Allegion plc (NYSE:ALLE) Q4 2024 Earnings Call Transcript

Allegion plc (NYSE:ALLE) Q4 2024 Earnings Call Transcript February 18, 2025

Allegion plc beats earnings expectations. Reported EPS is $1.86, expectations were $1.75.

Operator: Good morning and welcome to the Allegion Fourth Quarter 2024 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Josh Pokrzywinski, Vice President of Investor Relations. Please go ahead.

Josh Pokrzywinski: Thank you, Drew. Good morning, everyone. Thank you for joining us for Allegion’s fourth quarter 2024 earnings call. With me today are John Stone, President and Chief Executive Officer; and Mike Wagnes, Senior Vice President and Chief Financial Officer of Allegion. Our earnings release, which was issued earlier this morning and the presentation, which we will refer to in today’s call, are available on our website at investor.allegion.com. This call will be recorded and archived on our website. Please go to Slide 2. Statements made in today’s call that are not historical facts are considered forward-looking statements and are made pursuant to the Safe Harbor Provisions of Federal Securities Law. Please see our most recent SEC filings for a description of some of the factors that may cause actual results to differ materially from our projections.

The company assumes no obligation to update these forward-looking statements. Today’s presentation and commentary include non-GAAP financial measures. Please refer to the reconciliation in the financial tables of our press release for further details. Please go to Slide 3 and I’ll turn the call over to John.

John Stone: Thanks, Josh. Good morning, everyone. Thanks for joining us. Q4 marked the end to another solid year of growth and strong execution by the entire Allegion team. We’ve demonstrated the resilience of our business model, expanded our industry leading margins, and accelerated capital deployment to invest in our business and return cash to shareholders. I’m pleased with the topline growth in the fourth quarter and 2024 as a whole, especially in the Americas, where we’ve delivered mid-single-digit growth for the past three quarters as comparisons have normalized. Over the past year, we have primed the portfolio and the organization to grow faster, especially as our business continues to benefit from the stability of our institutional base.

We accelerated capital deployment in 2024, returning cash to shareholders and growing our business with accretive tuck-in acquisitions. Our strong cash generation, balance sheet, and pipeline of opportunities continue to position us well for future capital deployment to create long-term value for our shareholders. We’re encouraged by trends in our Americas non-residential business exiting 2024 and we’ll share some additional market perspectives when we discuss 2025 outlook later in the call. Please go to Slide 4. Let’s take a look at capital allocation for the full year. Allegion marked 2024 with meaningful product launches that demonstrate our deep customer understanding and the strength of our R&D effort and market leading brands. Throughout the year, you heard us speak to a few of these, the Schlage XE360 series, our next-generation commercial electronic lock family that supports the latest credential technologies across multifamily and commercial markets.

Schlage’s new Smart Lock integration with Airbnb, which was yet another industry first for our company, and the Schlage Indication Solutions, a best-in-class lock portfolio that allows users to more easily see the locked or unlocked status of a door, specifically designed with K-12 school security in mind. Lastly, the Von Duprin 70 series, a new product line that’s leveraging more than a century of expertise in developing high-performance exit devices to meet the safe entry and egress needs of customers today. We’re very proud of these and many others that you may have also heard about. SimonsVoss in Germany launched AX2Go, supporting mobile, smartphone-based credentials across both iOS and Android phones. And notably in Q4, Allegion became the first security solutions provider to support mobile credentials on Wear OS by Google smartwatches.

Look for more announcements like these in 2025 as Allegion continues to build on our legacy and invest for organic growth. Allegion executed M&A amounting to $137 million in 2024, this included five bolt-on acquisitions spanning our core markets. In Allegion International, we added Boss Doors and Dorcas to our portfolio, expanding how we go to market and expanding our electromechanical product portfolio. In the Americas, we added Krieger Specialty Products, Unicel Architectural, and SOSS Door Hardware, which increased the breadth of highly profitable specialty offerings in our non-residential portfolio. All of these are leveraging Allegion’s strengths like spec writing capability and expertise, our manufacturing distribution scale, and strong customer relationships.

