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.

Thanks, Dave, and good morning, everyone. Thank you for joining the call today. If you would, please go to slide number seven. This slide depicts the components of our revenue growth for the third quarter. I'll focus on the total legion results and cover the regions on their respective slides. As indicated, we delivered 6.4 percent organic growth in Q3. We saw strong volumes and solid price realization drive the organic increase this quarter. led by both the Americas and EMEA regions. Volumes recovered nicely from Q2 levels as market demand was strong. Also during the third quarter, currency in EMEA and Asia Pacific continued to be a headwind on total revenue growth. Please go to slide number eight. Reported net revenues for the third quarter were $748.3 million. As stated earlier, this reflects an increase of 5.2% versus the prior year of 6.4% on an organic basis. Adjusted operating income of $173 million increased more than 16% over the same timeframe last year. Adjusted operating margin of 23.1% increased 220 basis points and represents our highest quarterly adjusted operating margin since then. Leverage on incremental volumes price realization, and substantial productivity drove the operating income increase in margin expansion. During the quarter, all regions contributed sizable margin improvements. Headwinds to margin performance included incremental investments, which had a 30 basis point impact on adjusted operating margins. Please go to slide number nine. This slide reflects our earnings per share reconciliation for the third quarter. For the third quarter of 2018, reported earnings per share was $1.21. Adjusting two cents for the prior year restructuring and acquisition charges, as well as adjustments to provisions related to the enactment of tax reform, the Q3 2018 adjusted earnings per share was $1.23. Operational results increased earnings per share by 24 cents as favorable price, productivity, and operating leverage on incremental volume more than offset inflationary impacts and unfavorable currency. Favorable year-over-year share count drove another three-cent increase as we have executed nearly 180 million in share buybacks so far this year. A decrease in the year-over-year tax rate improved earnings per share by two cents. The impact of incremental investments in the quarter was a two-cent reduction. The combination of interest expense, Other expense and non-controlling interest had a negative 3 cent impact, which was driven mostly by favorable other income in 2018. This results in adjusted third quarter 2019 earnings per share of $1.47, an increase of 24 cents, or nearly 20 percent compared to the prior year period. Lastly, we had a 7 cent per share reduction for charges related to restructuring, acquisitions, and debt refinancing. After giving effect to these one-time items, you arrive at the third quarter 2019 reported earnings per share of $1.40. Please go to slide number 10. This quarter, revenues for the Americas region were $567.8 million, up 7.1% on a reported basis and 7.2% organically. Organic growth was driven by strong volume along with continued price realization. When compared to Q3 of last year, we experienced high single-digit growth in both non-residential and residential, as non-residential market demand remained strong and residential rebounded nicely from the sluggishness we experienced in the first half of the year. Electronics growth for the quarter came in at 10 percent. As Dave mentioned earlier, we are pleased with this electronics performance, given that the quarter was going up against a nearly 30 percent growth rate compared to last year. America's adjusted operating income of $175.6 million increased 13.8 percent versus the prior year period, and adjusted operating margin for the quarter increased 180 basis points. The increase in adjusted operating margin was driven by leverage on incremental volume, along with price and productivity significantly exceeding inflation. Incremental investments were a 50 basis point decrease on operating margins. Please go to slide number 11. Third quarter revenues for the EMEA region were $137.8 million, up 2.5% and up 6.9% on an organic basis. The organic growth was driven by increased volume across most products along with solid price realizations. Total revenue growth continues to be reduced by significant currency headwinds. EMEA adjusted operating income of $12 million increased 17.6% versus the prior year period. Adjusted operating margin for the quarter increased 110 basis points with price and leverage on incremental volume contributing to the increase. Timing of year-over-year investments benefited operating margins by 80 basis points, as startup costs incurred in 2018 related to our new Poland facility did not repeat this year. Please go to slide number 12. Third quarter revenues for the Asia Pacific region were $42.7 million, down 9.1% versus the prior year. Organic revenue decreased 4.8%. The organic revenue decline was driven by softer residential markets in Australia, along with internal revenue transfer of $1.5 million to the other regions. Foreign currency was, again, a significant headwind for the quarter, reducing revenue by more than 4%. Asia Pacific adjusted operating income for the quarter was $4.4 million, an increase of 37.5%, with adjusted operating margins improving 350 basis points versus the prior year period. The region saw strong productivity, the result of restructuring actions taken last year, and acquisition integration, which offset the 70 basis point headwind from incremental investments. Of note, 2019 Q3 operating income includes a $1.1 million favorable recovery of previously remitted non-income tax, which had a 260 basis point favorable impact on Asia Pacific margins in the quarter. Please go to slide number 13. Year-to-date available cash flow for the third quarter 2019 was $230 million, which is an increase of $1.4 million compared to the prior year period. The increase is driven by increased net earnings, mostly offset by increased capital spending. Working capital as a percent of revenues increased in the third quarter, and the cash conversion cycle was also slightly higher. We continue to remain committed to an effective and efficient use of working capital, and we will continue to evaluate opportunities to both minimize investments in working capital and increase available cash flow. Lastly, we are affirming our full-year available cash flow outlook range of $410 to $430 million. I'll now hand the call back over to Dave for an update on our full-year 2019 outlook. Thank you, Patrick.

