Allegion plc (ALLE) Earnings Call Transcript & Summary

[Audio Gap] multi-industrials analyst with Bank of America out of New York. Next up, we have Mike Wagnes, Senior VP and CFO of Allegion. And we're going to think -- well, first of all, thanks so much for coming to London. You've been a long-term supporter of the conference. We absolutely love having you here. And as I said, let's just jump into the Q&A.

So thanks for having us, Andrew.

Yes, yes. So maybe the first question is just on macro. '25 revenue guide for Americas assumes organic revenue growth sort of low to mid-single digits with more strength, I think, nonres versus resi. Maybe a good place to start just more color on some expectations for the various verticals, office, multifamily, K-12, data centers. Maybe that's where we can start.

Sure. So if you think of Allegion, our biggest business in Americas is our nonresidential business. It's about 80% of our Americas revenue. And institutional is the key vertical market for us. And institutional vertical markets, we're talking K-12, higher ed, health care as the 3 largest components within that institutional space. It's a very stable, resilient type market for us. There, you would see, in the last few years, we've had stable growth. We expect that to continue into '25 when you think of the institutional markets. If you think about commercial for us, that has been -- if you look at the components of that, multifamily -- we put our multifamily in that commercial piece, commercial office, retail, there, it's kind of mixed. The data center, as you mentioned, that's been good growth for us, but it's a very small part of our business. Commercial office, commercial office was weak in '24. We expect that to continue in '25. So it shouldn't be a headwind per se, just it shouldn't necessarily be a tailwind yet, right, so...

Bottoming, basically.

Yes. You're looking at it, it's a case where at least the headwind is behind us and we're just mature kind of market dynamics where we've been in, in a few years. Multifamily, also same dynamic where it was soft in '24, we expect that to continue in '25.

And maybe just K-12, were you impacted by the stimulus? And what's the outlook for K-12 just generally? And I guess I'll lump institutional to that, just on hospitals.

Yes, so like I mentioned, really stable. Our business did not benefit from the ESSER funding. So if you think about the stimulus, we didn't really get that boom. So as you look forward with that money now being no longer available, it's not a headwind for us. So it's a case of being driven more by local school districts needing money for schools as well as the health of state and local budgets, which are pretty healthy. So that business has been -- did well for us in '24 and expect it to continue to be the leader for us in growth in '25.

And in terms of your expectations for resi, what are those? And for resi for you, it's really completions. It's not the starts, right?

Yes. On the new build side, more track towards completions, not starts. Our residential business is more of an aftermarket. You could think of that as being sold through big box or online retailers. So we're more heavily to the retail side, where secondary home sales is a driver for us in our business there. Obviously, interest rates would be the swing factor for our business. If they start to moderate, that's a net plus for us because you'll have more secondary home sales. But as we mentioned on our earnings call 30 days ago, we expect our Americas business growth to be led by nonresidential. Residential continues to be in kind of the environment you saw last year.

And for resi, is it fair? Is it 80-20 replacement versus new? Or what's the ratio?

So it's certainly more aftermarket. It's not quite 80% aftermarket. I would think it more like maybe 2/3 aftermarket.

Okay. And I think if you think about the -- I think on the mechanical side, right, on the institutional side, it is pretty much North American based -- U.S. based. But for residential, right, you do manufacture the stuff in Mexico, quite a bit of it. So how do you think about your manufacturing capacity in Mexico? Any opportunity to flex, how does competitive environment -- let's just sort of get that out of the way.

Sure. We talked about this in our earnings call last month, 20% to 25% of our enterprise COGS is manufactured in Mexico and imported into the U.S. So we have a sizable Mexican operations. That's largely our residential business. And from a competitive standpoint, most of the residential product in our industry is manufactured outside the U.S. So our competitors are also manufacturing outside the U.S. So from a dynamic of where the competition is, we're all dealing with the current environment. And then from a manufacturing base, we do have some capability to manufacture locks in North America, particularly moving the nonresidential piece between Mexico and North America. However, at that size, 20% to 25% of your enterprise COGS, you're not going to be able to move enough to change that dynamic.

And what's going to happen with the tariffs? Is the idea that everybody is going to -- I assume everybody is just going to raise prices. Is that...

