Volume 32 | October 31, 2023
Hello, Happy Halloween for those that celebrate, and welcome to Brief #32!
This brief is a quick one to inform you about a member-only webinar that I will be hosting this Friday at 11 a.m. EST. If you cannot attend, don't worry, as I will share the recording with all of you afterward. I also pose a thought: "This Brief is a quick one as I wanted to let you know about a member-only webinar that I will be hosting this Friday at 11 am EST. If you can't make it, don't worry, as I will share it with you all after." Lastly, are the Q3 earnings by Allegion and ASSA ABLOY a canary in the coal mine of what is to come or just a bump in the road?
Thank you for being a member. Our community is continuously growing, and I appreciate your trust in me. I am grateful for this opportunity and will strive to continue delivering. If, for any reason, I am not meeting your expectations, please feel free to let me know.
Thank you!
PS: I am sure some of you may forward this on but please do so sparingly and encourage others to sign up here. Thank you!
The presentation is titled "Unlocking the Inevitable: Strategies for New Value Creation in the Access Control Industry" and it explores the trends and assumptions shaping the commercial access control industry. It provides insights into potential outcomes and offers strategies to make oneself more valuable to the market in the foreseeable future. The focus is on enablement and value creation, emphasizing the importance of staying relevant and competitive in the industry. This presentation aims to help individuals understand the changing landscape and take proactive steps to adapt and thrive in the evolving access control industry.
It is a new presentation I have been working on and the flow is:
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The story about how mobile wallets is a story about going back to the future
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2023 trends
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2024 assumptions
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Possible impacts and what you can do about it as you look to 2024
If you are interested, please reply to this email and I will send you a calendar invite or just join the webinar here:
Topic: ACEB Member Webinar: Unlocking the Inevitable
Time: Nov 3, 2023 11:00 AM Eastern Time (US and Canada)
Link: https://zoom.us/j/91736563121?pwd=bFJVdGZuODdEL1hyWFdvTFRXcDkvUT09
Meeting ID: 917 3656 3121
Passcode: 428591
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Meeting ID: 917 3656 3121
Passcode: 428591
We Have a Bigger Problem Than Prox
I plan to write more about this but in the meantime…
Is it that "prox" is bad, or is our industry's desire for linear thinking to blame?
Linear thinking refers to a cognitive approach where individuals perceive and process information sequentially and logically, following a linear progression. It involves a step-by-step thought process, focusing on transparent cause-and-effect relationships and a preference for incremental changes and improvements rather than radical shifts.
In this context, our industry's desire for linear thinking might be to blame for specific issues or limitations, not "prox."
Certainly, linear thinking brings some positives, especially in well-defined problems or tasks, but it is essential to recognize when a more flexible, holistic approach is needed. And what has been a feature of our industry during predictable times, like the last 30 years, is now a bug.
We can thank digital transformation for this.
For instance, security is not linear. It is not constant. It is constantly changing. We have to keep moving continuously. The threats are evolving, so why aren't we? We treat it as though it does not change. Some truths in our industry have become outdated, and just as some new truths are not applicable, some old truths are no longer viable.
This is why our industry needs to think more dynamically. Instead of trying to pinpoint who is at fault with the usage of "prox" (trust me, I've been on this train since 2019 and even had buttons made that said "Kill Prox" ready for ISC West - the ISC West that never happened), we should focus our energy on evolving and taking a more holistic and interconnected approach. Individuals should consider multiple possibilities, embrace complexity, and think in terms of systems and patterns rather than a linear progression.
In other words, evolve.
"The devil we know has finally died. It is time to embrace the devils we don't know.
As someone who prefers to have solutions asking with constructive criticism, I will take this conversation and write more about it in a future Brief and also on the Access Control Executive Brief slack channel.
Canary in the coal mine of whats to come?
Allegion has reported its Q3-2023 financial results, focusing on their strong increase in adjusted EPS outlook for the full year. They had .5% increase in revenue and actually saw a decrease in organic revenue by .6% (to the point where they reported their electronics and "software solutions" saw mid teens organic growth.
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They achieved net earnings per share (EPS) of $1.77, a 36.2% increase compared to the same quarter last year, and adjusted EPS of $1.94, up 12.1%.
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Revenues reached $917.9 million, a slight increase of 0.5% on a reported basis and a decrease of 0.6% on an organic basis.
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Operating margin improved to 21.0%, compared to 17.8% in the previous year.
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They experienced mid-teens organic growth in electronics and software solutions.
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Allegion remains on track for a record year in revenue, adjusted operating income, and adjusted EPS results. The full-year adjusted EPS outlook has been raised to a range of $6.80 to $6.90.
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However, it should be noted that despite the positive financial results, Allegion faces challenges in organic revenue growth, as it decreased by 0.6% on an organic basis. The decline can be attributed to lower volumes in the mechanical portfolio, offsetting the favorable price. They also experienced lower volumes in the Americas segment, particularly in the residential business, which saw a decline. Additionally, the International segment faced soft end markets, particularly in the Global Portable Security business and China.
While Allegion highlights strong execution and expansion of margins, it is crucial to closely monitor the company's ability to drive organic revenue growth and address challenges in specific segments. The company's long-term success will depend on its ability to sustain growth and adapt to evolving market dynamics. Strap in....its getting rocky.
As compared to ASSA ABLOY Quartlery here is what you have:
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Allegion increased earnings per share and improved operating margin. However, the company faced challenges in organic revenue growth, particularly in specific segments and regions. ASSA ABLOY increased net sales, operating margin, and operating income. The company also faced challenges in organic sales growth in certain regions but highlighted opportunities in sustainability and digitalization trends.
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Both companies emphasized their long-term focus and strategies for growth and adaptation to market dynamics.
We are seeing a softening in the market in mechanical locks. Both companies organic growth is rough and buoyed by price increases, inorganic growth from acquisitions and I am sure tough meetings right now. A side effect I believe we will see is managers retiring that have benefited greatly from the last 20 year bull run we have had and they will make way for new leadership to guide us through tough times ahead. Net positive. software revenue and electronics increase.
As a reminder, you have access to all the videos from the Access Control Summit. More on how to access them is below.
Here is how to access the 17 videos, 10 panel discussions, and 7 1:1 Fireside Chats.
The videos are hosted on your membership page:
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Just log in.
If you go to https://www.leeodess.com/
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Click "Login" in the top right corner, then select "Sign In."
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Hover over "Individual" or "Corporate" (depending on your membership) in the top right corner, and a menu will appear.
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Click on "ACS23 Video."
The URL for the videos is https://www.leeodess.com/acs23-videos.
