Allegion Plc Q4 FY2024 earnings call

• Q4 marked a solid year of growth with mid-single-digit topline growth and margin expansion. - Product launches included Schlage XE360 series, Smart Lock integration with Airbnb, Schlage Indication Solutions, Von Duprin 70 series, and SimonsVoss AX2Go. - 2024 M&A amounted to $137 million with five bolt-on acquisitions, including Boss Doors, Dorcas, Krieger Specialty Products, Unicel Architectural, and SOSS Door Hardware. - Returned cash to shareholders via dividends (11th consecutive increase) and share repurchases ($220 million). - Strong cash generation, balance sheet, and pipeline of opportunities for future capital deployment.

Americas Segment: Q4 revenue was $750 million, up 6.4% on a reported basis and 4.6% on an organic basis. Organic growth included favorable price and volume. Residential business was up high-single-digits, non-residential increased mid-single-digits organically. Americas adjusted operating income was $205.1 million, up 8.9% versus prior year, with adjusted operating margin up 70 basis points. International Segment: Q4 revenue was $195.6 million, up 1.5% on a reported basis and down 0.7% organically. International adjusted operating income was $30.9 million, down 4.3% versus prior year, with adjusted operating margin down 100 basis points due to lower volumes.

• Total Allegion revenue growth expected 1% to 3%, organic revenue growth 1.5% to 3.5%, with approximately one point from acquisitions and 1.5 points headwind from foreign currency. - Americas organic revenue growth expected low to mid-single-digits. - International organic revenue expected relatively flat. - Adjusted earnings per share outlook $7.65 to $7.85 (1.5% to 4% growth over prior year). - Available cash flow expected 85% to 90% of adjusted net income. - Tariffs: Guidance includes currently enacted tariffs on China (imports <5% of COGS), and potential tariffs on Mexico (20%-25% of COGS sourced from Mexico), with pricing actions anticipated to offset impact.

• Macroeconomic challenges in International, particularly in Germany. - Impact of potential tariffs on Mexico, which could require pricing actions. - Exit of operations in China, which was a headwind to 2024 international organic growth.

Q: Jeff Sprague asked about price-cost productivity investment equation and impact of tariffs on steel/aluminum.

A: Mike Wagnes said pricing in Q4 stepped down due to rebate accrual timing, core pricing still decent; John Stone said impact of steel/aluminum tariffs on non-residential business is very small as non-res is largely sourced/produced in US.

Q: Julian Mitchell asked about adjusted operating margin in guidance.

A: Mike Wagnes said expected margin expansion in 2025, lower end of prior framework (50-100 basis points), similar seasonality to 2024.

Q: Joe O'Dea asked about margin expansion across organization.

A: Mike Wagnes said Americas expected to lead margin expansion, international expected to expand, corporate has normal inflation increase.

Q: Timothy Wojs asked about non-res business quoting activity and M&A pipeline.

A: John Stone said non-res business accelerated in 2024, M&A environment healthy with high-quality targets in pipeline.

Q: Brett Linzey asked about organic sales outlook phasing and tariffs on Mexico.

A: Mike Wagnes said phasing similar to 2024; John Stone said pricing actions to offset Mexico tariff impact would be implemented.

Q: Christopher Snyder asked about Q4 tariff pull forward and Q1 impact.

A: Mike Wagnes said mid-single-digit millions tailwind in Q4 for Americas resi, expected headwind in Q1, majority of institutional project work from local funding sources insulated from government layoff uncertainty.