Allegion Reports Fourth-Quarter, Full-Year 2021 Financial Results, Introduces 2022 Outlook

Allegion plc, a leading global provider of security products and solutions, today reported fourth-quarter 2021 net revenues of $709.2 million and net earnings of $112.7 million, or $1.26 per share. Excluding charges related to restructuring, acquisition and integration, debt refinancing and a non-cash investment gain, adjusted net earnings were $99.7 million, or $1.11 per share, down 25.5 percent when compared with fourth-quarter 2020 adjusted EPS of $1.49. Reported net earnings for fourth-quarter 2021 include a $0.17 per share gain related to the re-measurement of one of our Allegion Ventures investments. Reported net earnings for fourth-quarter 2020 include a $0.41 per share charge for assets held for sale related to our former QMI business.

• Fourth-quarter 2021 net earnings per share (EPS) of $1.26, compared with 2020 EPS of $1.01; Fourth-quarter 2021 adjusted EPS of $1.11, down 25.5 percent compared with 2020 adjusted EPS of $1.49
• Fourth-quarter 2021 revenues of $709.2 million, down 2.5 percent compared to 2020 and down 1.4 percent on an organic basis
• Full-year 2021 EPS of $5.34, compared with 2020 EPS of $3.39; Full-year 2021 adjusted EPS of $5.19, up 1.6 percent compared with 2020 adjusted EPS of $5.11
• Full-year 2021 revenue of $2.87 billion, up 5.4 percent compared with 2020 and up 4.5 percent on an organic basis
• Full-year 2021 available cash flow was flat to the prior year at $443.2 million
• Company introduces positive 2022 outlook, reflecting expected strong end-market demand and a return to margin expansion
• Full-year 2022 reported revenue growth is estimated to be 6 to 7.5 percent, with organic revenue growth projected to be 7 to 8.5 percent; Full-year 2022 EPS outlook of $5.50 to $5.70 and $5.55 to $5.75 on an adjusted basis

Fourth-quarter 2021 net revenues decreased 2.5 percent when compared to the prior-year period (down 1.4 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 impacts from foreign currency and divestitures that offset the benefits of acquisitions.

“Our fourth-quarter results reflect the challenging operating environment that we faced throughout the second half of the year,” said David D. Petratis, Allegion chairman, president and CEO. “While end-market demand has remained strong, continued supply chain challenges caused operational inefficiencies and constrained revenue, especially in the Americas segment. We expect sequential improvements in revenue growth, EPS and operating margin performance throughout 2022 as we drive aggressive pricing and work to reduce elevated lead times. The continued strength in market demand, along with record backlog levels entering this year, support future growth well into 2023.”

The Allegion Americas segment revenues decreased 4.2 percent (down 4.3 percent on an organic basis). The non-residential business was up low-single digits percent, and the residential business was down mid-teens percent reflecting the comparison to the large prior-year channel load-in. The segment also faced headwinds due to continued supply chain challenges and shortages in materials and components (including electronic components), which have slowed the pace of revenue realization and extended product lead times. The supply chain headwinds along with robust market demand have led to record backlogs.

The Allegion International segment revenues increased 1.7 percent (up 5.8 percent on an organic basis). The organic growth was driven by continued strength in our Global Portable Security business. Reported revenues reflect the impact of foreign currency.

Fourth-quarter 2021 operating income was $115.1 million, a decrease of $2.6 million or 2.2 percent compared to 2020. Adjusted operating income in fourth-quarter 2021 was $116.3 million, a decrease of $47.2 million or 28.9 percent compared to 2020.

Fourth-quarter 2021 operating margin was 16.2 percent, flat compared to 2020. The adjusted operating margin in fourth-quarter 2021 was 16.4 percent, compared with 22.5 percent in 2020. The 610-basis-point decrease in adjusted operating margin is attributable to increased costs for material, freight, packaging, labor, and operational inefficiencies, driven by continued supply chain pressures which more than offset higher price realization. The adjusted operating margin decrease also reflects increases to variable compensation, more normalized levels of other discretionary spend and higher investment spending, all of which were reduced during 2020 due to the economic uncertainty surrounding the COVID-19 pandemic.