Please go to slide number 14. As you can see on this slide and was mentioned earlier, we are affirming our revenue outlook for the total company. The consolidated outlook for total and organic revenue remains at a range of 4.5% to 5.5%, although we are adjusting within the regions. In the Americas, we continue to see positive fundamentals in our non-residential verticals led by institutional markets, which we believe will continue to remain solid for the near-term future. In residential, we saw Q3 rebound from the sluggishness we experienced during the first half of the year. In addition, we expect a general positive trend for electronic products to continue for the foreseeable future and believe we are well positioned to take advantage of this long-term trend. Therefore, we are slightly increasing the revenue outlooks for Americas. For the EMEA region, we expect continued currency pressures for the remainder of the year and have taken down our outlook for total revenue. However, organic revenue remains unchanged. In Asia Pacific, we expect the softness in the Australian markets to continue, particularly around residential end markets. We also expect unfavorable currency impacts to continue. As such, we are lowering the outlook for both reported and organic growth in the region. We are also updating earnings per share outlook, raising the low end of both our reported and adjusted EPS ranges. Our reported EPS outlook is now at a range of $4.55 to $4.65 per share, with adjusted EPS at a range of $4.85 to $4.90. This represents adjusted EPS growth of approximately 8% to 9%. As Patrick stated, we are affirming our cash flow outlook range of $410 to $430 million. The outlook updates the expected investment spend to a range of $0.11 to $0.13 per share. The full-year adjusted effective tax rate is being updated to approximately 15.5%, with the favorability experienced in Q3, mostly offset in Q4. We are updating our outlook for outstanding diluted shares for the full year to approximately 94.3 million, reflecting the buyback activity completed so far this year, and including expected share repurchases for Q4. Please go to slide 15. As a brief summary of Allegiance Q3 performance, total revenue grew 5.2%, organic revenue grew 6.4%, Adjusted operating margins were up 220 basis points. Adjusted EPS was up nearly 20%. In Q3, we delivered our highest quarterly revenue, operating margin, and earnings per share. Allegiant has an operating system of operations that continue to strengthen the foundational elements of both safety and innovation. The system, combined with strong brands and channel relationships, has been a hallmark of our performance since then and certainly helped us deliver the third quarter results. Thank you to every member of the Allegiant team. Your commitment to excellence strengthens our future. Now Patrick and I will be happy to take your questions.

Yes, thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If any time your question has been addressed and you would like to withdraw it, please press star and then two. This time we will pause momentarily to assemble the roster. And the first question comes from Andrew Obin with Bank of America Merrill Lynch.

Yes, good morning.

Good morning, Andrew.

Just a question. We got a lot of questions, I think, regarding the fourth quarter guide and given the organic performance in the quarter. You know, was there any pull forward of revenue from fourth quarter into third quarter? I apologize. I joined a little bit late. But just conservatism about organic growth, specifically in America's in Q4, given the performance in the third quarter.

So I would characterize Q3 extremely strong growth, as indicated, 7% organic growth, really good performance, both in the non-res and residential segments. No real pull forward of activity. You know, I would say business improved a little bit kind of as we progressed throughout the quarter, which was good to see. But just as a reminder, you know, we did increase our full-year guide on organic revenue growth given the Q3 performance. And so that's baked in there. Our year-to-date organic growth, America's is at 6%, and our full-year guide is kind of within that range. And so, you know, still expect a good Q4 going forward, and we'll finish the year strong relative to top-line performance.

And then just a follow-up question. One of your competitors highlighted on their conference calls that they're starting to see sort of signs of markets slowing. I wonder if they were referring to your census data. But, you know, you guys are, I think, are quite a bit more upbeat. You know, what kind of visibility do you have over the next 12 to 18 months? Thank you.

