Good morning, welcome to Allegion first quarter 2019 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to your host today, Mike Wagnes, Vice President, Investor Relations and Treasurer. Please go ahead, sir.
Thank you, Keith. Good morning, everyone. Welcome, thank you for joining us for Allegion's first quarter 2019 earnings call. With me today are Dave Petratis, Chairman, President, and Chief Executive Officer, and Patrick Shannon, Senior Vice President, Chief Financial Officer of Allegion. Our earnings release, which was issued earlier this morning, and the presentation, which we refer to in today's call, are available on our website at allegion.com. This call will be recorded and archived on our website. Please go to slides number two and three. 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 first quarter 2019 results, which will be followed by a Q&A session. For the Q&A, we ask each caller to limit themselves to one question and one follow-up, then reenter the queue. We will do our best to get to everyone given the time allotted. Please go to slide four, I'll turn the call over to Dave.
Thanks, Mike. Good morning, thank you for joining us today. Allegion got out of the starting gate with a good quarter that has positioned us to deliver on our 2019 commitments. We had solid top-line revenue growth in the first quarter, which benefited from strength in the Americas and from the Gainsborough acquisition in the Asia Pacific region. The Americas growth was driven by the non-residential business, as end market fundamentals continue to be positive, particularly in institutional verticals. Pricing was also strong for the company, led by the Americas region. Electronics growth was at almost 10% for the quarter, which was lower than the growth rates experienced in 2018. While growth improved sequentially from the last quarter, our product portfolio and new market partnerships will drive even better growth in the coming quarters.
Allegion's combination of brands, expanded product portfolio, technical partnerships, and continuously evolving channel relationships give us a great opportunity to take advantage of this market as it develops. For the full year 2019, we expect the Americas electronics growth rate to be similar to historic levels, which is supported by the healthy demand of the recently launched Schlage Encode residential lock that is ramping up in Q2. Moving down the slide, Allegion was able to drive price realization and productivity actions, which more than offset the substantial inflationary pressures we experienced. I am pleased with the performance as we saw operating margin increase for the total company and in each of the individual regions. In the first quarter, we delivered a 10% increase in adjusted EPS, driven primarily from operations. This performance highlights our continued focus on accelerating growth, margin improvement, and driving increased shareholder value.
Last, we are affirming our outlooks for 2019 revenue and EPS. We project total and organic revenue growth between 5% and 6%. For reported EPS, the range continues to be $4.60-$4.75 per share, and adjusted EPS remains at $4.75-$4.90. Please go to slide number five. I'll walk through the first quarter financial summary. In Q1, Allegion delivered good top-line revenue performance. Revenue for the first quarter was $655 million, an increase of 6.8%, inclusive of 5.8% organic growth. Allegion also contributed to the top-line revenue expansion. Excuse me. Acquisitions also contributed to the top-line revenue expansion, offsetting the unfavorable currency impact. Americas led the way with organic growth of nearly 8% in the quarter, supported by strong pricing and solid volume in the non-residential business.
The EMEIA region saw modest organic growth. Asia Pacific total revenue was boosted by the Gainsborough acquisition completed last year. Adjusted operating margin increased by 10 basis points, aided by price and productivity, more than offsetting significant inflation. The businesses continue to focus on driving price realization productivity savings to combat inflationary pressures. Adjusted earnings per share of $0.88 increased $0.08 or 10% versus the prior year. As mentioned, the increase was driven primarily by operational performance, reduced share count and a slightly lower tax rate, with the other income providing a small benefit to EPS growth. Year-to-date available cash flow is down approximately $6 million. The decrease is related to increased working capital and higher capital expenditures that were offset slightly by increased earnings. Please go to slide six.
When Allegion was founded, we put together a sound strategy, values, and strategic pillars for our company. They have allowed us to deliver industry-leading results, including industry-leading organic growth and operating margins. As we move into the next five years, we made some nice adjustments to the strategy. In March, we shared our refreshed corporate strategy with you. Our vision of seamless access in a safer world is aligned with electronic trends in security and access. It also recognized the enhanced capabilities of technology, edge devices, and our unique ownership of the opening to provide layers of authentication and enhance safety to increase human productivity. We believe the five strategic pillars Allegion has laid out are the foundation for our future. Our pillars include expansion in core markets. We continue to broaden the core business through channel relationships, digital demand creation, and leading products. Be the partner of choice.
