Allegion plc

Good morning, and welcome to the Allegiant Q3 earnings 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 on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. And now I'd like to turn the call over to your host today, Mike Magnus, Vice President of Investor Relations and Treasurer. Please go ahead, sir.

Thank you, Keith. Good morning, everyone. Welcome and thank you for joining us for Allegiant's third quarter 2019 earnings call. On the call 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 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 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 and the financial tables of our press release for further details. Dave and Patrick will now discuss our third 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 number four and I'll turn the call over to Dave.

Thanks, Mike. Good morning and thank you for joining us today. Allegiant delivered great results in Q3. I'm extremely pleased with the revenue growth and operational performance which have positioned us well to deliver on our 2019 commitments. Top-line revenue growth was strong in the third quarter, particularly in the Americas and EMEA regions. In the Americas, both non-residential and residential businesses saw high single-digit growth. In EMEA, we saw solid volume increases across most of the region. The Americas delivered electronics growth of 10% in the quarter, which was a notable performance considering the challenging comparable from prior year, where we grew nearly 30%. Strong market acceptance of our new highly rated Schlage ENCODE residential lock continues to be robust and helped drive the electronics performance in the quarter. We were the first major manufacturer to bring a smart Wi-Fi deadbolt to the market, and it has a lot of momentum in the residential channel. We believe our brands, expanded product portfolio, technical partnerships, breadth of channel relationships, and a large installed base provide us with a great opportunity to take advantage of the electronics market as it continues to evolve and grow. Moving down the slide, Allegiant was able to drive price realization and productivity actions which significantly outpaced inflation. I'm proud of the performance as we saw substantial operating margin expansion of 220 basis points this quarter. In the third quarter, we delivered robust adjusted EPS growth at nearly 20%, driven primarily by operational performance along with favorable share count and tax rate impact. We are affirming the full year revenue outlook in which we continue to project total and organic revenue growth between 4.5% and 5.5%. I'll speak to the individual region outlooks later in the presentation. Last, we are tightening the outlook for reported EPS, going from a range of 450 to 465 per share to a revised outlook of 455 to 465 per share. The adjusted EPS outlook is also being tightened by raising the low end of the range and going from $4.80 to $4.90 per share to a revised outlook of $4.85 to $4.90 per share. Please go to slide five. Revenue for the third quarter was $748.3 million, an increase of 5.2%, inclusive of 6.4% organic growth. Currency headwinds offset some of the organic growth. The Americas and EMEA region were responsible for the organic growth results. Patrick will share more detail on this. Adjusted operating margin increased by 220 basis points, aided by substantial contribution from price and productivity outpacing inflation. Solid leverage on incremental volume also provided benefit to the margin expansion. Adjusted earnings per share of $1.47 increased by nearly 20% versus the prior year. As mentioned, the increase was driven primarily by operational performance along with favorable share count and a lower tax rate. Year-to-date available cash flows up slightly with the increased earnings. We have experience this year being mostly offset by increased capital expenditures. Please go to slide six. In March, we shared our Refresh corporate strategy with you, which centers on our vision of seamless access. Since that time, momentum and market acceptance continues to build. For instance, smartphones and connectivity are the norm. This translates to pressure from our customers to meet end users' demand for a mobile, connected life while ensuring security. Allegiant is well positioned to meet this demand. We see strong uptake with our seamless ID solutions for universities, in edge devices, in adoption of Schleg encodes, and in emerging technologies and venturing opportunities. We're confident in the long-term electronic opportunity and see that seamless access and safety lay a solid foundation for our future. As a reminder, our five strategic pillars that guide Allegiant are expanding core markets. We continue to broaden the core business through existing and new channel relationships, digital demand creation, and leading products. Be the partner of choice. Delivering seamless access means we're intent on leveraging partners and ecosystems to drive growth, which includes using open platforms that integrate well with others. Deliver new value and access. Our innovation will focus on the user experience for access, as well as working with partners to create unique solutions that increase safety and speed up productivity. We are also intent on bringing new products to market faster. 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. Last, enterprise excellence. Allegiant is committed to creating value through productivity, through excellent customer experience, and through a culture of safety, health, and employee engagement. Access has been a part of the company's heritage for 100 years, and seamless access will define our company going forward. Patrick will now walk you through the financial results, and I'll be back to discuss the 2019 outlook.