Allegion Plc · NYSE:ALLE
Allegion — 2017 Wells Fargo Industrials Conference
22 slides from Allegion's conference presentation, May 10, 2017
Slide 1: 2017 Allegion Overview: Pioneering Safety
2017 Allegion Overview Pioneering Safety 1
Slide 2: Safe Harbor
Safe Harbor This presentation contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the Company's 2017 financial performance, the Company’s growth strategy, the Company’s capital allocation strategy, the Compa
Slide 3: Safe Harbor (Continued)
Safe Harbor (Continued) The Company defines the presented non-GAAP measures as follows: Adjustments to revenue, operating income, operating margin, net earnings, EPS, and EBITDA include items that are considered to be unusual or infrequent in nature such as goodwill impairment charges, restructuri
Slide 4: Company Highlights
Company Highlights A leading global provider of security products and solutions Serving residential and non-residential end markets Strong brands with leading market positions Industry-leading organic growth and EBITDA margins High level of cash flow conversion performance Balanced and flexible capi
Slide 5: Global Reach
Global Reach $2,238 Million in 2016 Revenue | 9,500+ Employees | 10,000+ Channel Partners Corporate Headquarters: Dublin, Irl. Regional Offices: Carmel, Ind. | Faenza, Itl. | Shanghai, Chn. Asia Pacific $106 Million in 2016 Revenue Americas $1,646 Million in 2016 Revenue EMEIA 5 $486 Million in 2016
Slide 6: Allegion Portfolio Transformation
Allegion Portfolio Transformation + Zero International® + Brio® + Milre® + SimonsVoss® 2015 2017 + AXA® - Bocom Wincent - Venezuelan Business + Republic 2014 2016 + Schlage Lock de Colombia + Trelock® + Eco Schulte + FSH® - UK Doors & Services Businesses + Acquisition/Investment - Divestiture Growin
Slide 7: Key Strategies
Key Strategies Innovation in Opportunistic Expand in Existing & New Core Markets Acquisitions Product Categories Channel management Accelerate new product Expand geographic and demand creation development / vitality presence Commercial retrofit and index Emerging technology renovation Gr
Slide 8: Electro-Mechanical Convergence
Electro-Mechanical Convergence The Security Industry is at the cusp of major changes and convergences: Technology transfer Bringing new levels of Mechanical & integration and across residential, electro-mechanical multi-family, convenience solutions commercial Adaptive environments Enhanced de
Slide 9: What is the Opportunity for Electronic Security?
What is the Opportunity for Electronic Security? Residential: Non-Residential: Single Family Homes Perimeter Focused 100+ million homes ~6-12% penetration 200+ million doors ~4-6% penetration Growth Drivers: Growth Drivers: Mega-tech / Smart home Complete and mature options Millennial homeowner
Slide 10: Vitality: Allegion's Innovation
Vitality: Allegion’s Innovation Allegion’s Investments in Product Innovation Drive Vitality1 10 1Vitality Index is revenue from product innovations in the last three years as a percentage of total revenue
Slide 11: Financial Priorities to Drive Shareholder Value
Financial Priorities to Drive Shareholder Value Accelerate Improve High Balanced Organic Operating Cash Flow Capital Growth Margins Conversion Allocation Total Shareholder Return 11
Slide 12: Operating Performance
Operating Performance Organic Revenue Adjusted EBITDA Adjusted EPS¹ Growth Margin¹ 5.3% 6.5% 15.3% CAGR CAGR CAGR $3.34 5.8% 22.4% $2.18 3.9% 20.6% 2013 2016 2013 2016 2013 2016 Industry-leading organic growth Industry-leading EBITDA margins; Consistent and expanding over time High level of ca
Slide 13: Capital Allocation Strategy
Capital Allocation Strategy Leverage Management Target 2.75-3.25x of gross Debt / Adj. EBITDA March 31, 2017: 2.8x of gross Debt / Adj. EBITDA1 Organic Growth Shareholder M&A Investment Distribution Expand core portfolio Product / market Q1 2017: Quarterly and channel capability expansion
Slide 14: Disciplined Capital Allocation Usage
Disciplined Capital Allocation Usage % of Operating Cash Flow Capital Expenditures 2017 - 2019 Support growth and sustain business Debt Repayments Cap Ex ~10% Based on terms of credit facility Dividends Dividends Additional ~15% - 20% Subject to board approval Capital Deployment Additi
Slide 15: Organic Growth
Organic Growth New Product Channel Development Management Engineering / R&D Feet on the Street Product Launches Demand Creation Drive Above-Market Growth Increase Vitality Index Investment Self Funding; High ROIC Standardized Process, Prioritization & Post-Implementation Review 15
Slide 16: M&A Platforms / Thresholds
M&A Platforms / Thresholds Platforms Key Acquisition Criteria Aligned with strategic direction and core competencies Strong business and market fundamentals Leadership position and Expand Product ability to scale Portfolio Clear synergy opportunities Emerging Financial Technology Return
Slide 17: Historical Adjusted EBITDA Margins
Historical Adjusted EBITDA Margins Consistent EBITDA Margin Performance; Record Performance in 2016 (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 repre
Slide 18: Financial Targets
Financial Targets Three-Year Financial Targets 2017-2019* Organic Revenue Improving market fundamentals 4 - 6% CAGR Growth1 Incremental investments accelerating organic revenue growth above market EBITDA Margin Greater than Leverage on incremental volume +200 bps Net of investments EPS Growt
Slide 19: Appendix
ALLEGION PIONEERING SAFETY™
Slide 20: Consolidated Operating Income & EBITDA Reconciliation
Consolidated Operating Income & EBITDA Reconciliation 2008 2009 2010 2011 2012 2013 2014 2015 2016 Revenue $ 2,413.9 $ 2,006.7 $ 1,942.4 $ 1,998.3 $ 2,023.3 $ 2,069.6 $ 2,118.3 $ 2,068.1 $ 2,238.0 Asia Joint Venture Revenue (65.3) (64.5) (68.9) (58.6) (78.0) (52.0) 0.0 0.0 0.0 Adjusted Revenue 2,348
Slide 21: Reported EPS to Adjusted EPS
Reported EPS to Adjusted EPS Year ended December 31, 2013 Year ended December 31, 2016 Reported Adjustments Adjusted Reported Adjustments Adjusted Net revenues $ 2,069.6 $ (52.0) $ 2,017.6 $ 2,238.0 $ - $ 2,238.0 Operating income 240.8 127.7 368.5 425.5 13.5 439.0 Operating margin 11.6% 18.3% 19.0%
Slide 22: About Allegion
About Allegion™ Allegion (NYSE: ALLE) is a global pioneer in safety and security, with leading brands like CISA®, Interflex®, LCN®, Schlage®, SimonsVoss® and Von Duprin ®. Focusing on security around the door and adjacent areas, Allegion produces a range of solutions for homes, businesses, schools a