Allegion Plc · NYSE:ALLE
Allegion — Investor Day (May 2023)
82 slides from Allegion's investor day presentation, May 2, 2023
Slide 1: Securing the Future: Investor & Analyst Day
Securing the Future Investor & Analyst Day May 2, 2023
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally
Slide 3: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures The company presents operating income, operating margin, net earnings and diluted earnings per share (EPS) on both a U.S. GAAP basis and on an adjusted (non-GAAP) basis, revenue growth on a U.S. GAAP basis and organic revenue growth on a non-GAAP basis, EBIDTA, ad
Slide 4: “Be Safe, Be Healthy” Reminders
“Be Safe, Be Healthy” Reminders ▪ In emergency, use closest exit (two for this room) ▪ In severe weather, seek shelter in designated area ▪ No smoking; this is a tobacco-free campus 0.40 Allegion total recordable incident rate (TRIR) in 2022* ▪ If desired, masks and hand sanitizer are available TRIR
Slide 5: Presentation Agenda
Presentation Agenda 1. Full Company Overview with CEO John H. Stone 2. Americas Overview with SVP Dave Ilardi 3. International Overview with SVP Tim Eckersley 4. Finance Overview with CFO Mike Wagnes 5. Q&A with Executive Leadership 5 2023 Allegion Investor & Analyst Day: Securing the Future
Slide 6: Company Overview
Company Overview John H. Stone, President & CEO
Slide 7: Building on Our Legacy
Building on Our Legacy Securing the Future
Slide 8: Who We Are
Who We Are Allegion is a leading pure-play provider of security and access solutions Iconic brands with Healthy, growing leading market positions services business Industry-leading Engaged workforce, EBITDA margins focused on safety Broad customer base, Leading presence shaping a strategic partnersh
Slide 9: Strategic Focus on ESG
Strategic Focus on ESG Strong oversight and accountability; aligned to stakeholder feedback + GHG emissions intensity and water usage results for 2022 vs. 2020 baseline. Data based on data collected for manufacturing facilities and certain warehouses globally and has been normalized to hours worked
Slide 10: Vision and Strategy
Vision Enabling seamless access and a safer world Strategy Allegion creates value as a solutions provider of security and access Build on Deliver New Our Legacy Value in Access Be the Partner Operate with of Choice Excellence
Slide 11: Global Business Profile
Global Business Profile $3.3 Billion in 2022 Revenue | 22.1% Adjusted EBITDA* Margin ▪ Iconic brands with leading market positions ▪ Proven ability to expand margins over the cycle ▪ Enviable position for technology-fueled growth 11 2023 Allegion Investor & Analyst Day: Securing the Future *See appe
Slide 12: Markets We Serve
Markets We Serve Convenience, security and increased simplicity of adoption driving growth Global Total Available Market: $40 Billion Non-Residential Non-Residential Residential Mechanical Electronics & Software Low Single-Digit Growth High Single-Digit Growth Low Single-Digit Growth ▪ US funding in
Slide 13: How Allegion Wins
How Allegion Wins
Slide 14: Specification & Consulting Expertise
Specification & Consulting Expertise Understand critical outcomes for end users High security | Easy integration | Fire code compliance Emergency egress | ADA accessibility Rugged and reliable | Seamless access Design and specify openings for complex spaces Patient room | Maternity ward and nursery
Slide 15: Millions of SKUs, Made to Order
Millions of SKUs, Made to Order 15 2023 Allegion Investor & Analyst Day: Securing the Future *STANLEY ACCESS TECHNOLOGIES is used with permission. STANLEY is the property of Stanley Logistics L.L.C.
