Allegion Reports Third-Quarter 2021 Financial Results, Reaffirms Updated Full-Year 2021 Outlook

Allegion plc (“Allegion” or the “Company”), a leading global provider of security products and solutions, today reported third-quarter 2021 net revenues of $717 million and net earnings of $143.5 million, or $1.59 per share. Excluding charges related to restructuring and acquisition and integration, as well as a gain on the sale of an equity method investment, adjusted net earnings were $140.7 million, or $1.56 per share, down 6.6 percent when compared with third-quarter 2020 adjusted EPS of $1.67.

Third-quarter 2021 net revenues decreased 1.6 percent when compared to the prior-year period (down 1.6 percent on an organic basis). The organic revenue decrease was driven by the Allegion Americas business offset by growth in the Allegion International business. Reported revenues reflect benefits from foreign currency and acquisitions that offset the impact of divestitures.

The Allegion Americas segment revenues decreased 2.7 percent (down 3 percent on an organic basis). The non-residential business was down low-single digits percent, and the residential business was down high-single digits percent. The organic decline was driven by supply chain constraints and electronics and other parts shortages slowing the pace of revenue realization. This has led to historically high non-residential backlog levels, particularly for electronic products. The company expects to carry a large backlog forward into 2022.

The Allegion International segment revenues increased 1.7 percent (up 2.5 percent on an organic basis). The reported and organic growth was driven by the SimonsVoss, Interflex and Global Portable Security businesses.

Third-quarter 2021 operating income was $138.4 million, a decrease of $22 million or 13.7 percent compared to 2020. Adjusted operating income in third-quarter 2021 was $143.2 million, a decrease of $26.2 million or 15.5 percent compared to 2020.

Third-quarter 2021 operating margin was 19.3 percent, compared with 22 percent in 2020. The adjusted operating margin in third-quarter 2021 was 20 percent, compared with 23.3 percent in 2020. The 330-basis-point decrease in adjusted operating margin is attributable to higher material and freight costs, productivity challenges caused by supply chain pressures, volume deleverage and incremental investments.

“I’m encouraged by the continued strength in demand, particularly for our non-residential products,” said David D. Petratis, Allegion chairman, president and CEO. “Leading indicators are positive and market demand has increased faster than originally anticipated. Still, we need to recognize that supply chain, labor and electronic component challenges are unprecedented. For Allegion, that has resulted in record-level backlogs. We are rapidly adapting by re-engineering products and developing alternative supply sources to mitigate these challenges. In addition, we’re addressing pricing and continuing to work closely with our customers and suppliers to navigate through these extraordinary pressures.”

Additional Items

Interest expense for third-quarter 2021 was $12.3 million, down from $12.9 million for third-quarter 2020.

Other income net for third-quarter 2021 was $14.7 million, compared to other income net of $12.2 million in the same period of 2020.

The company’s effective tax rate for third-quarter 2021 was negative 2 percent, compared with 8 percent in 2020. The company’s adjusted effective tax rate for third-quarter 2021 was negative 1.1 percent, compared with 8.4 percent in 2020. The reductions in the reported and adjusted effective tax rates were driven by favorable settlements of uncertain tax positions and a benefit related to the mix of income earned in lower tax rate jurisdictions during the quarter, as well as the unfavorable tax impact recognized in 2020 related to the recording of valuation allowances.

Cash Flow and Liquidity

Year-to-date available cash flow for 2021 was $327.7 million, an increase of $71.6 million versus the prior year. The year-over-year increase in available cash flow is due to higher year-to-date net earnings, improvements in net working capital and lower capital expenditures. The company ended third-quarter 2021 with cash and cash equivalents of $503.9 million, as well as total debt of $1,430.9 million.

Share Repurchases

During third-quarter 2021, the company repurchased approximately 0.1 million shares for approximately $12.9 million under its previously authorized share-repurchase program approved by the company’s board of directors in February 2020.

2021 Outlook

The company is reaffirming its updated full-year 2021 revenue, EPS and available cash flow outlooks from the pre-release of Oct. 1, 2021.

The company expects reported revenue growth of 4 to 4.5 percent and organic revenue growth of 3 to 3.5 percent, when compared with 2020, after excluding the expected impacts of acquisitions, divestitures and foreign currency movements.

The company expects full-year 2021 reported EPS to be in the $4.95 to $5.05 range with adjusted EPS coming in between $5.00 to $5.10. Adjustments to 2021 EPS of $0.05 per share include expected charges for restructuring and acquisition and integration expenses, partially offset by a $0.07 per share gain on the sale of an equity method investment during the third quarter.

The outlook includes incremental investment of approximately $0.15 to $0.20 per share; assumes a full-year adjusted effective tax rate of approximately 9 percent; and assumes an average diluted share count for the full year of approximately 90.5 million shares.

The company expects full-year 2021 available cash flow of approximately $460 to $480 million.

“Our fundamental strategy to provide seamless access solutions for a safer world remains strong, and I couldn’t be prouder or more confident in the resiliency of our employees and the organization,” Petratis added. “As markets recover, we are well positioned to continue delivering value for Allegion and our shareholders through strong partnerships, strategic investments and effective capital deployment.”

For the full third 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 $2.7 billion in revenue in 2020, and its security products are sold around the world.

Contact:

Whitney Moorman – Reputation Management Leader – Whitney.Moorman@allegion.com – (317) 810-3241

Source: Allegion plc