It's a dynamic environment. We talked about this at length on our last earnings call. We expect to raise prices to deal with the tariff environment and work with suppliers, right? It's a combination of both and expect to offset the cost of the tariffs, any that are implemented so that it's neutral on an EBIT dollars.

Yes. And margin -- a little bit margin dilutive.

Yes, depending on the magnitude of it, right, we're really looking to offset it on the dollar basis.

And how is it going to work? Is it -- how long will it take to flow through your to -- by the time it's fully absorbed by your P&L? Is it a quarter? Is it 2 quarters? Because I'm sure you've learned quite a bit the last time around and inventory -- you guys have gotten much better at it.

And it's certainly a dynamic environment, right? It changes quite often. You could see this for the year, look at it being neutral on a dollar basis, could be depending on inventory positions, obviously, some lags. But just know that we're going to go out and we've even announced some pricing actions to the channel with respect to the current dynamics and look for that to continue as the situation changes.

So is it going to be a surcharge? Or it's just price increase?

We've announced surcharges already for certain select product categories.

And what happens if tariffs don't happen? Do...

So we've announced for what is in place today. As tariffs...

Got you. So you say if there is a tariff, there will be a surcharge.

Yes. And we already have some tariffs, if you think about China, coming in from China or steel and aluminum, et cetera, so...

Yes, yes. Okay. That...

Look for us to react quickly with the pricing actions to match the underlying tariff impact.

Okay. And just as we look at the construction data, the 2 areas of growth have been data centers and manufacturing. Just maybe give us a sense of what's your exposure because I would not have thought that you have exposure to data centers. But then people go, those like cages inside data centers probably have some very nice high-end locks, which I didn't think about, but -- and the fact that you brought it up sort of means that it's registered somewhat in terms of the growth. Just give us a -- right, because these are the 2 best markets as far as we can tell from the nonres in the U.S., like what's the relative size?

Sure. I'll start with the data centers. Really small as a percentage of total revenue. However, growing nicely...

But more than 1%, right?

It's small, so substantially less than, let's say, even 5% of revenue. But the growth is nice, right? So we saw good growth year-over-year. In the case of manufacturing, manufacturing has a lot of square footage, but there's not many openings where you're going to hang locks. So it's very small for us in the industry.

Okay. So basically, data center is the one that matters.

Yes. Data centers, we did see really good growth in '24, and we expect that to continue in '25.

Got you. So maybe just dive into residential. I think there was some prebuy, there -- so maybe you can just sort of unpack that for us a little bit. What's happening in fourth quarter potential impacting Q1?

Yes. In our fourth quarter, we had high single-digit growth in resi, and we know that, that is more than market, right? And we saw some sizable orders from select channel partners that are some pull ahead from the fourth quarter -- from the first quarter into the fourth quarter of last year. So we quantified that for the investors. Think of it as a mid-single-digit millions. So when you model this, you'll just model, hey, the first quarter is going to have the slight headwind from that pull ahead into the fourth quarter.

Got you. And I know companies don't like talking about sort of competitive dynamics against specific customers, but -- specific competitors, but your industry structure is fairly concentrated. So just maybe just talk a little bit, what's the competitive dynamic in North America? Who are the big competitors? ASSA ABLOY publishes their numbers. We can track that. You lost some shelf space during COVID. Clearly -- well, a, you've beaten up on them like for years and years and years. That was that. And then we lost some shelf space during COVID. Where are we in terms of sort of taking the market share back? And is it just a function, hey, the capacity is back, we're operating well, and we just go back to our natural share? Is that...

Yes. So let me talk about the dynamics in -- during the COVID period or the supply chain period of challenge that we had. If you think about 2021, our supply chain struggled to meet the demand, the bounce back from the COVID demand. And we certainly trailed some of our larger competitors in the '21, first half of '22. That turned around in the back half of '22. And we've now held serve and performed nicely versus our public peers that you can look at the growth rates since that mid-'22 period. Certainly, in '21, it was really driven by our supply chain challenges. There was some loss of share, but we feel confident. And if you look at the growth rates, you've seen then, that is -- we've recaptured some of that since then.

Yes. And generally, you should continue to do so probably.

Yes. I think moving forward, you've seen -- we would expect the dynamic to be similar to what you've seen over the previous 10 years, outside of that short period where our own struggles with supply chain limited our growth. Happy to say, though, those challenges have been resolved, and we have a much more resilient supply chain today than we had in 2021.