We’re very pleased with the accretive returns they bring to Allegion. We continue to see opportunity to grow inorganically in 2025 and have entered the year with a very active pipeline. This was recently marked by our acquisition of the Next Door Company in the United States and the announcement of our intent to acquire Lemaar in Australia. We’ll share more on both of these bolt-on acquisitions in our Q1 call. Allegion continues to be a dividend paying stock and earlier this month, we announced our 11th consecutive increase to our dividend. As we’ve shared before, you can expect our dividends to grow commensurate with earnings over the long-term. Lastly, we made share repurchases in the year amounting to approximately $220 million. We remain committed to balanced, consistent capital allocation with a clear priority of investing for growth.

We have an active pipeline that complements our core mechanical and electronics portfolio and leverages our channel strengths. I look forward to updating you as we progress through the year. Mike will now walk you through the fourth quarter financial results.

Mike Wagnes: Thanks, John, and good morning, everyone. Thank you for joining today’s call. Please go to Slide number 5. As John shared, our Q4 results reflect solid performance from the Allegion team, delivering another quarter of margin expansion with mid-single-digit topline growth. Revenue for the fourth quarter was $945.6 million, an increase of 5.4% compared to 2023. Organic revenue increased 3.5% in the quarter as a result of favorable price and volume. We saw strength within our Americas segment with international organic revenue down slightly in the quarter. Q4 adjusted operating margin increased by 10 basis points, driven primarily by volume leverage and favorable mix. Price and productivity, net of inflation, and investment was a slight headwind in Q4, but strong for the full year.

I am pleased with the 70 basis points of operating margin expansion for the full year of 2024. Adjusted earnings per share of $1.86 increased $0.18 or 10.7% versus the prior year. Operational performance, favorable tax, and accretive capital deployment more than offset a slight headwind from interest and other. Finally, full year 2024 available cash flow was $582.9 million, which was a 12.9% increase versus last year. We continue to effectively manage working capital and generate strong cash flow. I’ll provide more details on our balance sheet and cash flow a little later in the presentation. Please go to Slide number 6. This slide provides an overview of our quarterly revenue. I will review our enterprise results here before turning to our respective regions.

Organic revenue grew 3.5% in the quarter, which included volume growth of 2.9% and price realization of 0.6%. Price realization stepped down about a point in the fourth quarter versus Q3, largely due to timing of rebate accruals in the Americas business compared to prior year. For the full year, the enterprise had solid price realization of 2.4%. And as we think about 2025, we expect continued price realization. Acquisitions drove two points of growth in the quarter and currency was a slight headwind, bringing total reported growth to 5.4%. Please go to Slide number 7. Our Americas segment delivered strong operating results in Q4. Revenue of $750 million was up 6.4% on a reported basis and up 4.6% on an organic basis. Organic growth included both favorable price and volume in the quarter.

Reported revenue includes 1.9% growth from acquisitions and a slight currency headwind. Our residential business was up high-single-digits in the quarter. The quarter was stronger than expected as some of our residential customers pulled in purchases ahead of inflation and tariff uncertainty. We believe underlying residential markets likely grew more in line with the previous couple of quarters. As a result, Q4 revenue was benefited by approximately mid-single-digit millions of dollars. Our non-residential business increased mid-single-digits organically in the quarter as institutional end-markets remained stable. We did not have pull ahead within our non-residential customers. Electronics revenue was up low-single-digits compared to Q4 last year.

As we discussed on prior calls, electronic comparisons in recent years have reflected the timing of supply chain disruptions in prior years. Americas adjusted operating income of $205.1 million increased 8.9% versus the prior year period. Adjusted operating margin was up 70 basis points as a result of favorable volume leverage and accretive acquisitions. Price and productivity, net of inflation, and investments was a slight headwind in Q4, but strong for the full year. Please go to Slide number 8. Our International segment had a tough fourth quarter, driven by a challenging macroeconomic environment, particularly in Germany, which is our largest market internationally. Revenue of $195.6 million was up 1.5% on a reported basis and down 0.7% organically.

Acquisitions were a tailwind this quarter, positively impacted reported revenue by 2.4%. Currency was a slight headwind in the quarter versus prior year. China was also a headwind to international organic growth. We took additional steps in the quarter to exit our already small operations there. In total, we had approximately $5 million of revenue in full year 2024, which represents a slight headwind to 2025 organic growth. International adjusted operating income of $30.9 million decreased 4.3% versus the prior year period. Adjusted operating margin for the quarter decreased 100 basis points, while price and productivity exceeded inflation and investments, margin declines were due to lower volumes. Please go to Slide 9 and I will provide an overview of our cash flow and balance sheet.

