Allegion plc (ALLE) Earnings Call Transcript & Summary

Welcome to our next session. I'm Andrew Obin, BofA's multi-industrial analyst. And with us today, we have Mike Wagnes, he is Senior VP and CFO of Allegion. And I'm also absolutely delighted to have Josh on stage for the first time. Obviously, we've known Josh for many, many, many years and very glad to have him on stage in his new capacity. So welcome and thank you for being here.

Thanks, Andrew.

And I think the plan. We're going to have a fireside chat with Mike. Thanks so much for being here. You've anchored this event, I think, for several decades. So welcome back and thank you for being here.

Thanks for having us.

So let's sort of start big picture because we're in Europe and I think folks have sort of, I think, a different view of the market here. So maybe we can start and start talking about electronics, right? Been highlighted as one of your key priorities during our Analyst Day. Can you just talk about -- what always surprised me is just different electronics adoption by region? Why is it different, right? I think the numbers we have like North America, roughly 10%, EMEA, 5%, Australia and New Zealand, 8%. Why are these regions different?

Yes. So thanks for the question and thanks, everyone, for joining us today. So those numbers came from our Investor Day, which we had May of last year. And then what you'll find, this is market penetration, not anything to do with our sales. In the case of North America, probably the earliest adopter of electronics, highest penetration rate. Then you go to Australia and New Zealand, dynamics very similar to the North American market. When you think of our Australia and New Zealand business, it is the largest business by far of our Asia -- Asia Pac region. When you think of that part of the world, we're a Australia and New Zealand business. And the dynamics are very similar to North America. If you go to Europe, Europe a little less on the electronic adoption. It is very much an old installed base if you think about properties here, they're just older, more diversified than North America. If you think of North America, it's a pretty homogenous market from a door prep. Europe, you have a different door prep in each country. So electronic adoption is a little less. If you think of our business, we have strength in our European business and our SimonsVoss and Interflex businesses. Those are Germanic based. There you do see a little heavier adoption in electronics. Those are 2 great businesses we have. But in general, the market itself, adoption of electronics is probably most in or most accelerated in North America.

Got you. And how should I think about the impact of electronics growth on margins?

Yes. So electronics is a good profit margin business for us. It's just as healthy as the mechanical. Historically, we always said that it's the same margin percentage but more ASP, so more dollars, EBIT dollars. If you dissect that a little further, the part of the world where it's most different on a positive factor is in our International segment. The 2 businesses I mentioned earlier, SimonsVoss, Interflex, they are a richer mix of margin than historical mechanical Southern European businesses we have. So that would be a more profitable part in North America, roughly similar profit margins with a much higher ASP. And so you drive more EBIT dollars. And then as that business becomes larger for us, it only becomes more profit for us because it's now -- if you think about software, electronics and services, that's about 1/3 of our total revenue. So if you've been following us in the last decade plus, you'll know that, that was much smaller back then. And we've been talking about this electronic adoption for quite some time and it's now 1/3 of the portfolio. So really excited about electronics. And as we grow it, it certainly enhances the margin profile.

Interesting. And how do you think about your supply chain strategy as you push into electronics? Have it as an open up [indiscernible].

So for those who've covered us for a while, we ran into some challenges, when you think about 2021 in the supply chain especially in electronics. We've really struggled keeping up with the demand. And so we went through significant efforts as an enterprise to really build supply chain resiliency, where, in the case of electronics, what -- you may have had 1 chipset for an electronic lock, now you have 2 and 3 different manufacturers who can provide us that chipset. This resiliency makes us a much healthier company when you think about the supply chain. We also did it on the mechanical side where we qualified a lot of additional suppliers. Those of you who know us know that our supply chain is in a much healthier position than it was a few years ago. And that's really all these efforts to really redesign our products and qualify additional suppliers to make this a more resilient supply chain. And I think we're in a much healthier position than we were a few years ago. I know we are. And so really pleased with those efforts.

Excellent. So maybe just -- you talked about software and services but specifically, I'm thinking about services with the addition of Stanley. Because historically, I'm sort of blessed/cursed because of having a long history with you. So just probably have my biases. But historically, you guys did not -- you stayed away from services. And how should I think about -- how do you leverage the new service expertise in your core hardware business? Because that's to me, that was a very big deal when you did that deal.

