Allegion Plc · NYSE:ALLE
Allegion — Investor Day (March 2019)
105 slides from Allegion's investor day presentation, Mar 12, 2019
Slide 1: Access Opens Everything
Allegion 2019 Investor & Analyst Day Access Opens Everything March 12, 2019
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, including statements regarding the Company
Slide 3: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures The Company presents operating income, operating margin, net earnings, 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 (non-GAAP), and also adjusted EBIT
Slide 4: 2019 Investor & Analyst Day Agenda
2019 Investor & Analyst Day Agenda Company Overview Dave Petratis Technology & Innovation Vince Wenos & Rob Martens Regional Overview: Americas Tim Eckersley Regional Overview: EMEIA Lúcia Veiga Moretti Regional Overview: Asia Pacific Jeff Wood Finance Overview Patrick Shannon Wrap Up Dave Petratis
Slide 5: Company Overview
Allegion 2019 Investor & Analyst Day Company Overview Dave Petratis Allegion President, Chairman & CEO
Slide 6: Our Leadership
Our Leadership Regional Leaders Tim Eckersley Lúcia Veiga Moretti Jeff Wood Senior Vice President Senior Vice President Senior Vice President President, Americas President, EMEIA President, Asia-Pacific David Petratis President, Chairman & CEO Jeff Braun Tracy Kemp Shelley Meador Board of Directors
Slide 7: Vision
Vision Seamless access and a safer world 7 | Allegion 2019 Investor & Analyst Day
Slide 8: Who We Are
Who We Are Allegion is a pure-play global provider of security products and solutions Strong brands with leading market Innovative culture driving enhanced positions connectivity and access solutions Industry-leading organic growth and Engaged workforce with industry-leading EBITDA margins safety re
Slide 9: 9 | Allegion 2019 Investor & Analyst Day
9 | Allegion 2019 Investor & Analyst Day
Slide 10: Global Reach
Global Reach $2,732 Million in 2018 Revenue | 11,000+ Employees | 10,000+ Channel Partners Corporate Headquarters: Dublin, Irl. Regional Headquarters: Carmel, Ind. | Faenza, Ita. | Shanghai, Chn. Global Engineering Design Center Asia Pacific $153 Million in 2018 Revenue Americas $1,989 Million EMEIA
Slide 11: We Are a House of Brands
We Are a House of Brands Electronics and connectivity driving the portfolio 11 | Allegion 2019 Investor & Analyst Day
Slide 12: Global Business Profile
Mechanical vs. Electronics Global Business Profile ▪ Leading global provider of security products and ~80% solutions Mechanical ▪ Serving non-residential and residential end markets Electronics ~20% ▪ Strong brands with leading market positions Business by End Market ▪ Best-in-class pricing power ▪
Slide 13: Market Dynamics…
Market Dynamics… End Markets Remain Healthy Macro Trends Security Industry ▪ Connected world / IoT ▪ Codes and standards create ▪ Urbanization demand for premium products ▪ Increased demand for safety and ▪ Integrated products into various security ecosystems ▪ E-commerce / services ▪ Accelerated el
Slide 14: The Best Way to Predict the Future is to Shape It
The Best Way to Predict the Future is to Shape It Emerging technology and venturing Global product, business model and Digital transformation leads to process innovation best-in-class customer experiences Allegion Ventures helps companies grow Allegion’s annual Trailblazer Innovation Overtur, a clou
Slide 15: How Allegion Wins…Specification
How Allegion Wins…Specification Complex spaces Critical outcomes 1 Patient room + HOSPITAL ▪ High security 2 Maternity / Nursery / Neo. Intensive Care ▪ Easy integration 3 Behavioral health rooms 4 Stairwell / Exit ▪ Fire code compliance 5 Cross corridor / Compartmentalization ▪ Emergency egress Ima
Slide 16: How Allegion Wins…Product Range
