Allegion Reports Q4, Full-Year 2023 Financial Results, Introduces 2024 Outlook

Solid Q4 execution, record full-year results

Allegion plc (“Allegion”), a leading global security products and solutions provider, reported financial results for its fourth quarter (ended Dec. 31, 2023).

Quarterly Financial Highlights

(All comparisons against the fourth quarter of 2022, unless otherwise noted)

• Net earnings per share (EPS) of $1.34, down 12.4% compared with $1.53; Adjusted EPS of $1.68, down 0.6% compared with $1.69
• Revenues of $897.4 million, up 4.2% on a reported basis and up 2.6% on an organic basis
• Operating margin of 17.8%, compared with 18.5%; Adjusted operating margin of 22.0%, up 130 basis points compared with 20.7%

Full-Year Financial Highlights

(All comparisons against the full year of 2022, unless otherwise noted)

• EPS of $6.12, up 17.9% compared with $5.19; Adjusted EPS of $6.96, up 16.2% compared with $5.99
• Revenues of $3,650.8 million, up 11.6% on a reported basis and up 5.2% on an organic basis
• Operating margin of 19.4%, compared with 17.9%; Adjusted operating margin of 22.1%, up 160 basis points compared with 20.5%
• Available cash flow, which is defined as net cash from operating activities minus capital expenditures, was $516.4 million for 2023, an increase of 30.6% versus the prior year

2024 Full-Year Outlook Highlights

• Full-year reported revenue growth is estimated to be 1.5% to 3.5%, with organic revenue growth estimated to be 1% to 3%
• Full-year adjusted EPS is estimated to be $7.00 to $7.15
• Available cash flow is estimated to be $540 to $570 million

“Allegion’s fourth quarter reflected strong execution, margin expansion and cash generation by our team,” said President and CEO John H. Stone. “Celebrating our 10^th anniversary as a standalone company in December, we are proud to have closed the year with record revenue, adjusted operating income and adjusted EPS.”

“As we look ahead to 2024, we are focused on consistent execution of our strategy and balanced capital deployment, against what we expect to be a stable market backdrop. Committed to our vision of enabling seamless access and a safer world, we’ll deliver yet another year of growth.”

Q4 2023 Company Results

(All comparisons against the fourth quarter of 2022, unless otherwise noted)

Allegion reported fourth-quarter 2023 net revenues of $897.4 million and net earnings of $118.6 million, or $1.34 per share. Adjusted net earnings were $148.5 million, or $1.68 per share, down 0.6%, excluding charges related to restructuring, acquisition and integration costs and other non-cash impairment charges, as well as amortization expense related to acquired intangible assets.

Fourth-quarter 2023 net revenues increased 4.2%. Net revenues increased 2.6% on an organic basis, excluding impacts of acquisitions, divestitures and foreign currency movements. Solid growth in the company’s non-residential Americas business was partially offset by declines in its residential and Allegion International businesses. The reported revenue reflects a modest positive impact from foreign currency and acquisitions.

Fourth-quarter 2023 operating income was $159.7 million, an increase of $0.3 million or 0.2%. Adjusted operating income in fourth-quarter 2023 was $197.2 million, an increase of $18.5 million or 10.4%.

Fourth-quarter 2023 operating margin was 17.8%, compared with 18.5%. The adjusted operating margin in fourth-quarter 2023 was 22.0%, compared with 20.7%. The 130-basis-point increase in adjusted operating margin is attributable to positive price and productivity net of inflation and investments. These increases were partially offset by lower volumes.

Q4 2023 Segment Results

(All comparisons against the fourth quarter of 2022, unless otherwise noted)

The Americas segment revenues were up 3.7% (up 3.7% on an organic basis). Favorable price offset lower volumes. The segment had mid-single digit organic growth in electronics in the fourth quarter. The America’s non-residential business and the Access Technologies business both grew mid-single digits. The residential business continues to be soft and experienced a low-single digit decline. The segment’s results are up against a tough prior-year comparison, as the non-residential business had organic growth of mid-twenties percent in the fourth quarter of last year.

The International segment revenues increased 5.9% (down 1.3% on an organic basis). Positive price realization was more than offset by the impact of soft end markets. The reported revenue reflects a positive impact from foreign currency and acquisitions.