Slide 16: Relationships Built Over Decades
Relationships Built Over Decades Trusted advisors With end-user decision makers and community leaders Core partners and code consultants With facilities managers, architects and distributors Industry thought leaders Through organizations like Security Industry Assoc., Partner Alliance for Safer Scho
Slide 17: Highly Strategic Combination
Highly Strategic Combination Seamless Specification Complementary & Customer High-Growth Access Product Synergies Services Enhancement Portfolio 17 2023 Allegion Investor & Analyst Day: Securing the Future *STANLEY ACCESS TECHNOLOGIES is used with permission. STANLEY is the property of Stanley Logis
Slide 18: How Allegion Grows
How Allegion Grows
Slide 19: Strategic Priorities
Strategic Priorities Build on Our Legacy Be the Partner of Choice Deliver New Value in Access Operate with Excellence
Slide 20: Secular Growth: Industry Adoption of Electronics
Secular Growth: Industry Adoption of Electronics Allegion is leading and shaping this transformation Mobile credentials Electronic locks 1st “smart home” Proximity card Emerging standards & NFC, Bluetooth protocols device patented technology 1920 1990s 2010s 1909 AI/ML in 1909 1970s 2000s 2020s Acce
Slide 21: Electronics Transformation Still in Early Innings
Electronics Transformation Still in Early Innings EMEA ~5% electronics adoption North America ~10% electronics adoption Institutional | 10-15% Commercial | 10-12% Australia / Multifamily | 8-10% New Zealand ~8% electronics adoption Residential | 8-10% Data above excludes hospitality market 21 2023 A
Slide 22: Shaping the Future of Seamless Access
Shaping the Future of Seamless Access Expand technology leadership with our hardware, software and service solutions Emerging technology Guiding standards & Creating digital Growing services & venturing open ecosystems customer experiences capability & portfolio 22 Allegion 2023 Investor & Analyst D
Slide 23: Higher Education: Partner of Choice
Higher Education: Partner of Choice ▪ Electronic locks and reader hardware ▪ Enabling secure credential parity across multiple campus applications ▪ Meeting end-user demand for mobile- first experience ▪ Efficiency gains for university 23 2023 Allegion Investor & Analyst Day: Securing the Future All
Slide 24: Multifamily: Access Solutions Provider
Multifamily: Access Solutions Provider ▪ Creating new value in an underserved market ▪ Accelerating end-user adoption of electronic locks and mobile credentials ▪ Providing cloud-based, easy-to-operate access control software driving more ARR ▪ Delivering valuable data to end users 24 2023 Allegion
Slide 25: Capital Allocation Strategy
Capital Allocation Strategy Strategic investments driving seamless access Invest for Organic Growth Dividend1 Mergers & Acquisitions2 Share Repurchases 1Dividend growth commensurate with earnings 25 2023 Allegion Investor & Analyst Day: Securing the Future 2Maintain investment grade credit rating
Slide 26: Enabling Seamless Access and a Safer World
Enabling Seamless Access and a Safer World Returned to high operating level Electronics is the key growth driver Growing software and service revenues Capital deployment driving shareholder return
Slide 27: Allegion Americas
Allegion Americas Dave Ilardi, SVP & President
Slide 28: Americas: Business Profile
Americas: Business Profile $2,531 Million in 2022 Revenue | 26.9% Adjusted EBITDA* Margin ▪ Proven brands with strong market positions across diverse end markets ▪ Industry-leading architectural and end user relationships with deep specification expertise ▪ Expanding product and service portfolio, i
Slide 29: Americas: Product Categories & Primary Brands
Americas: Product Categories & Primary Brands Non-Residential Non-Residential Automatic Doors & Software & IoTP Residential (Mechanical) MECHANICAL ELECTRONICS (Electronics) MECHANICAL ELECTRONICS Service SERVICE INSTALL * 29 Allegion 2023 Investor & Analyst Day: Securing the Future * STANLEY ACCESS
