Allegion plc

Good morning, and welcome to the Allegiant First Quarter 2022 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. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I'd now like to turn the conference over to Tom Martineau, Vice President of Investor Relations and Treasurer. Please go ahead.

Thank you, Jason. Good morning, everyone. Thank you for joining us for Allegiant's first quarter 2022 earnings call. With me today are Dave Petratis, Chairman, President, and Chief Executive Officer, and Mike Wagness, 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.allegiant.com. This call will be recorded and archived on our website. Please go to slides 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 Mike will now discuss our first quarter 2022 results, which will be followed by a Q&A session. Please, for the Q&A, we would like to ask each caller to limit themselves to one question and one short follow-up, and then re-enter the queue. We would like to give everyone an opportunity, given the time allotted. Please go to slide four, and I'll turn the call over to Dave.

Thanks, Tom. Good morning and thank you for joining us today. We had a solid start to 2022. Overall market demand remains strong and our organic growth and pricing action accelerated. We also announced on Friday the acquisition of the Stanley Access Technologies business, a highly strategic acquisition for Allegiant, which is expected to close in the third quarter of this year. During Q1, we experienced robust demand on the non-residential side of the Americas, as well as strength in Simons Voss, Interflex, and portable security within the international segment. Residential markets in the Americas remain stable. We have made progress on our product redesigns and alternative sourcing, similar to the last two quarters. but were not able to fully meet the strong demand due to continued supply chain constraints. We did deliver good revenue growth in the quarter, driven primarily by price. The continued strength in demand is encouraging. With regard to the supply chain constraints, we expect electronic component challenges to persist, and the latest lockdowns in China are likely going to impact global supply chains even further. Looking at price versus cost, we continue to experience high inflationary impacts from material cost, labor, and freight. Price realization accelerated in Q1 and was the driver of organic growth in the quarter. With the recent spike in commodity prices, we have already announced additional price increases to take effect starting in Q2 across residential and non-residential markets. and will assess the need for further price increases as inflationary pressures continue. As we discussed in February, we are aggressively pursuing price across all products and in all channels to offset unprecedented inflation, and we expect price to exceed inflation further for the year. We are providing an updated outlook for 2022. We are raising our revenue outlook to reflect higher price, offsetting the additional inflation we are experiencing. We are holding our prior EPS range, and I'll share more detail on the outlook later in the presentation. Last, on the business review, I want to further highlight our announcement from last Friday. We have come to an agreement to acquire Access Technologies Business from Stanley Black & Decker. This is the right asset for Allegiant, and it progresses our seamless access strategic focus, adding a category leader with an expansive service footprint. The business has a strong financial profile and is very complementary to Allegiant America's core business and our portfolio. Closing is anticipated in Q3. And we welcome the Access Technology employees and we look forward to all of them joining our team. Now let's turn to the quarter performance for more details. Please go to slide five. Revenue for the first quarter was $724 million, an increase of 4.2% compared to last year. Organic revenue growth was 6.4%. The organic revenue increase in the quarter was driven by significant price realization of 6%. Allegiant International and Allegiant America's non-residential business also saw volume growth driven by robust demand highlighted earlier. America's residential volumes were down as that business had a tough comparable to last year attributed to the large channel load-in during Q1 of 2021. Michael Shumrow detailed on the business segments in a moment. Adjusted operating margin decreased by 240 basis points in the first quarter. Continued inflationary pressures, productivity challenge, and currency headwinds drove most of the decrease. Incremental investments for future growth caused 60 basis points of the decline. Adjusted earnings per share of $1.07 decreased 13 cents or approximately 11 cents versus the prior year. Lower operating income, a year-over-year tax rate increase, and reduced other income was partially offset by favorable share count. Year-to-date available cash flow came in at $12 million, which was down 89% versus Q1 of last year, but is in line with our historical trends. Last year's high number was driven by lower working capital requirements due to the COVID-19 pandemic. As I've stated before, I firmly believe our vision and strategy in support of seamless access is more relevant than ever, and the access technology acquisition will add momentum. We remain bullish on construction and DIY markets for 2022, and continue to expect the trend of electronic adoption to fuel growth for many years. Mike will now walk you through the financials, and I'll be back to discuss our 2022 outlook.