Good morning, welcome to the Allegion Q2 2023 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star, then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. 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 Jobi Coyle, Director of Investor Relations. Please go ahead. Thank you, Drew. Good morning, everyone. Thank you for joining us for Allegion's Q2 quarter 2023 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, I'll turn the call over to John. Thanks, Jobi. Good morning, everyone. Thanks for joining us today. My, how time flies! It's hard to believe this time last year, I was joining you for my first Allegion earnings call. I shared then my belief in our company's mission, our people, our culture, and my excitement around this chapter that we're writing in Allegion's history together. One year in, I'm even more energized about Allegion's future and even more proud of our global team, who has just delivered another quarter of outstanding operational performance. Let's go to Slide 3 and talk about some of the highlights. The Allegion team delivered 18% total growth, and we drove strong margin expansion. In Q2, we increased margins across Americas and International business segments, both sequentially and year-over-year, resulting in a 130 basis point increase in adjusted operating income margin for the quarter. We see electronics continuing to be a key growth driver for Allegion. Demand was strong for our electronic solutions in the second quarter, fueling Allegion's overall revenue growth. In Q2, strength across both residential and non-residential business in our Americas segment totaled nearly 40% electronics growth over the prior period. We also saw strong electronics and software solutions performance in our International segment. As we work to shape the transformation taking place in our industry, we continue to see electronics as key to our overall growth. Our non-residential markets remain stable, and electronics demand continues to be a bright spot in both Americas and International segments. However, we did see some softness in non-residential mechanical demand as customers and distribution partners adjust their ordering patterns to our reduced lead times due to much improved supply chain and operational execution. The Americas residential business was bolstered by very strong electronic sales, but we're still seeing soft mechanical demand. Certain international end markets, particularly in the portable security business, also remain soft. Overall, our team delivered another strong quarter, resulting in a solid first half of 2023. We are operating at a high level, and as a result, are raising our outlook for the year for adjusted EPS, which is now expected to be in a range of $6.70 to $6.80. I am very proud of the Allegion team's operational performance. I'll provide more color on the outlook later in the presentation. Please go to Slide 4. Let's move to our vision and strategy. This is a slide we talked through at our Investor Day, and while it's a simple overview, it reflects an important foundation for our company. Our vision of enabling seamless access in a safer world. What does that mean? It means if you have the right credential, whether that's a metal key, an encrypted proximity card, or a digital identity in a mobile wallet, we will provide you the most convenient and secure experience possible. Why is this the right strategy, and why is this the right strategy now? Because our world is increasingly digital, mobile, and connected. Because touchless and contactless experiences and technology will clearly live well beyond COVID. Because digital credentials and smart hardware not only provide more seamless access experiences, they also provide more rich data to the end user customer and added layers of security. We feel this transformation has a long runway ahead. Our vision is supported by a strategy of creating value as a pure-play provider of security and access solutions. This is how we differentiate our company and drive innovation for a safer world forward. Building on our legacy, delivering new value and access, being the partner of choice, and operating with excellence. Please go to Slide 5. This month also reflects the first anniversary of the Stanley Access Technologies acquisition. Acquiring the Access Technologies business was a direct reflection of our seamless access strategy, making the world more accessible, expanding our presence in access and security markets, and unlocking greater long-term value for our customers, our shareholders, and our employees alike. In year one, our teams have integrated very well together. We've taken very good care of our customers, and you can see this in our results, which reflect operational performance in line with the business plan. Access Technologies generated revenues of approximately $385 million, which represented approximately 10% growth. This was $0.11 accretive to adjusted EPS for Allegion in its first 12 months. In addition, when we made this acquisition, which is our largest to date, we committed to deleveraging quickly. You can see the results. Our leverage ratios are back to pre-acquisition levels. Overall, we feel great about this highly strategic combination. The automatic doors product portfolio is a hand-in-glove fit with our demand creation and specification engine. This acquisition has greatly enhanced Allegion's service