Slide 30: Americas: Markets We Serve
Americas: Markets We Serve Americas Total Available Market: $20 Billion Non-Residential Non-Residential Residential Mechanical Electronics & Software Low High Low Single-Digit Single-Digit Single-Digit Growth Growth Growth Source: AAADM, Dodge, IHS/Omdia, ITR, Technavio, Vista, Mngmt. Estimates 30 A
Slide 31: Americas: How We Win
Americas: How We Win Non-Residential Automatic Doors & Service Residential Trust your home to Schlage Demand generation Full-service approach Brand strength led by throughout building lifecycle to automatic doors technology innovation 31 Allegion 2023 Investor & Analyst Day: Securing the Future
Slide 32: Americas: Key Priorities
Americas: Key Priorities Grow Seamless Access Drive Organic Growth Enhance Business Portfolio
Slide 33: Grow Seamless Access
Grow Seamless Access Deliver new value Expand platformed Accelerate mobile in software devices, IoTP & portfolio credentials Simplified, integrated Market adoption of platformed Leadership and innovation of software and hardware products linked to strong mobile credentials driving access solution so
Slide 34: Drive Organic Growth
Drive Organic Growth Be the industry-leading Enable collaboration Provide connected partner of choice with digital tools device data & Build and strengthen Connect with customers service expertise partnerships with market throughout the lifecycle Add value with predictable and tech leaders of a buil
Slide 35: Enhance Business Portfolio
Enhance Business Portfolio Continue momentum of Build greater resiliency & Expand & innovate to Access Technologies manufacturing capability strengthen portfolio Drive sales and specification Drive operational efficiency, Leverage opportunities for synergies through integration automation and profit
Slide 36: Americas: Key Takeaways
Americas: Key Takeaways ▪ Leading brands and demand creation engine ▪ Robust portfolio and installed base ▪ Innovation in electronic products and software solutions driving differentiation ▪ Greater resiliency, efficiency and profitability
Slide 37: Allegion International
Allegion International Tim Eckersley, SVP & President
Slide 38: International: Business Profile
International: Business Profile $741 Million in 2022 Revenue | 15.3% Adjusted EBITDA* Margin ▪ Strong and growing electronics and software solutions business ▪ Brands that are recognized leaders in the markets they serve ▪ Global leverage accelerating our execution and growth 38 Allegion 2023 Invest
Slide 39: International: Product Categories & Primary Brands
International: Product Categories & Primary Brands Mechanical Global Portable Electronics Software Solutions MECHANICAL (Commercial & Residential) ELECTRONICS MECHANICAL ELECTRONICS SERVICE INSTALL Security 39 Allegion 2023 Investor & Analyst Day: Securing the Future
Slide 40: International: Markets We Serve
International: Markets We Serve International Total Available Market: $20 Billion Non-Residential Non-Residential Residential & Global Mechanical Electronics & Software Portable Security Low High Low Single-Digit Single-Digit Single-Digit Growth Growth Growth Source: IHS/Omdia, ITR, Technavio, Vista
Slide 41: International: How We Win
International: How We Win Electronics Mechanical Software Solutions Innovation leader, direct model Channel access Solution depth 41 Allegion 2023 Investor & Analyst Day: Securing the Future
Slide 42: International: Key Priorities
International: Key Priorities Grow Seamless Access Drive Organic Growth Enhance Business Portfolio
Slide 43: Grow Seamless Access
Grow Seamless Access Build & grow software Expand platformed Accelerate mobile & solutions devices, IoTP & portfolio credentials Expand cloud capability, Market adoption of platformed Leadership and innovation of driving SaaS value and products linked to strong mobile credentials driving accelerated
