four 3% on both a reported inorganic basis as favorable pricing more than offset lower volumes.
On a two year basis, our Americas business grew approximately 17% organically.
Michael Wagnes: Our nonresidential business inclusive of access technologies declined mid single digits against the prior year comp that grew nearly 30%.
Michael Wagnes: Residential markets remain soft with our business down low single digits in the quarter as higher interest rates continued to impact new and existing home sales.
Michael Wagnes: Demand for electronics in our Americas business remained strong while revenue was down low single digits in the quarter against a tough comp our electronics business has grown nearly 30% over the last two years.
Michael Wagnes: While revenue was down low single digits in the quarter against a tough comp, our electronics business has grown nearly 30% over the last two years. America's adjusted operating income of $197.3 million decreased 0.4% versus the prior year period due to lower volume. However, adjusted operating margin and adjusted EBITDA margins for the quarter were up 120 and 140 basis points, respectively. Overall, our Americas team continues to execute well and operate efficiently, driving margin expansion through price and productivity and excess of inflation and investments despite lower volumes. Please go to slide number eight.
Michael Wagnes: Adjusted Americas, adjusted operating income of 197.3 million decreased four tenths of a percent versus the prior year period due to lower volumes.
Michael Wagnes: However, adjusted operating margin and adjusted EBITDA margins for the quarter were up 120, and 140 basis points respectively.
Michael Wagnes: Overall, our Americas team continues to execute well and operate efficiently driving margin expansion through price and productivity in excess of inflation and investments despite lower volumes.
Michael Wagnes: Please go to slide number eight.
Michael Wagnes: Our international segment continues to see a challenging macroeconomic environment. Revenue of $184.6 million was up 1.4% on a reported basis, but down 0.8% organically. Price realization was more than offset by lower volumes associated with soft and market demand. Currency and acquisitions were a tailwinds this quarter, positively impacting reported revenue by 0.8% and 1.4%, respectively. International Adjusted Operating Income of $19.3 million decreased 2% versus the prior year period. Adjusted Operating Margin and Adjusted EBITDA Margin for the quarter decreased 40 and 50 basis points, respectively. Price and productivity were tailwinds, covering inflationary pressures, but modest volume declines resulted in lower year-on-year margin rates. Please go to slide number nine.
Michael Wagnes: Our international segment continues to see a challenging macroeconomic environment.
Michael Wagnes: Revenue of $184 6 million was up one 4% on a reported basis, but down eight tenths of a percent organically.
Michael Wagnes: Price realization was more than offset by lower volumes associated with soft end market demand.
Michael Wagnes: Currency and acquisitions were a tailwind this quarter positively impacted reported revenue by eight tenths of a percent and one 4% respectively.
Michael Wagnes: International adjusted operating income of $19 3 million decreased 2% versus the prior year period.
Michael Wagnes: Adjusted operating margin and adjusted EBITDA margin for the quarter decreased 40% and 50 basis points respectively.
Michael Wagnes: Price and productivity were tail wins, covering inflationary pressures, but modest volume declines resulted in lower year on year margin rates.
Michael Wagnes: Please go to slide number nine.
Michael Wagnes: Okay.
Michael Wagnes: As I mentioned earlier, year-to-date available cash flow came in at $23.9 million, down $22.8 million versus the prior year. Q1 2023 cash flow was particularly strong as it benefited from supply chain lead time reductions, while the current year is more in line with historical norms. Next, working capital as a percent of revenue increased, primarily driven by higher receivables as a result of the timing of revenue and collections within the quarter versus the prior year.
Michael Wagnes: As I mentioned earlier year to date available cash flow came in at $23 9 million down $22 8 million versus the prior year Q.
Michael Wagnes: Q1, 2023 cash flow was particularly strong as it benefited from supply chain lead time reductions while the current year is more in line with historical norms.
Michael Wagnes: Next working capital as a percent of revenue increased primarily driven by higher receivables as a result of timing of revenue and collections within the quarter versus the prior year.
Michael Wagnes: Finally, our net debt to adjusted EBITDA remains at a healthier ratio of 1.9 times, consistent with where we finished 2023. Our business is generating strong cash flow, and our balance sheet supports continued capital deployment. I will now hand the call back over to John.
Michael Wagnes: Finally, our net debt to adjusted EBITDA remains at a healthy ratio of one nine times consistent with where we finished 2023.
Michael Wagnes: Our business is generating strong cash flow and our balance sheet supports continued capital deployment I will now hand, the call back over to John.
