Good morning, and welcome to the Allegion Q3 Earnings Call. All participants will be in listen only mode. Please note, this event is being recorded. And now I'd like to turn the call over to your host today, Mike Wagnes, Vice President of Investor Relations and Treasurer. Please go ahead, sir.
Thank you, Keith. Good morning, everyone. Welcome and thank you for joining us for Allegion's Q3 2019 earnings call. On the call today are Dave Petratis, Chairman, President and Chief Executive Officer and Patrick Shannon, 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 Slides number 23. 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. Dave and Patrick will now discuss our 3rd quarter 2019 results, which will be followed by a Q and A session.
For the
Q and A, we ask each caller to limit themselves to one
I'll turn the call over to Dave. Thanks, Mike. Good morning and thank you for joining us today. Allegion delivered great results in Q3. I'm extremely pleased with the revenue growth and operational performance, which have positioned us well to deliver on our 2019 commitments.
Top line revenue growth was strong in the Q3, particularly in the Americas and EMEA regions. In the Americas, both non residential and residential businesses saw high single digit growth. In EMEA, we saw solid volume increases across most of the region. The Americas delivered electronics growth of 10% in the quarter, which was a notable performance considering the challenging comparable from prior year, where we grew nearly 30%. Strong market acceptance of our new highly rated Schlage Encode residential lock continues to be robust and help drive the electronics performance in the quarter.
We were the 1st major manufacturer to bring a smart Wi Fi deadbolt to the market and it has a lot of momentum in the residential channel. We believe our brands, expanded product portfolio, technical partnerships, breadth of channel relationships and a large installed base provide us with a great opportunity to take advantage of the electronics market as it continues to evolve and grow. Moving down the slide, Allegion was able to drive price realization and productivity actions, which significantly outpaced inflation. I'm proud of the performance as we saw substantial operating margin expansion of 220 basis points this quarter. In the 3rd quarter, we delivered robust adjusted EPS growth at nearly 20%, driven primarily by operational performance along with favorable share count and tax rate impact.
We are affirming the full year revenue outlook in which we continue to project total and organic revenue growth between 4.5% and 5.5%. Speak to the individual region outlooks later in the presentation. Last, we are tightening the outlook for reported EPS going from a range of $4.50 to $4.65 per share to a revised outlook of $4.55 to $4.65 per share. The adjusted EPS outlook is also being tightened by raising the low end of the range and going from $4.80 to $4.90 per share to a revised outlook of $4.85 to $4.90 per share. Please go to Slide 5.
Revenue for the Q3 was $748,300,000 an increase of 5.2%, inclusive of 6.4 percent organic growth. Currency headwinds offset some of the organic growth. The Americas and EMEA region were responsible for the organic growth results. Patrick will share more detail on this. Adjusted operating margin increased by 2 20 basis points, aided by substantial contribution from price and productivity outpacing inflation.
Solid 1 share of $1.47 increased by nearly 20% versus the prior year. As mentioned, the increase was driven primarily by operational performance along with favorable share count and a lower tax rate. Year to date available cash flow is up slightly with the increased earnings. We have experienced this year being mostly offset by increased capital expenditures. Please go to Slide 6.
In March, we shared our refresh corporate strategy with you, which centers on our vision of seamless access. Since that time, momentum and market acceptance continues to build. For instance, smartphones and connectivity are the norm. This translates to pressure from our customers to meet end users' demand for a mobile connected life, while ensuring security. Allegion is well positioned to meet this demand.
We see strong uptake with our seamless ID solutions for universities in edge devices, in adoption of Schlage Encode and in emerging technologies and venturing opportunities. Future. As a reminder, our 5 strategic pillars that guide Allegion are expand in core markets. We continue to broaden the core business through existing and new channel relationships, digital demand creation and leading products. Be the partner of choice, delivering seamless access means we're intent on leveraging partners and ecosystems to drive growth, which includes using open platforms that integrate well with others.
Deliver new value will focus on the user experience for access as well as working with partners to create unique solutions that increase safety and speed up productivity. We are also intent on bringing new products to market faster. Capital allocation. Allegion will continue to take a disciplined and flexible approach to capital deployment, one that spans organic investments, acquisitions shareholders distributions to optimize shareholder returns. Last, enterprise excellence.