And just maybe just talking about -- you provided initial guidance last year for resi. I think interest rates, if you ask anybody, remains stubbornly high relative to expectations. So how has your expectation for resi has evolved in the past 6 months relative to your initial thoughts?

Yes. So in the third quarter call that we had in October of '24, it was looking like residential might be bouncing back some. Interest rates were declining at that point in time. Subsequent to the November elections, you've seen interest rates and mortgage rates, in particular, peak back up. That is less advantageous for our residential business. For our nonresidential business, it's less of a challenge per se than resi, where mortgage rates are a swing factor. And so we talked about this on our fourth quarter call. We would expect to not have as strong a residential business as you see our nonresidential business for '25. And so that's kind of the dynamic we're in. If there is relief in interest rates, that's a net positive for us. And so that's something we monitor closely.

And as I said, we sort of talked a little about institutional market today. So what's the split in new construction versus retrofit on the institutional side?

Yes. Across the business, in general, on nonres, you could see it roughly 50-50 aftermarket and new build. And so institutional would be the same.

[indiscernible] it's going to -- yes.

Yes.

And I think as we look at the construction numbers within institutional, you can see decelerating health care and educational construction spending. So is that what we should be looking at? You sort of described it as steady. What gives you the confidence that it should continue to be steady?

Yes. So when we think about institutional for us for '25, still expect a stable, steady market growth, probably the leading growth for the nonres space. A couple of factors we see when you look at internal data like our specification data, which is a great leading indicator for us, which is our metric, that supports continued growth in '25. Another external market data that you all can look at is the local bond referendums and issuances, which have been really municipal bond referendums. That's been a strong positive for us. When you think of a school district, they'll raise a bond to use those proceeds then to build a school. They had strong growth in '24. That money will be used not only for '25 but even for '25, '26, '27 as they build the school. So both those indicators make us feel good about the institutional market.

Got you. Maybe we can just sort of just round up with the commercial market exposure in North America. So you sort of -- it sounds like that office or -- office, you think is bottoming. And multifamily, would you make a similar comment that multifamily has bottomed?

I would say this, if you think about office, it's been weak for so long that it's just the dynamic that we're in. Multifamily started to soften really significantly in '24. If you think about '25, I think it's at the same environment you saw in '24. More importantly, though, I want to size this up for you. If half of our business is aftermarket, that part of the business is very stable. So it's a stable part of the business. On the new build side, the commercial verticals are only, in aggregate, 20% of the nonres business when you back out the aftermarket. So they're not that big to begin with. And there, you'll see that's across all of the verticals. So office is a piece of it, multifamily. So none of them are individually 10% of our revenue on -- in the nonres space. So it is, in general, not a big piece of our business. It's why when you see weaker commercial office starts, it didn't dramatically impact our revenues such that we had negative revenue growth.

So maybe we can talk about -- yes, why don't I sort of skip and go sort of like maybe outside of North America? Just maybe take us around the world. Where are some of the weaker and stronger markets? Maybe we'll start there. And I know you've exited China. So just we know that. But APAC, ex China, Europe, I know in Europe, we have Spain, Italy, other big centers of gravity, but also presence in France, U.K. like locks -- yes.

So I'll walk you through our international business. Our largest market is Germany. You can think of that our electronics business of SimonsVoss and Interflex as the 2 big businesses there. Historically, a strong grower for us. Those markets are a little softer. So when you look at our guide for 2025, we have an organic guide for international of flattish. Germany is a little weaker from a market dynamic. When you think of Southern Europe, we have our CISA business and our Bricard business in France and Italy. But those businesses are historically lower growing, but they're actually growing nicely from a market dynamic. You'll see some low growth there, but it should be growth. And then in Asia Pac, our business is predominantly now Australia and New Zealand. So it is a vast majority of that Western markets driven by codes and standards. New Zealand is soft. Australia, hanging in there. China, for us, we divested our largest part of the business in 2015. So those who haven't been following a while, you've never known us to have a big China presence. We finally divested out of the last piece of it in the fourth quarter. And so China will not be part of our revenue base moving forward. And it was really small. Think of it as maybe a small headwind to growth in 2025, and we highlighted that and gave it to you in our fourth quarter earnings release.

And just going back to Germany. So a couple of things. Does German stimulus potentially move this investment in infrastructure? How should we think about it? So I'll start there.

