John Stone: Okay. That’s about 5 questions in there, Julian. Well done. I’d say on the channel destock, we feel pretty good there. I think our commentary in Q2 kind of indicated we didn’t view this as a real long-term issue. And channel checks kind of prove that out. I don’t think it’s still a big headwind at this point. We’ve met with our 25 largest distributors in the past few weeks, and then that would confirm that. So again, there’s still certain metro areas that are a little bit soft. There are still suburban areas that are quite strong, quite robust aftermarket, et cetera. So overall, feel pretty good along with the comments that Mike just shared. Let’s see what else to mention there. I think with respect to the spec activity, spec activities still remain solid, and it’s still hanging in there.
And so we would expect that institutional heavy business to be driven that’s the spec engine that we have to still remain solid as we move forward. So spec activity still remains strong for us.
Operator: The next question comes from Joe Ritchie with Goldman Sachs. Please go ahead.
Joe Ritchie: So can we maybe just following up on the mechanical business bottoming comment. So your portfolio has gone through some change, obviously, with the Access business, the electronics business growing at a faster pace. If I think about the kind of overall level of where the mechanical business is today, what’s the kind of right run rate that should be bottoming, whether that’s on a quarterly basis or an annual basis? Just any color around that would be helpful.
Mike Wagnes: I’d share this with you, Joe. If you look at our revenue growth, starting in Q3 last year, we started shipping those past due orders serving our customers. That continued, if you recall, Q1 this year, real large growth that we had. So you could think of that as a kind of a 3-quarter burn through that backlog type challenge and the customers adjusting to our new lead times. I think from that point on, we’re kind of more normalized. We talked in Q2 about that item. So I feel that that’s behind us. It’s those 3 quarters where you do have that more challenging comparable on the non-residential mechanical business we talked about.
Joe Ritchie: Okay. Great. Appreciate that, Mike. And then maybe my follow-on, John. You talked about the balance sheet getting back into investment grade, good shape. You delevered now to 2 turns. I’m curious, there are some fairly sizable assets that are out there potentially on the security side. As you’re thinking about deploying capital, how are you thinking about M&A and particularly like bolt-ons versus maybe some more transformative type deals?
John Stone: Yes. Great question, Joe. And I think the teams performed very, very well. Cash flow has improved very well this year. And we did delever quite well, and I think happy with where we’re positioned. And again, as in the prepared remarks, building capital to deploy for growth. And I think for us, you can look for us to be acquisitive. You can look for us to look to fill portfolio gaps with bolt-on hardware solutions, like we did with Access Technologies or SaaS businesses like we did with plano. As long as things are the right strategic asset, the right leadership team, a business model, a culture that fits with Allegion and is in the sandbox of security and Access solutions, you can look for us to be acquisitive. Certainly not right to comment on any particular transaction, but we do expect to grow through acquisition and building capital to do just that.
Operator: The next question comes from Brett Linzey with Mizuho. Please go ahead.
Brett Linzey: Just wanted to dig in on the complexion of the marketplace and really thinking about in the softer commercial pockets versus the institutional resilience. Is there any good way to think about the locker access content per building between those 2 verticals? I think you get multiples of the wallet share in school or a hospital versus a retail front, but any insight there would be helpful.
Mike Wagnes: Yes. Brett, when you think of our business, the more complex the business, a building rather, the richer the mix for us. So if you think about a higher edge school, a hospital, those are really good for us. The K-12 school, there’s doors frequently and openings frequently per square foot. If you think about open floor plans like commercial office, there’s clearly less openings on a commercial office floor plan than there is in an institution or a warehouse, or a warehouse, absolutely. So warehouse has been awful over the last 12 months from a starts, but we really don’t have any openings in the warehouse. So when you look at our business, that institutional heavy aspect of our portfolio gives us a richer mix and gives us more openings to address. So that’s a net positive for us. John?
Brett Linzey: Yes. Got it. And then just shifting back over to residential, down low teens. You will be lapping your first destock comp in the fourth quarter of ’23 here. Could you just characterize where you see those categories in their destocking phase? And any visibility you have on the sellout trends within some of those resi channels?
John Stone: Yes. So I think resi mechanical, when we see our own results and we see some other industry participant results, it’s a tough end market, let’s just say. So I don’t know that I necessarily attribute it just to destocking, but it’s a soft end market with mortgage rates going up. House churn, if you will, or resale is certainly a bit depressed. Permits and starts, maybe if you look through a rose-colored lens, you see some green shoots of hope for the future. But I think that overall market is still depressed. When we think about our comps, I would just come back to there was a period of time in 2022 where we just couldn’t ship our electronic locks even in the resi segment. And so the restocking phase was still going on until rather recently. And now you could say it’s a more normal point-of-sale-driven business on the e-lock side. The mechanical side, I think it’s just end market is depressed.