How Allegion Wins…Product Range Innovative solutions for complex spaces ▪ Von Duprin and LCN devices for cross corridor openings ▪ Glynn-Johnson push/pull locks ▪ Ives swing clear hinges ▪ AD Systems ExamSlide ▪ Schlage ligature resistant solution ▪ TGP LX Premium X-Ray Shielding Lead Glass Millions
Slide 17: Deep Relationships and Customer Base
Deep Relationships and Customer Base ▪ Largest specification writing team Channels in North America ▪ Distribution ▪ Architect relationships ▪ Contract Hardware Dealers ▪ Large number of distributors: 10,000+ ▪ Wholesalers ▪ Large installed base ▪ Direct ▪ Integrators ▪ Big-box retail ▪ E-commerce A
Slide 18: Strategy
Allegion creates value by securing people and assets with Strategy seamless access wherever they reside, work and thrive Expand in Deliver Core New Value Markets in Access Be the Capital Partner of Allocation Choice Enterprise Excellence 18 | Allegion 2019 Investor & Analyst Day
Slide 19: Strategic Pillars
Strategic Pillars Expand in Deliver New Be the Enterprise Capital Core Value in Partner of Excellence Allocation Markets Access Choice Broaden & evolve Create innovative Leverage partners Focus on total Take a flexible, the core access solutions & & ecosystems value creation balanced & platforms dis
Slide 20: Environmental Health and Safety
Environmental Health and Safety 6.7% YOY improvement in the 12.4% YOY reduction in 15.3% YOY reduction in Lost Time Injury Rate (LTIR) greenhouse gas emissions 2 waste disposed 2 Greenhouse Gas Emissions Waste Disposed Lost Time Injury Rate % Change YOY % Change YOY 0.155 1.9 0.15 2% 2% 0.150 -2% 20
Slide 21: Demonstrated Financial Performance
Demonstrated Financial Performance Revenue Growth 1 Adjusted EBITDA1 Adjusted EPS 1 Available Cash Flow 1 $3,550.0 $6.00 26.00% 6.2% 8.2% $500.00 $3,050.0 $5.00 15.6% 14.3% CAGR 24.00% CAGR CAGR $400.00 CAGR 22.00% $2,550.0 $2,732M $624.6M $4.00 $4.50 $408.7M 20.00% $421.0M 22.9% $300.00 $2,050.0 $3
Slide 22: Total Shareholder Return – Since Spin
Total Shareholder Return – Since Spin 117% 73% 63% S&P 400 Cap Goods S&P 500 Allegion Source: Calculations based on information in FactSet for the period Dec. 1, 2013 – Feb. 28, 2019 and assumes dividends are reinvested All trademarks are the property of their respective owners. Substantially exceed
Slide 23: Company Highlights
Company Highlights ▪ Strong industry characteristics and fundamentals ▪ Seamless access creates opportunities for profitable growth ▪ Entering next five years from a position of strength ▪ Innovative culture driving above-market growth in core markets ▪ Diverse customer base and business partners ▪
Slide 24: Technology & Innovation
Allegion 2019 Investor & Analyst Day Technology & Innovation Rob Martens Allegion Futurist & President of Allegion Ventures Vince Wenos Allegion VP of Engineering & Technology
Slide 25: At Allegion, innovation means:
At Allegion, innovation means: Transforming our thinking, products, processes and business models to deliver enhanced or breakthrough solutions that create new value for customers. 25 | Allegion 2019 Investor & Analyst Day
Slide 26: Ongoing History of Innovation in Electronics
Ongoing History of Innovation in Electronics Select electronic product introductions First patent e-Cylinder Keypad locks AD/CO Sense™ Bluetooth EncodeTM WiFi 1909 1998 2006 2010 2015 2019 WiFi Bluetooth Bluetooth LE Z-Wave Plus Zigbee Z-Wave Zigbee 3.0 1989 2003 2008 2014 2017 2018 Key ‘N Keyless L
Slide 27: Electronics Growth: Accelerating
Electronics Growth: Accelerating Increasingly connected world ▪ By the end of 2019, worldwide homes will have >10 billion WiFi devices1 ▪ >1.5 billion smartphones were sold in 20172 Connected home and the IoT ▪ Greater options, lower costs, easier installation and improved user experiences are incre
Slide 28: Strong Market Growth in Electronic Locks