Slide 44: Drive Organic Growth
Drive Organic Growth Drive demand generation Develop markets Expand the core & channels Leverage Overtur and global Leverage existing footprint, demand creation tools Leverage core capabilities offerings and SG&A base in new spaces 44 Allegion 2023 Investor & Analyst Day: Securing the Future
Slide 45: Enhance Business Portfolio
Enhance Business Portfolio Expand global entrance Be digital first Enhance software solution offering & services Establish digital maturity Tap into Access model, leveraging platforms Build on recent “plano” Technologies portfolio and and back-office tools from acquisition to expand business model t
Slide 46: International: Key Takeaways
International: Key Takeaways ▪ Growth mindset and improving margins ▪ Competitive advantage through global platforms ▪ Efficiency and customer excellence through common digital tools ▪ Acceleration of electronics and software innovation
Slide 47: Finance Overview
Finance Overview Mike Wagnes, SVP & CFO
Slide 48: Creating Long-Term Shareholder Value
Creating Long-Term Shareholder Value Accelerate Improve Drive high Effective organic operating cash flow capital growth margin conversion deployment Double-digit adjusted EPS growth through the cycle 48 2023 Allegion Investor & Analyst Day: Securing the Future
Slide 49: Historical Financial Performance
Historical Financial Performance Strong organic growth and industry-leading margins Revenue Growth Adjusted EBITDA1 Adjusted EPS 1 Available Cash Flow 1 $3,550.0 $6.00 26.00% $3,050.0 5.6% $3,271.9M 6.4% 11.3% $5.99 $500.00 8.4% CAGR 24.00% CAGR $5.00 CAGR CAGR $400.00 22.00% $2,550.0 $395.5M $4.00
Slide 50: Resilient EBITDA Margins Through Cycles
Resilient EBITDA Margins Through Cycles (1) EBITDA defined as operating income plus depreciation and amortization. (2) EBITDA Margin for 2008-2013 calculated using revenue adjusted for Asia joint venture order flow change 2000-2007 represents the Security & Safety or Security Technologies segment as
Slide 51: Capital Allocation Strategy
Capital Allocation Strategy Strategic investments driving seamless access Invest for Organic Growth Dividend1 Mergers & Acquisitions2 Share Repurchases 1Dividend growth commensurate with earnings 51 2023 Allegion Investor & Analyst Day: Securing the Future 2Maintain investment grade credit rating
Slide 52: Capital Deployment Priorities (2023-2025)
Capital Deployment Priorities (2023-2025) Significant capital available for deployment Sources & Potential Uses of Cash ▪ Grow dividends commensurate with earnings growth; Target 30% payout ratio Additional Capital Deployment $1,000 ▪ Share repurchase to offset creep from management compensation For
Slide 53: Proven Track Record of Quick Deleverage
Proven Track Record of Quick Deleverage Manage leverage to support growth while maintaining investment grade rating 53 2023 Allegion Investor & Analyst Day: Securing the Future Note: 2023 is an estimate and is dependent on actual EBITDA performance and capital allocation activities, including acquis
Slide 54: Organic Growth Investment
Organic Growth Investment ▪ Engineering / R&D / NPD Innovation ▪ Accelerate software and electronics ▪ IoT and mobile platform ▪ Consulting and specification expertise Demand Creation ▪ Digital process and systems (Overtur) ▪ Supply chain resiliency Operational Excellence ▪ Manufacturing capabilitie
Slide 55: Focused Approach to M&A
Focused Approach to M&A Priorities Product Portfolio Expansion | Emerging Tech & Electronics | Software & Services Growth Accelerates seamless access strategy ▪ Strong business and market fundamentals – capture TAM ▪ Leadership position and ability to scale ▪ Clear synergy opportunities Key Criteria
Slide 56: Acquisition Spotlight
Acquisition Spotlight ▪ Leading position in ▪ High-performance door ▪ Leading manufacturer European electronic locks systems, bolstering core and service provider of and innovative portfolio business automatic doors ▪ Highly profitable business ▪ Leverages Allegion ▪ Synergies in portfolio, with str
