Allegion plc

Good morning and welcome to the Allegiant first quarter 2019 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to your host today, Mike Wagnus, Vice President, Investor Relations, and Treasurer. Please go ahead, sir.

Thank you, Keith. Good morning, everyone. Welcome and thank you for joining us for Allegiant's first quarter 2019 earnings call. With me today are Dave Petratis, Chairman, President, and Chief Executive Officer, and Patrick Shannon, Senior Vice President and Chief Financial Officer of Allegiant. Our earnings release, which was issued earlier this morning, and the presentation, which we refer to in today's call, are available on our website at Allegiant.com. This call will be recorded and archived on our website. Please go to slides number two and three. 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. Dave and Patrick will now discuss our first quarter 2019 results, which will be followed by a Q&A session. For the Q&A, we ask each caller to limit themselves to one question and one follow-up, and then re-enter the queue. We will do our best to get to everyone given the time allotted. Please go to slide four, and I'll turn the call over to Dave.

Thanks, Mike. Good morning, and thank you for joining us today. Allegiant got out of the starting gate with a good quarter that has positioned us to deliver on our 2019 commitments. We had solid top-line revenue growth in the first quarter, which benefited from strength in the Americas and from the Gainesboro acquisition in the Asia-Pacific region. The Americas' growth was driven by the non-residential business, as in-market fundamentals continue to be positive, particularly in institutional verticals. Pricing was also strong for the company led by the Americas region. Electronics growth was at almost 10% for the quarter, which was lower than the growth rates experienced in 2018. While growth improved sequentially from the last quarter, our product portfolio and new market partnerships will drive even better growth in the coming quarters. Allegiant's combination of brands, expanded product portfolio, technical partnerships, and continuously evolving channel relationships give us a great opportunity to take advantage of this market as it develops. For the full year 2019, we expect the Americas electronics growth rate to be similar to historic levels, which is supported by the healthy demand of the recently launched Schlage ENCODE residential lock that is ramping up in Q2. Moving down the slide, Allegiant was able to drive price realization and productivity actions, which more than offset the substantial inflationary pressures we experienced. I am pleased with the performance as we saw operating margin increase for the total company and in each of the individual regions. In the first quarter, we delivered a 10% increase in adjusted EPS, driven primarily from operations. This performance highlights our continued focus on accelerating growth, margin improvement, and driving increased shareholder value. Last, we are affirming our outlooks for 2019 revenue and EPS. We project total and organic revenue growth between 5% and 6%. For reported EPS, the range continues to be $4.60 to $4.75 per share, and adjusted EPS remains at $4.75 to $4.90. Please go to slide number five, and I'll walk through the first quarter financial summary. In Q1, Allegiant delivered good top-line revenue performance. Revenue for the first quarter was $655 million, an increase of 6.8%, inclusive of 5.8% organic growth. Allegiant also contributed to the top-line revenue expansion, excuse me, acquisitions also contributed to the top-line revenue expansion, offsetting the unfavorable currency impact. Americas led the way with organic growth of nearly 8% in the quarter, supported by strong pricing and solid volume in the non-residential business. The EMEA region saw modest organic growth and Asia-Pacific total revenue was boosted by the Gainesboro acquisition completed last year. Adjusted operating margin increased by 10 basis points, aided by price and productivity, more than offsetting significant inflation. The businesses continue to focus on driving price realization, productivity savings to combat inflationary pressures. Adjusted earnings per share of 88 cents increased 8 cents or 10% versus the prior year. As mentioned, the increase was driven primarily by operational performance, reduced share count, and a slightly lower tax rate, with the other income providing a small benefit to EPS growth. Year-to-date available cash flow is down approximately $6 million. The decrease is related to increased working capital and higher capital expenditures that were offset slightly by increased earnings. Please go to slide six. When Allegiant was founded, we put together a sound strategy, values, and strategic pillars for our company, and they have allowed us to deliver industry-leading results, including industry-leading organic growth and operating margins. As we move into the next five years, we made some nice adjustments to the strategy. In March, we shared our refreshed corporate strategy with you. Our vision of seamless access and a safer world is aligned with electronic trends in security and access. It also recognizes the enhanced capabilities of technology, edge devices, and our unique ownership of the opening to provide layers of authentication and enhanced safety to increase human productivity. We believe The five strategic pillars Allegiant has laid out are the foundation for our future. Our pillars include expansion and core markets. We continue to broaden the core business through channel relationships, digital demand creation, and leading products. Be the partner of choice. Delivering seamless access means we're intent on looking beyond our walls and leveraging our partners and ecosystems to drive growth, which includes using open platforms that integrate well with others. Drive new value and access. Our innovation will focus on the user experience with access and working with partners to create unique solutions that increase their safety and speed up their productivity. We are also intent on bringing new products to the market faster through modular, global, scalable platforms. Capital allocation. Allegiant will continue to take a disciplined and flexible approach to capital deployment, one that spans organic investments, acquisitions, and shareholder distributions to optimize shareholder returns. And last, enterprise excellence. As you have seen in our Q1, Our ability to drive results through productivity and continuous improvement is a strength of our company. Allegiant is committed to create value with excellent customer experience and with a culture of safety, health, and employee engagement. Access has been a part of our company's history for over 100 years, and seamless access will define our company going forward. Patrick will now take you through the financial results, and I'll be back to discuss our full year 2019 outlook.