Allegion is committed to creating value through productivity, through excellent customer experience and through a culture of safety, health and employee engagement. Access has been a part of the company's heritage for 100 years and seamless access will define our company going forward. Patrick will now walk you through the financial results and I'll be back to discuss the 2019 outlook.
Thanks, Dave, and good morning, everyone. Thank you for joining the call today. If you would, please go to Slide 7. This slide depicts the components of our revenue growth for the Q3. I'll focus on the total Allegion results and cover the regions on their respective slides.
As indicated, we delivered 6 0.4% organic growth in Q3. We saw strong volumes and solid price realization drive the organic increase this quarter, led by both the Americas and EMEA regions. Volumes recovered nicely from Q2 levels as market demand was strong. Also during the Q3, currency in EMEA and Asia Pacific continued to be a headwind on total revenue growth. Please go to Slide number 8.
Reported net revenues for the Q3 were $748,300,000 As stated earlier, this reflects an increase of 5.2% versus the prior year, up 6.4% on an organic basis. Adjusted operating income of $173,000,000 increased more than 16% over the same time frame last year. Adjusted operating margin of 23.1 percent increased 220 basis points and represents our highest quarterly adjusted operating margin since then. Leverage on incremental volumes, price realization and substantial productivity drove the operating income increase and margin expansion. During the quarter, all regions contributed sizable margin improvements.
Headwinds to margin performance included incremental investments, which had a 30 basis point impact on adjusted operating margins. Please go to Slide number 9. This slide reflects our earnings per share reconciliation for the Q3. For the Q3 of 2018, reported earnings per share was $1.21 Adjusting 0 point $2 for the prior year restructuring and acquisition charges as well as adjustments to provisions related to the enactment of tax reform, the Q3 2018 adjusted earnings per share was $1.23 Operational results increased earnings per share by $0.24 as favorable price productivity and operating leverage on incremental volume more than offset inflationary impacts and unfavorable currency. Favorable year over year share count drove another $0.03 increase as we have executed nearly 180,000,000 in share buyback so far this year.
A decrease in the year over year tax rate improved earnings per share by $0.02 The impact of incremental investments in the quarter was a $0.02 reduction. The combination of interest expense, other expense and non controlling interest had a negative $0.03 impact, which was driven mostly by favorable other income in 2018. This results in adjusted Q3 2019 earnings per share of 1.47 dollars or nearly 20% compared to the prior year period. Lastly, we had a 0 point a $0.07 per share reduction for charges related to restructuring, acquisitions and debt refinancing. After giving effect to these one time items, you arrive at the 3rd quarter 2019 reported earnings per share of $1.40 Please go to Slide 10.
This quarter revenues for the Americas region were $567,800,000 up 7.1% on a reported basis and 7.2% organically. Organic growth was driven by strong volume along with continued price realization. When compared to Q3 of last year, we experienced high single digit growth in both non residential and residential as non residential market demand remains strong and residential rebounded nicely from the sluggishness we experienced in the first half of the year. Electronics growth for the quarter came in at 10%. As Dave mentioned earlier, we are pleased with this electronics performance given that the quarter was going up against a nearly 30% growth rate compared to last year.
America's adjusted operating income and $75,600,000 increased 13.8% versus the prior year period and adjusted operating margin for the quarter increased 180 basis points. The increase in adjusted operating margin was driven by leverage on incremental volume, along with price and productivity significantly exceeding inflation. Incremental investments were a 50 basis point decrease on operating margins. Please go to Slide 11. 3rd quarter revenues for the EMEA region were 137 $800,000 up 2.5% and up 6.9% on an organic basis.
The organic growth was driven by increased volume across most products along with solid price realization. Total revenue growth continues to be reduced by significant currency headwinds. EMEA adjusted operating income of $12,000,000 increased 17.6% versus the prior year period. Adjusted operating margin for the quarter increased 110 basis points with price and leverage on incremental volume contributing to the increase. Timing of year over year investments benefited operating margins by 80 basis points as startup costs incurred in 2018 related to our new Poland facility did not repeat this year.
Please go to Slide number 12. 3rd quarter revenues for the Asia Pacific region were $42,700,000 down 9.1% versus the prior year. Organic revenue decreased 4.8%. The organic revenue decline was driven by softer residential markets in Australia along with internal revenue transfer of $1,500,000 to the other regions. Foreign currency was again a significant headwind for the quarter, reducing revenue by more than 4%.