capabilities, and we look forward to much more long-term, profitable growth opportunities together. I'll ask Mike now to walk you through the Q2 financial results, and I'll be back to discuss our updated 2023 outlook. Thanks, John. Good morning, everyone. Thank you for joining today's call. Please go to Slide 6. Allegion delivered another strong quarter with both top and bottom-line growth, as well as improving cash flows. Revenue for the second quarter was $912.5 million, an increase of 18% compared to 2022. Organic growth of 5.6% was driven by price realization, along with strong growth in electronics, offsetting lower volumes in mechanical products. Our Access Technologies acquisition contributed approximately 12% to total growth. Adjusted operating margin and adjusted EBITDA margin in the second quarter increased by 130 and 110 basis points, respectively. These increases were attributable to strong operational execution and favorable price and productivity, which more than offset inflation and investments. Excluding our acquisition of Access Technologies, adjusted operating margin was up 270 basis points. Adjusted earnings per share of $1.76 increased $0.33, or approximately 23% versus the prior year. Operational performance drove 20% earnings per share growth, with additional earnings per share growth coming from acquisitions, offset by the unfavorable impact of anticipated higher interest. Details of our earnings per share performance versus the prior year are in the appendix. Year-to-date available cash flow is $190.1 million, up nearly 125% versus last year. Please go to slide number seven. I will start by reviewing the revenue results for the enterprise year before turning to our respective regions. In Q2, we delivered 5.6% organic growth, driven by price realization across the portfolio. Strong volume growth in electronics was more than offset by volume declines in our mechanical products. Our Access Technologies acquisition served as the primary driver of our 12.5% growth in net acquisitions and divestitures. Currency pressure were minimal in the quarter, bringing total reported growth to 18%. First half organic revenue growth was 10.2% overall, driven by strength in electronics. Americas operating growth was nearly 15%, and international was down 3%. Please go to Slide 8. Our Americas segment continued to deliver strong operating results in the second quarter, with revenues of $727.2 million, up 23.8% on a reported basis and up 7.7% organically. During the second quarter, we achieved double-digit price realization. Our electronics growth for the Americas was nearly 40%, as we continued to see both improvements in our supply chain and strong demand. Electronic component availability was significantly challenged in the first half of 2022, making the quarter an easier comparison versus the prior year as our supply chains are much healthier now. In the second quarter, we saw soft mechanical volumes as customer adjust to our reduced lead times to our improved supply chain and operational execution. Organic growth was up high single digits for both our non-residential and residential Americas businesses. As John mentioned earlier, Access Technology has now been part of Allegion for just over a year, and we are pleased with the ongoing integration and results. This business had pro forma revenue growth of approximately 9.5% versus Q2 2022, and contributed over 16% to the Americas reported growth. Our adjusted operating income of $205.9 million increased 32.9% versus the prior year period, while adjusted operating margin and adjusted EBITDA margin for the quarter were up 190 and 180 basis points, respectively. Excluding Access Technologies, our Americas segment drove a 460 basis point improvement in operating margin versus the prior year. Our team is executing well, we were able to drive price and productivity in excess of inflation and investments to deliver this strong margin expansion. Please go to Slide 9. Our international business had a solid Q2, with revenues of $185.3 million, flat on a reported basis and down 1% organically. In the quarter, price realization was more than offset by lower volumes, primarily associated with our global portable securities business. As we've discussed previously, this business benefited from a COVID-related demand surge in the first half of last year. We expect this market will normalize and be less of a headwind to our international segment in the second half of this year. Our electronics and software solutions are performing well and continue to be a growth driver for our international segment. Currency was a slight tailwind this quarter and positively impacted reported revenue by 0.6%. International adjusted operating income of $20.9 million increased 2% versus the prior year period. We saw significant improvement in adjusted operating margin and adjusted EBITDA margins of 30 and 40 basis points, respectively, when compared to last year. The margin improvement was primarily driven by favorable price and productivity in excess of inflation and investment, reflecting strong execution by the team. Please go to Slide 10. Year-to-date available cash flow came in at $190.1 million, up $105.6 million versus the prior year. This increase is driven by higher earnings and lower cash used for net working capital, primarily offset by higher capital expenditures. Working capital as a percent of