So we are a solid, positive, upbeat on the economy. As I look at, you know, the positive factors, consumer confidence, low unemployment, state and local tax revenues, which are a key for our business, low interest rates, and, you know, tightness in the housing markets, I don't know why you could not be positive about the view going forward. I was looking at, you know, future activity for bond issues. In the state of Texas, there's 84 bond issues on the ballot. I just see a trend and need in the economy for investments on both residential and non-residential and feel positive about the outlook.

I got you. Thank you.

Thank you. And the next question comes from Julian Mitchell with Barclays.

Hi, good morning. Just wanted to ask about the residential business. You did have a good acceleration there in the third quarter. Whether you see that growth rate as sort of a blip because you were starting a bunch of initiatives or whether you think that because of all your sort of self-help measures in resi you can drive a good mid-single-digit plus growth rate in the quarters and years ahead.

I think if you compare our first half residential performance, which I believe was plus four, was respectable in a soft patch in the market. We also had some self-help there or correction that we were doing in the channel. The market improved in Q3. That's reflective. I think the best opportunities going forward in res will be multifamily. That continues strong. I think single family, which is important to us, is going to continue to plod along. It's not getting significantly better. You add electronics on top of that with some of our leading products, our high star ratings, our connectivity. And the first Wi-Fi embedded lock, I think it sets us up for continued solid performance in that segment.

Thanks. And then just my second quick one would be around the implied sort of operating margins in Q4. You know, we've had some questions this morning around it. It looks as if that implies a softer margin performance than what you saw in the third quarter, just based on the full year guide. Just, you know, maybe any comments you could provide on that fourth quarter margin trend year on year, any big headwinds or tailwinds you'd call out.

Yeah, well, let me first maybe comment on a little bit more specifics on Q3 operating margin performance. So, as indicated, really strong across the board, all regions showing fairly significant margin improvement. We did benefit, if you kind of look at the price-productivity-inflation dynamic, extremely favorable. Inflation, you may recall, last year was at a peak in Q3, and so the comparisons were easier, if you will, and that gap was extremely favorable in the reported results in Q3 this year. We won't see that favorability as much reflected in Q4, and therefore... The margin profile expansion won't be as strong in Q3. However, I would say, just given the anticipated continued strength in the overall markets, revenue growth, et cetera, we will have good operating margin improvement year over year with margins continuing to expand. And, you know, our full year expectation, again, is like an 80 to 100 basis point margin improvement full year. still anticipate strong operational performance in Q4 to finish out the year.

Hey, just one point of clarification, Julian. The number Dave quoted for residential, that was year-to-date for the ResiGrip.

Understood.

Thanks very much for the help. Thank you. And the next question comes from Deva Raghavan with Wells Fargo Securities. Please go ahead, Debo. Your line is open. Is your phone on mute, perhaps? All right. Very well. We'll move on to the next question. This is from Josh Chan with Baird.

Josh Chan Thank you, morning, and congrats on a strong quarter.

Thank you.

Josh Chan I wanted to ask about your confidence in terms of America's outlook. I wonder if you've kind of internally tried to reconcile some of the softer kind of data points versus what you are kind of seeing in your business in terms of non-res overall growth. And just kind of curious what kind of conclusion you might have come across and then also what kind of verticals in particular are you seeing that strength into the rest of the year and 20, I guess.

So a lot packed into that. I think you've got to look at the macro noise and take heed of that. Again, as I look at the macro, I see a lot of positive out there, including, again, I'll emphasize state and local tax revenues. Then you've got to square that with what's the level of our backlog, quote activities, I'd remind you, Josh, that construction backlogs still remain at over eight months. That's healthy. Residential inventories, historic low from my perspective at four months. And then, you know, look at our activities for quotes. We like what we see going forward. That continued... you know, solid progression of the business. You have to temper that with electronics, which we think positively influences. So, you know, we're confident in what we see, you know, over the next nine to 12 months.

All right. That's good to hear. And my follow-up is on the investment spending. I noticed that you kind of took the investment spend down a little bit for the year. I wonder if if that's a little bit of a shift in terms of thinking, or is that more timing or anything to read into there?

Nothing really to read into that, more of a timing item. When we look at the end markets, there are still many opportunities to continue to invest in our business, particularly around channels, demand creation, new product development, this Internet of Things platform, connectivity, seamless access. There's a host of that we can continue to invest in that we believe will continue to accelerate our top-line performance. And so we'll continue to look at those opportunities and give you more kind of specifics relative to 2020 going forward. But there's a lot of activity and things we can continue to invest to continue to drive our business forward. Okay, great. Thank you for your time.

Thanks, Josh.