Yes. So historically, if you think of our business in North America, the channel has -- really services our product, right? That Stanley business has a direct model and it also has a service element, which, one of the things I love about a service arm that access technologies has, that Stanley Access Technologies business is, there's a remarkable resiliency when you have that service element that's less susceptible to market gyrations in new construction. So there's a real stability in the access tech business. Do we really like it today? We haven't evolved much today from where we were, where they're servicing the access tech only. But in the future, I do think that having more service capabilities, software capability will just become more and more prevalent for us and look for us to really try to drive some of that more stable revenue that it provides us.

And just speaking about software, I think Interflex is one of the crown jewels that the company has and maybe investors don't talk as much about as they should. But at the same time, I appreciate that it's a market with very specific set of strength, end customers and very sort of deep penetration but within a narrow vertical. So what are the opportunities to; a, to scale it up with existing customers maybe going beyond its legacy region? And what else can you do with it?

Yes. Interflex is our access control and workforce management business we have in Germany. And it's a great example of how we find areas and niches in the market where our software can enhance product sales as well. So this solution we have, we really have been investing in it over the last, let's call it, half a decade. And you see what a gem of a business it is. Its business model allows it to grow with its multinational customers. So if you think about large German multinationals, they'll start in Germany with the Interflex solutions but as they grow around the world, they'll implement the Interflex solutions with them. So we're able to grow with our existing customers as they grow internationally. We're also -- you've seen us deploy some capital to enhance that solution and we've done a couple of bolt-on acquisitions and the most recent Plano, early last year, where you take the legacy Interflex solution and you provide more capability and enhancements that Plano provides, to make a better user experience for the customer. And so both those things combined really have us excited with the software capabilities that Interflex provides us and kind of gives you a looking glass when we think about software, how you can find a niche market where we could be successful and drive growth and margin. It's a rich margin business for us as well as well as ARR.

And before we sort of go to more region-specific questions, maybe 2 big-picture questions. So maybe I'll start with EBITDA margins, right? So I think; a, what would it take to exceed prior peak? And the second question, I was just going to make it more complicated. But you're highlighting 50 to 100 bps per year going forward, right? But at the same time, clearly, more service business going forward. It does seem that there is more interest in investing in software. So how do you balance just natural, very healthy leverage inherent in the business model with somewhat different business mix and what seems to be a focus on higher growth area but maybe one that requires you guys to invest?

Yes. Let me take the second part of the question first. If you think about how we -- we kind of think about managing the margins. We think of it of managing the inputs, price plus productivity, we exceed inflation and investments, right? We're going to drive productivity to fund our investments. And it's something we disclose every quarter in our earnings release where we'll -- talked about what that is for the quarter such that we'll manage those inputs and then leverage volume on a long-term basis to expand margins. So if you've looked at our history over the last couple of years, we've done a pretty good job recapturing some of the margins lost from the supply chain. So we're essentially back to where we were like-for-like business on the margin front. I do think there's more room for margin expansion. If you think about the framework we provided at our Investor Day, we said that over a 3-year period from '23 to '25, we'll expand the margins 50 to 100 basis points each year. As we sit here today, we certainly exceeded the high end of the range last year. So we had a really strong year. And then I think we're positioned well this year and moving forward. So I feel good about how our business model, how we manage the inputs and then leverage volume on a long-term basis. But I think it's important to say, we'll always invest in our business, Andrew. You talked about technology and software. We're going to invest in those capabilities for the long term. We run the business on a long-term basis and that's how we think. And so look for us to continue to invest in R&D. If you've followed us since we spun, you'll see our R&D as a percent of sale has increased over time and we're going to continue to make those investments to drive the right long-term decisions for the company.

Excellent. And yes, so let's talk about capital allocation because I think there's been some chatter around it. So yes, how should we think about your capital allocation priorities? And how do acquisitions bed into this?