revenue increased versus the prior year, partially driven by our Access Technologies business, which was not owned in the first half of last year. Working capital management remains a priority of our company as we efficiently turn earnings to cash. As committed, we deleveraged following the acquisition of Access Technologies, our net debt to adjusted EBITDA is back down to 2.1 times. We repaid $60 million on our revolving credit facility in Q2, the remaining $30 million outstanding was repaid in the month of July. This means we have completed our repayments of short-term borrowings for the acquisition, demonstrating our ability to effectively deploy capital and maintain an investment-grade credit rating. Our business continues to generate strong cash flow, and our balance sheet continues to be in a healthy position. I will now hand it back over to John for an update on our full year 2023 outlook. Thanks, Mike. Please go to Slide 11. As we look at the remainder of 2023, we're tightening our full-year revenue outlook while also increasing our earnings per share outlook. We now expect the Americas segment to be between 15% to 16% for total growth and 7.5% to 8.5% organically. Within the Americas, we expect to see non-residential organic growth up high single to low double digits. We expect the residential business to be relatively flat as electronics growth is expected to offset mechanical weakness in that segment. As a reminder, our supply chain challenges in our Americas business began to recover in the second half of last year, we'll have a tougher comparable period in the second half of 2023. Additionally, due to our improved lead times this year and their impact on our non-residential customers' ordering patterns, seasonality is expected to be somewhat flatter than what Allegion's history would imply. For international, we expect revenue to be down 1% to flat in total and down 1% to 2% organically. The comparison for the international business is somewhat easier in the second half of 2023, as weaker market conditions really started to set in during the second half of last year. All in, for the company, our growth outlook reflects total revenue growth to be between 11.5% to 12.5%, with organic revenue growth of 5.5% to 6.5%. As a result of our team's strong operational execution and favorable first half margin performance, we're raising our adjusted EPS outlook for the year and believe it will be between $6.70 and $6.80, which is approximately 12% to 13.5% over the prior year period. As you heard from Mike, this is primarily driven by operations execution. Lastly, we're increasing our outlook on available cash flow for 2023 to be in the $500 million to $520 million range. Please go to Slide 12. In summary, Allegion delivered a solid first half of 2023. Like we said at Investor Day, we've returned to a high operating level. Our teams are executing very well. At Investor Day, we laid out the Allegion operating model that I'd like to go back and revisit a little bit, about driving organic growth, compounding that organic growth with both margin expansion and capital deployment, resulting in double-digit EPS growth. I feel we're well on track to deliver all of that for 2023. Our end markets are stable. Demand is steady. Electronics will continue to fuel our overall revenue growth as we stay focused on our vision of enabling seamless access in a safer world. I'm confident in our outlook and very proud of what our team and our distribution partners delivered this quarter and in my first year with Allegion. With that, we can open up the Q&A. We will now begin the question-and-answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. Again, please limit yourself to one question and one brief follow-up. At this time, we will pause momentarily to assemble our roster. The first question comes from Julian Mitchell with Barclays. Please go ahead. Hi, good morning. Maybe just a first question to try and understand the organic sales guidance development, first off. You, you raised the guidance in late April on organic sales, and you've taken it down a little bit today. Was it that you saw channel partners and customers suddenly start to destock sort of late in the second quarter? Maybe help us understand sort of what the process was behind that guidance revision. Then also on the non-residential market, specifically, it seems the macro drivers in the Americas are still very good. Perhaps a little bit puzzled that you're not seeing new orders coming in to sort of offset the destocking that seems to be happening in some areas. Julian, if you think about the guide, you know, the last few years, we really struggled with lead times, and we got considerably better the end of last year. Our channel partners were maybe a little late to adjust to our reduced lead times. What we saw in the second quarter is they're starting to adjust that ordering pattern to our reduced lead times, especially on the mechanical side. They're back down to normal, and we're, let's say, at March 31. It took a little longer for them to adjust their ordering, so they're burning through some of the work that they previously ordered. As you know, we're mostly a made-to-order business, but channel partners will, you know, order based on what they think, you know, manufacturers can provide product at. We did have some of that choppiness in the second quarter that you saw. When