Strong Market Growth in Electronic Locks >20% >10% 11% 5% Allegion is positioned to capitalize on continued Residential Non-residential growth in e-lock sales across both residential and Allegion Americas electronics revenue, 2018 non-residential markets U.S. market CAGR 2017-20221 1IHS Markit Alleg
Slide 29: What's New and Driving Our Growth
What’s New and Driving Our Growth Exit device Door controller Mortise lock Cylindrical lock Q6 SEL 500 X7 MI 6400 MI 460T Smart Handle AX Push-Pull ENGAGE, INTERFLEX, MILRE, SCHLSGE and SIMONSVOSS are 29 | Allegion 2019 Investor & Analyst Day trademarks of Allegion plc. All other marks are the prope
Slide 30: Maximizing our Engineering Investment
Maximizing our Engineering Investment Digitally transforming the development process Platforming & reuse driving efficiency in Managed headcount growth across mature & for speed & effectiveness development & product maintenance emerging markets 39% 50% 50% 61% NPD/Innovation Sustaining/VAVE Electron
Slide 31: Consistently Recognized for Innovation and Design
Consistently Recognized for Innovation and Design Winner – Judge’s Choice ISONAS is a trademark of Allegion plc. All other marks are the property of their respective owners. 31 | Allegion 2019 Investor & Analyst Day
Slide 32: Megatrends and the Opportunity for Allegion
Megatrends and the Opportunity for Allegion 32 | Allegion 2019 Investor & Analyst Day
Slide 33: Megatrends
Megatrends Edge computing ▪ Focused on doing more processing at the location rather than in the cloud = better user experience Conversational platforms ▪ Voice authentication can be a bridge between physical and digital security Secure and scalable IoT ▪ Providing secure, scalable platforms and solu
Slide 34: Megatrends: Allegion's Opportunity
Megatrends: Allegion’s Opportunity Edge computing: Conversational platforms: our unique geography – the on all major voice platforms today door – is the ideal location for many edge devices Secure and scalable: Smarter specifications: putting the “S” in IoT leveraging existing platforms to enhance o
Slide 35: Partner of Choice
Partner of Choice ▪ Open standards ▪ Innovative products ▪ Recognized experts We make products that play well with everyone 35 | Allegion 2019 Investor & Analyst Day All trademarks are the property of their respective owners.
Slide 36: Schlage Encode: Support for Key by Amazon
Schlage Encode: Support for Key by Amazon 36 | Allegion 2019 Investor & Analyst Day
Slide 37: Allegion Innovation Engines
Allegion Innovation Engines Engineering & Creating solutions and leading innovation in the core business Advanced Strategic development Development, IT Global platforming and rapid deployment Ventures & Investment & relationships with promising ideas & enterprises Partnerships Seeding for the future
Slide 38: Allegion Ventures: A Focus on the Discovery of Emerging Technology
Allegion Ventures: A Focus on the Discovery of Emerging Technology Allegion Ventures works with early-stage companies poised for growth that make security and access: smarter, stronger, faster and less intrusive Smarter, more secure buildings Reducing friction in the world so buildings are smarter a
Slide 39: How We Define Success
How We Define Success Be the smartest, most convenient security devices to Install Integrate Manage Own for your home, property or business ecosystem 39 | Allegion 2019 Investor & Analyst Day
Slide 40: Americas Region
2019 Investor & Analyst Day Americas Region Tim Eckersley Allegion SVP & President of the Americas Region
Slide 41: Americas Reach
Business by End Market1 Americas Reach $1,989 million in 2018 revenue | 29.7% adjusted EBITDA margin ~40% ~30% Institutional ▪ Industry-leading organic growth driven by ~30% Commercial focused market segmentation and electronics Residential 1The U.S. represents ~90% of the region’s revenues ▪ Strong
Slide 42: Americas Primary Brands and Product Categories