Yes. So if you've listened to us over time and starting with our Investor Day, for us, it starts with organic growth. We're always going to invest in organic growth, right? And I mentioned it earlier, the R&D. Dividends, we're going to continue to be a dividend company and expect us to grow our dividend commensurate with earnings. Then from there, the 2 other items, obviously, is M&A and then share repurchases. M&A, we look for the right businesses to expand our seamless access strategy. And obviously, share repurchases from time to time, we're authorized and we make share repurchases. If you look at our history, since spin, roughly 50% of our capital deployment has been M&A with the other 50% being the capital deployment on shareholder distributions of M&A and -- I'm sorry, of buyback and dividends. I would say for M&A, in particular, want to grow the business with the right assets to drive our seamless access strategy. But if you've heard us over the years, you know we're going to be disciplined. So we're going to be disciplined stewards of capital. For us, in our history, the biggest acquisition we've done, Andrew, as you know, is the Access Technologies business. Think of that as a $900 million purchase price for us. So that would be big if you think about our history but most of our M&A has been some of the singles and the doubles, right? The $50 million, $100 million, $200 million acquisitions where you just bolt on to your existing business and where we do best is where we can leverage something that supplements our core operations.

And from that perspective, are there any sizable opportunities available in the market? And I know over the years, Europe has always been potential, like given just the market structure but also the market structure is something that keeps any M&A from happening at the lower level. So yes, how do you think about the opportunity set that's out there over the next several years? And specifically [Audio Gap]

From a market dynamics, clearly, North America is a little more consolidated today than Europe, which is a little more fragmented. But we love acquisitions both in Europe and in North America. So we're looking to do M&A to enhance our businesses in both geographies. And then from -- you mentioned sizable. I kind of gave a framework there or some things you can see, right? A lot of the singles and doubles. We recently announced a few acquisitions earlier this quarter, smaller tuck-ins that work well with our existing footprint today.

And I'll just keep pressing, I know you've answered in a certain way but I'll keep pressing. So Josh can relate in his prior -- so for the right deal, like how far, right, because you have very stable cash flows. For the right deal, like how far north of 3x can the company flex its leverage?

From a leverage? Yes. So as you mentioned, we're blessed with strong cash flows and it's a great, great dynamic of our business. So as you saw when we bought Access Technologies, right, historically, we tend to be at leverage level, net leverage, 1.5x to 2.5x.

That's right.

But we will lever above that to bring in the right access -- the right asset like we did with Access Technologies. So when we bought Access Technologies, we went north of that, a little north of 3x. And then quickly delevered 1 year later to, we're right down a year after the fact, right around net leverage around 2x. So if you think about it, as we think about leverage management, starts with maintaining investment grade. We are committed to that investment-grade credit rating. At the same time, we can bounce up a little higher because we generate such strong cash flow that will delever shortly. So long term, right, historically, we've been about 1.5x to 5x but we will go higher for the right acquisition.

All right. Excellent. And just to think about, I think your framework is 8%, 10% organic and then 2%, 3% on top of it from capital deployment. So is it fair to say, if you look at history, split it down the middle, 50% capital return to shareholders, 50% M&A and that's the right framework sort of thinking going forward?

Yes. So if you think about our business, right, organically, we believe we can drive that 8% to 10% organic growth. And then you get a 2% kicker on top with effective capital deployment. It's a combination of both. On a long-term basis, that's what you see, year-to-year it could differ, right? So if you think about 2022, we do an acquisition, '23, it's paying down debt, right? But if you go back to some years, there's more buyback. So I would say, in general, look for us to invest in the business, deploy capital in M&A as well as from time to time, buy back stock to drive shareholder distributions.

Got you. And I'll just ask a question because I'm on stage. Just, you did provide earnings outlook when you reported the numbers. So can you just remind us what are the comments you made about the seasonality? Because, right, there's -- the comps are tricky this year. Could you just remind us and within the seasonality, what aspects of seasonality should we focus on?

Sure. Why don't I start and then supplement. So it's important -- we always are a year-end guider, so we provide outlook for the full year. We don't give quarterly guidance. However, it's important to understand, when you try to model our business, that last year was abnormal for us. Historically, the summer months, Q2 and 3, they tend to be our stronger quarters revenue-wise in Q1 and Q4 like most, multinationals are a little less. For us last year, Q1 was our highest quarter in the Americas and that's the abnormality. And so what I was trying to do in our year-end earnings release is just remind everyone, "Hey, if you think of '23 seasonality, that's abnormal." Take a look at our history, our history and you do some averages, you really find that on a top line basis, right, Q1, Q4 are less than the summer months, take a look at the history to get an idea for a relative size. And then everything is off a top line. When we talk about seasonality, we give you the inputs for you all to run your models on profitability but really, from a seasonality perspective, we wanted to give you some prior year comp and just call out the frankly, unusual nature of last year, which we talked about at length on our quarterly earnings calls last year that, that Q1 was abnormal.

