Core Insights - Allegion is showcasing innovative electronic access control technologies and services at ISC West 2025, emphasizing interoperability as a key aspect of their security solutions [1][2] - The company aims to provide seamless and secure access solutions by fostering integration across various technologies and manufacturers, enhancing customer choice and adoption of new technologies [2] Product Highlights - Schlage Mobile Credentials now support NFC credentials in Apple Wallet® and Google Wallet™, making Schlage the first provider to support mobile credentials on Wear OS by Google Smartwatches, enhancing convenience and security for users [3] - New Latch Retraction Mortise Solutions feature ultra-quiet, motor-driven latch retraction, designed for various access control and fire systems, providing a quieter solution for door operations [3] - Von Duprin's Outdoor Defense option protects exit devices from moisture and temperature variations, ensuring functionality in exterior applications [3] - Zentra™ offers a unified access system for multifamily properties, streamlining operations for property owners while enhancing security for residents [3] - The ND Series Keyed Privacy Indication Trim Options expand Schlage's indication offerings, featuring keyed unlocking and improved visibility [4] Collaborative Efforts - Allegion collaborates with the Partner Alliance for Safer Schools (PASS) to enhance school safety and security, providing resources and expert guidance to implement safety guidelines [5] - The Allegion Alliance Network fosters partnerships with other companies to broaden the range of products and services available to customers [2] Digital Solutions - Overtur™ is a cloud-based solution that facilitates collaboration on door security design and management, integrating with industry tools to streamline processes and reduce reliance on manual methods [8] - The Schlage XE360™ Series offers a next-generation wireless electronic lock designed for common area openings, enhancing operational efficiencies for multifamily property owners [8]

Core Viewpoint - Allegion's shares have increased by approximately 1.6% since the last earnings report, outperforming the S&P 500, raising questions about the sustainability of this positive trend leading up to the next earnings release [1] Estimates Movement - Estimates for Allegion have trended upward over the past month, indicating a positive outlook for the company [2] VGM Scores - Allegion has a Growth Score of B, a Momentum Score of D, and a Value Score of C, resulting in an aggregate VGM Score of B, which is favorable for investors not focused on a single strategy [3] Outlook - The upward trend in estimates and the magnitude of revisions suggest a promising outlook for Allegion, supported by a Zacks Rank of 2 (Buy), indicating expectations for above-average returns in the coming months [4]

Core Insights - Schlage introduces Advanced Rekey, a new rekeying solution aimed at enhancing home security and providing users with greater control over their locks [1][2] Product Features - Advanced Rekey allows builders and homeowners to efficiently manage key systems, facilitating a simple rekeying process without the need for professional assistance [2][7] - The solution is designed to be user-friendly, enabling anyone to rekey locks in a few simple steps, making it ideal for situations like lost keys or changes in homeownership [7] - Advanced Rekey enhances security by ensuring that old keys become inoperative after rekeying, thus preventing unauthorized access [7] Market Availability - The Advanced Rekey solution will be available to builders through dealers and wholesale partners in late 2025 [4] Company Background - Schlage is a brand under Allegion, which is recognized as a global leader in access solutions, focusing on safety and convenience [5]

Financial Data and Key Metrics Changes - Q4 2024 revenue was $945.6 million, an increase of 5.4% compared to 2023, with organic revenue increasing by 3.5% due to favorable price and volume [17][21] - Adjusted earnings per share for Q4 was $1.86, up $0.18 or 10.7% year-over-year [19] - Full year 2024 available cash flow was $582.9 million, a 12.9% increase from the previous year [20][29] Business Line Data and Key Metrics Changes - Americas segment revenue was $750 million, up 6.4% reported and 4.6% organically, with residential business up high-single-digits [22][23] - International segment revenue was $195.6 million, up 1.5% reported but down 0.7% organically, with acquisitions contributing positively [27] - Adjusted operating margin for the Americas increased by 70 basis points, while the international segment saw a decrease of 100 basis points due to lower volumes [26][28] Market Data and Key Metrics Changes - The institutional markets are showing stable growth, supported by healthy municipal bond issuance [34] - Dodge Institutional Indicators indicate positive territory for square footage starts, contributing to volume growth [34] - The international market, particularly in Germany, is facing challenges, impacting overall growth expectations [36][37] Company Strategy and Development Direction - The company is focused on capital deployment, returning cash to shareholders, and pursuing accretive tuck-in acquisitions [8][12] - Allegion plans to continue investing in R&D and product launches to enhance its market position [10][12] - The company anticipates continued growth in the Americas, particularly in non-residential and residential sectors, while expecting flat growth in international markets [35][36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of the institutional market and the potential for growth in 2025 [34][42] - The company expects total revenue growth of 1% to 3% and organic revenue growth of 1.5% to 3.5% for 2025 [35][36] - Management highlighted the importance of local funding sources for project work, which may insulate the company from broader economic uncertainties [110] Other Important Information - Allegion executed M&A transactions totaling $137 million in 2024, with plans for further acquisitions in 2025 [12][14] - The company announced its 11th consecutive dividend increase, indicating a commitment to returning value to shareholders [15] - Allegion's balance sheet remains strong, with a net debt to adjusted EBITDA ratio of 1.6 times [30] Q&A Session Summary Question: Price-cost productivity investment equation - Management noted that the pricing dynamics were affected by timing of rebate accruals, not core pricing [56][57] Question: Sourcing of steel and aluminum - Management indicated that the impact of steel and aluminum tariffs is minimal, as most sourcing is domestic [59] Question: Adjusted operating margin guidance for 2025 - Management expects margin expansion in 2025, with the Americas leading this growth [66][75] Question: International growth guidance and China exit - The revenue from China was minimal, and the exit will have a small headwind for 2025 [77] Question: Non-residential business outlook - Management expressed optimism about non-residential business growth, supported by increased quoting activity [84] Question: M&A pipeline and margin profile - Management confirmed a healthy M&A pipeline, with a focus on high-quality targets [90] Question: Organic sales outlook and growth phasing - Management expects balanced growth across commercial and institutional sectors, with no significant back-end loading [95][96]