Slide 57: Organic Financial Targets (2023-2025)
Organic Financial Targets (2023-2025) Three-Year Financial Targets 2023-2025 Market assumptions Organic Revenue1 MSD CAGR ▪ Americas Non-Residential: Mid-Single Digits Growth ▪ Americas Residential: Low-Single Digits Electronics Revenue Double-Digit CAGR ▪ International: Low-Single Digits Growth ▪ S
Slide 58: Long-Term Value Framework
Long-Term Value Framework ~11-14% ~10-13% ~8-10% MSD Organic revenue growth Total Returns Adjusted Adjusted For +100-200 bps Operating Earnings Per Shareholders Income & ~2-3 % Share Margin EPS Capital Market Growth & ~1% Dividend Deployment Expansion Yield 58 2023 Allegion Investor & Analyst Day: S
Slide 59: Creating Long-Term Shareholder Value
Creating Long-Term Shareholder Value ▪ Poised for growth ▪ Industry-leading EBITDA margins ▪ Resilient through cycles ▪ Reliable cash conversion supporting capital deployment
Slide 60: Appendix
Appendix
Slide 61: Our Leadership
Our Leadership Jeff Braun Tim Eckersley Dave Ilardi Senior Vice President, Board of Directors General Counsel Senior Vice President, Senior Vice President, Allegion International Allegion Americas Kirk S. Hachigian Chairman Former Chairman JELD-WEN Holding, Inc. Steven C. Mizell Executive Vice Presi
Slide 62: 2023 Allegion Investor & Analyst Day: Securing the Future
62 2023 Allegion Investor & Analyst Day: Securing the Future *STANLEY ACCESS TECHNOLOGIES is used with permission. STANLEY is the property of Stanley Logistics L.L.C.
Slide 63: Global Reach & Manufacturing Footprint
Global Reach & Manufacturing Footprint 12,000+ Employees | 15,000+ Channel Partners | 120 Countries Where Products Sold Allegion Corporate Corporate headquarters Dublin, Ireland Global technology center Bangalore, India Allegion Allegion Americas International 63 2023 Allegion Investor & Analyst Day
Slide 64: Vision and Strategy
Vision | Enabling seamless access and a safer world Strategy | Allegion creates value as a solutions provider of security and access Build on Deliver New Be the Partner Operate with Our Legacy Value in Access of Choice Excellence ▪ Extend leadership in demand ▪ Drive industry-first innovation ▪ Deve
Slide 65: $2B in Acquisitions Since Spin
$2B in Acquisitions Since Spin 2015 2017 2018 2015 2018 2020 2015 2018 2022 2016 2018 2023 *STANLEY ACCESS TECHNOLOGIES is used with permission. STANLEY is the property of Stanley Logistics L.L.C.
Slide 66: Future Dividend Growth Commensurate with Earnings
Future Dividend Growth Commensurate with Earnings Estimated Payout Ratio (Adj NI)1 Targeting ~30% 12% 13% 14% 15% 18% 21% 24% 26% 27% 30% Payout Ratio $1.80 $1.64 $1.44 $1.28 $1.08 $0.84 $0.64 $0.48 $0.40 $0.32 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024E / Actual Actual Actual Actual Act
Slide 67: Consolidated Operating Income & EBITDA Reconciliation
Consolidated Operating Income & EBITDA Reconciliation ( in USD Millions) 2014 2015 2016 2017 2018 2019 2020 2021 2022 Revenue $ 2,118.3 $ 2,068.1 $ 2,238.0 $ 2,408.2 $ 2,731.7 $ 2,854.0 $ 2,719.9 $ 2,867.4 $ 3,271.9 Net Income 175.2 153.9 229.1 273.3 434.9 401.8 314.3 483.0 458.0 Adjustments to arri
Slide 68: Consolidated Net Income & EPS Reconciliation
Consolidated Net Income & EPS Reconciliation 68 2023 Allegion Investor & Analyst Day: Securing the Future
Slide 69: Consolidated Reconciliation of Available Cash Flow
Consolidated Reconciliation of Available Cash Flow Available Cash Flow (in USD Millions) 2014 2022 Net cash provided by operating activities from continuing operations $ 259.0 $ 459.5 Capital Expenditures (51.5) (64.0) Available Cash Flow $ 207.5 $ 395.5 69 2023 Allegion Investor & Analyst Day: Secu
Slide 70: Overtur digital collaboration space