2024 available cash flow came in at approximately $583 million, up $66.5 million versus the prior year. This increase is driven by higher earnings and improvements in working capital, partially offset by higher capital expenditures. Working capital as a percent of revenue improved as we continue to focus on working capital efficiency to convert earnings to cash. We saw improvements in both inventory turns and DSO this year, which drove the improvement. Finally, our balance sheet remains strong. Our net debt to adjusted EBITDA is at a healthy ratio of 1.6 times. Our business continues to generate strong cash flow and our balance sheet supports continued capital deployment. I will now hand the call back over to John.

John Stone: Thanks, Mike. Please go to Slide 10. Last quarter, we provided some initial market commentary for 2025. Today, I’d like to focus specifically on our institutional markets to provide more perspective on what’s one of the main drivers of our business. Allegion holds an enviable position in the industry here with strength in our sales footprint, our specification capabilities, and our relationships with channel partners. We win business by solving complex problems for end users and working closely with architects with whom we’ve had decades long relationships. As we start off 2025, we continue to see indications of stable growth in our key market segments. A key source of funding, as indicated by new municipal bond issuance remains healthy, following a very strong 2024 and you can expect these bonds will be spent over the next several years.

Dodge Institutional Indicators also support volume growth as square footage starts have been in positive territory. The institutional markets are still growing, partially offset by known pockets of softness like commercial office and multifamily. Please go to Slide 11 and let’s walk through our outlook for 2025. We expect total Allegion revenue growth to be 1% to 3% and organic revenue growth to be 1.5% to 3.5%. Total growth includes approximately one point of acquisitions, which is largely carryover from 2024 and approximately 1.5 points of headwind from foreign currency, primarily in Allegion International. In the Americas, we expect organic revenue growth to be low to mid-single-digits with growth coming from both our non-residential and residential businesses.

For Allegion International, we anticipate that organic revenue will remain relatively flat. As Mike mentioned earlier, macroeconomic conditions in our International markets, particularly in Germany, continue to be weak. We’re estimating an adjusted earnings per share outlook in the range of $7.65 to $7.85. This represents growth of approximately 1.5% to 4% over the prior year period, inclusive of a significant headwind from tax rate, which is estimated to be 17.5% in 2025 at the midpoint. You can find more details in the appendix. Lastly, our outlook on available cash flow is 85% to 90% of adjusted net income. We are committed to balanced, consistent and disciplined approach to capital deployment and this outlook assumes $86.7 million in average diluted shares outstanding, inclusive of anticipated share repurchases in 2025.

Allegion’s M&A pipeline is active and we anticipate allocating additional capital to acquisitions this year. However, this outlook does not account for any further acquisitions beyond the recent announcements we’ve shared on Next Door Company at Lemaar. One more item of interest that I’d like to cover given the evolving headlines in recent weeks is tariffs. Our guidance includes the currently enacted tariffs on imports from China and at the enterprise level, we import less than 5% of our cost of goods sold from China. We’re taking a combination of pricing actions and sharing those costs with our suppliers to minimize the impact. Our guidance does not include potential tariffs that may be enacted on Mexico. We source approximately 20% to 25% of cost of goods sold from Mexico, primarily related to our residential business in the Americas.

Should tariffs go into effect, we anticipate taking pricing actions to cover the higher costs and expect to offset the dollar impact at the operating income and earnings per share level. Please go to Slide 12. In summary, Allegion delivered a record year in 2024, a year marked by consistent execution, solid margin expansion and balanced capital deployment. These results are a testament to our team of highly engaged experts, who together with our distribution and channel partners, solve complex problems for our end-user customers and work tirelessly to make the world safer. We expect 2025 will be another opportunity to showcase the strength of this team. And with the consistency and discipline we have in investing for our future, Allegion is primed for more growth.

With that we’ll be happy to take your questions.

Josh Pokrzywinski: Drew, we can open up the line for questions. Drew, we can move to Q&A.

Q&A Session

Operator: We will now begin the question-and-answer session. [Operator Instructions] Our first question today will come from Jeff Sprague of Vertical Research. Please go ahead.

Jeffrey Sprague: Thank you. Good morning, everyone. And I guess the old adage patience is a virtue still holds. I wonder if we could just address first is kind of the price-cost productivity investment equation. I think it’s the first time that’s flipped negative maybe since you’ve reported it. Can you give us a little color on maybe just kind of headline price-cost or maybe what was going on in investment spending in the quarter to drive that change?

Operator: The speaker line may be muted. You are live.