Asia Pacific adjusted operating income for the quarter was 4 point $4,000,000 an increase of 37.5 percent with adjusted operating margins improving 3.50 basis points versus the prior year period. The region saw strong productivity, the result of restructuring actions taken last year and acquisition integration, which offset the 70 basis point headwind from incremental investments. Of note, 2019 Q3 operating income includes a $1,100,000 favorable recovery of previously remitted non income tax, which had a 260 basis point favorable impact on Asia Pacific margins in the quarter. Please go to Slide 13. Year to date available cash flow for the Q3 2019 was $230,000,000 which is an increase of $1,400,000 compared to the prior year period.
The increase is driven by increased net earnings, mostly offset by increased capital spending. Working capital as a percent of revenues increased in the 3rd quarter and the cash conversion cycle was also slightly higher. We continue to remain committed to an effective and efficient use of working capital and we will continue to evaluate opportunities both minimize investments in working capital and increase available cash flow. Lastly, we are affirming our full year available cash flow outlook range of $410,000,000 to $430,000,000 I will now hand the call back over to Dave for an update on our full year 2019 outlook. Thank you, Patrick.
Please go to Slide number 14. As you can see on this slide and was mentioned earlier, we are affirming our revenue outlook for the total company. The consolidated outlook for total and organic revenue remains at a range of 4.5% to 5.5%, although we are adjusting within the regions. In the Americas, we continue to see positive fundamentals in our non residential verticals led by institutional which we believe will continue to remain solid for the near term future. In residential, we saw Q3 rebound from the sluggishness we experienced during the first half of the year.
In addition, we expect the general positive trend electronic products to continue for the foreseeable future and believe we are well positioned to take advantage of this long term trend. Therefore, we are slightly increasing the revenue outlooks for Americas. For the EMEA region, we expect continued currency pressures for the remainder of the year and have taken down our outlook for total revenue. However, organic revenue remains unchanged. In Asia Pacific, we expect the softness in the Australian markets to continue, particularly around residential end markets.
We also expect unfavorable currency impacts to continue. As such, we are lowering the outlook for both reported and organic growth in the region. We are also updating earnings per share outlook, raising the low end of both our reported and adjusted EPS ranges. Our reported EPS outlook is now at a range of $4.55 to $4.65 per share, with adjusted EPS at a range of $4.85 to $4.90 This represents adjusted EPS growth of approximately 8% to 9%. As Patrick stated, we are affirming our cash flow outlook range of $430,000,000 The outlook updates the expected investment spend to a range of $0.11 to 0.13 15.5% with the favorability experienced in Q3, mostly offset in Q4.
We are updating our outlook for outstanding diluted shares for the full year to approximately 94,300,000 reflecting the buyback activity completed so far this year and including expected share repurchases for Q4. Please go to slide 15. At the brief summary of Allegiant's Q3 performance, total revenue grew 5.2%, organic revenue grew 6.4%, adjusted operating margins were up 2 20 basis points. Adjusted EPS was up nearly 20%. In Q3, we delivered our highest quarterly revenue, operating margin and earnings per share.
Allegion has an operating system of operations that continue to strengthen the foundational elements of both safety and innovation. The system combined with strong brands and channel relationships has been a hallmark of our performance since then and certainly helped us deliver the 3rd quarter results. Thank you to every member of the Allegion team. Your commitment to excellence strengthens our future. Now Patrick and I will be happy to take your questions.
Yes. Thank you. We will now begin the question and answer session. And the first question comes from Andrew Obin with Bank of America Merrill Lynch.
Yes, good morning.
Good morning, Andrew.
Just a question, we got a lot of questions I think regarding the 4th quarter guide and given the organic performance in the quarter, was there any pull forward of revenue Q4 into Q3? And I apologize, I joined a little bit late. But just conservatism about organic growth, specifically in Americas in Q4 given the performance in the 3rd quarter.
So, I would characterize Q3 extremely strong growth. As indicated, 7% organic growth, really good performance both in the non res and residential segments. No real pull forward of activity. I would say business improved a little bit kind of as we progressed throughout the quarter, which was good to see. But just as a reminder, we did increase our full year guide on organic revenue growth given the Q3 performance.
And so that's baked in there. Our year to date organic growth Americas is at 6% and our full year guide is kind of within in that range. And so, still expect a good Q4 going forward and we'll finish the year strong relative to top line performance.
