Mike Wagnes - Allegion Plc David D. Petratis - Allegion Plc Patrick S. Shannon - Allegion Plc

Julian Mitchell - Barclays Capital, Inc. Joshua Charles Pokrzywinski - Morgan Stanley & Co. LLC John Walsh - Credit Suisse Robert Aurand - Longbow Research LLC Timothy Ronald Wojs - Robert W. Baird & Co., Inc. Ron J. Jewsikow - Wells Fargo Securities LLC Jeffrey Ted Kessler - Imperial Capital LLC Joe Ritchie - Goldman Sachs & Co. LLC

Good morning and welcome to Allegion Third Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mike Wagnes, Vice President, Treasurer and Investor Relations. Please go ahead. Mike Wagnes - Allegion Plc: Thank you, Andrew. Good morning, everyone. Welcome and thank you for joining us for Allegion's third quarter 2018 earnings call. With me today are Dave Petratis, Chairman, President and Chief Executive Officer; and Patrick Shannon, Senior Vice President and Chief Financial Officer of Allegion. Our earnings release, which was issued earlier this morning and the presentation which we'll 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 slide number 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 materially differ from anticipated results and projections. The company assumes no obligation to update these forward-looking statements. Please go to slide number 3. Our release and today's commentary include non-GAAP financial measures, which exclude the impact of charges related to restructuring, acquisitions, tax reform and debt refinancing in current year and prior year results. We believe these adjustments reflect the underlying performance of the business when discussing operational results and comparing to the prior year periods. Please refer to the reconciliation in the financial tables of our press release for further details. Dave and Patrick will discuss our third quarter 2018 results, which will be followed by a Q&A session. For the Q&A, we would like to ask each caller to limit themselves to one question and one follow-up and then reenter the queue. We will do our best to get to everyone given the time allotted. Please go to slide number 4 and I'll turn the call over to Dave. David D. Petratis - Allegion Plc: Thanks, Mike. Good morning and thank you for joining us today. Allegion delivered another strong quarter in Q3 and I'm pleased with our operational performance, which has positioned us well to deliver a solid 2018. Allegion saw a strong top-line revenue growth in the third quarter with strength across all regions. The Americas saw solid volume in both the non-residential and residential businesses, as end-market fundamentals continue to be positive, particularly in institutional verticals. Price was very strong in the Americas and remain firmed in Europe. Asia-Pacific saw organic growth rebound nicely in the quarter. Acquisitions continue to contribute to total company revenue growth. Electronics growth globally continues to accelerate and was quite substantial during the quarter, led by the Americas region, which saw nearly 30% growth in electronic products during the quarter. We see the electronics growth outlook continuing to be a long-term positive trend, as more and more products become connected for ease of access. We are driving price realization and productivity actions in an effort to mitigate the substantial inflationary pressures we are experiencing. We did experience margin declines in the quarter as acquisitions were diluted. Excluding the 2018 acquisitions, adjusted operating margins were flat year-over-year. I'm very pleased with our ability to manage those inflationary pressures and maintain organic margins through both pricing and cost actions. In the third quarter, we delivered robust EPS growth, seeing more than 20% expansion in adjusted EPS, driven primarily from operations and tax rate benefits. This EPS performance highlights our continued focus on driving increased shareholder value. Last, we are raising our outlook for revenue and EPS. Total revenue growth is projected to be between 13% and 13.5%, raising from our previous range of 12.5% to 13.5%. Organic revenue is being increased to a range of 5% to 5.5%, up from the 4% to 5% provided last quarter. For adjusted EPS, we are raising the range to $4.43 to $4.50 per share, bringing up the low end of our previous outlook, which was $4.35 to $4.50. Please go to slide 5. In Q3, Allegion delivered strong top-line revenue performance. Revenue from the third quarter with $711.5 million, an increase of 16.8%, inclusive of organic growth of 8.5%. Benefits from acquisition also contributed to the top-line revenue expansion, offsetting the slightly unfavorable currency impact. All regions grew organically. America led the way with organic growth of just over 10% in the quarter, supported by robust growth in electronics, strong pricing, and solid volume in both the nonresidential and residential businesses. The EMEIA regions saw organic growth of 3.4% and Asia-Pacific organic growth rebounded nicely, coming in at nearly 6%. Adjusted operating margins decreased by 140 basis points due to the dilution related to our acquisitions made earlier this year. Excluding the impact of those acquisitions, the base operating margins were flat year-over-year as the business did a good job of driving price realization and productivity savings to combat continued inflationary