you think of our business in general, I talked about this at Investor Day. Expect for us to be total company, roughly 50/50, first half to back half. As you look at our guide right now, you would say, you know, it's roughly 50/50 as a company. I do think in the second quarter, we did see that channel partners are adjusting to our improvement operationally, which is great, 'cause, you know, we put a lot of effort to get back to operating at a high level. The second part of your question related to markets, I'll kind of let John answer that. Yeah, Julian, thanks for the question. We see some of those same things, I think, If you disaggregate America's non-res a little bit, the institutional segment, in particular, shows you know, continues to flash signals of resilience. Healthcare, education, even airports, that probably are still in the benefiting phase from the infrastructure bill, 'cause airport terminal renewal was one of the funding principles there of that bill. The institutional segment continues to show good signals, positive signals, and as you know, that's where our business is a bit heavily weighted. Now, that being said, are there pockets of weakness, major metro, commercial office? I mean, that's been soft for sure. That's no secret. We're also late cycle. We're heavily weighted towards institutional. That segment seems pretty resilient. In general, yeah, we feel, again, that our exposure in non-res is quite stable. The end markets are stable there. That's helpful. Thank you. Then just my follow-up, just to make sure we're sort of calibrated properly within the second half. Clearly, seasonality is abnormal this year. You know, your revenues were down sequentially in Q2, which is unusual, you talked in the prepared remarks about flatter seasonality this year. Should we assume that you have a much narrower sort of variability between the third and fourth quarter earnings as we look at that, and maybe sort of sales and margins also, you know, not that different across the two? Yeah, thanks for the question, Julian. You know, historically, you know us, we are, we don't guide quarters, but if you think about our business, usually have a step down in Q4 versus Q3 in the Americas, and it's reverse in international. If you think of the Americas this year, we would expect that to be more flatter than normal. The way you're thinking about it, without giving numbers, is correct. You shouldn't see as big a drop-off from Q3 to Q4 when you model this versus, let's say, historical norms. That's great. Thank you. Thanks, Julian. The next question comes from Joseph O'Dea with Wells Fargo. Please go ahead. Hi, good morning. Thanks very much. Joe. I guess, in terms of that last point, and as we think about what's going on with channel partners and volume trends and the swing from Q1 to Q2, as we think about the back half of the year and how you're thinking about channel inventory levels, and given, you know, maybe not as much seasonality from Q3 to Q4, is that based on sort of an expectation that, you know, at the end of the third quarter, these channel inventories are sort of roughly normalized, or just any views on timing when those channel inventories get to a more or less normal state? Yeah, Joe, I think you would find, and we find on our channel checks and customer visits, a very wide range of answers there. I think our two-step distribution partners, our wholesalers, would have a different answer than some of the more traditional contract hardware distributors. Our integrated hardware distributors might have a bit different answer. I think, you know, in aggregate, we still hear comments like aftermarket activity is very strong, particularly in the non-res space. Again, the leading macros would say, the institutional segment is still pretty resilient. We still see, I'd say, good levels of sell-through. You know, the inventory state of the business is gonna be different within the channel. Overall, I think the best way to think about it is you just listen to what Mike said and think first half, second half, 50/50 is kind of the way we see 2023 working out. On the Americas margin, x access tech, that 31%, you know, clearly a really strong margin level. You know, I guess just sort of framing that relative to some of the comments at the Investor Day and targets to grow margins, you know, 50 to 100 basis points kind of annually. Is there anything about the mix that you're seeing or price cost dynamics that make kind of growing off of this base a little bit more challenging? Just kind of wanna understand some of the strength behind that margin in the quarter. Joe, great question. As you know, obviously, the back half of the year won't have as much margin expansion year-over-year as first half, just because the back half of last year was pretty strong. As a result, we still expect to see margin expansion in the back half in total, but it won't be as strong as what you saw the last two quarters, just due to the prior year comp. You know, if you think of last year, we started to really pick up operationally back half. Long term, on Investor Day, I talked about that 50 to 100 basis point improvement. That's part of our operating model, and we still believe on a long-term basis, we can deliver margin expansion in those levels. You know, quarter to quarter, it could change it by a prior year comp, but think of the operating model, where