Americas Primary Brands and Product Categories Mechanical Electronic Electronic Doors & Hardware Locking Access Control Door Systems Com. / Inst. Home ■ ■ ■ ■ ■ ■ 42 | Allegion 2019 Investor & Analyst Day
Slide 43: Americas Industry Overview
Americas Industry Overview Market 2019-2021 Business Market Trends Size¹ Outlook ▪ Favorable new construction market trends ▪ Labor and productivity constraints Institutional ▪ Continued importance on code and specification expertise ~$2.3B ▪ R&R driven by electronics and channel segmentation ▪ Tech
Slide 44: Competitive Advantage: Non-Residential
Competitive Advantage: Non-Residential ▪ Trusted experts in codes, applications and specifications ▪ Proven brands deliver peace-of-mind and lowest cost-to-own ▪ Large installed base driving aftermarket ▪ Targeted channel segmentation and value generation ▪ World-class operations and customer experi
Slide 45: Expanding the Competitive Advantage
Expanding the Competitive Advantage Digital business platforms ▪ Improve efficiencies, collaboration and customer experiences Budget Owners Facility ▪ Leverage new information, analytics and business insights Mgmt Facility Mgmt Architects Design ▪ Optimize the design, construction and building lifec
Slide 46: Competitive Advantage: Residential
Competitive Advantage: Residential ▪ Trusted leader with loyal brand equity ▪ Substantial home installed base ▪ Leading retail, e-commerce and pro-builder channel presence ▪ Innovator in smart e-locking and connected home ▪ Partner-of-choice for ecosystem providers ▪ Product platforms enable portfol
Slide 47: Strategic pillars Americas priorities Key elements
Strategic pillars Americas priorities Key elements Expand in core markets ▪ Value propositions across all segments Channel ▪ New fulfillment business models development ▪ Business model innovation Deliver new value in access ▪ Reduce friction – seamless access ▪ Technology and channel alliances Be t
Slide 48: Channel segments
Significant Discretionary Opportunity Channel-led discretionary segment Large, growing and fragmented segment ▪ ~$2 billion underserved growth segment ▪ End users entrust the channel to decide products Distributor (1-Step) ▪ Less complex and fast-growing electronics adoption Specified Channel segmen
Slide 49: Channel Business Development
Channel Business Development Expanding channel business programs Winning products and partnerships ~700 locksmith programs ~400 integrator programs by YE19 ▪ Broad mechanical and electronic products and price points ▪ Nationwide network of motivated locksmith and integrator partners Motivating chann
Slide 50: Residential Electronics Growth Accelerating
Residential Electronics Growth Accelerating Fast growing – low penetration ▪ Forecasted low double-digit market growth ▪ Single family market adoption ~7% ▪ Growth not limited by slowing new construction Many acceleration drivers Market Adoption Market Growth ▪ Mega-techs, smart home, home builders,
Slide 51: Residential Electronics Growth
Residential Electronics Growth Examples: Market-leading position Home Home Broadband ▪ 2018 electronics revenue growth >20% Retailers security automation providers ▪ 2018 electronics revenue approximately one-third of residential business ▪ Broad portfolio and price points Extensive access channel a
Slide 52: Non-residential Electronics Growth Continues
Non-residential Electronics Growth Continues Significant opportunities remain Electronic Adoption and Potential ▪ Total current electronic market adoption ~14%¹ ▪ Current adoption mostly on perimeter openings ▪ Total non-perimeter electronic adoption mid single-digit Education Accelerating market de
Slide 53: Partnerships Expand Market and Scale into Broader Ecosystems