And then just a follow-up question, one of your competitors highlight on their conference calls that they're starting to see sort of signs of markets slowing. I wonder if they were referring to your census data. But you guys are, I think are quite a bit more upbeat. What kind of visibility do you have over the next 12 to 18 months? Thank you.
So we are solid positive upbeat on the economy. As I look at the positive factors consumer confidence, low unemployment, state and local tax revenues, which are a key for our business, low interest rates and tightness in the housing markets. I don't know why you could not be positive about the view going forward. I was looking at future activity for bond issues. In the state of Texas, there's 84 bond issues on the ballot.
I just see a trend and need in the economy for investments on both residential, non residential and feel positive about the outlook.
Got you. Thank you.
Thank you. And the next question comes from Julian Mitchell with Barclays.
Hi, good morning. Just wanted to ask about the residential business. You did have a good acceleration there in the Q3. Whether you see that growth rate as sort of a blip because you were starting a bunch of initiatives or whether you think that because of all your sort of self help measures in resi, you can drive a good mid single digit plus growth rate in the quarters and years ahead?
I think if you compare our first half residential performance, which I believe was plus 4 was respectable in a soft patch in the market. We also had some self help there or correction that we were doing in the channel. The market improved in Q3. That's reflective. I think the best opportunities going forward in res will be multifamily.
That continues strong. I think single family, which is important to us, is going to continue to plod along. It's not getting significantly better. You add electronics on top of that with some of our leading products, our high star ratings, our connectivity and the 1st Wi Fi embedded lock, I think it sets us up for continued solid performance in that segment.
Thanks. And then just my second quick one would around the implied sort of operating margins in Q4. We've had some questions this morning around it. It looks as if that implies a softer margin performance than what you saw in the Q3 just based on the full year guide. Just maybe any comments you could provide on that 4th quarter margin trend year on year, any big headwinds or tailwinds you'd call out?
Yes.
Well, let me first maybe comment on a little bit more specifics on Q3 operating margin performance. So as indicated, really strong across the board, all regions showing fairly significant margin improvement. We did benefit, if you kind of look at the price productivity inflation dynamic, extremely favorable. Inflation, you may recall last year was at a peak in Q3. And so the comparisons were easier, if you will, and that gap was extremely favorable in the reported results in Q3 this year.
We won't see that favorability as much reflected in Q4 and therefore the margin profile expansion won't be as strong in Q3. However, I would say just given the anticipated continued strength in the overall markets, revenue growth, etcetera, we will have good operating margin improvement year over year with margins continue to expand. And our full year expectation again is like an 80 to 100 basis point margin improvement full year. So still anticipate strong operational performance in Q4 to finish out the year.
Hey, just one point of clarification, Julian. The number Dave quoted for residential that was year to date for the resi growth.
Understood. Thanks very much for the help.
Thank you. And the next question comes from Deepa Raghavan with Wells Fargo Securities. Very well. Moving on to the next question is from Josh Chan with Baird.
Hi, good morning and congrats on a strong quarter.
Thank you.
I wanted to ask about sort of your confidence in terms of the Americas res you are kind of seeing in your business in terms of non res overall growth? And just kind of curious what kind of conclusion you might have come across? And then also what kind of verticals in particular are you seeing that strength into the rest of the year in 2020, I guess?
So a lot packed into that. I think you've got to look at the macro noise and take heat of that. Again, as I look at the macro, I see a lot of positive out there, including again I'll emphasize state and local tax revenues. Then you've got to square that with what's the level of our backlog, quote activities. I'd remind you, Josh, that construction backlogs still remain at over 8 months.
That's healthy. Residential inventories, historic low from my perspective at 4 months. And then look at our activities for quotes, we like what we see going forward. That continued solid progression of the business, you have to temper that with electronics, which we think positively influences. So we're confident in what we see over the next 9 to 12 months.
Right. That's good to hear. And my follow-up is on the investment spending. I noticed that you kind of took the investment spend down a little bit for the year. I wonder if that's a little bit of a shift in terms of thinking or just is that more timing or anything to read into there?
Nothing really to read into that, more of a timing item. When we look at the end markets, there are still many opportunities to continue to invest in our business, particularly around channels, demand creation, new product development, activities that we can continue to invest in that we believe will continue to accelerate our top line performance. And so we'll continue to look at those opportunities and give you more kind of specifics relative to 2020 going forward. But there's a lot of activity and things we can continue to invest to continue to drive our business it.