Sure. German markets have been weak recently. There's been announced changes in the political environment there that should be advantageous for growth. That should help us, right? So that's a net positive when you think of those particular businesses. In the case of Interflex, Interflex is a software solution of access control and workforce management. It tends to be a pretty stable business. And so SimonsVoss, though, is somewhat dependent upon a healthier economy. And so any stimulus is a net plus for us there.

I guess a couple of things. So SimonsVoss should have an -- so that business, just manufacturing business comes with a real incremental, right? [ I think ] it was an incremental margin, SimonsVoss.

Yes. Yes. Very strong margin business.

Okay. So that's part one. And Interflex, I always think, is sort of connected to German manufacturing, specifically to auto. So German, I think, auto production is still quite depressed. So is it just -- basically should I think that it's generally just linked to OpEx budget of these manufacturers, i.e., if German consumer feels better, they buy more cars and if the auto -- those budgets go up, do you benefit?

Well, actually, if you think of the business, it's remarkably stable. It's the access control solution and workforce management solution. As such, it has an annual recurring revenue model and a maintenance model that remains strong even in a weaker macro. So it's -- even though production may not be strong, you're still going to have that recurring revenue on that business.

Okay, got you. So that -- it's just stable. As long as you have a factory and that's what you really get paid for, getting workers in and out, then those budgets don't really -- unless you build a lot more new factories.

Exactly. So think of it this way. For every $1 -- or a EUR 1 of product revenue, we could have EUR 1.5 of software and maintenance revenue. So it's a really stable type business model.

And can we just sort of talk about it just in terms of what are the key opportunities to improve the channel in international markets? And specifically, let's forget about Australia and New Zealand and just focus on Europe. I always think about it, right, as sort of separate. You have CISA, which is sort of Southern Europe, right? Then you have Germany. Then you have France and U.K. that's like sort of its own thing. And then we have the [ Bricard ], this -- so maybe just sort of talk how can we -- and you've done a good job sort of getting the margins up. So what's the next step for structurally getting things better in Europe over time?

Yes. Just if you think of the history of our international business, we -- when we first spun out, think of it as a breakeven business, right? In the first decade, we talked about how do we get to 10% margins. Well, now we're approaching 15%, right? That's the next target out there. Much healthier margin profile today, and then as you think about some of the activity we're driving, our leadership of our international business, Tim Eckersley used to run our Americas business. And so he's taken some of the strengths that we have from a specification, demand generation, channel activities, et cetera, that we're very strong in North America, and we're starting to build that muscle and capability in international. That should be a net plus for us as we move forward and excited about our international business being a much healthier business than what it used to be. And so you could see it across the portfolio, each of the businesses from growth rates and profitability, much healthier than, let's say, when we first met each other in...

Yes, exactly. That's right. But what needs to happen? Is it -- and maybe I can sort of tie it into M&A, right, because part of it is just you have this capacity underabsorption issue in Southern Europe. Well, yes, no?

I would say we made structural changes. From what remember seeing in 2015, we fixed a lot of that.

Right. But it can -- scale would help. Incremental scale would help.

I would say this, growth will certainly help. So as we can grow the business, that is very advantageous to margin rates.

Is there an opportunity for M&A growth? There's always been this promise of this incremental deal in Europe. And it's a fragmented market. A lot of the businesses are family owned, but nothing has happened. Is there anything that could potentially happen over the next 24, 36 months, anything? Or it's just more of the same lots of promise, nothing really happening?

I would say this, our M&A has started to accelerate. If you think of '24, we announced 5 transactions. We have a couple we've already announced in '25. And we do believe we'll continue to see M&A activity accelerate in '25, both in the Americas and in international. Two examples we have in '24, we announced the acquisition of Boss Door Controls and DORCAS. Both of those in Western Europe, they give us capability. In the case of Boss, gives us access to that specification channel I talked about earlier. So look for us to continue to find some of these bolt-on acquisitions that make us even stronger in the European or Australia and New Zealand type.

Okay. So it's bolt-ons.

Right.

Okay. Got you. And maybe we can pivot as we talk about electronics, Interflex, such a gem, but very German. So maybe we can start with Interflex. How can you take it outside of Germany, scale it up? What are the opportunities there other than sort of German transplants in North America?