Partnerships Expand Market and Scale into Broader Ecosystems Comprehensive market access ▪ Partnerships deliver value thru portfolio of open Software Development Kits (SDK) and Application Programming Interfaces (API) SDK / API PACS ▪ Targeted software strategy by market segment using ENGAGE, ISONAS
Slide 54: Non-residential Electronics Growth
Non-residential Electronics Growth Industry leading growth Mobile Ecosystem Application ▪ 2018 electronics revenue growth >10%1 Assign access rights ▪ Growth driven by new products including Schlage NDE / LE Impactful innovation PACS ▪ Mobile Credentials – Expanded platform for iOS (incl. Apple ID)
Slide 55: Enterprise Excellence
Enterprise Excellence ▪ Digital price management and analytics maximize price realization ▪ Digital tools create new value-chain efficiencies and customer experiences – both internal and external ▪ Product platforming and global supply chain to reduce costs and increase speed / flexibility ▪ Continu
Slide 56: Americas Key Takeaways
Americas Key Takeaways ▪ Healthy end markets ▪ Above-market growth driven by accelerating electronics and channel initiatives that is not tied to new-construction market ▪ Key partnerships are driving accelerated growth momentum ▪ Digital convergence is trending in the industry ▪ Continued margin an
Slide 57: EMEIA Region
2019 Investor & Analyst Day EMEIA Region Lúcia Veiga Moretti Allegion SVP & President of the EMEIA Region
Slide 58: EMEIA Reach
EMEIA Reach Mechanical vs. Electronics $590 Million in 2018 Revenue | 14.6% adjusted EBITDA margin ~60% ▪ Strong brands with history of innovation ▪ Leading portfolio of vertical solutions Mechanical ~40% Electronics ▪ Large install base supported by strong channel presence ▪ Growing electronics bus
Slide 59: EMEIA Primary Brands and Product Categories
EMEIA Primary Brands and Product Categories Mechanical Electronic Portable Security Access Control Security Unique portfolio of solutions for a changing world 59 | Allegion 2019 Investor & Analyst Day
Slide 60: EMEIA Industry Overview
EMEIA Industry Overview 2019-2021 Business Market Trends Market Size Outlook ▪ Slower construction in mature markets partially offset by faster emerging markets Mechanical Security ~$4.0B ▪ Increased focus on collaboration to optimize the supply chain / build cycle ▪ Security and connectivity, conve
Slide 61: Strategic pillars EMEIA priorities Key elements
Strategic pillars EMEIA priorities Key elements Expand in core ▪ Specification Center of Excellence markets Demand ▪ Complete product solutions creation ▪ Knowledge of building codes Deliver new value in ▪ End-user intimacy access ▪ Intelligent and connected devices Be the partner of Electronics ▪ S
Slide 62: Demand Creation – Middle East
Demand Creation – Middle East ▪ Strong construction growth forecasted for the region, representing long-term opportunity Kuwait ▪ Specification-driven market based on complex codes Qatar and standards. Saudi Arabia ▪ UAE ▪ Significant demand for ANSI (U.S.) and EN (European) Oman premium product off
Slide 63: Allegion – Middle East
Allegion – Middle East ▪ Local presence with specification capabilities ▪ Strong end-user intimacy within key vertical markets – healthcare, education, commercial, transportation ▪ Trusted advisor – deep understanding of building codes, standards, certifications and end-market environments ▪ Coordin
Slide 64: Key Project Won – Heart of Doha
Key Project Won – Heart of Doha Allegion delivered a total access solution 64 | Allegion 2019 Investor & Analyst Day
Slide 65: Electronics Growth
Electronics Growth ▪ Connected platforms drive profitable growth – commercial electronic market adoption high-single digit ▪ End-user value – convenience and productivity with enhanced control and security ▪ Interoperable mechanical and connected solutions – driven by Simons Voss digital key ▪ Seaml
Slide 66: SimonsVoss
SimonsVoss Technology leader in fast-growing digital cylinder market 66 | Allegion 2019 Investor & Analyst Day