Delivering seamless access means we're intent on looking beyond our walls and leveraging our partners and ecosystems to drive growth, which includes using open platforms that integrate well with others. Drive new value and access. Our innovation will focus on the user experience with access and working with partners to create unique solutions that increase their safety and speed up their productivity. We are also intent on bringing new products to the market faster through modular, global, scalable platforms. Capital allocation. Allegion will continue to take a disciplined and flexible approach to capital deployment, one that spans organic investments, acquisitions, and shareholder distributions to optimize shareholder returns. Last, enterprise excellence. As you have seen in our Q1, our ability to drive results through productivity and continuous improvement is a strength of our company.
Allegion is committed to create value with excellent customer experience and with a culture of safety, health, and employee engagement. Access has been a part of our company's history for over 100 years, and seamless access will define our company going forward. Patrick will now take you through the financial results, and I'll be back to discuss our full year 2019 outlook.
Thanks, Dave, and good morning, everyone. Thank you for joining the call this morning. If you would, please go to slide number seven. This slide depicts the components of our revenue growth for the first quarter. I'll focus on the total Allegion results and cover the regions on their respective slides. As indicated, we delivered 5.8% organic growth in Q1. This performance reflects another strong quarter in the Americas region, which included 7.6% organic growth led by the non-residential markets and returns on our channel initiatives. Pricing in the quarter was strong at 2.1%. The company will continue to take necessary pricing actions to help mitigate the impact of ongoing inflationary pressures. Also, during the first quarter, acquisitions contributed more than 3% growth, offsetting the substantial currency headwinds we experienced. Please go to slide number eight. Reported net revenues for the first quarter were $655 million.
As stated earlier, this reflects an increase of 6.8% versus the prior year, up 5.8% on an organic basis. Adjusted operating income of $112.1 million increased nearly 8% over the same time frame from last year. Adjusted operating margin of 17.1% increased 10 basis points. Price realization and productivity actions outpaced inflation, which contributed to the operating income increase, and solid volume leverage contributed to the margin expansion. Headwinds to margin performance included incremental investments, which had a 40 basis point impact on adjusted operating margins and regional mix driven by acquisitions. Each of the regions saw expansion in operating margin, which offsets in corporate expense related to deferred compensation plans due to favorable financial markets and accelerated vesting of stock-based compensation for retirement-eligible employees.
The incremental costs associated with deferred compensation plans were offset in other income below operating income, such that it had no impact on earnings per share. Please go to slide nine. This slide reflects our earnings per share reconciliation for the first quarter. For the first quarter of 2018, reported earnings per share was $0.75. Adjusting $0.05 for the prior-year restructuring expenses and cost related to acquisitions, the Q1 2018 adjusted EPS was $0.80. Operational results increased earnings per share by $0.09 as favorable price, operating leverage on incremental volume, and productivity more than offset inflationary impacts and unfavorable currency. Favorable year-over-year share count drove another $0.01 as we executed more than $63 million in share buyback in the quarter. The impact of incremental investments in the quarter was a $0.02 reduction. These incremental investments are for new product development, channel strategies, and demand creation spending.
Collectively, these incremental investments enable Allegion to accelerate growth, particularly in electronics. The combination of interest expense, other income, non-controlling interest, and tax rate offset each other to have no impact on year-over-year earnings per share growth. This results in adjusted first quarter 2019 earnings per share of $0.88, an increase of $0.08 or 10% compared to the prior year. Lastly, we have a $0.04 per share reduction for charges related to acquisitions and restructuring. After giving effect to these one-time items, you arrive at the first quarter 2019 reported earnings per share of $0.84. Please go to slide 10. First quarter revenues for the Americas region were $475.3 million, up 8.2% on a reported basis and 7.6% organically. The organic growth was driven by low double-digit increase in the non-residential business. Pricing was strong in Americas region, coming in at 2.6% in the quarter.