Yes. So historically, it's been a case of we grow as our German multinationals grow internationally. We have also made some acquisitions to supplement the existing platform with software capabilities to make it an even better solution. So an example of that is our plano acquisition we made in '23, where it made the offering an even better solution than what existed previously. Look for us to continue to make some of these tiny tuck-ins to make solutions like that even better. And then as far as growing outside the Germanic region, it is something we've always tried to grow. Look for it, though, the closer you can get to that German environment, the more likely you are to get the customer base. it's not something where you could just show up in North America and go to a U.S. manufacturer and say, hey, come with the Interflex solution. It's probably not going to be the solution they would choose.

Interesting. And why not?

It's specifically designed for work councils in the environment of Germany and the Germanic laws that are applicable that are not in the U.S.

Interesting. Maybe just as I said, to keep going in electronics, clearly, one of your key priorities you've highlighted during your Analyst Day. Just maybe can you just highlight to us what is driving different electronics adoption by region?

Yes. For our business, electronics is the big growth driver as you think about accelerating organic growth. So you can see us over the last decade, it's grown at the high single to low double-digit basis over that period. As we move forward, we still expect electronics growth to be larger than the mechanical portfolio. But from a percentage of revenue, it's now 1/4 of our total revenue, right, if you think of the Americas. If you move to international, international, that Interflex, SimonsVoss business is a larger percentage of the total international. You could see -- think of that as 40%. Again, the best growers in international. So in general, expect electronics growth to continue to outpace mechanical moving forward. And that should help us drive that above-market growth or above-mechanical growth moving forward.

And what changes do you make -- do you need to make to the channel to enable -- this growth continues to be sustainable?

Yes. I think the channel is prepared for electronics, and they've -- especially, right, if you think of the Americas, on the nonres side, they've been selling electronics for a while now. It's just continual adoption by that end user. If you take a university, right, a university, the large big state universities, many of them already have electronic locking on all their dorms, but it's the smaller campuses that are still moving to electronics. So there's a lot of opportunity to get there. They're just not going to get there overnight. It's going to be a steady tailwind to growth, but it's not going to be kind of like a massive adoption over a 3-, 4-year period. So think of it as long-term steady tailwind to growth.

And what's the impact of electronics growth on margins? Because I know there is a difference in replacements. Two issues: a, there's a dollar impact because different replacement cycle, but also just what's the just simple impact on margins?

Yes. So you could think of it -- I'll take the margin rate to start. Same margin rate, but the ASP per unit could be double. So it's more OI dollars. So for every unit of sale, you'll love electronics. Then you factor in the useful life. The useful life of a circuit board is much shorter than mechanical components. So the useful life will have a quicker replacement cycle. And as technology changes, you could see a retrofit opportunity that you don't have in mechanical. For instance, our first electronic locking in the higher ed space didn't have mobile capability. So if you think about a digital credential or a mobile credential, today, some of our larger universities are now the early adopters, are retrofitting those applications they put on the doors 10, 12 years ago, with the new electronic lock that does have that capability. So as you think about it moving forward, great opportunity to have a much shorter replacement cycle and double ASP. So it is a great -- every unit sale there is a net plus for us, and that's why we're so bullish on electronics for our long-term growth.

And maybe just sort of tie this in, if you could, to mobile credentials. So what does it do to the growth? And right, but if you go to mobile credentials instead of the fob, right, that's a very different business model. So how do you transition from sort of selling -- I had a fob like many, many, many years ago, right? But it's -- that's a physical thing you lose, and you just get another one. But how does the mobile credentials work because that's a software-based product, right?

Yes. So if you think about a credential, 30 years ago, a credential, you think of a key, a mechanical key. 15 years ago, you think of your card badge that you badge in. If you think moving forward, more and more of that credential is going to be on your phone. It's going to be a digital credential on your phone. And a great opportunity, a great vertical market to show this opportunity is multifamily. It is so inefficient for a multifamily unit to show an apartment. You have to have someone at the front desk who will show the apartment. With digital credentials, you can fit out that entire building with a mobile credential that you can give to a guest for them to see something when you're not even there. There's an efficiency play when someone moves out. So digital credentials is actually helping pull the electromechanical hardware. So it is a great driver of growth, not just in the credential space, but in the actual product, the electromechanical product that we sell. So multifamily is a great example of it. Even higher ed, we're seeing it more and more being used. So it will be the credential of tomorrow. And over time, that is a net plus, not only in the credential revenue but in the product revenue and electromechanical product revenue.