So top line is a good place as a good first step to start your analysis.

Yes. When we gave that comment about normal seasonality, it was on the revenue slide and it was really just trying to provide you all some, some additional guidance. Anything you want to add on that?

Yes. I would just say the other piece of that is, obviously, this is an industry that normally has some stability through the year and predictable seasonality when you throw in things like supply chain, it's really a reference point on that's not what normal should look like. Inventory doesn't move around a lot, lead time shouldn't move around a lot. So getting back to normal really is a reflection of rolling that last tough comp or unusual comp.

That's pretty useful. So maybe we can go to the Americas. And maybe we can start with residential. So how should we model and think about sort of the timing of housing starts versus completions? And how should we think about Allegion's business model? What should we look at?

Yes. If you think about residential for us, you put a lock on late in the construction phase. So our business is probably more correlated to completions than starts. Now obviously, starts is critical because the start today is a completion in the future. So it's an important factor to look at. But when you try to consider our business, we're just being mindful we're a little closer to completions than starts on the new build side. Now our residential business is a little more aftermarket than new build, right? We go through big-box retail and online retail, a big part of our business. And that's also dependent on secondary home sales, right? So it's not just the starts. If you listened to our year-end call, we gave some color there for residential. Our outlook assumes a softer resi this year where we said flat to slightly down. And if markets are better than we think, we are positioned very well with the Schlage brand to capitalize if the market is better than we assumed in our outlook. So I think each of us have a different assessment on market. Just know when you think of our business, we're more closely tied to completions than starts and just feel comfortable that we have a great brand in Schlage that will take advantage of any potential market upside.

Excellent. And then as I think about where the inventory is for the residential market, how should I think about, where does it sit? Like how much of it sits at the homebuilders, big box? Does some of it sort of sit on these distributors? Like how should I think where it is? And what does inventory level look like? Because clearly, you've stabilized and normalized your lead times and that's on track but where are you? And should I be thinking about any specific differences about parts of the residential channel?

Sure. So biggest part of our business, obviously, like I mentioned, is the retail channel. There, they absolutely stock inventory. There's -- that part of the business has been soft for a while. So I'm not really concerned about any level of destock because they've already adjusted to consumer buying behavior. On the new build side, we do service that through distribution. So distribution partners service that and then again, any kind of channel dynamics with inventory, I think that's already impacted us. You saw some of that last year. We talked about it. Last year, it was probably a little more non-res than resi but the concept of the channel having inventory or too much inventory, I think we worked through that last year. I know we worked through it last year. And so we're in a much better position than when we were, let's say, this summer when we came and talked about that.

Excellent. And as we think about sort of the competitive dynamic in North America and I know it's a very rational market and it's been for a long time. Having said that, it was fun to watch for many years. One of your European competitors will report numbers and then your numbers were like perpetually high, like for 5 years in a row. And then during COVID, there were a couple of quarters when they were not. And I guess my working assumption that the space on the -- shelf space at retailers, you sort of -- you're confident about sort of maintaining it over the long term once you normalize. But what's the market? The competitor was able to gain some market share off your troubles. So is the market -- I also appreciate that it's a very rational competitor. So is the market back to normal? Or there is some sort of any sort of tussle over market share that's not normal?

Yes. When you think about our industry, it's a -- consumers, they probably need product on the residential side. If you don't have it, that could be a lost sale. But if you think about non-res, which is the largest part of our business, your end users are end users for decades, right? Your institutional end user will have a campus, pick a university, where they'll have 40 buildings on that campus. Those are relationships you maintain for a very long time. From time to time, you could see growth rates differ from our prior year comp. But in general, it's a rational non-residential marketplace where we're positioned quite well especially in the premium part of the market with our Von Duprin, LCN and Schlage branded product. So the challenges we had in supply chain are behind us. And I think we're positioned quite well to take advantage of the marketplace with a much healthier supply chain. From a comp from time to time, comps get wonky in our industry, right? We know Q1 of last year, in particular, extremely strong. But in general, that abnormality is in the rearview mirror and now we're kind of back to a more normal operating environment where I like the position that Schlage, LCN, Von Duprin have as the key 3 brands in that nonresidential space.

And maybe we can shift to the institutional market because I also think investors don't necessarily appreciate that that's a big vertical for you, institutional versus sort of office buildings. But from that perspective, what is happening in institutional market today, right, because I would imagine the big verticals are education, hospitals, federal is part of it, right?