we're gonna drive price and productivity to offset and fund that inflation and investment, drive some expansion with that and the volume leverage. In total, the operating model I talked about in length at Investor Day still holds, and we feel good about the progress we've made in, you know, our operational execution over the last four quarters. Thank you. Thanks, Joe. The next question comes from Joe Ritchie with Goldman Sachs. Please go ahead. Thanks. Good morning, everybody, and John, congrats on the one-year anniversary. Thank you, my friend. Yeah. Maybe let's just start on pricing. You know, obviously very strong this quarter. Americas was, what? 10%, and you had international pricing that actually accelerated in Q2. Maybe just tell us a little bit about what's, what to expect as we progress through the year and whether you're putting additional pricing actions in either region? Yeah, Joe, we've talked about this in the past. You know, we fell behind starting in the back half of 2021, we put efforts in to catch up to that inflation dynamic that we struggled with in years past. I feel like we did a pretty good job and have caught up now. The last pricing actions we put in in our non-res business were earlier this year, as we discussed in previous earnings calls. You should think about back half pricing. You will see it step down in the realization percentage, only because the prior year comps started to accelerate last year. If you take a look at last year, Q2 to Q3 to Q4, you get an idea of what happened that you can model the price realization this year on, knowing that the pricing actions have been put in the marketplace. I think it's important to note, you know, we drive pricing actions to kind of recover that inflationary pressures, coupled with productivity and investment, so that four-item dynamic I've talked about over the last year, that still holds. You will see a step down in the realization percentage due to the prior year comparable. Got it. That's helpful, Mike. My follow-on, since you referenced that equation, it. That price and productivity, net of inflation and investments, is the strongest I think we've seen in really many years. Can you maybe just break down a little bit what you're seeing on the productivity versus the investment side? Again, how that's expected, the cadence for that going forward through the remainder of the year. Yeah, Joe, I really don't wanna give individual numbers, but I will say you are seeing an improvement in our productivity and in our efficiency, right? As our supply chains normalize and we operate at a higher level, we are driving a higher level of productivity than what you saw in, you know, 2022, 2021. We're really excited about the momentum we have in productivity. We expect that to continue as an organization, and we do expect to continue to invest in our business to drive that top-line growth, thinking about, you know, the great opportunity that electronics and software provides us. We'll continue to invest in the business. What you saw this quarter, you do have better operational efficiency and productivity as that has been a focus for us. Absolutely. That, just to be clear, that equation is expected to remain, like, pretty strongly positive in the back half of the year, correct? Yeah, I don't want to forecast or guide that dynamic. Just make sure you get the margin rate right as you look at our EPS guide and revenue. I kind of gave you the pricing as well, so you can back into the, all the dynamics you need for your model. Expect to see margin expansion in the back half. As you look at quarters, just be cognizant of our Q3, Q4 comparables of last year as well. Understood. Thank you. The next question comes from Josh Pokrywka with Morgan Stanley. Please go ahead. Hi, good morning, guys. Hey, Josh. Just want to tease out, if we can, you know, some of these supply versus demand signals on the mechanical side. I think we've heard elsewhere in terms of lead time normalization, some destocking. I guess those could be two separate things, but same concept. Any indicators that you're getting from distributors or, you know, maybe specifying architects on demand signals or sell-through in June, maybe just to kind of match up that supply versus demand dynamic a bit better? Yeah. Josh, we'll segment this down a little bit. I think when you look at mechanical products broadly, as we indicated in the comments, you know, residential mechanical for us is indeed soft, offset by very strong electronics performance. In the non-res side, I think that dynamic again, you can imagine if for the last eight, nine, 10 months, you were placing your orders and you're not getting delivery for 15, 20 weeks, and then suddenly you're getting delivery in two to four weeks, it takes a little bit to work through that. I think channel checks have anecdotally indicated things to us like, you know, when you look across the Americas, places like the Midwest, South, Southeast, really strong. If you go to some major metro areas that are probably a bit heavy commercial office, they're pretty light. It's, it's pockets of strength, pockets of weakness. On balance, we still see good sell-through. We still see that the non-res market is stable, primarily supported by the institutional segment. Super helpful. Just to pick up, you know, some comments that you made, I guess, you know, congrats on the quick delevering, you