pressures. Adjusted earnings per share of $1.23 increased $0.21 or 20.6% versus the prior year. The increase was driven by our operational performance and a favorable year-over-year tax rate. Year-to-date available cash flow is up more than $90 million nearly 68%. The prior year discretionary pension funding payment, along with increased earnings, are driving the increase. Please go to slide 6. Electronic growth continues to accelerate. Our global brands continue to innovate to develop smart solutions across residential and nonresidential markets. One recent example of such innovation is the SimonsVoss SmartHandle AX, which was launched in the third quarter. The SmartHandle AX is a modular handset that leverages the SimonsVoss AX platform. This means the solution has a flexible design that can adapt to different door variants and global standards, while also offering smart features like Bluetooth phone-to-door communication. We are excited that this technology can be leveraged globally because of its adaptability and open architecture. What's more interesting, the SmartHandle AX has an intrinsic security feature to put users' minds at ease. It fits seamlessly into existing security hardware environments with retrofit features, including door monitoring. At Allegion, innovation in access is an opportunity to put our customers first. Our SimonsVoss SmartHandle AX offers security and compatibility as well as easy installation and extended battery life without compromising design quality. Patrick will now walk you through the financial results, and I'll be back to discuss our full year 2018 outlook. Patrick S. Shannon - Allegion Plc: Thanks, Dave, and good morning, everyone. Thank you for joining the call this morning. If you would, please go to slide number 7. This slide depicts the components of our revenue growth for the third quarter. I'll focus on the total Allegion results and cover the regions on their respective slides. As indicated, we delivered 8.5% organic growth in the third quarter. This high organic growth rate reflects outstanding performance in the Americas region, which saw very good price, solid volumes in both the nonresidential and residential businesses, and nearly 30% growth in electronic products. The significant growth in electronics occurred in both the residential and nonresidential businesses as Allegion continues to be well-positioned to take advantage of the industry trend of moving toward electronic locks and connected security solutions. Pricing for Allegion, in total, was strong in the quarter and more than offset material inflation, as the company is taking necessary actions to help mitigate the impact of continued inflationary pressures. Third quarter price realization was strong in our Americas and EMEIA businesses, with pricing that was essentially flat in Asia-Pacific. Overall, I was very pleased with the improvement in pricing, both year-over-year and sequentially. The pricing performance demonstrates the strength in our brands, products and channels. Also, during the third quarter, acquisitions contributed 9% and foreign currency was a slight headwind in all three regions. Please go to slide number 8. Reported net revenues for the third quarter were $711.5 million. As stated earlier, this reflects an increase of 16.8% versus the prior year, up 8.5% on an organic basis. Adjusted operating income of $149 million increased nearly 10% over the same timeframe last year. Adjusted operating margin of 20.9% decreased 140 basis points with the decrease driven by dilution from acquisitions. Excluding the 2018 acquisitions, adjusted operating margins on the base business were flat year-over-year. Total inflation slightly exceeded price plus productivity, as price realization and necessary cost containment actions, which drive productivity, helped mitigate the impact of inflationary headwinds. Other headwinds to margin performance were incremental investments, which had a 50 basis point impact on adjusted operating margins. And while acquisitions were dilutive to margins, they were accretive to adjusted earnings per share. Please go to slide number 9. This slide reflects our earnings per share reconciliation for the third quarter. For the third quarter of 2017, reported EPS was $0.94. Adjusting $0.08 for the prior year restructuring expenses, integration cost-related acquisitions and charges related to debt refinancing, the 2017 adjusted earnings per share was $1.02. Operational results increased EPS by $0.11 as favorable price, operating leverage on incremental volume and productivity more than offset inflationary impacts. Favorable year-over-year tax rate drove another $0.10 with the favorability driven primarily by the favorable impact of tax reform, favorable discrete items and changes in the mix of income earned in lower tax rate jurisdictions. Acquisitions contributed $0.02 in the quarter. The combination of interest expense, other income and non-controlling interest increased earnings per share by a penny, with favorability from interest offset by the prior-year non-operating gains. The impact of incremental investments in the quarter was a $0.03 reduction. These incremental investments for new product development, channel strategies and demand creation spending to take advantage of the accelerating electronic products market, continue to drive