John H. Stone: Thanks, Mike. Please go to slide 10.
John H. Stone: Thanks, Mike Please go to slide 10.
John H. Stone: As we did last quarter, I want to spend a moment to highlight some of the key factors that we believe distinguish Allegiant's business model and how we win in the marketplace. We continue to see favorable long-term demand drivers, particularly in our core institutional markets. Projects in these markets are largely funded outside of traditional bank financing and may be more commonly funded by municipal bond issuance.
John H. Stone: As we did last quarter I want to spend a moment to highlight some of the key factors that we believe distinguish allegiance business model and how we win in the marketplace.
John H. Stone: We continue to see favorable long term demand drivers, particularly in our core institutional markets.
Projects in these markets are largely funded outside of traditional bank financing and maybe more commonly funded by municipal bond issuance.
John H. Stone: Bond issuance has continued its steady long-term growth with cycles around election-year referendums. Issuer continues to support our view for stable institutional market demand as we progress through 2024. Moving to the right side, we feel strongly we have a winning formula that comes from bringing the depth of Allegiant expertise into these attractive markets. Our team is not for multiple health care wins in 2024.
John H. Stone: Bond issuances continued its steady long term growth with cycles around election year referendums issuance continues to support our view for stable institutional market demand as we progress through 2024.
John H. Stone: Moving to the right side, we feel strongly we have a winning formula that comes from bringing the depth of allegiant expertise into these attractive markets. Our team is not multiple health care wins in 2020 for our traditional mechanical hardware. It sliding door solutions have a strong value proposition in this vertical and the service capability we have.
John H. Stone: Our traditional mechanical hardware and sliding door solutions have a strong value proposition in this vertical, and the service capability we acquired with Access Technologies frequently puts us over the top. This shows the value we unlock through M&A as we continue to deploy capital and broaden our portfolio as a pure play in security and access. Please go to slide 11.
John H. Stone: Acquired with access technologies frequently puts us over the top.
John H. Stone: This shows the value we unlocked through M&A as we continue to deploy capital and broadened our portfolio as a pure play in security and access please.
John H. Stone: Please go to slide 11.
John H. Stone: In summary, Allegion's first quarter was marked by strong execution, our team expanded margins and delivered balanced capital allocation, and we're affirming our full year 2024 outlook. It's noteworthy to share that Allegion was named a 2024 Gallup Exceptional Workplace Award winner earlier this month. This highly competitive award recognizes Allegion as one of the most engaged workplaces, and it's a testament to the dedication of all 12,000 plus Allegion employees. Our team truly believes in Allegion's responsibility to keep our employees safe, operate sustainably, live up to high ethical standards, and serve our local communities.
John H. Stone: In summary, it leaves us the first quarter was marked by strong execution, our team expanded margins and delivered balanced capital allocation and we're affirming our full year 2024 outlook.
John H. Stone: It's noteworthy to share that Allegiant was named a 2020 for Gallup exceptional workplace Award winner earlier. This month. This highly competitive award recognizes Allegiant is one of the most engaged workplaces and it's a testament to the dedication of all 12000, plus Allegiant employees.
John H. Stone: Our team truly believes in allegiance responsibility to keep our employees safe operate sustainably live up to high ethical standards and serve our local communities.
John H. Stone: By living our values and increasing employee engagement, we accelerate Allegion's success and advance our vision of enabling seamless access and a safer world for you. I'm proud of the progress we're making and grateful to be a part of this high-performance, Okay, let's turn to Q&A.
John H. Stone: By living our values and increasing employee engagement, we accelerate allegiance success and advance our vision of enabling seamless access and a safer world for you.
John H. Stone: I'm proud of the progress, we're making and grateful to be a part of this high performing team.
Speaker Change: Okay, let's turn to Q&A.
Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star then 2. Please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. The first question comes from Julian Mitchell of Barclays.
Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: At any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: Please limit yourself to one question and one follow up.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question comes from Julian Mitchell with Barclays. Please go ahead.
Matthew Pan: Hi, good morning. This is Matthew Pan from Julian Mitchell's team at Barclays.
Speaker Change: Hi, Good morning. This is Matthew Pan from Julian Mitchell's team at Barclays.
Matthew Pan: Just the first one, you know, kind of thinking about seasonality. Q2 is typically about 25% of the year's earnings. Any reason that might be different this year?
Matthew Pan: The first one you know kind of thinking about seasonality Q2 is typically about 25% of the year's earnings any reason that might be different this year.