Core Insights - Allegion plc reported fourth-quarter 2024 adjusted earnings of $1.86 per share, surpassing the Zacks Consensus Estimate of $1.74, marking a year-over-year increase of 10.7% [1] - The company's revenues reached $945.6 million, reflecting a 5.4% year-over-year growth, and exceeded the Zacks Consensus Estimate of $939 million [2] Revenue Details - Revenues from Allegion Americas increased by 6.4% year over year to $750 million, accounting for 79.3% of total revenues, with organic revenues up 4.6% [2] - Allegion International's revenues were $195.6 million, a 1.5% year-over-year increase, but organic revenues decreased by 0.7% due to lower volume [3] Margin Profile - Allegion's cost of revenues rose by 3.3% year over year to $528.9 million, while gross profit increased by 8.1% to $416.7 million, resulting in a gross margin of 44.1% [4] - Adjusted operating income grew by 6% year over year to $209.1 million, with an adjusted margin of 22.1% [5] Balance Sheet and Cash Flow - At the end of Q4 2024, Allegion had cash and cash equivalents of $503.8 million, up from $468.1 million at the end of 2023, while long-term debt increased to $1.98 billion [6] - The company generated net cash of $675 million from operating activities, a 12.3% increase year over year, with available cash flow for the year at $582.9 million [6] Shareholder Returns - Allegion repurchased shares worth $220 million and paid dividends totaling $166.9 million, reflecting a 5.2% year-over-year increase [7] 2025 Outlook - The company anticipates revenue growth of 1-3% year-over-year, with organic revenues expected to rise by 1.5-3.5% [9] - Adjusted earnings are projected to be in the range of $7.65-$7.85 per share, with available cash flow estimated at 85-90% of adjusted net income [9]

Financial Data and Key Metrics Changes - Q4 2024 revenue was $945.6 million, an increase of 5.4% compared to 2023, with organic revenue up 3.5% due to favorable price and volume [17][18] - Adjusted earnings per share for Q4 was $1.86, an increase of 10.7% year-over-year [19] - Full year 2024 available cash flow was $582.9 million, a 12.9% increase from the previous year [20][29] Business Line Data and Key Metrics Changes - Americas segment revenue was $750 million, up 6.4% reported and 4.6% organically, with residential business up high-single-digits [22][23] - International segment revenue was $195.6 million, up 1.5% reported but down 0.7% organically, with acquisitions providing a positive impact [27][28] Market Data and Key Metrics Changes - The institutional markets are showing stable growth, supported by healthy municipal bond issuance [34] - The company anticipates total revenue growth of 1% to 3% for 2025, with organic growth of 1.5% to 3.5% [35][36] Company Strategy and Development Direction - Allegion is focused on capital deployment, returning cash to shareholders, and pursuing accretive acquisitions [8][12] - The company plans to continue investing in R&D and product launches to drive organic growth [10][14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about trends in the Americas non-residential business and stable growth in key market segments [9][33] - The outlook for 2025 includes expectations for continued price realization and margin expansion, despite headwinds from foreign currency [36][39] Other Important Information - Allegion executed M&A totaling $137 million in 2024, with plans for further acquisitions in 2025 [12][14] - The company announced its 11th consecutive dividend increase, indicating a commitment to returning value to shareholders [15] Q&A Session Summary Question: Price-cost productivity investment equation - Management clarified that the pricing dynamics were affected by timing of rebate accruals, not core pricing [46][56] Question: Sourcing of steel and aluminum - Management indicated that the impact of steel and aluminum tariffs is minimal, as most sourcing is domestic [58][59] Question: Adjusted operating margin guidance for 2025 - Management expects margin expansion in 2025, with the Americas leading this growth [63][66] Question: International growth guidance and China exit - Management noted that the revenue from China was minimal, and the exit would not significantly impact overall growth [76][78] Question: Non-residential business outlook - Management highlighted positive quoting activity and project work in the non-residential sector, indicating a favorable start to 2025 [82][84] Question: Organic sales outlook for non-residential - Management expects growth in both commercial and institutional markets, with a focus on education and healthcare [94][96] Question: Tariff pricing mitigation actions - Management stated that pricing actions would be evaluated once tariffs are implemented, with a mix of pricing strategies anticipated [99][100] Question: Government exposure within institutional markets - Management reassured that most project work is funded by local sources, insulating them from federal funding uncertainties [110]