While the non-residential business grew nicely, the residential business was essentially flat in the quarter when compared to Q1 of last year. Electronics growth still exceeded total growth in the Americas and came in at nearly 10%. Americas adjusted operating income of $123.1 million increased 8.5% versus the prior year period and adjusted operating margin for the quarter increased 10 basis points. The increase in adjusted operating margin was driven primarily by volume leverage. Additionally, price and productivity exceeded the significant inflationary pressures observed in the region and contributed to the operating income increase. Incremental investments were a 30 basis point drag on margins. Please go to slide 11. First quarter revenues for the EMEIA region were $142.9 million, down 4.9% and up 1.7% on an organic basis. The organic growth was driven by pricing and favorable volume in our SimonsVoss and Interflex businesses, offsetting weakness in Southern Europe.
Total revenue growth was reduced by significant currency headwinds. EMEIA adjusted operating income of $11.7 million increased 30% versus the prior year period. Adjusted operating margin for the quarter increased 220 basis points, driven by price and productivity exceeding moderate inflation. The region also saw volume leverage and favorable mix, which partially offset currency pressures. Incremental investments were a 30 basis point headwind operating margin. Please go to slide 12. First quarter revenues for the Asia Pacific region were $36.8 million, up 55% versus the prior year. Organic revenue declined 2.2%, driven by an internal revenue transfer of $1.5 million to the other regions. Total revenue growth was driven by the Gainsborough acquisition, which increased revenues in the region by more than 63%. Foreign currency was a significant headwind for the quarter, reducing revenue by nearly 6%.
Asia Pacific adjusted operating loss for the quarter was $0.7 million, an improvement of $0.3 million, with adjusted operating margins improving 230 basis points versus the prior year period. Similar to the other regions, the price productivity inflation dynamic was positive in the region, and the Gainsborough acquisition was accretive to operating margin in the quarter. Please go to slide number 13. Year-to-date available cash flow for the first quarter 2019 was negative $24.9 million, which is a decrease of $6.1 million compared to the prior year period. The decrease is driven by higher working capital requirements and increased capital spending, partially offset by higher net earnings. Working capital as a % of revenues increased slightly in the first quarter, while the cash conversion cycle was down.
As always, we remain committed to an effective and efficient use of working capital and will continue to evaluate opportunities to minimize investments in working capital and increase available cash flow. Lastly, we are affirming our full-year available cash flow outlook of $430 million-$450 million. 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 noted on the slide, we are affirming our revenue outlook. The consolidated outlook for total organic revenue remains at a range of 5%-6%. In the Americas, we see continued positive fundamentals in our non-residential verticals led by institutional markets, which we believe will continue to be strong throughout 2019. We expect the general trend toward electronic products to continue, and we are positioned to take advantage of this trend. For the EMEIA region, we expect strength in our electronic businesses led by SimonsVoss and Interflex to more than offset weaknesses that we are experiencing in Southern Europe. Total revenue will be negatively affected by currency headwinds. In Asia Pacific, we continue to see healthy growth in China with softening markets in Australia and New Zealand.
The total revenue growth reflects the full-year impact of the Gainsborough acquisition, which has another quarter before we pass the anniversary date. We are also affirming our earnings per share outlook with reported EPS at the range of $4.60-$4.75 per share, and adjusted EPS to be between $4.75 and $4.90. This represents adjusted EPS growth of approximately 6%-9%. As Patrick stated, we are also affirming our cash flow outlook of $430 million-$450 million. The outlook assumes no change in the previously provided investment spend of approximately $0.15 per share. The full-year adjusted effective tax rate continues to be approximately 16%, with an anticipated higher rate in the first half of the year than in the second half. We are updating our outlook for outstanding diluted shares to approximately 95 million, reflecting the buyback activity completed in Q1. Please go to slide 15.
As a summary of Allegion's Q1 performance, total revenue grew nearly 7%, organic revenue grew almost 6%, adjusted operating margins were up 10 basis points and were up in all regions. Adjusted EPS saw 10% growth in the quarter. Access has been an important part of our past and will be more important part of the future as we connect the world through seamless access and smart devices. Patrick and I will be happy to take your questions.
Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. We do ask that in consideration of the others, you limit yourself to one question and a follow-up. At this time, we'll pause momentarily to assemble the roster. Today's first question comes from John Walsh with Credit Suisse.
Hi, good morning.
Good morning, John.
Hi, I guess, maybe a first question here around electronics. The near almost 10% growth. I think you've been talking about sustaining a mid-teens type growth rate on an annual basis. You have another quarter here of a high teens comp. How should we think about the cadence and maybe a little bit underneath that number between residential and non-residential would also be helpful as well.
I would say continue your cadence in terms of mid-teens growth for our electronics businesses. As I said in Investor Day, our industry was going to do well with this transformation over the next decade. Feel good about the business with the launch of Encode, our partnership with Ring, the conversion of Lennar, who's leading on electronics home launch. We see that the adoption continues to be strong. We have a strong pipeline of new products and partnerships. When I see the 10% growth in the quarter, there was some work behind the scenes that we conducted in the channel that I think took some steam out of our sales, but will help us accelerate as we go forward.
I guess maybe can you elaborate on those actions in the channel a little bit?
I would describe it as this. With the advent and growth of e-commerce, it can be at times a little bit of the Wild West. We went in and buttoned up some channel partners that will help us to drive price realization and growth in the marketplace.
Got you. Maybe just one quick one here. Nice to see the price and productivity net be a 60 basis point contributor year-on-year. How should we think about that cadence as we go through the year? Does that actually pick up?
As we've commented earlier, well, first of all, was very pleased with the performance in the quarter. It's good to see us turn the corner on the price productivity inflation dynamic. As you recall, last year, every quarter, we were a little bit underwater, we turned positive this year, particularly across all regions. Very pleased with the performance as it relates to that. As we look forward during the course of the year, you would see from a margin expansion, continued improvement as we progress throughout the year. The margin improvement being more heavily weighted towards the back half of the year, that's when the comparisons on inflation become a little bit more easier, particularly as we look at input costs on steel and those type of things.
Consider continued migration of margin expansion, more heavily back-end loaded in the back half of the year.
Thank you. The next question comes from Josh Pokrzywinski with Morgan Stanley.
Hi. Good morning, guys.
Good morning, Josh.
I guess thinking back on 1Q, it seems like every company we've heard from so far has had some mix of inventory and weather discussions. Just wondering as it pertains to residential, where the mechanical side looks like it was probably a little bit weaker. Anything that you saw from weather or channel destocking that makes that kind of less of a trend line and something that can accelerate or at least improve a little bit from here?
I'd say, first look at the macro. We see the renovation and retrofit softened in the quarter. I think you see overall starts down or at least softened. Not surprising, I think, again. Third, there's some pretty big players in retail that have year-ends that tends to wind down inventory. Then it was a pretty tough winter. I don't like to point at that, but, especially in res, north of the Mason-Dixon line, people generally don't go out and replace their front door locks when it's below zero. I think there was a lot of things working in that. Overall, I think we performed pretty well in the quarter with some of those stressors.
Got it. That's helpful. Just on the price mix in Americas, I think that's a high water mark that we haven't hit in some time. Just understanding that mix was probably particularly solid, given resi versus non-resi and electronics, which probably could have been a little bit better to your earlier point. How should we think about how that paces through the rest of the year? Should that price mix number start to moderate as you lap some of the increases last year?
Yeah. You would expect to see kind of a similar type of dynamic maybe for Q2. As you said, the price increase implemented last year, beginning of Q2, so that laps, or excuse me, beginning of Q3, so that laps in Q3. The price increase that we're going out with this year isn't of the same magnitude. Therefore, the price increase year-over-year becomes less in the back half of the year.
Got it. That's helpful. Thanks, Dave. Thanks, Patrick.
Thank you. The next question comes from Julian Mitchell with Barclays.
Thank you. Good morning.
Good morning.