know, post access technologies. I think the analysts say, you know, a lot more focused on growth and inorganic growth was a piece of that. How would you characterize the pipeline right now and, you know, and what you guys are seeing out there, especially with now higher interest rates and maybe, you know, some less P/E competition? Yep. I'd say short of talking about any specific targets or anything, I would feel very good about the top of our funnel in terms of looking for acquisition targets. I think, again, think of us as a pure play provider of security and access solutions. We talked a lot about, you know, the importance of electronics, the importance of controlling software, really driven by the increasing use of smartphone wallets and mobile credentials. You know, that as a macro tailwind, really propelling and giving new uses for smart hardware, electronic access control solutions. We feel, again, as an industry, that's still, all the signals we can find, that's still high single-digit growth, that we can tend to outperform by a point or two and get a leading performance in the low double-digit range. Certainly, acquisitions plays a part in that. I think as we've said now, you can look for us to be acquisitive. You can look and expect us to also be a disciplined buyer, but we do see acquisitions playing a key role in our overall growth strategy. Good color. Thanks. I'll leave it there. Thank you. The next question comes from Andrew Obin with Bank of America. Please go ahead. Hey, guys, good morning. Hey, good morning, Andrew. Good morning. Just a question on international market volumes. You highlighted portable security weakness, but seems like underlying volumes got sequentially a little bit better. I know that it's a fairly diverse group of countries, but can you just highlight dynamic, maybe by region, you know, Italy, Spain, you know, I don't know, France, Central Europe, Korea, Australia, just any granularity on what's happening there? Yeah, I'll take a little bit different angle and hope it still answers your question, Andrew. Of course. Thank you. I'd say the portable security business, without a doubt, volume drag. No doubt about it. You know, as Mike mentioned in the prepared comments, the post-COVID demand spike that you saw in that space was quite dramatic. We do expect that market is gonna normalize as you get into 2024 and 2025. I'd say, and, you know, we're not alone in seeing this or commenting on it, but residential in general, in Europe is rather weak. Large and mechanical business. Those volumes are under pressure, there's no doubt. Our electronics and software solutions would still be in probably the low double to mid-teens organic growth. We feel really good there, which is, again, more in the commercial side of our business, the non-res side of our business. APAC, for us, you know, we do have some China exposure. It's not a lot, but there's no doubt China's under a lot of pressure. Our relatively small but profitable business there is certainly lower, relatively speaking. Australia, New Zealand, pretty steady, pretty stable, kind of falling in line with what you see in the Americas, just stable end markets. Our teams are performing well there. Just maybe a follow-up question, related to institutional. A, if you could sort of, differentiate between what's happening in hospitals and schools, because it seems the dynamic is somewhat different. B, a more interesting question, and you guys turned me on to this years ago, but, if you look at muni bond issuance and, tax receipts, what's your latest read on the environment going to second half in 2024? Because I know you guys, have an educated view there. Thanks so much. You're very kind in your comments, Andrew. I'd say, looking at the institutional segment, you don't see quite the amplitude of volatility that you might see in other parts of the commercial business. It's a little bit steadier, it's a little bit more stable. That is the segment that we perform very well in. That's a segment where codes, compliance, safety standards for your building really matter, and that's where Allegion differentiates and I think really excels. Healthcare has been pretty resilient, education has been pretty resilient, and that's both higher ed and K-12. You know, school safety is always important. Allegion has, for a long time, been a very proud and vocal advocate for proper standards, proper codes, and compliance. We've increased our human resources, human capital in that space, and continue to be, I think, a very positive participant in the industry for school safety there. When we look at things to the second half of your question, like muni bonds and state tax revenues, the picture's actually pretty stable, pretty favorable. I'd say state tax revenues look to be relatively high. You know, unlike what you saw back in the 2008, 2009 crash, the environment is a little different this year. Maybe some COVID stimulus, maybe just, you know, good economic growth, very low unemployment, et cetera. The tax revenues at the state level seems to be pretty good from the data that we see. You know, bond issuance in 2021 and 2022 was very high. Obviously, it's taken a bit of a dip here, but seems to be sequentially recovering somewhat. Also, remember, Andrew, Allegion is a late cycle. You know, from bond issuance to budget development, to projects being firmed up, to shovel