Jeffrey Sprague: Can you hear me? I’m not muted.

Operator: I hear the questioner. I’m asking if the speaker line is muted from Allegion. Is your line muted? Okay. Ladies and gentlemen, it appears we are having difficulty with the speaker line. Please stand by one moment.

Josh Pokrzywinski: Hello. This is Allegion. Are we audible?

Operator: Okay. Hi. This is the operator. Go ahead and would you like me to have the questioner repeat the question? I can hear your line now.

John Stone: You got the question. Mike Wagnes is going to go ahead and answer it. Thanks for the patience everyone and thanks for the question, Jeff.

Mike Wagnes: Yes. Hey, Jeff, can you hear me?

Jeffrey Sprague: I got you loud and clear, Mike. Thanks.

Mike Wagnes: Perfect. Sorry about that. So if you think about pricing in the quarter, it did step down like we shared in the prepared remarks, but that was a function of timing of our rebate accruals. It wasn’t core pricing driven. Core pricing was still decent. If you remember in 2023, our volume was more first-half loaded, right? And so as we got through the end of ’23, we took down those rebated reserves. In ’24, it was actually a positive development, our volume accelerated in the back half of the year and especially Q4, you saw the volume. So we had to make some adjustments to those accruals. I think the key takeaway for me is pricing was still decent in the Americas, of course, led by non-residential, which was strong. And as we think about 2025, continue to expect to see pricing and productivity in excess of inflation and investment on a dollar basis. So that equation that you’re comfortable for the full year, we expect that dynamic to continue next year.

Jeffrey Sprague: Great. Thanks for that. And John then thanks for the color on the tariffs, obviously on everyone’s mind. I guess one other element is just the sourcing of steel or other metals, steel, and aluminum. Anything you could add there on where you’re sourcing for your US plants and if there’s any particular risk that you’ve identified there?

John Stone: Yes, that’s a good question, Jeff, on these steel and aluminum derivative tariffs. Initial look through that, the impact is very small. It doesn’t even have two commas in it. We’ve still got more analysis to do on that, but I’d say our non-residential business is largely sourced and produced in the United States. So we don’t anticipate a big impact from those additional tariffs on steel and aluminum.

Jeffrey Sprague: Okay, great. Thanks. I’ll leave it there. Much appreciated.

John Stone: Thanks.

Operator: Your next question today will come from Julian Mitchell of Barclays. Please go ahead.

Julian Mitchell: Hi. Good morning. Maybe just a first question around the adjusted sort of operating margin that’s embedded in the guide. So you had pretty good margin expansion most of last year. It sort of dried up a bit in the fourth quarter, partly because of that price dynamic that you’ve discussed. For the full year ’25, are we sort of assuming it’s a few tens of basis points of margin expansion that’s in the guide? And is there any kind of acceleration in there year-on-year in the back half versus the first half? Thank you.

Mike Wagnes: Yes, thanks for the question, Julian. If you look at the guide, right, we give EPS all the below the line items. And then as you pick revenue, you can back into the margin expansion. We do expect to have margin expansion in 2025. And as you think about the framework that we gave previously, the last two years, ’23, ’24 extremely strong, 230 basis points of margin expansion. If you think about 2025, that third year in that framework, I’d expect to be at the lower end of that framework we previously gave of the 50 basis points to 100 basis points. And when you back into the implied guide, you can kind of calculate that. With respect to timing, I would just share 2025 will look similar to 2024 from a normal seasonality as we progress throughout the year.

Julian Mitchell: That’s helpful. Thank you. And then just within the Americas organic sales guidance for 2025. Is it sort of embedding residential up kind of low-single-digits, non-residential organic sales up mid-single-digits? And then Electronics is that getting back on track for kind of decent growth in ’25? I think it was down low-single in ’24.

Mike Wagnes: Yes, we would expect non-residential to be the stronger of the two, as you would think from our prepared remarks. We don’t give exact figures resi versus non-resi, but you could think the non-residential being the stronger of the two. And then for Electronics, I think, we’re back to a normal comparison. So you can expect to see Electronics growth outpace the mechanical like we’ve shown in the past. So you could see Electronics growth certainly be better than the overall Americas growth.

Julian Mitchell: Great. Thank you.

Mike Wagnes: Thanks.

Operator: Your next question today will come from Joe O’Dea of Wells Fargo. Please go ahead.

