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Allegion Reports Q2-2023 Financial Results

Electronics growth, margin expansion and increased cash flow lead to strong second-quarter performance; Company raises full-year 2023 EPS outlook

Allegion NYSE

Quarterly Financial Highlights
(All comparisons against the second quarter of 2022, unless otherwise noted)

  • Net earnings per share (EPS) of $1.61, compared with $1.30; Adjusted EPS of $1.76, up 23.1% compared with $1.43
  • Revenues of $912.5 million, up 18.0% on a reported basis and up 5.6% on an organic basis
  • Operating margin of 20.2%, compared with 19.0%; Adjusted operating margin of 22.2%, up 130 basis points compared with 20.9%
  • Americas electronics growth of approximately 40%


Full-Year Outlook Highlights

  • Raising full-year 2023 EPS outlook to a range of $6.10 to $6.20 and adjusted EPS outlook to a range of $6.70 to $6.80 (+11.9% to +13.5%)
  • Raising full-year 2023 available cash flow to a range of $500 to $520 million
  • Tightening full-year 2023 reported revenue growth outlook to 11.5% to 12.5% and full-year 2023 organic revenue growth outlook to 5.5% to 6.5%


DUBLIN (July 26, 2023) Allegion plc (NYSE: ALLE), a leading global security products and solutions provider, today reported financial results for its second quarter (ended June 30, 2023).

“Allegion delivered another quarter of outstanding operational performance, margin expansion and increased cash flow,” said President and CEO John H. Stone. “Q2 revenue growth was fueled by electronics, as we continue to shape the transformation taking place in our industry with our vision of enabling seamless access and a safer world.

“On July 5, we passed the one-year milestone of acquiring Stanley Access Technologies. Our teams have integrated very well together, taking good care of our customers while delivering on the business plan. This acquisition is accretive to adjusted EPS in its first year.     

“As we think about the second half of the year, we expect end markets will be stable with continued strong demand for our electronic solutions. We are raising Allegion’s full-year EPS guidance. I’m confident in our outlook and very proud of the Allegion team.”


Company Results
(All comparisons against the second quarter of 2022, unless otherwise noted)

Allegion reported second-quarter 2023 net revenues of $912.5 million and net earnings of $142.0 million, or $1.61 per share. Excluding charges related to restructuring, acquisition and integration costs, as well as amortization expense related to acquired intangible assets, adjusted net earnings were $155.4 million, or $1.76 per share, up 23.1%.

Second-quarter 2023 net revenues increased 18.0%. Excluding impacts of acquisitions, divestitures and foreign currency movements, net revenues increased 5.6% on an organic basis. This organic revenue increase was driven by price realization, along with strong growth in electronics offsetting lower volumes experienced in the mechanical portfolio. Foreign currency exchange rate impact was relatively flat.

Second-quarter 2023 operating income was $184.6 million, an increase of $37.5 million or 25.5%. Adjusted operating income in second-quarter 2023 was $202.6 million, an increase of $41.1 million or 25.4%.

Second-quarter 2023 operating margin was 20.2%, compared with 19.0%. The adjusted operating margin in second-quarter 2023 was 22.2%, compared with 20.9%. The 130-basis-point increase in adjusted operating margin is attributable to positive price and productivity net of inflation and investments. These increases were partially offset by lower volumes, as well as the dilutive impact of the Access Technologies acquisition.


Segment Result
(All comparisons against the second quarter of 2022, unless otherwise noted)

The Americas segment revenues increased 23.8% (up 7.7% on an organic basis). The organic increase was driven by price realization across all businesses. The Access Technologies acquisition contributed $96.1 million or more than 16% to total Americas growth. The non-residential and residential businesses both grew high-single digit percent, showcasing strength in electronics volume partially offset by lower mechanical volume, as customers adjust their ordering patterns to the company’s reduced lead times due to its improved supply chain and operational execution.

The International segment revenues were down 1.0% on an organic basis. Strength in electronics and software solutions, as well as positive price realization, were more than offset by soft end markets, especially in the Global Portable Security business. The reported revenue reflects a slight positive impact from foreign currency.


Additional Items
(All comparisons against the second quarter of 2022, unless otherwise noted)

Interest expense for second-quarter 2023 was $23.7 million, an increase of $6.5 million. This was driven by increased debt from the Access Technologies acquisition along with an increase in variable interest rates. Interest expense in the prior year included $4.3 million of debt financing fees related to the Access Technologies acquisition, which was excluded from adjusted EPS.

Other income net for second-quarter 2023 was $1.6 million, compared to other income net of $3.4 million.

The company’s effective tax rate for second-quarter 2023 was 12.6%, compared with 13.6%. The company’s adjusted effective tax rate for second-quarter 2023 was 13.9%, compared with 14.7%.