Company Performance - Allegion reported quarterly earnings of $1.86 per share, exceeding the Zacks Consensus Estimate of $1.74 per share, and up from $1.68 per share a year ago, representing an earnings surprise of 6.90% [1] - The company posted revenues of $945.6 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 0.68% and increasing from $897.4 million year-over-year [2] - Over the last four quarters, Allegion has surpassed consensus EPS estimates four times and topped consensus revenue estimates three times [2] Stock Outlook - Allegion shares have increased approximately 2.1% since the beginning of the year, compared to a 4% gain in the S&P 500 [3] - The company's earnings outlook is mixed, with a current Zacks Rank of 3 (Hold), indicating expected performance in line with the market in the near future [6] - The current consensus EPS estimate for the upcoming quarter is $1.64 on revenues of $920.18 million, and for the current fiscal year, it is $7.62 on revenues of $3.86 billion [7] Industry Context - The Security and Safety Services industry, to which Allegion belongs, is currently ranked in the bottom 46% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Allegion's stock performance [5]

Q4-2024 Earnings Call February 18, 2025 Cautionary Statements Forward-Looking Statements This presentation contains "forward-looking statements," which are statements that are not historical facts, including, but not limited to, statements related to FY- 2025 Outlook, FY-2025 EPS Outlook Details and statements regarding market trends, electronics growth, global software solutions business, the company's financial performance in 2024 and future years, the company's business plans and strategy, the company's ...

Revenue Sources and Market Exposure - Approximately 24% of the company's 2024 net revenues were derived from outside the U.S.[82] - The company is exposed to market risks, including currency exchange rate fluctuations, which may adversely affect financial results[82]. Financial Position and Debt - The net carrying value of goodwill and other indefinite-lived intangible assets totaled approximately $1.5 billion and $101 million, respectively, as of December 31, 2024[84]. - The company had approximately $2 billion of outstanding indebtedness at December 31, 2024, with a senior unsecured revolving credit facility permitting borrowings of up to $750 million[88]. - The combined outstanding variable rate balance of the Credit Facilities was $212.5 million at December 31, 2024, exposing the company to variable interest rate risk[89]. Strategic Initiatives and Competition - The company must develop and commercialize new products and services to meet evolving customer needs and remain competitive[93]. - The company is focused on making acquisitions to strengthen its industry position and expand into adjacent markets, but future acquisitions may not achieve anticipated benefits[99]. - The company competes in a market with significant competition, including from private label brands and technological developments[91]. - The company must navigate shifting consumer preferences, particularly towards e-commerce, to maintain expected future revenues[96]. Operational Risks and Challenges - The company faces risks associated with potential impairment charges on investments in start-up companies and development-stage technology[102]. - Restructuring initiatives may lead to increased costs and reduced productivity, impacting the company's ability to achieve growth or cost savings[105]. - Global climate change and unexpected events could disrupt operations, affecting the availability and cost of materials, and leading to increased operating costs[106]. - Compliance with evolving climate change regulations may result in increased costs for energy, production, and raw materials, adversely impacting operations[107]. - Global health crises could restrict business operations and affect financial performance, with uncertain impacts on future developments[108]. - Labor shortages and increased turnover rates have led to higher operational costs and could negatively affect production efficiency[118]. - Disruptions in the global supply chain, including reliance on sole suppliers, may impair the company's ability to meet customer demands and impact financial performance[120]. IT and Cybersecurity Risks - The company relies heavily on IT systems for operations, and any failures or disruptions could impair business management and operations[109]. - Third-party service providers are critical to the company's IT infrastructure, and their failures could increase cybersecurity risks and operational costs[110]. Legal and Regulatory Risks - The company is currently involved in legal proceedings that could adversely affect its business and financial condition[125]. - The company faces risks related to intellectual property infringement claims, which could disrupt its operations and require costly litigation[126]. - Regulatory compliance costs are significant, and changes in laws could necessitate increased expenditures or the development of new products[128]. - The company has received notifications from governmental agencies regarding hazardous substance cleanup, which may lead to substantial liabilities[129]. - The company operates under a complex tax structure, with potential disagreements from tax authorities that could result in significant tax liabilities[130]. - Changes in tax laws and regulations could adversely affect the company's effective tax rate and cash obligations[132]. - The implementation of global tax reforms, including a minimum effective corporate tax rate of 15%, could materially impact the company's financial results[133]. - The company may be subject to Irish dividend withholding tax, which could discourage investment in its stock[141]. Shareholder and Acquisition Risks - Provisions in the company's Memorandum and Articles of Association could delay or prevent acquisitions, potentially affecting share price[144]. - Irish law imposes certain restrictions on shareholder actions that could hinder acquisition attempts[145].