in the dirt, so to speak, to finally, you know, door-to-door hardware going on, that can take some time. You know, I think in general, looking at bond issuance over the long term, drawing a trend line there, you can kind of understand why that segment we see is particularly stable. You know, I'd say again, flashing signals of resilience, in the institutional segment would be the way we'd see it. Thank you. Thanks so much. The next question comes from Ryan Merkel with William Blair. Please go ahead. Hey, thanks. Two questions for me. Any way to quantify the impact of the order pattern adjustment for mechanical for the full year? On electronics, when do you see the lead times normalizing there? Could we see a similar order pattern adjustment at some point there? Thank you. I'll talk about the first one. You know, if you think about our business, Ryan, I keep on talking about that roughly 50/50 first half to back half. If you think about it for the full year guide, that will be completed by the end of the year. It really won't have an impact on full year, but you could see a flatter quarter-to-quarter variance like we talked about earlier in the call. For a full year, it's really not applicable, but when you think about quarterly timing, it does result in a little more smoothing quarter to quarter over the last three than you would normally expect. Remind me again, your second question? Electronics. Yeah, electronics. Yeah, I can jump in. Yeah, the electronics, you know, should we expect to see a similar ordering pattern adjustment and lead times, et cetera? Lead times have been coming down. I'd say that is the portion of our business where lead times are still a little bit extended. Certainly down from the peaks that we saw in the middle of last year, but maybe not yet back to normal, but have been on a pretty good glide path getting back to a more normal, say four to six- week kind of lead time for those products. Backlogs are still a little bit elevated there. Demand is still strong. You know, if you see our Investor Day material, talking about the non-res mechanical segment being a low single-digit growth industry, the electronics portion would be high single-digit growth. I think that's the main thing, is we see that as the key growth driver. Will that same dynamic pop up in the channel? It certainly could, yet to be seen. I think as we all get a little bit smarter here, having gone through these quite volatile and dynamic times with the supply chain, maybe with good work, we can mitigate it, but yet to be seen. I guess I don't have a real good detailed forecast for you there, but we'll be watching out for it. Just to add, Ryan, just remember that electronics, we talked about it extensively at Investor Day, about what a real strong long-term growth driver that is for us. Demand there, as John mentioned, is still really strong. As you think about that business moving forward, that electronics business should be a double-digit growth long-term driver for us. This is not a couple quarters of growth. This is a long-term growth opportunity for us. Got it. Thank you. Thanks. The next question comes from David MacGregor with Longbow Research. Please go ahead. Yes, good morning, everyone. Hi, David. Hey, I just wanted to maybe build off Ryan's question on the electronics. You know, obviously, a 40% number is a huge number, and there's a lot of backlog clearance going on there. But can you... you talked about kind of the, Mike, about the high single-digit growth that's underlying that. Is there any way to sort of trifurcate that down between institutional, commercial, and residential, and just give us a better feel for what the second half of this year demand in electronics is likely to look like by sort of that framework? What you'll see, David, a couple dynamics in the second quarter, and I talked about it earlier in the prepared remarks. Admittedly, Q2 last year was a little weaker, so you do have some growth here due to a weaker previous year. Still, this is now four quarters in a row, really strong growth in electronics. We saw strength in both electronics growth in resi as well as non-res, so both were strong in the quarter. As we look forward to the end of the year, the back half, we expect to see, you know, good growth in electronics. The one thing I'll remind you is, the comps in the back half of last year get much tougher, particularly in electronics, right? If you remember last year, we threw some pretty robust numbers up in the back half. Just make sure you take that into consideration when you model, you know, your electronics. Overall, still expect to have some good growth, this year and beyond this year in electronics, in both res and non-res. Okay, thanks for that. Secondly, just a question on Access Technologies. I wonder if you could just talk about the extent to which you've been successful in building out the recurring service revenues in the first year of ownership. Maybe just to also remind us on the scale of the international business for AT, and your growth with that business over the first year? Yep, yeah, really good question, David, we're always thrilled to talk about Access Technologies. It's been a great add to the Allegion portfolio. I'd say, the service side of the business has historically been about 40% of the total. It has also historically grown around a low double-digit rate, high single, low