Allegion plc

Good morning and welcome to the Allegiant second quarter 2023 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then 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. I would now like to turn the conference over to Jobe Coyle, Director of Investor Relations. Please go ahead.

Thank you, Drew. Good morning, everyone. Thank you for joining us for Allegiant's second quarter 2023 earnings call. With me today are John Stone, President and Chief Executive Officer, and Mike Magnus, 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 slide two. 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. Please go to slide three, and I'll turn the call over to John.

Thanks, Joby. Good morning, everyone. Thanks for joining us today. My how time flies. It's hard to believe this time last year I was joining you for my first Allegiant earnings call. I shared them, my belief in our company's mission, our people, our culture, and my excitement around this chapter that we're writing in Allegiant's history together At one year end, I'm even more energized about Allegiant's future and even more proud of our global team, who has just delivered another quarter of outstanding operational performance. Let's go to slide three and talk about some of the highlights. The Allegiant team delivered 18% total growth, and we drove strong margin expansion. In Q2, we increased margins across America's and international business segments, both sequentially and year-over-year, resulting in a 130 basis point increase in adjusted operating income margin for the quarter. We see electronics continuing to be a key growth driver for Allegiant. Demand was strong for our electronic solutions in the second quarter, fueling Allegiant's overall revenue growth. In Q2, strength across both residential and non-residential business in our America segment totaled nearly 40% electronics growth over the prior period. We also saw strong electronics and software solutions performance in our international segment. As we work to shape the transformation taking place in our industry, we continue to see electronics as key to our overall growth. Our non-residential markets remain stable, and electronics demand continues to be a bright spot in both America's and international segments. However, we did see some softness, In non-residential mechanical demand, as customers and distribution partners adjust their ordering patterns to our reduced lead times due to much improved supply chain and operational execution. The America's residential business was bolstered by very strong electronic sales, but we're still seeing soft mechanical demand. Certain international end markets, particularly in the portable security business, also remain soft. Overall, our team delivered another strong quarter, resulting in a solid first half of 2023. We are operating at a high level, and as a result, are raising our outlook for the year for adjusted EPS, which is now expected to be in a range of $6.70 to $6.80. I am very proud of the Allegiant team's operational performance. I'll provide more color on the outlook later in the presentation. Please go to slide four. Now let's move to our vision and strategy. This is a slide we talked through at our investor day, and while it's a simple overview, it reflects an important foundation for our company. Our vision of enabling seamless access in a safer world. What does that mean? It means if you have the right credential, whether that's a metal key, an encrypted proximity card, or a digital identity and a mobile wallet, we will provide you the most convenient and secure experience possible. Why is this the right strategy and why is this the right strategy now? Because our world is increasingly digital, mobile, and connected. Because touchless and contactless experiences and technology will clearly live well beyond COVID. Because digital credentials and smart hardware not only provide more seamless access experiences, they also provide more rich data to the end user customer and added layers of security. We feel this transformation has a long runway ahead. Our vision is supported by a strategy of creating value as a pure play provider of security and access solutions. This is how we differentiate our company and drive innovation for a safer world forward. Building on our legacy, delivering new value and access, being the partner of choice and operating with excellence. Please go to slide five. So this month also reflects the first anniversary of the Stanley Access Technologies acquisition. Acquiring the Access Technologies business was a direct reflection of our seamless access strategy, making the world more accessible, expanding our presence in access and security markets, and unlocking greater long-term value for our customers, our shareholders, and our employees alike. In year one, our teams have integrated very well together. We've taken very good care of our customers, and you can see this in our results, which reflect operational performance in line with the business plan. Access technologies generated revenues of approximately $385 million, which represented approximately 10% growth. This was 11 cents accretive to adjusted EPS for Allegiant in its first 12 months. In addition, when we made this acquisition, which is our largest to date, we committed to deleveraging quickly. You can see the results. Our leverage ratios are back to pre-acquisition levels. Overall, we feel great about this highly strategic combination. The Automatic Doors product portfolio is a hand-in-glove fit with our demand creation and specification engine. This acquisition is greatly enhanced, alleges in service capabilities, and we look forward to much more long-term profitable growth opportunities together. I'll ask Mike now to walk you through the second quarter financial results, and I'll be back to discuss our updated 2023 outlook.