Full-year Results

Full-year 2021 net revenues of $2.87 billion increased 5.4 percent, compared with the prior year (up 4.5 percent on an organic basis). The revenue increases were primarily driven by continued, strong end-market demand and COVID-19 pandemic related pressures in the prior year, which more than offset the impact of supply-chain related revenue delays noted above.

Full-year 2021 net earnings were $483 million or $5.34 per share, compared with $314.3 million or $3.39 per share for the prior year. Full-year 2021 adjusted net earnings were $469.4 million or $5.19 per share, compared with $474.1 million or $5.11 per share in 2020. Reported EPS for 2021 includes $0.24 per share of gains related to equity method and other investments during the year. Reported EPS for 2020 includes $1.07 per share for charges related to goodwill and intangible asset impairment, as well as a $0.41 per share charge for assets held for sale related to our QMI business.

Full-year 2021 operating margin was 18.5 percent, compared with 14.8 percent in 2020. The adjusted operating margin for full-year 2021 was 18.8 percent, compared with 21 percent in 2020. The 220-basis-point decline was driven primarily by inflation exceeding price and productivity, which reflects the impact of increased commodity, material component, packaging, freight and labor inflation, inefficiencies caused by supply chain challenges, as well as the increases to variable compensation, other discretionary spend and incremental investments noted above.

Additional Items

Interest expense for fourth-quarter 2021 was $13.2 million, compared to $12.3 million for fourth-quarter 2020. During the quarter, the company entered into a new $750 million unsecured credit agreement consisting of a $250 million Term Facility and a $500 million Revolving Facility. The new agreement fully replaced the prior credit facility.

Other income net for fourth-quarter 2021 was $22.6 million, compared to other income net of $0.4 million in the same period of 2020. Included within other income, net for the fourth-quarter 2021 was $20.7 million for the investment gain discussed above, which is excluded from fourth-quarter adjusted net earnings and adjusted EPS.

The company’s effective tax rate for fourth-quarter 2021 was 9.5 percent, compared with 11.7 percent in 2020. The company’s adjusted effective tax rate for fourth-quarter 2021 was 6.1 percent, compared with 9.5 percent in 2020.

Cash Flow and Liquidity

Available cash flow for 2021 was $443.2 million, flat versus the prior year. The company ended 2021 with cash and cash equivalents of $397.9 million, as well as total debt of $1,442.1 million.

Share Repurchase and Dividends

During fourth-quarter 2021, the company repurchased approximately 1.5 million shares for approximately $200.1 million under its previously authorized share-repurchase program approved by the company’s board of directors in February 2020. For the year, the company repurchased approximately 3.3 million shares for approximately $412.8 million. As announced on Feb. 4, 2022, Allegion’s board of directors declared a quarterly dividend of $0.41 per ordinary share of the company, an increase of 14 percent over the prior dividend. The dividend is payable March 31, 2022, to shareholders of record on March 16, 2022.

2022 Outlook

The company expects full-year 2022 revenues to increase 6 to 7.5 percent on a reported basis and increase 7 to 8.5 percent organically, when compared with 2021, after excluding the expected impacts of acquisitions, divestitures and foreign currency movements.

Full-year 2022 reported EPS is expected to be in the range of $5.50 to $5.70, or $5.55 to $5.75 on an adjusted basis. Adjustments to 2022 EPS include estimated impacts of approximately $0.05 per share for restructuring costs. The outlook includes incremental investment of approximately $0.15 to $0.20 per share to support future growth opportunities in electronics and seamless access; assumes a full-year adjusted effective tax rate of approximately 13 percent; and assumes an average diluted share count for the full year of approximately 88 million shares.

The company is targeting full-year available cash flow of approximately $465 to $485 million.

“Allegion’s long-term business fundamentals are sound, and we continue to invest in our future,” Petratis said. “Strong economic demand, particularly in recovering non-residential markets, is encouraging. I am proud of how our employees responded to numerous challenges in 2021 and am confident Allegion is well-positioned to drive solid results in 2022 and beyond.”

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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 $2.9 billion in revenue in 2021, and its security products are sold around the world.

Contact:

Doshia Stewart – Vice President, Global Corporate Communications – Doshia.Stewart@allegion.com – + (317) 810-3512

Source: Allegion plc