double-digit rate. You know, we feel really good about that. We see lots of future opportunities and potential there as our overall, our total Allegion service capabilities continue to expand and grow. I'd say, in terms of an international presence with Access Technologies, it's quite small. It's not zero, but it's quite small. This is mainly an Americas business, and where we really focus the investments, the new product development, and just really staying close to those customer requirements. Are you focused on putting more feet on the street and building the service offering in that sense? Maybe just talk about how you're investing in that business. I think certainly it's a human capital-intensive business, right? These are very highly qualified, very highly trained, very professional service technicians that go out and do this work. I'd say it's a lot of things. We've got to put better productivity tools in their hands, better diagnostic tools in their hands. We're working on a variety of technology there. You know, as we work together with certain channel partners as well, making sure we got the right coverage and the right people to take care of those customers. The human element is important, absolutely. Technology is also important there. Are you able to find those people? I mean, I'm just wondering how much of a struggle it is to identify and recruit and retain those people. Okay, three follow-ons. All right. Yeah, I'd say. You said you'd like to talk about Access Technologies. Yeah, yeah. Don't take advantage of me. Come on. Well, again, these people are hard to find. I won't sugarcoat it. These are very highly skilled, very professional technicians. We put a lot of investment into training and support as well. We have to be very choosy because these technicians are the ones keeping our customers up and running. You know, it's not just hire as many as you can, it's hire the best, and that's what we focus on doing. Thanks very much for the question. Thanks. Thanks. Thanks, John. The next question comes from Brett Lindsey with Mizuho Americas. Please go ahead. Hey, thanks. Good morning. Hey, just a question on electronics versus mechanical. I know historically you've said that margin profile is similar, but, curious as you get more scale in that category and considering all the redesigns and the reengineering you did last year, is there headroom for the, for the eLock gross margin to move higher over time? You know, Brett, we think about gross margins for the organization moving higher over time as we drive, you know, the price, productivity, in excess of the inflation and investments, and we leverage, you know, volume growth. I don't think it's just in the electronics. I think as an organization, we're gonna drive margin expansion. You know, with respect to electronics, I would say they're roughly similar percentages, but with a higher selling price, electronics will give us a little more dollars per every unit of sale. That's a dynamic, you know, we've talked about in the past. It's great when we can upsell to an electronic device, and it's something we're focused to drive long term. Great. Just on the international side, clearly volumes continue to be weak, but margins pretty solid in the quarter on price and productivity. Assuming the volume environment remains soft, do you think, you know, Tim and team can defend operating margins in that low double-digit range? Just curious what the sensitivity might be on the upside to downside. Yeah, I appreciate the question because we were really proud of what the international team put up in Q2. Flat revenues, roughly, and still driving margin expansion, to your point. Price productivity, net of inflation and investments, is a positive dynamic for that group. I'd say, like previous quarters, the Allegion international business is on a much more firm foundation as a business, and we're continuing to find improvement opportunities. Tim and the team are performing very well. We're proud of what they're accomplishing, and I think we're making good progress against the goals that we've got set out for international. I appreciate you calling that out. Yep. Thanks for taking the question. This concludes our question and answer session. I would like to turn the conference back over to John Stone, President and CEO, for any closing remarks. Thanks very much, thanks, everyone, for a really great Q&A. Just to really quickly wrap up the main themes you heard today. Electronics continues to be a strong growth engine for us, we believe we're in the early innings of adoption there within the industry. The driver here is the flexibility and added layers of security that are available when you adopt smart hardware and mobile credentials. Our end markets are stable, while we saw a softening in mechanical volumes this quarter, as customers adjusted to our improved lead times, indication from our channels show steady demand, stable end markets. The Allegion team continues to deliver outstanding operational performance. Our team is controlling the things they can control, they're executing very well, in my opinion. This is marked by strong margin expansion and increased cash flow. With this, we're confident in our performance for the remainder of the year and raising our full-year EPS outlook as a result. Thanks very much. Have a nice day. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.