Allegion plc (ALLE) Q1 2023 Earnings Call Transcript

For the period ending March 31, 2023

April 26, 2023 8:00 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the Allegion First Quarter 2023 Earnings Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Tom Martineau, Vice President of Investor Relations and Treasurer. Please go ahead.

Tom Martineau

Thank you, Andrew. Good morning, everyone. Thank you for joining us for Allegion’s first quarter 2023 earnings call. With me today are John Stone, President and Chief Executive Officer and Mike Wagnes, Senior Vice President and Chief Financial Officer of Allegion. 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 Slides 2 and 3. 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 4. And I will turn the call over to John.

John Stone

Thanks, Tom. Good morning, everyone. Thanks for joining us today. Allegion delivered another quarter of outstanding operational performance. We reported revenue roughly 27% up and adjusted EPS growth of nearly 40%.

Looking at our markets, we see ongoing robust demand in our North America non-residential business, along with strong demand globally for our electronic solutions. We are seeing improvement in electronics components availability. And although supply is still short of demand, Americas Electronics 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 Allegion as pricing momentum continues and efficiency and productivity are accelerating. We remain committed to expanding margins for 2023 and beyond, as you’ll hear on our Investor Day next week. We also realized significant improvement in cash flow year-over-year driven by its favorable earnings and better operating efficiencies. We are raising our outlook for the year on revenue, EPS and cash flow given strong Q1 execution, resilient market demand in non-residential segments, improving electronics availability amid the ongoing industry transformation to electronic smart hardware.