Full-Year 2023 Company Results

(All comparisons against the full year of 2022, unless otherwise noted)

Allegion reported full-year 2023 net revenues of $3,650.8 million and net earnings of $540.4 million, or $6.12 per share. Adjusted net earnings were $614.9 million, or $6.96 per share, up 16.2%, excluding charges related to restructuring, acquisition and integration costs and other non-cash impairment charges, as well as amortization expense related to acquired intangible assets.

Full-year 2023 net revenues increased 11.6%. Net revenues increased 5.2% on an organic basis, excluding impacts of acquisitions, divestitures and foreign currency movements. Favorable price was more than offset by lower volumes experienced in the mechanical portfolio. The company had approximately 20% global organic growth in electronics and software solutions in the year. The reported revenue reflects a positive impact from foreign currency and acquisitions.

Full-year 2023 operating income was $708.4 million, an increase of $122.0 million or 20.8%. Adjusted operating income for full-year 2023 was $805.6 million, an increase of $133.6 million or 19.9%.

Full-year 2023 operating margin was 19.4%, compared with 17.9%. The adjusted operating margin for full-year 2023 was 22.1%, compared with 20.5%. The 160-basis-point increase in adjusted operating margin is attributable to positive price and productivity net of inflation and investments. These increases were partially offset by lower volumes.

Additional Items

(All comparisons against the fourth quarter of 2022, unless otherwise noted)

Interest expense for fourth-quarter 2023 was $22.9 million, a decrease of $0.8 million.

Other income, net for fourth-quarter 2023 was $0.1 million, compared to other income, net of $4.5 million.

The company’s effective tax rate for fourth-quarter 2023 was 13.4%, compared with 3.4%. The company’s adjusted effective tax rate for fourth-quarter 2023 was 16.4%, compared with 6.2%, driven by timing of discrete items. The company’s adjusted effective tax rate for full-year 2023 was 14.3%, compared with 12.7% in 2022.

Cash Flow and Liquidity

Year-to-date available cash flow for 2023 was $516.4 million, an increase of $120.9 million versus the prior-year period. The year-over-year increase in available cash flow is due to increased year-to-date net earnings and lower cash used for net working capital, partially offset by higher capital expenditures. The company ended fourth-quarter 2023 with cash and cash equivalents of $468.1 million, as well as total debt of $2,015.0 million.

Share Repurchase and Dividends

For the year, the company repurchased approximately 0.5 million shares for approximately $60 million. As announced on Feb. 7, 2024, Allegion’s board of directors declared a quarterly dividend of $0.48 per ordinary share of the company, an increase of 7% over the prior dividend. The dividend is payable March 29, 2024, to shareholders of record on March 15, 2024.

2024 Full-Year Outlook

The company expects full-year 2024 revenues to increase 1.5% to 3.5% on a reported basis and increase 1% to 3% organically, when compared to 2023, after excluding the expected impacts of acquisitions, divestitures and foreign currency movements.

Full-year 2024 reported EPS is expected to be in the range of $6.45 to $6.60, or $7.00 to $7.15 on an adjusted basis. The outlook assumes a headwind of approximately $0.37 based on a full-year adjusted effective tax rate of 18% to 19%, inclusive of the estimated impacts of global minimum tax.

Adjustments to 2024 EPS include estimated impacts of approximately $0.46 per share for acquisition-related amortization, as well as $0.09 per share for restructuring and M&A.

The outlook assumes an average diluted share count for the full year of approximately 88 million shares.

The company expects full-year available cash flow of approximately $540 to $570 million.

For the full fourth quarter results, click here.

About Allegion

Allegion (NYSE: ALLE) is a global pioneer in seamless access, with leading brands like CISA^®, Interflex^®, LCN^®, Schlage^®, SimonsVoss^® and Von Duprin^®. Focusing on security around the door and adjacent areas, Allegion secures people and assets with a range of solutions for homes, businesses, schools and institutions. Allegion had $3.7 billion in revenue in 2023, and its security products are sold around the world. For more, visit www.allegion.com.

Contact:

Whitney Moorman – Director, Global Communications – Whitney.Moorman@allegion.com – (317) 810-3241

Source: Allegion plc