Slide 67: Interflex
Interflex Barriers Singularization Mobile Live Time Recording Bag Search Biometric Offline Vandal-proof and Gates Indoors and Data Recording Image Recognition Solutions Access Control Outdoors Comparison Long-range Parking Lot Access Visitor Card Elevator Video Key Security Readers Control Control M
Slide 68: Connected Residential Security
Connected Residential Security ▪ Connected residential security market growing quickly but still at very early adoption (<1%) ▪ Current market dominated by ‘soft’ security monitoring devices – intruder alarms, CCTV and video door bell ▪ Strategic investment in Nuki adds connectivity to existing lock
Slide 69: Enterprise Excellence
Enterprise Excellence ▪ Focus on continual margin expansion ▪ Customer excellence – value creation will drive value differentiation / price ▪ Integration of acquisitions will enhance operational efficiencies and productivity ▪ Mid-range footprint optimization initiatives will drive lower costs and i
Slide 70: EMEIA Key Takeaways
EMEIA Key Takeaways ▪ Innovative demand creation solutions focused on customers and end users ▪ Creating value through electronic access solutions and services ▪ Enterprise excellence driving efficiency, productivity and asset optimization ▪ The best years are ahead of us 70 | Allegion 2019 Investor
Slide 71: Asia Pacific Region
2019 Investor & Analyst Day Asia Pacific Region Jeff Wood Allegion SVP & President of the Asia Pacific Region
Slide 72: Asia Pacific (APAC) Reach
Asia Pacific (APAC) Reach $153 Million in 2018 Revenue | 8.7% adjusted EBITDA Mechanical vs. Electronics margin ▪ Transformed business from low margin, poor cash flow ~70% system integration business to product-based business with strength in mature markets ▪ Significant shift in portfolio to greate
Slide 73: APAC Primary Brands and Product Categories
APAC Primary Brands and Product Categories Folding and Electronic Access Sliding Door Systems Electro-Mechanical Mechanical Control Management Expanding portfolio of electronics and mechanical products 73 | Allegion 2019 Investor & Analyst Day
Slide 74: Focus on Profitable Growth
Focus on Profitable Growth 2013 2014 2015 2016 2017 2018 Key Closed Acquired FSH Acquired Brio & Integrated China Acquired Activities IR Fu Hsing Milre SimonsVoss business Gainsborough & Asia transformation API Locksmith Divested Bocom (System Integration business) Transformed business to electronic
Slide 75: APAC Industry Overview
APAC Industry Overview Market 2019-2021 Outlook Business Market Trends Electronic I Mechanical Size ▪ Residential construction softening Australia / ▪ Growing health/aged care investment ~$0.5B New Zealand ▪ Rising awareness for electronic solutions ▪ Transitioning from high growth to moderate growt
Slide 76: Strategic pillars APAC priorities Key elements
Strategic pillars APAC priorities Key elements Expand in core ▪ Cost and revenue synergies markets Gainsborough ▪ Channel and brand alignment ▪ Product optimization plus electronics & Australia ▪ Aftermarket capabilities with API Deliver new value in access ▪ Demand creation through new and existing
Slide 77: Australia / New Zealand
Australia / New Zealand Expanding in core market within Asia Pacific Gainsborough brand and channel presence ▪ Leader in single-family construction ▪ Specification capabilities Full range of distribution, from dealers to DIY and OEM Manufacturing & assembly facilities Local manufacturing and assembl
Slide 78: ONE Australia
ONE Australia Revenue growth ▪ Channel-focused solutions ▪ Electronics penetration: Asia and U.S. platforms ▪ API Access & Security Margin expansion ▪ Back office consolidation ▪ Product portfolio optimization ▪ Supply chain economies of scale Customer experience enabled by ONE business Integration
Slide 79: Electronics Growth