Michael Wagnes: Thanks for the question, Matt. When you think about our year, I would say a return to normal seasonality is a theme that we said last year was abnormal. As far as individual quarters, we really don't like giving individual quarterly guidance, as you know. I would just say, as you think about our business, don't think of last year as normal. Think of maybe some of the history that we had in the past, where the summer months had more revenue. Like many companies that deal with the construction industry, we have more revenue in the summer months, the middle two quarters, with the revenues on the book ends one and four being a little less.
Speaker Change: Thanks for the question Matt.
Speaker Change: When you think about our year I would say a return to normal seasonality is a theme that we said last year was abnormal as far as individual quarters, we really don't like giving individual quarterly guidance as you know I would just say as you think about our business.
Don't think of last year as normal think of maybe some of the history that we had in the past where the summer months have more.
Speaker Change: More revenue like many come.
Speaker Change: Companies that deal with the construction industry, we have more revenue in the summer months, the middle two quarters with the revenues on the book ends one and for being a little less so our business tends to have a little more revenue in the back half of the year than the first half, but in general think of 'twenty for us.
Michael Wagnes: So our business tends to have a little more revenue in the back half of the year than in the first half, but in general, think of 24 as a return to more normal seasonality versus what you saw in 23.
Speaker Change: Return to more normal seasonality versus what you saw in 'twenty three.
Michael Wagnes: Got it. And then just one follow-up. Um, you know, Lennox talked about some project delays and commercial construction, and Otis was pretty downbeat on new orders. Does Allegiant see any sort of project delays or any worse market outlook in the Americas non-resi piece versus, say, six months ago? Yeah.
Speaker Change: Got it and then just one follow up you know Lennox talked about some project delays in commercial construction and Otis was pretty downbeat on new orders the lesion see any sort of project delays or any worse market outlook in the Americas nonresident piece versus say six months ago.
John H. Stone: Yeah, so this is John. I appreciate the question. I think, you know, we would just go back to some of the prepared remarks where we see Allegiance's business is rather heavily weighted towards institutional, which, as we indicated, has more public financing type avenues to market. And, you know, that the institutional segment is stable. And I think we're in the commercial space, you know, if our commercial business is kind of split between Office, Multifamily, and then kind of everything else, you know, which would include retail, which would include warehouses, manufacturing, and data centers. There are certainly pockets of strength and pockets of weakness.
Speaker Change: Yeah. So hey, this is John I. Appreciate the question I think we would just go back to some of the prepared remarks, where we see allegiant business is rather heavily weighted towards institutional which as we indicated is more public financing type of avenues to market.
John H. Stone: And you know that the institutional segment is stable and I think we're in a car.
John H. Stone: Commercial space.
John H. Stone: Our commercial business is kind of split between.
John H. Stone: Office multifamily.
John H. Stone: Family, and then kind of everything else.
John H. Stone: Would include.
John H. Stone: Retail, which would include warehouses manufacturing data centers, there are certainly pockets of strength and pockets of weakness.
John H. Stone: I think the broad portfolio and the broad end market exposure we have that's what comes together and gives you the guide that we're contemplating for 2024, the outlook that we're contemplating. And so, you know, institutional, stable bond issuance actually had a pretty strong Q1, if you look at that year over year, which gives us, you know, a good feel that our outlook is pretty solid. In terms of specifics, like did this project get delayed?, as you go through channel checks and as we get out and visit distributors and customers and things, yes, you do hear about that.
I think the broad portfolio and the broad end market exposure. We have that's what comes together and gives you. The guide that we're contemplating for 2024, the outlook that we're contemplating and so institutional stable.
John H. Stone: Bond issuance actually you had a pretty strong Q1, if you look at that year over year, which gives us a good feel that our that our outlook is pretty solid.
John H. Stone: In terms of specifics like did this project get delayed as you go through channel checks and as we get out and visit distributors and customers and things. Yes, you do hear about that you don't hear much in the way of cancellation you do hear maybe you know a multifamily project is on <unk>.
John H. Stone: You don't hear much in the way of cancellations. You do hear, maybe, you know, a multifamily project is... held for a little bit. You do hear some of that. But I'd say our business is more heavily weighted towards institutional, and that segment is quite stable right now.
<unk> for a little bit you do hear some of that but I'd say our business is more heavily weighted towards institutional and that segment is quite stable right now.
Got it thanks very much.
Operator: The next question comes from Joe O'Day with Wells Fargo. Please go ahead.
John H. Stone: The next question comes from Joe O'dea with Wells Fargo. Please go ahead.