Joe O’Dea: Hi. Good morning. Thanks for taking my questions. On the margin commentary and what’s implied in roughly 50 bps of year-over-year margin expansion. Can you just touch on that kind of across the organization? Should we think about both segments seeing year-over-year margin expansion, maybe Americas leading that and then a little bit of corporate leverage on top of that?

Mike Wagnes: Yes, sure. Thanks for the question, Joe. Obviously, if you think about Allegion, the enterprise can’t get there without the Americas. So we expect the Americas to have a stronger margin expansion. If you think about international though, we do expect to expand margins there this year. And then from a corporate, every year, we have just like a normal increase of a few percent for regular inflation. So you could take the actuals for the current 2024, so the past ’24 and just increase it by a few percent for inflation.

Joe O’Dea: Got it. And then just in terms of the international growth guidance in ’25, can you touch on the China component to that and what is embedded within that in terms of any headwind as it relates to the exit there and timing around being done with those actions?

Mike Wagnes: I’ll just share like we had in the prepared remarks, the revenue was only $5 million in ’24. So as you think about a headwind for ’25, it kind of sizes up that it’s small.

Joe O’Dea: Got it. Thanks very much.

Operator: Your next question today will come from Tim Wojs of Baird. Please go ahead.

Timothy Wojs: Hey, guys, good morning.

John Stone: Hey, Tim.

Timothy Wojs: Hey, maybe just on the non-res business. It sounded like you, in your prepared remarks were a little bit more confident or saw some things in the quarter that you thought developed positively. So maybe just talk a little bit about some of the quoting activity that you’re seeing. And I guess if you could kind of thread that into how do you get to kind of the upper-end of the Americas guide for 2025 on the revenue side?

John Stone: Yes, thanks for the question, Tim. I’d say the non-res side of the business in the Americas did accelerate in 2024 a bit better than we had originally contemplated. Volumes picked up a little bit like Mike talked about and that’s carried on into 2025. That momentum has carried on. I think our spec activity supports that view. Other indicators like we showed on Dodge Starch on the institutional side. The earliest of the early indicators, Dodge Momentum has been reading a little bit favorable. So just the project work that we’re seeing on the commercial side, the sell-through that our channel partners are sharing with us, the volume outlook just feels a bit better than it has in recent months. So it’s a good end to 2024 and a good start to 2025 on the commercial side of the business.

Timothy Wojs: Okay. And I guess what would you need to see, would it just be like this needs to continue kind of through the year to get to the upper end? I’m just trying to kind of gauge what you kind of think about and kind of guardrails in terms of what gets you the kind of the lower or the higher end of that revenue guide in Americas.

Mike Wagnes: Yes, Tim, we give an outlook there. It’s a range. Clearly, we’re only a month into the year, right. So let’s see how this year progresses before we think about changing to upper end. I’d share with you on the residential side, obviously, we think that will not be as strong as the non-residential side. So obviously, if that is better than we anticipate, that could help. But overall, that core institutional part of the business has remained stable for quite some time on the non-res side and we expect that to continue.

Timothy Wojs: Okay. That’s helpful. And then it sounds like you have a pretty healthy pipeline in terms of M&A deals. And I guess if you just kind of look through the filings, I mean, it does seem like the M&A that you’ve done kind of in 2024 is accretive to margins. Is that a similar makeup to, I guess, what’s in the pipeline or is there a little bit more variance within the margin profile of potential deals?

John Stone: I think I appreciate the question, Tim. I think we can’t speculate on deals we haven’t done yet, but I would say the M&A environment is good, it’s healthy. I think we have a lot of interesting targets, very high quality targets in the pipeline today. Working hard on those. Will every single one be accretive to industry leading margin business like Allegion? Maybe not, but I think don’t lose sight of we will be disciplined on our acquisitions, but I do see if I was ended 2024 happy with our progress on M&A, I could see myself ending ’25 very happy on M&A.

Timothy Wojs: Okay. Sounds great. Thanks a lot for the time.

John Stone: Thank you.

Operator: And our next question today will come from Brett Linzey of Mizuho. Please go ahead.

Brett Linzey: Hi. Good morning. Thank you. Hey, I wanted to come back to the organic sales outlook, the 1.5% to 3.5% and really the non-res side of that. How are you thinking about commercial versus institutional? Do you see growth in both of those areas? And then is there anything to think about in terms of the phasing of that growth first-half versus second-half? Is it fairly level loaded year-over-year or is there some front-end or back-end weighting?

