Allegion plc

Good morning and welcome to the Allegiant Q3 2022 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 telephone keypad. To answer your question, please press star then two. Please note this event is being recorded. I would like to turn the conference over to Tom Martineau, Vice President of Investor Relations and Treasurer. Please go ahead.

Thank you, Francesca. Good morning, everyone. Thank you for joining us for Allegiant's third quarter 2022 earnings call. With me today are John Stone, President and Chief Executive Officer, and Mike Wagdis, 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.legion.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 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. John and Mike will now discuss our third 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 John.

Thanks, Tom. Good morning, and thank you all for joining us today. Allegiant delivered a very strong third quarter, and as we look at the market dynamics, we continue to see strength in the America's non-residential sector. Leading indicators for that business, like the ABI and AIA consensus, are positive and continue to be an expansionary territory, particularly for institutional verticals. On the America's residential side, our business grew nicely in the quarter, but we are seeing signs of a slowing market. Certainly new construction is impacted by rising mortgage rates, and retail point of sale for our industry is returning to more normal levels. Although Allegiant International is experiencing broader weakness in many of its markets, we continue to see strength in demand for our electronics and software solutions. Allegiant delivered record revenue during the third quarter. This is due to the hard work and dedication of our team, as we've made significant progress on product redesign and other supply chain improvements that are driving strong operational performance across the company. Top line revenue was also aided by robust price realization in the quarter across the world. I do want to highlight that while we've made some progress, there's still choppiness in the electronics supply chain. Backlogs in electronics are still elevated as demand for those products has remained strong. At the beginning of the year, we underscored our commitment to aggressively pursue price across all products and in all channels. The result of this effort is evident in the quarterly results. While we continue to experience inflationary headwinds, our price, productivity, and inflation dynamic was positive this quarter, both on a dollar and margin basis. Allegiant will continue to assess the need for future price increases. Lastly, the currency pressures impacting our international businesses persist. The reported revenues in the third quarter reflect $26 million of pressure related to foreign exchange rates. Please go to slide five. At the beginning of the quarter, on July 5th, in fact, we officially welcome the Access Technologies business into the Allegiant family. Together, we will deliver long-term value for customers, shareholders, and employees alike, and we're already moving in that direction. The operational performance of the business was in line with the expectations shared with you in last quarter's earnings call, and our teams are getting well aligned on culture, vision, and strategy. Just as important, our early work together affirms that access technologies and Allegiant are a great combination. We have unique opportunities to accelerate our seamless access strategy with innovation that will create new value around doors and entrances. This is where I get to say a picture says a thousand words, and we now have a well-established recurring service business that positions us to meet new customer needs as devices become more connected and technology advances. And we have an expanded portfolio of products that fills gaps, complements our business, and takes full advantage of our demand generation specification engine in the Americas. Bottom line, Access Technologies is a strong business. It's another category market leader for Allegiant. We're off to a great start and excited about the opportunities ahead. Now let's turn to slide six and take a look at the quarter performance for more details. Revenue for the third quarter was $914 million, an increase of 27.4% compared to last year. Organic revenue growth was 18.6%, attributed to both significant price realization worldwide and strong volume growth in the Americas. The Access Technologies acquisition contributed approximately 12% to the total growth number, and currency impacts remain a significant headwind. Mike will share more details on the segment reporting in a moment. Adjusted operating margin and adjusted EBITDA margins increased by 100 basis points each in the third quarter. The increase was driven by volume leverage in the Americas as well as price and productivity exceeding inflation. These more than offset the margin dilution related to access technologies. Excluding the access technologies, business adjusted operating income margins were up 240 basis points. Adjusted EPS of $1.64 increased 8 cents. or approximately 5% versus the prior year. Robust operational performance more than offset the unfavorable tax rate impact, which is compared against a prior year that had substantial non-recurring benefits. Mike will now walk you through the financials, and I'll be back later to discuss our 2022 outlook.