Joseph Alfred Ritchie: Hi, good morning. Thanks for taking my question. Hi, Joe.
Joseph Alfred Ritchie: Hi, good morning, Thanks for taking my question.
Joseph Alfred Ritchie: Hi, Joe.
Joseph Alfred Ritchie: Hi, I'm, sorry, I wanted to ask on Americas electronics.
Joseph Alfred Ritchie: So I wanted to ask about America's electronics, you know, the down low single digit in the quarter on a tough comp, the, you know, plus 30% two-year stack still showing, you know, strong demand there. I guess just in terms of as you think about the year and what the comps look like in the remainder of the year, is this an area where you expect to see growth? You know, any context on the kind of magnitude of year over year change for electronics demand in America on a full year basis?
Joseph Alfred Ritchie: The download single digit in the quarter on a tough comp the plus 30% two year stack still showing strong.
Demand there I guess just in terms of as you think about the year and what the comps look like in the remainder of the year is there a scenario, where where you expect to see growth you know any context on kind of magnitude of year over year change for electronics demand in Americas on a full year basis.
Michael Wagnes: Yeah, hi Joe. If you think about it, thanks for the question. If you think about individual product lines, we don't guide a product line or electronics. What I would share with you is a long-term growth driver. You can see this business, on a long-term basis, delivering keggers of high single-digit to low double-digit growth for electronics. Clearly, last year, we had some catch-up associated with previous supply chain challenges, and so it was very robust growth that you saw, frankly, over the last two years. When you think of our electronics business, think of it as a long-term growth driver that's going to provide tailwinds for us to deliver above-market growth.
Joseph Alfred Ritchie: Yes, Hi, Joe if you think about thanks for the question. If you think about individual product lines, We don't guide a product line or or electronics, what I would share with you long term growth driver you can see this business on a long term basis, delivering CAGR of high single digits.
Low double digit growth for electronics, clearly last year, we had some catch up associated with previous supply chain challenges.
Joseph Alfred Ritchie: So it was very robust growth that you saw frankly over the last two years. When you think of our electronics business think of it as a long term growth driver that's going to provide tailwind for us to deliver above market growth.
Michael Wagnes: Got it. Thanks, Mike.
Speaker Change: Got it thanks, Mike and.
Joseph Alfred Ritchie: And then also, just related to the end markets, and I guess what we've seen recently in kind of ABI and Dodge Momentum, some of the softening there, you know, not really sure that that kind of aligns with maybe the way you're characterizing things in particular. And really just interested in your perspective and what we're seeing in some of those lead indicators versus what you're seeing in spec writing and activity on the ground.
And then also just related to the end markets and I guess, what we've seen recently and kind of Abi and Dodge momentum.
Some of the softening there not really sure that that kind of aligns with maybe the way you're characterizing things in particular.
Speaker Change: Some softness related to Dodge momentum in institutional markets and it really just interested on your perspective on what we're seeing in some of those leading indicators versus what you're seeing in spec writing and activity on the ground.
Joseph Alfred Ritchie: And especially as it relates to the backlog of projects and the degree that that could be weighing on some of the lead indicators where there's just a large backlog of projects. And so the stuff that's coming in might be a little bit slower just because of long lead times. So anyway, observations on kind of
And especially as it relates to backlog of projects and the degree of that could be weighing on on some of the lead indicators, where there's there's just a large backlog of projects and so.
Speaker Change: You know the stuff that's coming in it might be a little bit slower just because of long lead times, so anyway observations on kind of lead indicators.
John H. Stone: Yeah, this is John. I'll add some comments, I guess, to your comments, Joe. I think... You know, the lead indicators are what they are. I'd say we always got to be cautious not to read too much positive or too much negative into those. They, you know, they're good signals, and we watch them just like you do.
Speaker Change: Yeah. This this is John I'll I'll I'll add some comments I guess to to your comments, Joe I think.
John H. Stone: The lead indicators are what they are I would say, we always got to be cautious not to read too much positive or too much negative into those they they.
John H. Stone: They're they're good signals and we watch them just like you do.
John H. Stone: I think over the last, like, 18 to 20 months, institutional has been favorable when compared with some of the other commercial verticals. That does seem to play out in the end market as we get out and visit customers and distributors. You know, I think the...
John H. Stone: Over the last like 18 to 20 months.
John H. Stone: Institutional has been favorable when compared with some of the other commercial verticals.
John H. Stone: That does seem to play out and in the end market as we get out and visit customers and distributors.
John H. Stone: You know I think the.