Electronics Growth 2016-2022F AP Residential Construction Investment by Region China Others US$ B 1,540 1,490 Accelerated growth driven by adoption in new 1,290 1,330 1,350 1,400 1,430 construction and consumer retrofit of existing locks ▪ Mature markets: South Korea, Japan 59% 60% 60% 60% 60% 61% 5
Slide 80: Electronics Portfolio
Electronics Portfolio Milre ▪ RIM, mortise, push-pull, lockers, glass doors ▪ South Korea design and manufacturing ▪ Export to APAC and OEMs under multiple brands China ▪ Mortise for residential development and retail ▪ Design with manufacture of local and Milre SKUs Australia & New Zealand E-commer
Slide 81: Winning in Asia
Winning in Asia Quality products, safe and secure Agile R&D ▪ Speed to market with partners ▪ Productivity > price erosion: value engineering New channels and solutions ▪ New construction and retrofit ▪ Online and offline retail ▪ Beyond hardware stores Connecting to create value beyond a lock ▪ Par
Slide 82: Enterprise Excellence
Enterprise Excellence European, U.S. and local-product market ▪ Value-oriented solution, right product in the right place ▪ Localization of cost competitive platforms Acquisition integration ▪ Back-office synergies ▪ Supply chain economies of scale Vitality and value engineering ▪ Residential consum
Slide 83: APAC Key Takeaways
APAC Key Takeaways ▪ Stronger, transformed for growth in electronics and residential ▪ Electronic portfolio driving organic growth ▪ Unlocking synergies with new scale in Australia / New Zealand ▪ Building capabilities within the region to deliver year over year margin expansion 83 | Allegion 2019 I
Slide 84: Finance Overview
2019 Investor & Analyst Day Finance Overview Patrick Shannon Allegion SVP & CFO
Slide 85: 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 85 | Allegion 2019 Investor & Analyst Day
Slide 86: Demonstrated Financial Performance
Demonstrated Financial Performance Revenue Growth 1 Adjusted EBITDA1 Adjusted EPS 1 Available Cash Flow 1 $3,550.0 $6.00 26.00% 6.2% 8.2% $500.00 $3,050.0 $5.00 15.6% 14.3% CAGR 24.00% CAGR CAGR $400.00 CAGR 22.00% $2,550.0 $2,732M $624.6M $4.00 $4.50 $408.7M 20.00% $421.0M 22.9% $300.00 $2,050.0 $3
Slide 87: Capital Deployment Strategy
Capital Deployment Strategy Leverage Management Maintain Investment Grade (BBB-/Baa3) Organic growth Shareholder distributions Acquisitions investments ▪ Expand core portfolio and ▪ Product / market expansion ▪ Accelerate dividends faster than earnings growth channel capability ▪ Emerging technologi
Slide 88: Capital Deployment Priorities (2019-2021)
Capital Deployment Priorities (2019-2021) (In $ millions) Sources & Potential Uses of Cash ▪ Available cash flow accelerating ▪ Significant capital available for deployment ▪ Cash and borrowing capacity to fund M&A ▪ Opportunistic share repurchases ▪ Share repurchase to offset dilution from manageme
Slide 89: Projected Leverage Overview
Projected Leverage Overview Total Debt / Adjusted EBITDA ▪ Deleverage quickly with growth in EBITDA $1.5B $1.4B $1.4B ▪ Allegion has a strong cash flow generation 3.4 x 2.3 x ~2.0 x profile over the next three years 2015A 2018A 2019E 1 ~$1.5 billion available cash flow Total Debt Total Debt / Adjust
Slide 90: Organic Growth Investments
Organic Growth Investments New Product Development Channel Development Enterprise Excellence ▪ Engineering / R&D ▪ Market segmentation ▪ Digital process and systems (Overtur) ▪ Accelerate electronics ▪ Demand creation ▪ Integrate/connect with partners Intentional Wholesalers Segmentation Intentional
Slide 91: M&A Platforms / Criteria
M&A Platforms / Criteria Platforms Key Acquisition Criteria Aligned with strategic direction and core competencies ▪ Strong business and market fundamentals ▪ Leadership position and ability to scale Expand product portfolio ▪ Clear synergy opportunities Emerging technology / Financial Electronics ▪