Mike Wagnes: Yes. I’ll address the phasing and then John can talk to the vertical markets. With respect to the phasing, I kind of look to ’24 as a more normal year. And so, I wouldn’t say that this is a back-end loaded year vis-a-vis what we just put on the board for 2024.

John Stone: Yes. I think on the non-res side, as we showed, a bit of a focus on the institutional verticals, education, and healthcare, supported by very strong issuance of muni bonds in 2024. That segment is still growing. That is where Allegion’s business is a bit more heavily weighted. So that’s quite favorable for us. In the commercial verticals, still a mixed bag, I would say. Data Centers, as everyone knows, is growing very rapidly. Allegion has a very good and very rapidly growing business there, supported by rapidly growing specification activity. On multifamily, obviously, rather soft on the new construction side on commercial office, major metro areas. Again, this is mature bad news. Still a bit soft, but we’re encouraged when we hear return to office mandates and things like this.

So there are reasons to start to think about flirting with the bottom on those segments and we’ll just have to see, as Mike said, we’ll have to see as the year progresses, how those other verticals start to shape up.

Brett Linzey: Okay. Great. And then just a follow-up on the tariffs, and this is specific to Mexico. You talked about some of the pricing mitigation actions. I’m just curious what would the mechanics of price look like? Would these be normal list prices or would they be surcharges? Any color on the nature of that?

John Stone: Yes. So I think we would have to evaluate once something gets implemented, Brett. I mean it’s difficult to speculate on the unknown and just give you some hypotheticals. So, I would just summarize it with, we would see ourselves implementing pricing actions. There could be a mix of pricing actions to be able to offset the dollar impact on the operating income and earnings per share line. I think that’s the best we can give you at this point because again, we’re — it’s just hypothetical at this point.

Brett Linzey: Appreciate the detail.

John Stone: Thanks.

Operator: We have just one final question in queue and that question will come from Chris Snyder of Morgan Stanley. Please go ahead.

Christopher Snyder: Thank you. I wanted to ask about the Q4 tariff pull forward. I think you said mid-single-digit millions for Americas resi, if I heard that right, so maybe like 2% to 3% kind of tailwind in the quarter if my math is right. I guess the question, one, how do you size that? How can you kind of pinpoint that number? And then the second is like is the expectation that this tariff pre-buy continues into Q1? Are you seeing that here kind of halfway through the quarter? Thank you.

Mike Wagnes: Thanks for the question, Chris. If you think about our residential business, we grew at the high-single-digits and that was frankly more than you would expect based on underlying market demand. So our best estimate is, hey, there’s about mid-single-digit millions. So if you back that out, you’re looking at maybe a low-to-mid type growth for resi, it’s not precise. It’s an estimate that we have, knowing that our channel partners in the residential business tend to be pretty large companies who place larger size orders because it’s more concentrated than on the non-res side. I think for me, the more important thing is we didn’t see this in non-residential, where John talked about how we ended strong. With respect to Q1, I would expect that mid-single-digit millions to be a headwind to resi.

But if you think about total Americas, that’s not very big. So when you model it, just know that that’s coming from Q1 into the fourth quarter of ’24, but I wouldn’t expect further pull out.

Christopher Snyder: Thank you. I appreciate that. And then I also appreciate all the color and the communication around the Institutional business. I guess anything — maybe that you could flag around the government exposure within institutional? I know education and healthcare are the largest verticals, but obviously, just a lot of uncertainty out there on government buildings with headlines of layoffs, et cetera. Thank you.

Mike Wagnes: Yes. It’s a timely question and a fair one. I would say the majority of the project work that we see out there is coming from local funding sources, right, municipal bonds, local property taxes, that’s what funds K-12 schools as an example, rather than federal monies out of Washington. So fair to ask the question, I would just say the majority of our end-user customers are a little bit insulated from that because it’s more local funding sources, property taxes, muni bonds, things like that.

Christopher Snyder: Thank you.

Operator: At this time, we will conclude the question-and-answer session. I’d like to turn the conference back over to John Stone, President and CEO, for any closing remarks.

John Stone: So thanks everyone again for joining the call. I am very proud of the year that the Allegion team and our distribution channel partners put on the board for 2024 and very excited to see us navigate our way through what should be a very favorable 2025.

Mike Wagnes: Thanks.

Operator: The conference has now concluded. We thank you for attending today’s presentation and you may now disconnect.