Maybe just the first question on your residential business. As you said, this is the second quarter in a row of sort of no growth really, a lot of issues in the broader market and also weather. Maybe just update us on what you're expecting your residential business to grow in 2019. What sort of impact do you think we could see from electronics products within that, and whether there's been any evidence of demand destruction from price increases?
We don't split out the overall residential growth. I think as you look at the macro on new builds, I think we're going to continue for single family in North America around 850. A relatively flat market. I think multifamily continues to be robust. That surprises me, but people are moving into the inner city. These projects tend to be more price competitive, especially on the traditional mechanical hardware. We do like the trend that these are becoming more electronic. We have, over the last two years, had a focused effort around this, and we think it will give us some lift. The strength of our company continues to be on the retrofit side of this. I like our opportunities as we go into the res, and our growth will advance beyond what we saw in Q1.
Let me just add, too, on the price perspective as it relates to residential. It has been a little choppy, not in the sale to price through the distribution channel, but more on the rebate side and discounts and those type of things. We actually had positive price realization in Q1 this year as it relates to residential. There's no deterioration, if you will, in the pricing dynamics and what's going on in the marketplace and believe we can continue to hold our own, particularly as it relates to some of our new electronic products, and I think we'll continue to be extremely competitive there.
Thanks. My second question, just on those Americas margins. It was good to see the slight increase year-on-year in the first quarter. Based on your comments around productivity efforts in the margin bridge, and also acquisition impacts, should we see that margin expansion accelerates through the year? What kind of headwind from M&A on margin do you expect in Americas?
We would continue to see expansion throughout the course of the year. Again, the back half will be a wider gap there, more favorable than Q2. M&A, as we've indicated historically, the businesses we acquired, we like very much. Believe we will continue to drive improvement as they become part of the Allegion business operating system and continue to drive synergies on both the top end and the cost side. Those businesses, though, when we acquired them, had a lower margin profile, and therefore by nature, they're dilutive
To the Americas margin. We'll continue to get improvement in those businesses, and that will help margin performance year-over-year comparisons going forward.
Thank you. The next question comes from Deepa Raghavan with Wells Fargo Securities.
Good morning. My question is on the guide 2019. There's not much we can glean from this unchanged full-year guide. There seems to be some crosswinds. Europe is softer, obviously North America holding better than we thought. Asia may be okay there. Let me ask you this way, does the guide at midpoint, say 482 EPS or organic growth of 5.5% for the full year, does that feel bolstered now where you stand post Q1, or is it just stable at this point in time versus what you were thinking prior?
Pretty stable, I'd say, basis of the performance, pretty much in line with what we were expecting. Therefore, you don't really see an uptick relative to the guide. Feel pretty good where we are and our execution and basis of what Dave indicated, the demand, particularly in institutional markets going forward. Feel really good about that and feel like we've got good visibility to execute on our guidance for 2019.
Deepa, I'd add to that. I'd just say confident of what we see coming out of Q1. I'd go back 90, 120 days ago, a lot of uncertainty about what was going to unfold in 2019. My message to the Street is confidence. We see good solid end markets. As I travel really globally, there's opportunity for Allegion. As I think about the electronic convergence, I like what I see ahead in 2019.
Got it. My follow-on is on Q2. Is there any quirkiness either on year-on-year basis or sequentially or comp-wise we should be mindful of?
Nothing comes to mind out of the ordinary. Other than maybe below the line items, you're going to see some pressure as it relates to other income expense and the tax rate, I believe, was anticipated to be higher.
Got it. That's all I had. Thank you.
Thank you. The next question is from David MacGregor with Longbow Research.
Yes. Good morning, everyone. Congratulations on the quarter. Just looking at the Americas non-residential business, the low double-digit growth. Is there any way you can separate out institutional versus commercial for us there?
We don't. I would say as I look at our execution in those markets, we continue to perform at a high level. I think that's reflective of the number. We see strength in the institutionals, especially around K through 12 and college campuses. As I look at those segments, I think we see the electronic trends that are driving us. Things like Overtur that we have rolled out help us to better connect with specifiers and contractors to drive that growth. I think fundamentally, the market's strong, and we're executing at a very good level.
