Allegion plc — 2024 Q1
Transcript
Each turn shows the speaker, their inferred role, the section, and that turn's net sentiment (×1000).
Good morning, and welcome to the Allegion First Quarter 2024 Earnings Call [Operator Instructions] Please note, this event is being recorded.
Thank you, Drew. Good morning, everyone. Thank you for joining us for Allegion'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 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.
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 will share more on each of these through the course of the presentation. Institutional markets remain healthy as we expected, our team continues to leverage our capabilities in spec writing, made-to-order manufacturing and strong distribution partnerships to best serve our end user customers.
Thanks, John, and good morning, everyone. Thank you for joining today's call. Please go to Slide #5. 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 previous supply chain interruptions.
Thanks, Mike. Please go to Slide 10. As we did last quarter, I want to spend a moment to highlight some of the key factors that we believe distinguish Allegion'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. Bond issuance has 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.
[Operator Instructions] The first question comes from Julian Mitchell with Barclays.
This is Matthew Pan from Julian Mitchell's team at Barclays. Just the first one, kind of thinking about seasonality, Q2 is typically about 25% of the year's earnings. Any reason that might be different this year?
Thanks for the question, Matt. When you think about our year, I would say 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.
Got it. And then just 1 follow-up. Lennox talked about some project delays in commercial construction and Otis was pretty downbeat on new orders. Does Allegion see any sort of project delays or any worse market outlook in the Americas nonresi piece versus, say, 6 months ago?
Yes. So this is John. I appreciate the question. I think we would just go back to some of the prepared remarks, where we see Allegion's business is rather heavily weighted towards institutional, which, as we indicated, has more public financing type avenues to market. And the institutional segment is stable.
The next question comes from Joe O'Dea with Wells Fargo.
So I wanted to ask on Americas electronics. The downward single digit in the quarter on a tough comp, plus 30% to your 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 this an area where you expect to see growth? Any context on kind of magnitude of year-over-year change for electronics demand in Americas on a full year basis?
Joe, if you think about -- 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, long-term growth driver. You can see this business on a long-term basis, delivering CAGRs of high single-digit to low double-digit growth for electronics.
Got it. 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. Not really sure that, that kind of aligns with maybe the way you're characterizing things in particular, saw some softness related to Dodge Momentum in institutional markets. And really just interested on your perspective and what we're seeing in some of those leading indicators versus what you're seeing in spec writing and activity on the ground.
Yes. This is John. I'll add some comments, I guess, to your comments, Joe. I think 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're good signals, and we watch them just like you do. 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.
The next question comes from Brett Linzey with Mizuho.
This is Peter Costa on for Brett. 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?
Well, let me -- this is John. I would just open with tariffs of any kind or 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.
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.
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.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.