A part. Yes.

Yes. So how do you sort of gauge, how do you track the impact of the federal stimulus on this market because I think it's a little bit weird because historically, we track the bond issuance, which has been down because tax receipts have been down but at the same time, specifically in education space, there's a lot of stimulus money. It seems like hospitals are getting back on track. If you look at the spending data, it's quite good. What's happening because there seems to be a lot of moving pieces.

Josh has done a lot of work on this. Why don't you kind of share something?

Yes. So on the stimulus front, I mean, education [Technical Difficulty] is a front and center topic. So you're going to see some level of that all the time in bits and pieces and we try to get our fair share. But if you're talking specifically about say, ESSER funding, which is probably where you're going with that.

That's right. Yes.

Yes, ESSER funding really had more of a COVID bent to it around healthy buildings, a little bit of remote learning and digital spending. It wasn't really a security focus. So the other folks that you see out there in some different verticals in the building who have had a little bit more of that backlog growth that you've seen yourself, it didn't really apply to us. Didn't see the surge, didn't see the tough comp and the other stuff.

But are you benefiting from -- because to be completely frank, the educational spending has been better than I would have thought because we do track the bond issuance, which has not been particularly exciting, yet the money -- the universities are getting money from somewhere. So what has been the dynamic for funding that vertical? Where is the money coming from? And how much visibility do you -- because you [ census ] data, would paint the same picture, I'm just wondering what does the money come from?

So traditionally, it's been a public bond referendum on large projects. One of the thing about institutional that may not be fully understood is how rough of a '20, 2021 period it had. And so if you looked at our last investor deck at earnings, we showed a slide which shows that institutional didn't peak, it's actually recovering, meaning '20 and '21 were rough and it's starting to come out of that trough. And so from a market, I think you'll find that institutional is way healthier. The commercial office side, for us, it's only 10% of our Americas business. So it's much smaller, has been rougher but institutional has been stable.

And I think if you were to smooth out some of that bond issuance over time, there's kind of these 2-year cycles that take place that it is this kind of low growth funding source over time. And when you get disruptions in the market and I think you probably heard the team say this in the past as well, it gets -- it has a snowplow effect. So it's just steady for longer.

And within your commercial market exposure, how should I think about new versus remodel?

Yes. So our business is roughly 50-50 new build versus aftermarket. And then from a vertical market, if you think of our Americas business, a little less than half of the business is institutional, right, with 1/4 being residential and the remaining piece being the various elements of commercial. As a result, it's that stability of institutional vertical markets that really provides our tailwind when we talk about growth this year.

And just how should I think about pricing? And this is from a different market but I keep using this example. We recently sort of had a meeting with the CEO of one of multi-industrial companies and what we've heard is that he stated that labor cost inflation is now outpacing his material inflation and there's more labor inflation versus material inflation and his view was that, look, you should be thinking about just price going forward. Maybe before you were thinking 1 to 2, 2 to 3 is a better placeholder just structurally. So within your industry, right, how should we think about inflation and pricing going forward? Does the same logic apply to you? Or there are different industry dynamics in the markets you serve?

Yes. We operate in a rational, disciplined industry. We manage the inputs. And so as there's inflation, as we've shown over the last few years, we pass along inflation in the form of pricing. One of the things we see is that inflation has -- when you're in a inflationary environment and you can't just look at metals, right? And so the person you were talking to is absolutely correct. You got to look at all elements of the cost base and it is inflationary. And it's our belief that we will pass that on as we've shown a multiple year history of being able to combat inflationary pressures with pricing. And it's something we're quite good at. And I would expect that to continue.

And so if that's my framework, whatever that labor inflation will remain stronger for longer, just dial in more pricing. That's my framework. Not asking for specific guidance but within that framework, you feel comfortable with your ability to continue to drive pricing to cover the inflation and have the spread.

Yes, because the answer is, we must, right? And so if inflation is more, we'll adapt, right? We adapted in the past, we'll continue to adapt and ensure that we take the necessary actions.

Can we just talk about sort of the ramp-up of the Mexico plant? What's happening? You sort of talked about it and you didn't talk about it. And just give us an update and what opportunities does it give you going forward?