Thank you. And the next question comes from John Walsh with Credit Suisse.

Hi. Good morning.

Good morning, John.

Hey, congrats on a strong operational quarter as well. You know, I guess two questions. You know, one is thinking about pricing. Obviously, we knew it was going to step down given the comparison, what we saw in the first half of this year. But it was better than I thought. So... One, I was curious if that's kind of mix-related or if you're actually realizing better capture on price than maybe you would have anticipated.

Nothing out of the ordinary. I mean, you hit it right in terms of, you know, sequentially the pricing was down, but pretty much in line with our expectations. The teams across the board, I would say, particularly in Americas and Europe, continue to execute extremely well on price realization and capturing what they can. You know, particularly in the non-residential segment, as you know, resi, a little bit harder to get price, you know, particularly in the big box arena. But, you know, performance has been good and, you know, we'll continue to drive it going forward and capture what we can given the strong markets.

Gotcha. And then, obviously, good cash performance, cash built quarter over quarter. You know, kind of what are your expectations or visibility into, you know, capital allocation decisions, whether it be M&A or share repurchase or others?

I would say... We continue with our strategy. We think there's opportunities to wring some cash out on inventories. We invested in 2019 with some of the moves that we made globally, and I'm extremely pleased on how we executed on that move. So our move from Turkey to Poland, some ERP consolidations that never hit you know, the press that we're executing in a high level, we put some additional inventory in place that will ring out of the system. As we think about capital deployment, you know, the M&A pipeline continues to be robust. Prices are high. You know, we remain disciplined. And, you know, we continue to be active in terms of some stock repurchases.

Thank you. And if I could just sneak one more in here, if you don't mind. Just thinking about the electronics growth rate, I mean, you know, you did have a very difficult compare. You have an easier compare in Q4. You know, you had been doing 20% to 30% growth on growth, and it really ticked up this quarter. Anything to call out there or how we should think about that growth rate going forward, just given the very strong growth on growth?

Our growth in electronics has been robust over the last several years. It's hard to, you know, put up 30 percent growth a year ago and top that. You know, so the numbers are getting bigger. The opportunities are also remains, I think, compelling. If you remember at Investor Day, 40 billion openings in the world. Connected devices, technologies, our approach to open protocols with connected capabilities continues to open up opportunities. We think we understand the growth of these markets on a global basis, and it'll continue to be a positive driver for Allegiant.

But you characterize it right, if I can add, that the comparisons get a little bit easier, particularly in Q4. But, you know, kind of low double digits is kind of how you should think about it, you know, going forward.

Very appreciated. Thank you.

Thank you. And the next question comes from Jeff Pestos, Imperial Capital.

Thank you. At the recent GSX conference, I spent a lot of time with Brad going through the way the company is essentially changing its Let's go to market with customers trying to get a more holistic type of sale as opposed to just selling product by product. I'm wondering if that has played into the efficiency and the margin improvement that you've seen in the last couple of quarters.

So you're breaking up a little bit there, but I'll try and hit that. The conversations you had with Brad, I think number one, partnerships is, you know, one of our strategic objectives here. You know, working with people, the big integrators, whether it's Seaboard, whether it's Bosch, Siemens, we think we bring a unique approach to that. I think secondly, is a heavy focus on customer satisfaction and quality through the value stream. I'd like to think that from when we first work with an architect to when we install, we can be the best provider through that stream. anytime you've got an industry like ours that's got a mechanical heritage and we're introducing electronics and connectivity to high role, there's opportunity to differentiate ourselves. And I'm confident Brad talked about this, but it's really around customer satisfaction and partnering with tools like Overture, making sure our connected devices install seamlessly on the customer campus or activity with the best products. This is our strategy.

Okay. And as far as I know, I'm breaking up a little bit because I've had problems with this phone. I apologize for that. Just as a specific follow-up to that, in In going to market, how have you been able to use your open market stance, basically compared to your major competitor, in being able to develop the partnerships you're talking about? being able to convince more and more people to use Overture because you do have an open system. Are you finding that there's any resistance to that, or does that open system allow you to be able to talk to your channel a little bit easier?

I believe our position and strategy to be open gives us an advantage. It's also key that we're flexible there. We'll have customers that want control. They want closed systems, and it's really having that flexibility with our customers that we're not going to drive one connected strategy, that we leave that to the customer and we adapt to that. I think this is important around things like identity. and we're intentional in creating differentiation there.

Okay, thank you. Identity, I think, is probably going to be one of the next steps going forward down the line. It would be a natural evolution for you. We like our position. Just a comment on my part. Okay, thank you very much, and congrats on the quarter. Thank you.

