Company Overview
Allegion plc, a global leader in security solutions, has a rich history of innovation and a steadfast commitment to keeping people and assets safe across the world. With a diverse portfolio of industry-leading brands, the company has established itself as a trusted partner in the security industry, consistently delivering cutting-edge products and services that cater to the evolving needs of its customers.
Historical Background
Founded in 1908, Allegion's roots can be traced back to the inception of the exit device, a pioneering safety solution that revolutionized the way buildings were designed and secured. Over the past century, the company has continued to build upon this legacy, expanding its reach and capabilities through strategic acquisitions and relentless product development.
Allegion plc was incorporated in Ireland on May 9, 2013, to hold the commercial and residential security businesses of what was then Ingersoll Rand plc. On December 1, 2013, Allegion became a stand-alone public company after Ingersoll Rand completed the separation of these businesses. The company's origins, however, span over a century, with several of its brands established more than 100 years ago.
Many of Allegion's founding brands have long and distinguished operating histories. Von Duprin, established in 1908, was awarded the first exit device patent. Schlage, established in 1920, was awarded the first patents granted for the cylindrical lock and the push button lock. LCN, established in 1926, created the first door closer. CISA, established in 1926, devised the first electronically controlled lock. SimonsVoss, established in 1995, created the first keyless digital transponder.
Allegion has built upon these founding legacies since its entry into the security products market through the acquisition of Schlage, Von Duprin and LCN. The company has continued to develop, acquire and introduce innovative products over the years. In 2018, Allegion announced the formation of Allegion Ventures to invest in and help accelerate the growth of companies with innovative, digital-first technologies and products. This was further expanded in 2021 with the announcement of a second Allegion Ventures fund.
Challenges and Adaptations
Throughout its history, Allegion has faced various challenges, including navigating changes in trade agreements, foreign trade policies, and global macroeconomic conditions. The company has also had to adapt to the evolving security landscape, with the increasing adoption of connected hardware and software solutions. Despite these challenges, Allegion has remained a leader in the security products industry, leveraging its extensive product portfolio, deep expertise, and strong customer relationships to deliver innovative solutions to its customers.
Current Offerings
Today, Allegion's comprehensive offerings span mechanical and electronic security products, including locks, doors, access control systems, and workforce management solutions. The company's extensive portfolio of market-leading brands, such as Schlage, CISA, and Von Duprin, has solidified its position as a global powerhouse in the security industry.
Business Overview
Allegion is a leading global provider of security products and solutions. The company sells a wide range of security and access control solutions for end-users in commercial, institutional and residential facilities worldwide, including the education, healthcare, government, hospitality, retail, commercial office and single and multi-family residential markets. Allegion's leading brands include CISA, Interflex, LCN, Schlage, SimonsVoss, and Von Duprin.
The company operates in two reportable segments: Allegion Americas and Allegion International.
Allegion Americas Segment
The Allegion Americas segment is a leading provider of security products, services and solutions throughout North America. This segment sells a broad range of products and solutions including locks, locksets, portable locks, key systems, door controls and door control systems, exit devices, doors, glass and door systems, accessories, electronic security products, access control systems and software, and service solutions. The primary brands in this segment are LCN, Schlage, Von Duprin, and Stanley Access Technologies.
In 2024, the Allegion Americas segment generated net revenues of $3.01 billion, up 3.4% compared to 2023. Segment operating income increased 7.8% to $816.2 million, with the segment operating margin expanding to 27.1% from 26.0% in the prior year. The increase in net revenues and operating income was driven by improved pricing, the impact of acquisitions, and favorable foreign currency movements, partially offset by slightly lower volumes.
Allegion International Segment
The Allegion International segment provides security products, services and solutions primarily throughout Europe, Asia and Oceania. This segment offers a range of products and solutions including locks, locksets, portable locks, key systems, door controls and door control systems, exit devices, doors, electronic security products, access control systems, time and attendance and workforce productivity solutions, among other software and service offerings. The primary brands in this segment are AXA, CISA, Gainsborough, Interflex, and SimonsVoss.
In 2024, the Allegion International segment generated net revenues of $759.8 million, up 3.1% compared to 2023. Segment operating income increased 14.1% to $66.3 million, with the segment operating margin expanding to 8.7% from 7.9% in the prior year. The increase in net revenues and operating income was driven by improved pricing, the impact of acquisitions, and favorable foreign currency movements, partially offset by lower volumes in certain European, Asian and Oceanic markets.