Yes. So actually, I was there last week. So I saw it firsthand. We built a plant in Central Mexico and greenfield, the operations, we're now having product coming off the line. Anytime you start a new plant, right, it's not easy. The thing about us, though, I feel -- we feel good that we've taken that into account for the guide but this is a long-term investment you make. You build a plant based on having the capability and the supply chain resiliency for years and decades, not weeks and months. This particular plant is going to service the North American market. So we're going to make product down in Mexico to service North America.

Which market specifically?

Mostly United States.

No, no but which product category?

This is where -- the residential business to start. So this will be our residential -- some residential product that historically we sourced from Asia. We bring that capability in-house. So things are moving along as anticipated. And I feel that this is something, as we service North America, we predominantly manufacture and sell in the region we operate. This is product that we source, that we're now bringing in-house to serve that North American market.

And is there more labor inflation in Mexico to deal with? Or it's just the starting point is so low that it just doesn't matter that much?

Yes. When you think about a new plant, there's a lot of automation in that plant, right? So you do have a case where there is labor inflation in Mexico but we'll ensure that we earn a competitive position from a cost perspective and long term, this is the right business decision we made.

Interesting. So just international, just to touch in the remaining minutes. Can you just take us around the world? And just what are you seeing in the way and sort of think about it right, there is Southern Europe with CISA. There is Central Europe with Interflex and SimonsVoss presence in France and the U.K. Then you have Australia and New Zealand, a little bit maybe of electronic locks in Korea. Just take us around the world, what are we seeing?

Sure. So if you think about our biggest businesses in Europe, right, I talked about SimonsVoss and Interflex, the software and services businesses, they operate in Germany and it's been a good growth driver for us and we expect that to continue long term. That is even -- it's less market dependent than some of our other businesses, that's taking advantage of the electronic adoption we keep on talking about. If you move to Southern Europe, that is traditionally a mechanical business for us. That's our Bricard and CISA branded businesses. There, you see -- they kind of plow along with GDP historically. In there, we'd also have -- we put our Briton brand, which is the U.K. There we're making some inorganic investments. We talked about [indiscernible] and Boss Door Controls, we recently announced, very small acquisitions but to increase our presence here in what we call our home and work business. Global portable is our -- those who followed us last year know, we started talking about it a lot. This is a bike lock business that had a boom during COVID and then a subsequent decline and pretty pronounced decline in overall market demand. We are now at a point where we've lapped frankly, some rougher quarters. So it shouldn't be a significant headwind as you think about growth rates moving forward because it's already in the base. But I wouldn't tell you that we expect a substantial rebound or bounce back of explosive growth. It's more now operating at this lower level. And then in Asia, our largest business by far is our Australia and New Zealand. We have small operations in China but it's very, very small. I mean Australia and New Zealand tends to be the Asia Pac business for us. And those dynamics similar to the North American marketplace.

And just, can you just help us and I just can't help and Josh, I'm sorry but can you help us size the portable business because -- is it SimonsVoss? Is it Interflex? What is it? Because we're sort of -- I knew you had it but we never talked about it. And all of a sudden, as you just you talk about, so I assume, because of the margin structure between the margin structure and the size, it's moving the needle and that's why you're talking about it. Just sort of, if you can help us in any way to size it.

Yes, it's not that big. If you think of our international business, it's less than 20%. However, I think the declines last year were so substantive that it actually moved the needle for international and that's why we started to talk about why it really was a headwind in 2023. If you think about '24, I don't anticipate the big headwind but it's -- from a sizing, less than 20% [indiscernible]

Okay. So that makes sense. I just did not appreciate how big it is. And maybe the last question, last minute. What are channel improvement opportunities for you? Let's just in the interest of time, just focus in Europe. What can you do in Europe to enhance your channel?

One of the areas we do particularly well is, if it's a code-driven, spec-driven market, we tend to capitalize on that. If you think about North America, we're really strong. So one of the things, our current President of International came from Americas and he's bringing in some of that spec capability that we're quite good at in North America out to international. And so whether that's organically writing specifications or inorganically, we made the Boss Door acquisition, which gives us access to that spec-driven market. So just think of Allegion. If there's a specification, it tends to be a net plus for our chances of succeeding and doing well. And so we're going to look to leverage more of that capability internationally.

All right. That has been a very powerful tool in North America. With that, we're out of time. Thank you so much for being here. And as I said, thanks so much for anchoring this event for multiple decades now, which is like scary. Thank you.

Thank you.