Allegion (NYSE:ALLE), a global provider of security products, reported strong operational performance in the third quarter of 2023, citing significant organic growth in its electronics and software solutions sectors. The company raised its full-year guidance for adjusted EPS and maintained its outlook on revenue and available cash flow, indicating an optimistic view of its financial performance.
Key takeaways from the call include:
- Allegion expects continued growth in electronics adoption and plans to accelerate the growth of its software solutions portfolio.
- The company's net debt to adjusted EBITDA has reduced to 2x, indicating successful deleveraging after the Access Technologies acquisition.
- Allegion repaid the final $39 million of its revolving credit facility, returning to pre-acquisition leverage levels.
- The company expects record full-year revenue, adjusted operating income, and adjusted EPS in 2023.
- Allegion anticipates 15% to 16% total growth in the Americas, led by non-residential business, while the residential sector is slightly down.
- The international segment is projected to experience flat to a 1% decline in total revenue, with a 1% to 2% decline in organic revenue.
- The company projects total revenue growth between 11.5% and 12.5%, with organic revenue growth between 5.5% and 6.5%.
- Allegion Ventures made a significant investment in Ambient AI, a company that enables seamless access through AI technology.
During the call, Allegion executives discussed the company's pricing strategies and growth in the electronics and software solutions business. Despite inflationary pressures, the company implemented price increases over the past 18 months and plans to have an annual price increase based on expected inflation levels.
Allegion also highlighted the mid-teens organic growth in its electronics and software solutions business globally, driven by new product launches and strong end-user demand in sectors like education and healthcare. The company additionally noted its investment in cloud-based SaaS solutions for multifamily applications.
The company acknowledged the impact of supply chain challenges on its aftermarket business but indicated that they are now in a position to compete and regain lost market share.
Overall, Allegion is focused on driving organic growth, margin expansion, and delivering value in the seamless access market. The company's strong performance and outlook underscore its commitment to strengthening its balance sheet and expanding its margins.
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