Financials
Allegion's financial performance over the past few years has been impressive, showcasing the resilience and agility of its business model. In 2024, the company reported net revenues of $3.77 billion, a 3.3% increase compared to the previous year. Its adjusted earnings per share (EPS) grew by 8.2% to $7.53, highlighting the company's ability to navigate challenging market conditions and deliver consistent returns to its shareholders.
For the fiscal year 2024, Allegion reported annual net income of $597.5 million and annual operating cash flow of $675.0 million. The company's annual free cash flow reached $582.9 million, representing a 12.9% increase from the prior year and underscoring the company's emphasis on efficient operations and prudent financial management.
In the most recent quarter (Q4 2024), Allegion reported revenue of $945.6 million, a 5.4% increase year-over-year, driven by 3.5% organic growth from favorable pricing and volume. Net income for the quarter stood at $144.1 million. The Americas segment saw 6.4% reported revenue growth and 4.6% organic growth, while the International segment had 1.5% reported growth but a 0.7% organic decline due to macroeconomic challenges, particularly in Germany.
Geographic Performance
Allegion operates globally, with approximately 24% of 2024 revenue derived outside the U.S., primarily in Europe, Asia and Oceania. This diverse geographical presence allows the company to capitalize on various market opportunities while mitigating risks associated with regional economic fluctuations.
Liquidity
The company's strong financial footing is further bolstered by its robust cash flow generation and disciplined capital allocation strategy. As of December 31, 2024, Allegion had cash on hand of $503.8 million. The company maintains a $750 million revolving credit facility, of which $18.5 million in letters of credit were outstanding, leaving $731.5 million of available credit.
Allegion's debt-to-equity ratio stands at 1.332, while its current ratio of 2.04 and quick ratio of 1.43 indicate a healthy liquidity position. These financial metrics demonstrate the company's ability to meet its short-term obligations and invest in growth opportunities.
Growth Strategy
Allegion's growth strategy has been multi-faceted, encompassing both organic and inorganic initiatives. The company has consistently invested in research and development, introducing innovative products and solutions that cater to the evolving needs of its customers. This dedication to innovation has yielded a steady stream of new product launches, including the Schlage XE360 series, a next-generation commercial electronic lock family, and the Schlage Indication Solutions, a portfolio designed to enhance security in the education sector.
Allegion has also strategically leveraged its strong balance sheet and cash flow to pursue accretive acquisitions that complement its core business. In 2024, the company completed five bolt-on acquisitions, including the additions of Boss Doors, Dorcas, Krieger Specialty Products, Unicel Architectural, and SOSS Door Hardware. These strategic transactions have expanded Allegion's product offerings, strengthened its market position, and contributed to its overall financial performance.
Industry Trends
The security products industry is expected to continue benefiting from trends such as increased concerns about safety and security, and technology-driven innovation enabling seamless access and better user experiences. The industry is also seeing growth in connected security products and solutions as end-users adopt newer technologies. Allegion is well-positioned to capitalize on these trends through its innovative product portfolio and strong market presence.
Future Outlook
Looking ahead, Allegion remains well-positioned to capitalize on the growing demand for security solutions across various end markets. For 2025, the company expects total revenue growth of 1% to 3%, with organic revenue growth of 1.5% to 3.5%. This includes approximately 1 point of acquisitions and 1.5 points of foreign currency headwind.
In the Americas segment, Allegion expects organic revenue growth to be low to mid-single-digits, with growth in both the non-residential and residential businesses. For the Allegion International segment, the company anticipates organic revenue will remain relatively flat, due to continued macroeconomic challenges, particularly in Germany.
Allegion's adjusted EPS outlook for 2025 is in the range of $7.65 to $7.85, representing growth of approximately 1.5% to 4% over the prior year, despite a significant headwind from an estimated 17.5% tax rate. The company's available cash flow outlook for 2025 is 85% to 90% of adjusted net income.
It's worth noting that Allegion's guidance does not include the potential impact of tariffs on imports from Mexico, which could be offset through pricing actions.
Allegion's success is underpinned by its unwavering commitment to innovation, customer-centric approach, and disciplined execution. As the company continues to pioneer new standards in safety and security, it remains poised to deliver long-term value for its shareholders and contribute to a safer and more accessible world.