Slide 92: M&A Track Record
M&A Track Record Overview of Completed M&A in Last 5 Years 2014 - 2017 (Jan-2018) (Feb-2018) (Mar-2018) (Jul-2018) (Jul-2018) Colombia Leading North American One of Middle East’s largest High-performance interior Premier residential door Unique provider of edge- manufacturer of advanced manufacturer
Slide 93: Allegion Dividends Per Share
Allegion Dividends Per Share Dividend growth Payout Ratio faster than 1 earnings (Adj Net Income ) $1.60 25% 13% 14% 16% 18% ~22%2 $1.40 12% 20% $1.20 $1.08 $1.00 15% $0.84 $0.80 $0.64 10% $0.60 $0.48 $0.40 $0.40 $0.32 5% $0.20 $0.00 0% 2014 2015 2016 2017 2018 2019 2020/2021 Consistent dividend gro
Slide 94: Historical Adjusted EBITDA Margins
Historical Adjusted EBITDA Margins (1 (2) EBITDA ) % margin Resilient and consistent EBITDA margin performance through cycles 1EBITDA defined as operating income plus depreciation and amortization 2EBITDA Margin for 2008-2013 calculated using revenue adjusted for Asia joint venture order flow change
Slide 95: Illustrative Margin Expansion
Illustrative Margin Expansion 40% leverage on incremental volume Beginning Net Net Price, Productivity, Investment, Ending Adj Operating Margin Volume/Mix Inflation All Other Adj Operating Margin Strong leverage on organic growth; manage inputs for margin accretion 95 | Allegion 2019 Investor & Anal
Slide 96: 2019 Outlook
2019 Outlook Forecasted Revenue Growth Forecasted Adjusted EPS Growth Americas 2018 Reported EPS $4.54 Total: 5% to 6% 2 Organic¹: 5% to 6% Adjustments ($0.04) 2018 Adjusted EPS $4.50 Adj. Op. Income EPS impact Operational Improvements (Growth / OPEX / FX) $0.62 to $0.77 +$0.47 to $0.62 or EMEIA Inv
Slide 97: 2019-2021 Financial Targets
2019-2021 Financial Targets Past Five Years Three-Year Financial Results Financial Targets 2013-2018 2019-2021* Organic Revenue 5.6% CAGR 4-6% CAGR ▪ Above-market growth driven by Growth1 electronics and channel initiatives Adjusted2 +50-100 bps ▪ Leverage on incremental volume +190 bps per annum ▪
Slide 98: Illustrative Total Shareholder Returns – Long Term
Illustrative Total Shareholder Returns – Long Term ~11-14% 4-6% Organic 1 ~10-13% Revenue ~8-10% Growth Total Adjusted Adjusted Shareholder +100 to 200 bps Earnings Per Return Operating ~2-3% Income & Share Margin Acquisition ~1+% Market growth & EPS & share dividend expansion repurchase yield Posit
Slide 99: 99 | Allegion 2019 Investor & Analyst Day
99 | Allegion 2019 Investor & Analyst Day
Slide 100: Appendix
ALLEGION PIONEERING SAFETY™
Slide 101: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures The Company presents operating income, operating margin, net earnings, 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 (non-GAAP), and also adjusted EBIT
Slide 102: Consolidated Operating Income and EBITDA Reconciliation
Consolidated Operating Income and EBITDA Reconciliation 1 ( in USD Millions) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 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 $ 2,408.2 $ 2,731.7 Asia Joint Venture Revenue (65.3) (64.5) (68.9) (5
Slide 103: Consolidated Net Income and EPS Reconciliation
Consolidated Net Income and EPS Reconciliation (in USD Millions, except per share data) 2013 2014 2015 2016 2017 2018 Net Income $ 32.3 $ 175.2 $ 153.9 $ 229.1 $ 273.3 $ 434.9 Discontinued operations 3.6 11.1 0.4 - - - Net Income from continuing operations attributable to Allegion plc $ 35.9 $ 186.3
Slide 104: Consolidated Reconciliation of Available Cash Flow
Consolidated Reconciliation of Available Cash Flow Available Cash Flow (in USD Millions) 2013 2018 Net cash provided by operating activities from continuing operations $ 229.3 $ 457.8 Capital Expenditures (20.2) (49.1) Available Cash Flow $ 209.1 $ 408.7 104 | Allegion 2019 Investor & Analyst Day
Slide 105: 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 an