Thank you. And the next question comes from David McGregor with Longwell Research.

Hi, Rob Arendon for David this morning. You know, last quarter you had discussed taking actions to remove bad actors in the e-commerce channel. You were protecting pricing for residential locks. I guess, can you talk about the success of that? Is that channel cleaned up now? Is there more actions to take, or did you more bad actors just take the place of, you know, who you cleaned up last quarter? How is that playing out?

I'd say our work in terms of just some good maintenance in the channels behind us. You know, the introduction of e-commerce, you know, over the last few years creates a little bit of a situation like the Wild West. You can have things appear on eBay or, you know, storefronts can pop up. It's part of the natural evolution. But, yes, we think that's behind us and I think reflective of some of the growth we saw in the quarter.

Perfect. And just on pricing, I mean, you're still seeing strong price realization in the third quarter. I guess with raw material prices coming down, how do you see that playing out going forward?

You know, I would say, and you know this relative to our industry, you know, we'll continue to push price even a couple years ago in a deflationary environment, which we're in that today to the extent of input costs, you know, being a little bit lower year over year. you know, we can still probably push price a little bit, you know, given the strong market demand. And we will do that and remain competitive. And so, you know, you wouldn't see necessarily the full year-over-year price increase that you'll see for the full year of 2019 going forward. But nonetheless, you should expect continued price realization in the broader market. All right. Thank you for taking my questions.

Thank you. And next we have another time from Deepa Raghavan with Wells Fargo Security.

Hey, good morning. I apologize if this question was asked already, but so can you talk about the progression of the quarter by month?

You know, if you can talk as it was progressively better, worse, or you think it was as expected? That's my first question.

I think... A normal third quarter, you know, we've got operating systems here that, you know, we try and track how we move through it. You know, it's the peak of the summer construction season, and I think things behave normally.

Okay. Was there any pull forward of demand in Q3 from Q4? I mean, you've kept your guide basically even though Q3 kind of outperformed. So just curious, what are some of the puts and takes we should be thinking about as we think through Q4? Or is there, you know, you just want to bake in some conservatism because there's still a lot out there in macros that you probably, you know, can't forecast precisely?

You know, I would characterize it as not any specific pull forward of activity, i.e., specific actions. I would say Q3 came in better than originally anticipated when we were together 90 days ago. But, again, still anticipating a relatively strong performance in Q4 going forward.

Got it. Okay, so just... Is there a tax giveback in Q4?

Sorry, that's- Yeah, so that's a good point, and Dave mentioned it a little bit relative to the full-year guide. So as indicated, our effective tax rate for Q3 came in better than anticipated. That turns negative on us in Q4 so that you have a much higher tax rate in Q4 relative to the year-to-date tax rate, which today stands a little bit south of 15%. So with a full year of 15.5, you can kind of work the math. And so that's going to be a pretty big headwind for year-over-year comparability in Q4.

Got it. My final one, sorry. So what's a normalized price? Yes.

We're going to ask you to get back in queue. We have to get to other callers.

Oh, no worries. Thank you. Yeah, thanks so much. Yep.

Thank you. And at this time, I would like to return the floor to Mike Wagness for any closing comments.

Sorry, why don't we let Deepa since she's the last question. Why don't you fire away, Deepa?

Okay, just one moment. Let me reactivate her line. One moment, please.

Hi, can you hear me? Hey, hi, can you hear me now?

Sorry about that.

Yeah, no, no, no worries. No, just one on pricing here. I mean, pretty strong pricing trends. I think they've got asked, you know, a couple of different ways already. But what's a normalized price range? Do we start to bake in like more? 1% to 2% price range going forward, or it just seems like pricing is, at this point in time, a little peakish. You may have the commodity tailwinds and everything, but just given, how do we think about it in a normalized range? And that's my final question. Thank you so much.

Yeah, think about around 1%, maybe a little bit north of that, but that would be kind of a normalized type of level.

I would also say we'll continue to push Allegiant to be disciplined in pricing. We're seeing wage inflation. I think it's important that our team think about those pressures and make sure that we're responsible in going out there and winning our business, driving strong productivity equations, and continuing to... make sure that we're compensated for the value that we create, I think, with our customer relationships.

Got it. Thank you so much.

Thank you. And at this time, I would like to return the floor to Mike Wagnus for any closing comments, please.

We want to thank everyone for participating in today's call. Please contact me for any further questions, and have a great day.

Thank you. The conference has now concluded. Thank you for attending today's presentation. May now disconnect your lines.