Okay, great. Thank you for your time.
Thanks, Josh.
Thank you. And the next question comes from John Walsh with Credit Suisse.
Congrats on a strong operational quarter as well. Obviously, we knew it was going to step down, given the comparison what we saw in the first half of this year, but it better than I thought. So one, I was curious if that's kind of mix related or if you're actually realizing better capture on price than maybe you would have anticipated?
Nothing out of the ordinary. I mean, you hit it right in terms of sequentially, the pricing was down, but pretty much in line with our expectations. And the teams across the board, I would say, particularly in Americas and Europe, continue to execute extremely well on price realization and capturing what they can, particularly in the non residential segment, as you know, resi, little bit harder to get price particularly in the big box arena, but performance has been good and we'll continue to drive it going forward and capture what we can given the strong markets.
Got you. And then obviously, good cash performance, cash built quarter over quarter. Kind of what are your expectations or visibility into capital allocation decisions, whether it be M and A or share repurchase or others?
I would say, we continue with our strategy. We think there's opportunities to ring some cash out on inventories. We invested in 2019 with some of the moves that we made globally. And I'm extremely pleased on how we executed on that moves. Our move from Turkey to Poland, some ERP consolidations that never hit the press that we're executing in a high level, we put some additional inventory in place that will ring out of the system.
As we think about capital deployment, the M and A pipeline continues to be robust. Prices are high. We remain disciplined and we continue to be active in terms of some stock repurchases.
Thank you. And if I could just sneak one more in here, if you don't mind. Just thinking about the electronics growth rate, I mean, you have you did have a very difficult compare. You have an easier compare in Q4. You had been doing 20% to 30% growth on growth and it really ticked up this quarter.
Anything to call out there or how we should think about that growth rate going forward, just given the very strong growth on growth?
Our growth a year ago and
top that.
So the numbers are a year ago and top that. So the numbers are getting bigger. The opportunities are also remains, I think, compelling. If you remember at Investor Day, dollars 40,000,000,000 openings in the world, connected devices, technologies, our approach to open protocols with connected capabilities continues to open up opportunities. We think we understand the growth of these markets on a global basis and it will continue to be a positive driver for Allegion.
Yes. But you characterize it right, if I can add that the comparisons get a little bit easier, particularly in Q4, but kind of low double digits is kind of how you should think about it going forward.
Great. Appreciate it. Thank you.
Thank you. And the next question comes from
recent GSX conference, I spent a lot of time with Brad going through the way the company is essentially changing its sale, its go to market with customers trying to get a more holistic, more or less type of sales opposed to just selling product or product. If you could I'm wondering if that has played into the efficiency and then the margin improvement that you've seen in the last couple of quarters?
So, you're breaking up a little bit there, but I'll try and hit that. The conversations you had with Brad, I think number 1, partnerships is one of our strategic objectives here. Working with people, the big integrators, whether it's Seaboard, whether it's Bosch, Siemens, we think we bring a unique approach to that. I think second is a heavy focus on customer satisfaction and quality through the value stream. I'd like to think that from when we first work with an architect to when we install, we can be the best provider through that stream.
And it's industry like ours that's got a mechanical heritage and we're introducing electronics and connectivity to high roll, there's opportunity to differentiate ourselves. And I'm confident Brad talked about this, but it's really around customer satisfaction and partnering with tools like Overtur, making sure our connected devices install seamlessly on the customer campus or activity with the best products. This is our strategy.
Okay. And as far I know I'm breaking up a little bit because I've had problems with this phone. I apologize for that. Just as a specific
follow-up to that,
in going to market, how have you been able to use your open market stance compared to basically compared to your major competitor in being able to develop the partnerships you're talking about and indeed being able to convince people, more and more people to use Overtur because you do have an open system. Are you finding that there's any resistance to that? Or is that open system does that open system allow you to be able to talk to your channel a little bit easier?
I believe our position and strategy to be open gives us an advantage. It's also key that we're flexible there. We'll have customers that want control. They want closed systems. And it's really having that flexibility with our customers that we're not going to drive one connected strategy that we leave that to the identity And we're intentional in creating differentiation there.