Overtur is the digital collaboration space connecting all building phases in opening design, construction and ongoing management. Transforming the opening lifecycle through a common view of the data to make the opening the easiest part of building management. Architect / Design Team End User (Owner
Slide 71: Overtur in the Construction Process
Overtur in the Construction Process DESIGN & SPECIFY MANAGE & MAINTAIN Import Revit Data View Plans View Plans View/Edit Opening Data Assign Hardware to Openings Site Survey Existing Conditions Write Specifications Manage Revisions INSTALL & VERIFY Desktop and Mobile Experience View Plans BID & ORDE
Slide 72: Intentional Outcomes Lead to Business Results
Intentional Outcomes Lead to Business Results Drive collaboration and efficiency in Give actionable information on the site to create specifying to increase front-end demand stickiness and software/service revenue DESIGN MANAGE & MAINTAIN 72 2023 Allegion Investor & Analyst Day: Securing the Future
Slide 73: Gaining Traction in the Marketplace
Gaining Traction in the Marketplace “I can’t remember before Overtur, or maybe I just don’t want to…” – Architect Orchestrating the life of an opening for the health of a building. “The integration between the division 08 door Overtur is the digital environment connecting all building hardware, divi
Slide 74: Advanced Development | Connectivity
Advanced Development | Connectivity Our Team’s Strategic Pillars Develop state-of-the-art technologies Develop and maintain technology Provide thought leadership through to support world-class products roadmaps, collaborate cross- participation in industry groups, key globally while reducing variabi
Slide 75: Matter: The Foundation for Connected Things
Matter: The Foundation for Connected Things Interoperability among smart-home products, simplifying the connected home and improving the customer experience. The royalty-free standard will minimize the need for multiple partner integrations and associated costs. Highlights ▪ Built on Internet Protoc
Slide 76: Ultra Wideband: Paradigm Shift
Ultra Wideband: Paradigm Shift Ultra-Wideband (UWB) is a standardized wireless technology that can determine relative position of peer devices with a very high degree of accuracy and is ideal for access control applications. θ d July 20, 1976 Seamless Access with UWB ▪ Hands-free Digital Credential
Slide 77: Product Platforming at Allegion
Product Platforming at Allegion Building families of products through planned and managed reuse of architectures and sub-assemblies ▪ Focus on design and validation reuse via common sub-assemblies while facilitating meaningful value differentiation between products ▪ Enable rapid product customizati
Slide 78: Benefits Beyond Speed to Market
Benefits Beyond Speed to Market ▪ Sourcing and Supply Chain ▪ More opportunities for economy of scale benefits Locks Readers ▪ Simplification of multiple source components ▪ Factory Operations ▪ Simplified inventory ▪ Consistent tooling and fixtures ▪ Late-stage product configuration ▪ In-field upgr
Slide 79: Electronics Evolution
Electronics Evolution The pace of connected solution / electronics product introduction is accelerating ▪ As technology evolves, electronic locks and our approach to design does as well ▪ Allegion's connectivity product path is well over a decade old ▪ 900MHz (proprietary, Z-Wave), NFC, BLE, Wi-Fi .
Slide 80: Allegion Physical Access Control (PAC) Alliance Partners
Allegion Physical Access Control (PAC) Alliance Partners Our credential innovation strategy and hardware portfolio enable PAC software and hardware integrations, allowing decision making at “the edge.” Additionally, our interoperability-driven credential and hardware options serve the needs of end u
Slide 81: Sample Hardware Integration Portfolio for PACs
Sample Hardware Integration Portfolio for PACs 81 2023 Allegion Investor & Analyst Day: Securing the Future
Slide 82: About Allegion
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, busi