John H. Stone: The lead time that you brought up, you know, with construction labor shortages, projects taking longer, that that probably is extending some jobs out some projects out longer than maybe historically it has been in terms of quantifying that and its impact, and The Dodge Momentum or any of these indices, I we're not the right people to do that. What I would say is, Again, we see stable institutional markets, and again, that's where our business is heavily weighted.
John H. Stone: The lead time that you brought up with construction labor shortages projects, taking longer that that probably is extending some jobs out some projects out longer than than maybe historically it has been.
John H. Stone: In terms of quantifying that and an impact and.
John H. Stone: The Dodge momentum or any of these these indices.
Speaker Change: We're not the right people to do that what I would say is again, we see stable institutional markets.
Speaker Change: And again, that's where our business is heavily weighted.
John H. Stone: In the commercial segment of our business, you see a mixed set of verticals, just like we mentioned in the previous question. Our resi business, as we mentioned, is flat to slightly down, and in our outlook, we don't contemplate any dramatic changes or any dramatic tailwinds from those end markets. But we feel good about the outlook we've provided, and I think the initial start to the year affirms that for us.
Speaker Change: And you know the commercial segment of our business you see a mixed set of verticals just like we mentioned on the previous question our resi business as we mentioned as you know flat to slightly down.
Speaker Change: And in our outlook, we don't contemplate.
Speaker Change: Any dramatic changes or any dramatic tail winds from those end markets, but feel good about the outlook we've provided.
Speaker Change: And I think initial star.
Speaker Change: Start to the year affirms that for us.
Joseph Alfred Ritchie: I appreciate the details. Thanks.
Speaker Change: I appreciate the detail thanks.
Okay.
Operator: The next question comes from Brett Linzey with Mizuho. Please go ahead.
Speaker Change: The next question comes from Brett Linzey with Mizuho. Please go ahead.
Peter Koston: Good morning guys, this is Peter Koston on behalf of Brett. So I just have a strategic question around the election and tariffs. Obviously, we don't know what the outcome looks like, but just understanding that Allegion has a manufacturing footprint outside the U.S., can you just talk about how nimble your supply chain is and just your ability to flex around different regions should we enter a more aggressive tariff regime?
Speaker Change: Good morning, guys. This is peter costs on for Brett, but I just thought of a strategic question around the election and tariffs. Obviously, we don't know what the outcome looks like but just understanding the allegiant has a manufacturing footprint outside the U S. You used to talk about how nimble your supply chain is and just your ability to flex around the region should we enter a more aggressive tariff.
Speaker Change: Jim.
John H. Stone: Well, let me just say this is John. I would just open with tariffs of any kind are not helpful to a company like Allegion in terms of our supply chain. I'd say we learned a lot of lessons, as did everybody else over the course of 2022 and 2023. And in terms of supply chain resiliency, we feel a lot better about our position than we would have a couple of years ago. I'm not going to get into specifics of where we buy this part or where we make this or that.
Speaker Change: Well, let me just this is John I would just open with tariffs of any kind are not helpful to a company like Allegiant.
John H. Stone: In terms of our supply chain.
Say, we learned a lot of lessons as did everybody else over the course of 2022 and 2023 and then in terms of supply chain resiliency, we feel a lot better about our position then than we would have a couple of years ago.
John H. Stone: I'm not going to get into specifics of where we buy this part of that part of where we make this or that but I would say.
John H. Stone: But I would say, you know, managing the portfolio of several million SKUs like we do, in a made to order environment in terms of supply chain and manufacturing, I'm quite confident in Allegiant's capabilities, regardless of tariff regimes or administration.
John H. Stone: Managing the portfolio of several million Skus like we do made to order environment in terms of supply chain and manufacturing I'm quite confident in the allegiance capabilities regardless of.
John H. Stone: Tariff regimes or administrations.
Peter Koston: Well, thanks for the color. That's it for me.
Speaker Change: Well thanks for the color that's it for me.
John H. Stone: This concludes our question and answer session. I would like to turn the conference back over to John Stone, President and CEO, for any closing remarks.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to John Stone, President and CEO for any closing remarks.
John H. Stone: Well, thanks very much. And just to reiterate, we feel we're off to a solid start in 2024. We look forward to connecting with you again next quarter. Be safe, be healthy, everyone.
John H. Stone: Well, thanks, very much and just to reiterate we feel we're off to a solid start in 2024, and we look forward to connecting with you again next quarter be safe be healthy everyone.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Mhm.
Speaker Change: Yeah.
Speaker Change:
Speaker Change:
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: [music].