Okay. Thank you. Identity, I think, is probably going to be one of the next steps going forward down the line. If I mean it would be just a natural evolution for you? Just a comment on my part.
Okay. Thank you very much and congrats on the quarter. Thank you.
Thank you. And the next question comes from David MacGregor with Longbow Research.
Hi, Rob Aurand on for David this morning. Last quarter, you had discussed taking actions to remove bad actors in the e commerce channel. You're protecting pricing for residential locks. I guess, can you talk about the success of that? Is that channel cleaned up now?
Is there more actions to take? Or do more bad actors just take the place of who you cleaned up last quarter? How is that playing out?
I'd say our work in terms of just some good maintenance in the channels behind us. The introduction of e commerce over the last few years creates a little bit of a situation like the Wild West. You can have things appear on eBay or store fronts can pop up. It's part of the natural evolution. But yes, we think that's behind us and I think reflective of some of the growth we saw in the quarter.
Perfect. And then just on pricing, I mean, you're still seeing strong price realization in the Q3. I guess with raw material prices coming down, how do you see that playing out going forward?
I would say, and you know this relative to our industry, we'll continue to push price even a couple of years ago in a deflationary environment, which we're in that today to the extent of input costs being a little bit lower year over year, we can still probably push price a little bit given the strong market demand and we will do that and remain competitive. And so you wouldn't see necessarily the full year over year price increase that you'll see for the full year 2019 going forward. But nonetheless, you should expect continued price realization in the broader market.
All right. Thank you for taking my questions.
Thank you. And next we have another time from Deepa Raghavan with Wells Fargo Securities.
Hey, good morning. I apologize So can you talk about the progression of the quarter by month? If you can talk if it was progressively better or worse or you think it was as expected? That's my first question.
I think a normal Q3, we've got operating systems here that we try and track how we move through it. It's the peak of the summer construction season and I think things behave normally.
Okay. Was there any pull forward of demand in Q3 from Q4? I mean, you've kept your guide basically even though Q3 kind of outperformed. So just curious, what are some of the puts and takes we should be thinking about as we think through Q4 or is there you just want to bake in some conservative macros that you probably can't forecast precisely?
I would characterize it as not any specific pull forward of activity, I. E. Specific actions. I would say Q3 came in better than originally anticipated when we were together 90 days ago. But again, still anticipating a relatively strong performance in Q4 going forward.
Got it. Okay. So just is there a tax giveback in Q4? Sorry, that's
Yes. So that's a good point. And Dave mentioned it a little bit relative to the full year guide. So as indicated, our effective tax rate for Q3 was came in better than anticipated. That turns negative on us in Q4, so that you have a much higher tax rate in Q4 relative to the year to date tax rate, which today stands a little bit south of 15%.
So, with the full year of 15.5%, you can kind of work the math. And so that's going to be a pretty big headwind for year over year comparability in Q4.
Got it. My final one, sorry. So what's a normalized price? Yes.
Deepa, we're going to ask you to get back in queue. We have to get to other callers.
No worries. Thank you. Yes, thanks so much. Yes.
Thank you. And at this time, I would like to return the floor to Mike Wagnes for any closing comments.
Sorry, why don't we let Deepa since she's the last question. Why don't you far away Deepa?
Okay. Just one moment. Let me reactivate her line. One moment please.
Hi, can you hear me?
Sorry about that.
Yes. No, no, no worries. No, just one on pricing here. I mean, pretty strong pricing trends. I think they've got asked a couple of different ways already.
But what's a normalized price range? Do I start do we start to bake in like more 1% to 2% price range going forward or it just seems like pricing is at this point in time a little peakish. You may have the commodity tailwinds and everything, but just given how do we think about it in a normalized range? And that's my final question. Thank you so much.
Yes. Think about around 1%, maybe a little bit north of that, but that would be kind of a normalized type of level.
I would also say, we'll continue to push Allegion to be disciplined in pricing. We're seeing wage inflation. I think it's important that our team think about those pressures and make sure that we're responsible in going out there and winning our business, driving strong productivity equations and continuing to make sure that we're compensated for the value that we create, I think, with our customer relationships.
Got it. Thank you so much.
Thank you. And at this time, I would like to return the floor to Mike Wagnes for any closing comments. Please.
We want to thank everyone for participating in today's call. Please contact me for any further questions and have a great day.
Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.