Okay, thanks for that. I guess just as a follow-up, just talking about the electronics business and the profitability there. Any notable change in terms of the profitability of that business? It sounds like maybe there were some investments this quarter in the residential electronics, but just how should we think about the profitability and then how you're thinking about that as it extends through the balance of the year?
Profitability really similar to prior years. As we've indicated, similar margin profile, but a higher ASP, meaning more EBIT dollars. This whole trend of electronics growth, really positive for Allegion. We'll continue. There's nothing on the horizon that would suggest any margin deterioration relative to the new products we've introduced. Similar margin profiles, we believe we can sustain that going forward.
Patrick, as the new product cadence accelerates, does that profitability improve, or how should we think about that?
No. Similar margin profile.
Okay.
As we think about that pipeline of new electronic products, our desire is to use design innovation, standardization, global platforms to be able to maintain that margin profile.
Thanks very much.
Thank you. The next question comes from Jeff Kessler with Imperial Capital.
Thank you. Thank you for taking my question. First question is, this year or the last year and a half, we've seen an acceleration in companies that have been doing, well, let's call it enhanced card access. Companies like I just mentioned, like one Identiv, but some of them compete with you on card access. Some of them have things that are actually outside of what you've been doing. Are you looking at expanding into that business a little bit further? I'm not just talking about generic card access. I'm talking about card access that actually has permissions on it that has some maybe federal attachments to it. I know you're mostly commercial, but there are other vertical markets that the entire access business gets involved with and brings involved new technologies like audio over IP, things like that.
The bottom line question is, are there card access areas that interest you to expand the business in that area?
I think a couple ways we think about that. Number one, with acquisition. Isonas was part of that. We think we got some nice IP and capabilities. I think second, partnerships. I really am excited with our venture group and potential partners and new technologies that walk through. I think partnership is not a bad place to position. I also think edge devices, with layers of authenticity, will be an important part of that equation to be able to drive access through cards and readers.
Okay. Quickly on Overtur, I'm just wondering, thinking about Overtur as a service, the fact that you can now have a collaborative capability that brings in a number of parties, which really does, I think, create some value added to your ability to bring a group of people to design something and help you get that product out faster. Is there a way to make that some type of a service, or other parts of Allegion, a service subscription? Not subscription, but a service I would call a recurring revenue, subscription-based way to get involved in working with Allegion in some way, shape, or form, if something like Overtur becomes ubiquitous.
The answer would be yes. However, our first priority is to make sure the user satisfaction and adoption is at a high level. Why would my answer be yes? I think if you think about an institutional campus, a hospital, a K through 12 schools, the ability to digitally capture access, workflows, and keep that updated is attractive to an operator of that hospital or college campus. Think about if the system, Overtur, keeps those things current, it's not easy for a campus administrator to go out and access those multiple documents, would be one example. Another is what's installed on that door as the potential is needed for service in a variety of areas.
I'd say, we're trying to stretch our thinking of what the possibilities of digital systems like Overtur can mean to the business, and I think there's positive opportunity as we go forward, Jeff.
Okay, thank you. I'm just kind of following up. You have futurists who work with you and who are working inside you, and I think there's a lot of things that they can think about right now, given the broader base of your products, and if something like this were to get a very high user rate, you could probably move forward with a recurring revenue type of program.
I hope all of our listeners will take a look at our Investor Day presentations and our view on seamless access. There's great opportunities for us to redefine our industry and develop new ecosystems that will benefit Allegion in a variety of ways beyond Overtur. We're excited about it.
Thank you. The next question comes from Josh Chan with Baird.
Hi, good morning, Dave, Patrick, Mike.
Good morning.
Good morning. My first question is on the non-res business in the Americas. Growth is obviously very strong. Just wondering, you talked about visibility through the whole year. Could you give us some color in terms of what you're hearing from the channel or contractor backlogs or anything like that that kind of lends you that confidence regarding growth for the rest of the year?