And how do you get paid for credential software? Is it license per product? Like how do you get paid in that?

You could see a onetime charge on a card is the primary way it's being used today. Over time, it could change, but you get paid just like you would a physical credential. So your pricing structure is similar.

So just onetime charge.

That's what a majority of it is today. Now if you think about multifamily, you have your unit lock, which is electronic, so you have your digital credential. You could also use our Zentra software solution where you have a recurring charge per door per unit, right? So there is that opportunity there.

Got you. And how does the sale process change to sell this mobile credential?

Well, our sales force sells it today, and it's something that we're getting more capability. It's really driven by the end user, though. The end user is going to determine whether or not they want the physical credential or the mobile credential.

Yes. And I guess what I was trying -- sort of I'm just thinking generally software and services, right. That historically...

Software and services.

Yes, yes, that's sort of -- so would that be a part of it? Or would that be sort of more in the hardware, the credential side? Where would credential sale reside?

I would say this, if you think about software, better example than even just the digital credential is the Zentra solution. Historically, we would have no revenue associated with access control in that multifamily space. Moving forward, we're going to have a -- we have that solution today, where we're going to come to a multifamily unit with both a hardware, software solution. And we will get the hardware sale upfront, but we'll get the recurring revenue on the access control for the software solution on a monthly basis. So think of an annual recurring revenue. Now for us, Zentra today starts in multifamily, but you could see over time our capabilities expanding in some of those less complex vertical markets. In the more complex verticals like your higher ed, your health care, there, their existing partners of ours already provide that access control. We're not looking to take Zentra into higher ed or a hospital. But there is the opportunity starting with multifamily for us to take this software and solutions -- software, the access control software, bundle it with the hardware and have a solution that is perfect for that end user for their application.

And maybe we can talk about services, right? So you've entered the services -- you made an acquisition. You're now part of the -- you have the service market. So what capabilities going forward strategically -- this is going to be a horrible pun. What doors does it open, sort of having the service capability? What can you do in the next 5 years that you have not been able to do before?

Historically, our business always counted on a channel to do services, right? So we would have virtually 0 service revenue. When we bought the Access Technologies business in '22, we acquired a service capability. So if you think about sliding doors, today, we service them with our Access Technologies business. So for the first time, we have that capability starting in '22. I think moving forward, it's going to be a combination. There is service capability today that Access Technologies has, but we're still going to count on the channel as well. So it's a combination of both. It is not a case of you're going to now compete against your channel partners. We're going to service the product offerings that we go direct on in the case of Access Tech but also leverage the channel where needed to service other existing products that we offer.

And as you think about sort of deals and capital allocation, so can you just remind us what level of leverage -- you have an incredibly stable business model, so what level of leverage would Allegion be comfortable with?

Historically, our leverage, our net debt to EBITDA is about 1.5 to 2.5x. You have seen us over time for the right acquisition go above 3x like we did for Access Technologies. But because we generate cash flow, strong cash flow, we're able to delever very quickly. So in the case of the Access Technologies example I gave earlier, within 6 months, we were right back -- 12 months right back in that 1.5 to 2.5x. So look for us to stay in that investment-grade bandwidth, right? We're committed to investment grade. But you could see us add a little leverage for the right acquisition like we did in Access Technologies.

So just 2 more questions in the remaining time. How active is the funnel today? Clearly, many more smaller bolt-ons, but anything beyond that in the funnel, something bigger? And the second question, how should we think about buybacks?

Yes. So in the case of M&A, large for us was that Access Tech. Think of that as a $900 million purchase price. We've done one of them in a decade. Most of our acquisitions have been more of those singles or doubles. Second largest acquisition we've done is $200 million. That gives you a size of the type of transactions that are out there. It's not a ton of very large acquisitions.

But there is stuff around $200 million.

There are opportunities out there in the hundreds of millions, yes.

Okay. And buyback?

Yes. From buyback, I would say, over time, look for us to do a combination of both. Historically, about 50% of our capital deployment has been M&A. The other 50% is dividends and buyback. We would prefer to invest for growth. So we would prefer to do acquisitions. But from time to time, you can see us do buyback as well.

That was -- well, thanks so much, Mike. Always a pleasure.

Thank you, Andrew.

Thank you.