Cash Flow and Liquidity

Year-to-date available cash flow for 2023 was $190.1 million, an increase of $105.6 million versus the prior-year period. The year-over-year increase in available cash flow is due to increased year-to-date net earnings and lower cash used for net working capital, partially offset by higher capital expenditures. The company ended second-quarter 2023 with cash and cash equivalents of $322.6 million, as well as total debt of $2,059.3 million. The company repaid $60.0 million of borrowings on its revolving credit facility during the second quarter of 2023 and ended the period with a balance of $39.0 million outstanding on the facility, which it repaid in July 2023.

During second-quarter 2023, the company repurchased approximately 0.2 million shares for $19.9 million under its previously authorized share repurchase program.  


Updated Full-Year Outlook

The company is tightening its full-year 2023 revenue growth outlook and expects it to be 11.5% to 12.5%, while also updating its organic revenue growth outlook and expects it to be 5.5% to 6.5%, excluding the expected impacts of acquisitions, divestitures and foreign currency movements.

The company is increasing its full-year 2023 reported EPS outlook and expects it to be in the $6.10 to $6.20 range, with adjusted EPS expected to be between $6.70 to $6.80.

Adjustments to 2023 EPS include estimated impacts of approximately $0.40 per share for acquisition-related amortization, as well as $0.20 per share for restructuring, M&A and amortization expense related to acquired backlog (approximately $9 million pre-tax).

The outlook assumes a headwind of approximately $0.29 for interest and other income, a full-year adjusted effective tax rate of approximately 15% to 15.5% and an average diluted share count for the full year of approximately 88.3 million shares.

The company increases expectations for full-year 2023 available cash flow to approximately $500 to $520 million.


Conference Call Information

On Wednesday, July 26, 2023, President and CEO John H. Stone and Senior Vice President and Chief Financial Officer Mike Wagnes will conduct a conference call for analysts and investors, beginning at 8 a.m. ET, to review the company's results.

A real-time, listen-only webcast of the conference call will be broadcast live online. Individuals wishing to listen may access the call through the company's website at https://investor.allegion.com.



About Allegion

Allegion (NYSE: ALLE) is a global pioneer in seamless access, with leading brands like CISA®, Interflex®, LCN®, Schlage®, SimonsVoss® and Von Duprin®. Focusing on security around the door and adjacent areas, Allegion secures people and assets with a range of solutions for homes, businesses, schools and institutions. Allegion had $3.3 billion in revenue in 2022, and its security products are sold around the world.

For more, visit www.allegion.com.


Non-GAAP Measures

This news release includes adjusted non-GAAP financial information which should be considered supplemental to, not a substitute for or superior to, the financial measure calculated in accordance with GAAP. The company presents operating income, operating margin, net earnings and diluted earnings per share (EPS) on both a U.S. GAAP basis and on an adjusted (non-GAAP) basis, revenue growth on a U.S. GAAP basis and organic revenue growth on a non-GAAP basis, EBITDA, adjusted EBITDA and adjusted EBITDA margin (all non-GAAP measures) and Available Cash Flow (“ACF”, a non-GAAP measure). The company presents these non-GAAP measures because management believes they provide useful perspective of the company’s underlying business results and trends and a more comparable measure of period-over-period results. These measures are also used to evaluate senior management and are a factor in determining at-risk compensation. Investors should not consider non-GAAP measures as alternatives to the related U.S. GAAP measures. Further information about the adjusted non-GAAP financial tables is attached to this news release.


Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, including, but not limited to, statements under the heading “Updated Full Year Outlook,” and statements regarding the company's 2023 financial performance, the company’s business plans and strategy, the company’s growth strategy, the company’s capital allocation strategy, the company’s ability to successfully complete and integrate acquisitions and achieve anticipated strategic and financial benefits, and the performance of the markets in which the company operates. These forward-looking statements generally are identified by the words “believe,” “aim,” “project,” “expect,” “anticipate,” “estimate,” “forecast,” “outlook,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result” or the negative thereof or variations thereon or similar expressions generally intended to identify forward-looking statements. Forward-looking statements may relate to such matters as projections of revenue, margins, expenses, tax rate and provisions, earnings, cash flows, benefit obligations, dividends, share purchases or other financial items; any statements of the plans, strategies and objectives of management for future operations, including those relating to any statements concerning expected development, performance or market share relating to our products and services; any statements regarding future economic conditions or our performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Undue reliance should not be placed on any forward-looking statements, as these statements are based on the company's currently available information and our current assumptions, expectations and projections about future events. They are subject to future events, risks and uncertainties - many of which are beyond the company’s control - as well as potentially inaccurate assumptions, that could cause actual results to differ materially from those in the forward-looking statements. Important factors and other risks that may affect the company's business or that could cause actual results to differ materially are included in filings the company makes with the Securities and Exchange Commission from time to time, including its Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q and in its other SEC filings. All forward-looking statements in this press release are expressly qualified by such cautionary statements and by reference to the underlying assumptions. The company undertakes no obligation to update these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.


Media Contact:
Whitney Moorman – Reputation Management Leader


Analyst Contact:
Jobi Coyle – Director, Investor Relations


Source: Allegion plc

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