Contractor backlogs, close to nine months. Historically, that's extremely healthy. I think we continue to see labor in the construction markets is tight. I think that continues to snowplow, as you've heard me say. I think the adoption of electronics continues to be an attractive trend. You get into the K through 12 opportunity, bond issuance is on the rise. The other one that's a little bit more sobering, the average age of a K through 12 school is 40 years old. The need for upgrade with the opportunity or driver around campus security is going to continue to be good for our business. You move over to healthcare, we see some softening in the big hospitals, but we see up-techs around what we call medical offices and specialty clinics.
There's a repositioning here, but these medical clinics still drive the same complexity of code and specification, product enhancements that we think drive growth. For me as well, the commercial market continues to have legs. We like the overall view. We think things like Overtur spec rating capability and then adding electronics bode well for 2019. Josh, just as an add-on, some of our leading indicators of bid quote activity, specifications written, those type of things, very strong. Trend continues to be up. Normally, there's a lag, obviously, between the time you get those and when the products are put in place. We feel really good relative to the market demand and the feedback we get from our customer base.
Okay, thanks. That's good to hear. My second question's on the buyback. It seems like the pace in Q1 was maybe slightly above what you normally do in Q1. Just wondering if this is more of a focus this year than in the prior years.
Well, as we indicated during our shareholder day, capital allocation is a key strategic pillar for the company. As you know, we're in a really good financial position. Our balance sheet is the healthiest it's been since then, the 2x debt to EBITDA. Cash flow will continue to increase as our business grows and expands. We have a lot of optionality, and the key message is we're going to deploy capital, put it to use for our shareholders to drive shareholder returns. Last year, as you know, we were extremely busy in adding some really good businesses to the portfolio. We're still integrating those. Our pipeline from an M&A perspective remains active and busy. We'll remain disciplined. If we're not active in M&A, we've always said we would provide incremental shareholder distributions, either through dividends or share repurchases. You saw the dividend increase executed in Q1.
We're more active now in share repurchase. We have available cash to put it to use, and we'll continue to do so.
Okay, great. Thanks for taking my questions.
Thank you.
Thank you. All right, next question comes from Joe Ritchie with Goldman Sachs.
Thank you. Good morning, guys.
Hi, Joe Ritchie.
Yeah. Dave, you've become a friend. My friends typically will refer to me by both names. Don't know why, but it's been a trait since I've been in high school. Anyhow, going off on a tangent. The question I have is really regarding trends. If we think about the first quarter, we've heard of varying degrees of trends throughout the quarter because of weather, because of tariffs, I'm just wondering, as you guys progressed through the quarter, how did your trends either improve or decelerate as we moved through the quarter?
I think there was another little fly in the ointment there called the government shutdown. I think clearly as we went through the quarter, things got better. There's a hangover after the New Year's, things pick up, but felt good with the momentum. I felt better about our execution on price and productivity. We put up, I thought, an aggressive 2019 plan with margin expansion, and I was very pleased with our ability not only to put up good organic growth, but more pleased by our execution on the price and productivity side.
I guess specifically though, Dave, as we kind of progressed through March, did things get any better? Did they get worse? How did things progress?
As we went through March, it's normal with the thawing of the ground, things get better. That's happened for the last 38 years in my exposure to building products. In my mind, it's just a part of the spring routine. It gets better.
Okay. That's helpful. If I could just kind of follow on on your investment spending. I saw that you did $0.02 this quarter, still looking to do about $0.15 for the year. Patrick, how does the cadence come through for the rest of the year on the investments and perhaps maybe some color around the investments that you're doing for the rest of the year?
Yeah. Obviously it's going to pick up here, I think more heavily weighted towards the back half of the year, which kind of matches our improvement and margin expansion. The incremental investments are the same kind of criteria, new product development, so acceleration of products, particularly around electronics. I feel like we're getting really good demand from those going forward. Channel development, continue to invest in the channel and underserved market opportunities around the globe. We'll continue to do that. Demand creation as it relates to trying to accelerate adoption centered around electronics. Those are kind of the three primary categories, all kind of front-end loaded in terms of revenue driving growth. We'll continue to do that, and again, it will expand during the course of the year.
Thank you. This concludes the question and answer section. I would now like to return the call to Mike Wagnes for any closing remarks.
We'd like 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 is now concluded. Thank you for attending today's presentation. You may disconnect your lines.