David MacGregor: Right. Okay. Thanks for that. And as my follow-up, I mean we’re looking at a relatively strong U.S. dollar here. I’m just wondering what impact that has on your business by drawing more imported product into the marketplace?
Mike Wagnes: David, as you think about imports, they play at the very low end of the marketplace in, let’s say, North America, if you think of our non-res business, we tend to be really strong in the premium space with our institutional heavy business. We’ve been talking about this for years. We tend to be strongest when the customer values that premium offering of complexity and solutions that we provide. So a strong dollar or a weaker dollar is not something that we view as really going to be changing the dynamics of our competitive industry.
John Stone: Yes. I would add just 1 comment there, David. Some of our flagship products, like the Von Duprin, exit devices like the [indiscernible], I mean, these are very proudly manufactured in the United States.
Operator: The next question comes from Andrew Obin with Bank of America. Please go ahead.
Andrew Obin: Congratulations on a strong quarter. So a question on Europe and sort of the margins in Europe. Can you just give us a sense of what Interflex has been doing because I know it’s one of the higher profitability business. I was just trying to understand how much the mix is at play here? Or if it’s not Interflex, just as I said, the performance in Europe has continued to surprise despite the headwinds from the sort of the backlog business, just sort of more insight as to what’s driving the structural improvement in margins now?
John Stone: Yes, Andrew. I really appreciate that question because I am just super proud of how the international team has been on this steady march of building momentum, increasing productivity, expanding margins without a volume tailwind giving them operating leverage to lean on. They’ve been doing extremely well. I would say the Interflex in particular, we’re not going to call out a specific margin or a P&L for them, but that’s a very strong business, let’s just say. And we talk about them together with the other electronics portfolio in Europe, double-digit growth for us and has been for a while. Strong margin performance as well. And I think we put our money where our mouth is with the plano acquisition. And while that was rather small, the growth potential is quite large, the margin is very attractive, and the customer value delivered there between plano and Interflex together is very compelling.
And Interflex is another one of those very special businesses. Like in this call, we mentioned Access Technologies has a blue-chip customer base. Interflex really has a blue-chip customer base. And we take pride in delighting those customers with good solutions and good service, and that business continues to grow very positive for us.
Andrew Obin: Excellent. And just maybe a follow-up question. I think your predecessor, when he started used to talk quite a bit about discretionary retrofit market in North America being a source of outgrowth and then we sort of stopped talking about it. Can we just talk about where we are there? And what’s the remaining opportunity for continuing to increase your market share there? Have you taken a closer look at it? Just maybe an update on this business because it used to be a big source of our growth.
John Stone: Yes, Andrew, it’s a hugely important point. When the supply chain challenges hit and orders started piling up and backlog started piling up, we were in the business of just shipping everything we could to make up for orders that had been in the queue for a long while. And then, obviously, aftermarket work is going to take a backseat to whatever, 3, 4 months’ worth of backlog that’s just sitting there in orders that you’ve already got to fill for project business and other things. So I would say I’d feel like when the supply chain challenges were at their worst, we definitely lost some aftermarket share to competitors that Allegion typically doesn’t and shouldn’t lose share to. We’re now in a position with our lead times, our published lead times back to normal.
Our delivery performance improving. Our supply chain performance is vastly better. We’re in a position to now compete and gain that share back, and I think that’s a real opportunity for us that has been a long time coming. But getting the lead times back to where they ought to be, getting the delivery performance up and getting our internal productivity better now puts us in a better position to get out and win more of that business.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to John Stone, Chief Executive Officer, for any closing remarks.
John Stone: Well, thanks, everyone, for a great Q&A. And just to wrap up the main themes that I hope you heard today. Allegion continues to operate at a high level. Strong execution drove these Q3 results that include mid-teens organic growth in electronics and software solutions, continued margin expansion and a healthy balance sheet and cash flow, giving us good momentum going into next year. We’re on track for a record year of revenue, adjusted operating income and adjusted EPS results in 2023. We will continue to drive organic growth and margin expansion, as we mentioned. In both the short term and the long term, I feel we’re very well positioned to both build on our legacy and continue to invent and deliver new value and seamless access. Thank you. Be safe, be healthy. Have a great day.
Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