Financial Performance - Allegion reported Q4 2024 net revenues of $945.6 million, a 5.4% increase compared to Q4 2023, with organic revenue growth of 3.5%[2][3] - Net earnings for Q4 2024 were $144.1 million, or $1.65 per share, representing a 23.1% increase in EPS compared to $1.34 in Q4 2023[3][4] - Full-year 2024 net revenues reached $3,772.2 million, up 3.3% from 2023, with organic growth of 2.1%[7][8] - Operating income for Q4 2024 was $184.6 million, compared to $159.7 million in Q4 2023, reflecting a 15.6% increase[25] - Net earnings attributable to Allegion plc for Q4 2024 were $144.1 million, a 21.5% increase from $118.6 million in Q4 2023[25] - Full-year net revenues for 2024 were $3,772.2 million, up 3.3% from $3,650.8 million in 2023[25] - Operating income for 2024 was $780.7 million, with an operating margin of 20.7%, compared to $708.4 million and a margin of 19.4% in 2023[35] - Adjusted EBITDA for the year ended December 31, 2024, was $919.1 million, representing a margin of 24.4%, up from $858.5 million and a margin of 23.5% in 2023[40] - Net earnings attributable to Allegion plc for 2024 were $597.5 million, compared to $540.6 million in 2023, reflecting a growth of 10.5%[35] - Diluted earnings per share for 2024 were $6.82, an increase from $6.12 in 2023, marking a growth of 11.4%[35] Cash Flow and Assets - Available cash flow for 2024 was $582.9 million, a 12.9% increase year-over-year[13] - Cash flow from operating activities for 2024 was $675.0 million, up from $600.6 million in 2023, indicating a 12.4% increase[42] - Total assets as of December 31, 2024, were $4,487.8 million, an increase from $4,311.5 million as of December 31, 2023[26] - Cash and cash equivalents at the end of 2024 were $503.8 million, up from $468.1 million at the end of 2023[28] - Net cash provided by operating activities for 2024 was $675.0 million, compared to $600.6 million in 2023, indicating a strong operational performance[28] Segment Performance - The Americas segment saw a revenue increase of 6.4% in Q4 2024, driven by price realization and volume growth[5] - Allegion Americas segment reported Q4 2024 net revenues of $750.0 million, a 6.5% increase from $704.6 million in Q4 2023[29] - Allegion International segment net revenues for Q4 2024 were $195.6 million, a 1.5% increase from $192.8 million in Q4 2023[29] - The International segment's revenues increased by 1.5%, but organic revenue decreased by 0.7% due to volume decline[6] - Adjusted operating income for Allegion Americas in 2024 was $859.6 million, with a margin of 28.5%, compared to $803.0 million and a margin of 27.5% in 2023[40] - Allegion International reported adjusted operating income of $99.1 million in 2024, slightly up from $96.6 million in 2023, with a margin of 13.0%[40] Future Outlook - Allegion expects 2025 revenues to grow by 1% to 3% on a reported basis and 1.5% to 3.5% organically compared to 2024[15][16] - Full-year 2025 adjusted EPS is projected to be between $7.65 and $7.85, with an effective tax rate of approximately 17% to 18%[16][17] Shareholder Returns - Allegion repurchased approximately 0.7 million shares for about $100 million in Q4 2024 and paid dividends of $0.48 per share[14] Tax and Charges - The effective income tax rate for 2024 was 14.5%, compared to 12.4% in 2023, reflecting an increase in tax expenses[35] - The company incurred $22.1 million in restructuring charges and acquisition costs in 2024, compared to $33.8 million in 2023[35] Revenue Growth Analysis - Total GAAP revenue growth for Allegion was 5.4% in Q4 2024, an increase from 4.2% in Q4 2023[43] - Total organic growth (non-GAAP) for Allegion was 3.5% in Q4 2024, compared to 2.6% in Q4 2023[43] - For the full year 2024, Allegion's total GAAP revenue growth was 3.3%, down from 11.6% in 2023[43] - Allegion's total organic growth (non-GAAP) for the full year 2024 was 2.1%, compared to 5.2% in 2023[43]