above-market growth and are providing solid returns on our investment. This results in adjusted third quarter 2018 earnings per share of $1.23, an increase of $0.21 or 20.6% compared to the prior year. Lastly, we have a $0.02 per share reduction for charges related to acquisitions and restructuring as well as adjustments to the provisions related to the enactment of tax reform. After giving effect to these one-time items, you arrive at third quarter 2018 reported earnings per share of $1.21. Please go to slide number 10. Third quarter revenues for the Americas region were $530.1 million, up 16.5% on a reported basis and 10.1% organically. The organic growth was driven by robust growth in electronic products, which came in at nearly 30%. Pricing was also very strong in the quarter, delivering 2.5 points of revenue growth. Both the non-residential and residential businesses saw a solid volume performance. The non-residential business grew low-double digits, excluding acquisitions. Residential experienced high-single digit growth. Acquisitions added 6.6% growth to total revenue. Americas' adjusted operating income of $154.3 million increased 11.4% versus the prior year period and adjusted operating margin for the quarter decreased 130 basis points. The decrease in adjusted operating margin was driven primarily by the dilutive acquisitions. Excluding these acquisitions, adjusted operating margins on the base business were down slightly year-over-year as price, productivity and volume leverage nearly offset the impact of high inflation and headwinds from incremental investments. Please go to slide number 11. Third quarter revenues for the EMEIA region were $134.4 million, up 7.4% and up 3.4% on an organic basis. The organic growth was driven by solid pricing for the quarter and strength in electronics driven by the SimonsVoss and Interflex businesses. The reported revenue increase was boosted by acquisitions, which more than offset currency headwinds. EMEIA adjusted operating income of $10.2 million increased slightly versus the prior year period. Adjusted operating margin for the quarter decreased 50 basis points driven by margin dilution from acquisitions. The base business saw margins increase with volume leverage, price and productivity more than offsetting inflation and incremental investments. Please go to slide number 12. Third quarter revenues for the Asia-Pacific region were $47 million, up 61.5% versus the prior year. Organic revenue rebounded nicely, growing at 5.9% and was volume-driven. Total revenue growth was driven by the GWA Door and Access Business acquisition. Foreign currency was a headwind for the quarter. Asia-Pacific adjusted operating income for the quarter was $3.2 million, an increase of $1 million, with adjusted operating margins down 80 basis points versus the prior year period. Similar to other regions, dilution from acquisitions drove the margin decline. The base business adjusted operating margins were up slightly, with price and productivity more than offsetting the unfavorable impacts from inflation, incremental investments and mix. Please go to slide number 13. Year-to-date, available cash flow for the third quarter 2018 was $228.6 million, which is an increase of $92.3 million compared to the prior year period. The increase is driven by the non-recurring $50 million discretionary pension funding payment that was made in the first quarter of 2017, along with higher net earnings and favorable working capital changes. Working capital as a percent of revenues and the ratio for the cash conversion cycle increased slightly in the third quarter 2018 when compared to the prior year period. The increase is primarily driven by working capital related to recently acquired businesses. As always, we remain committed to an effective and efficient use of working capital and we'll 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 $380 million to $400 million I'd now hand the call back over to Dave for an update on our full year 2018 outlook. David D. Petratis - Allegion Plc: Thank you, Patrick. Please go to slide number 14. As noted on the slide, we are updating revenue outlooks for all regions and for the company as a whole. We are raising total and organic revenue growth in the Americas and lowering total and organic revenue growth outlooks for both Europe and Asia. This results in the consolidated outlook for total revenue increasing to a range of 13% to 13.5% and organic revenue increasing to a range of 5% to 5.5%. If we look closer at the Americas business, end market fundamentals remain solid as evidenced by our third quarter results and we continue to see positive indicators in the nonresidential markets with particular strength in institutional verticals, which is expected to continue through 2019. We expect a strong demand for electronic products, especially residential electronic locks, to continue as more residential consumers desire connected smart access to their homes. European markets are expected to continue to see modest growth driven by electronic products. General European macroeconomic conditions, like consumer and business confidence, remain positive, but are softening. The GDP in all of our key economies are expanding. In the Asia-Pacific region, we should see solid growth with strength in electronic products. However, the markets in our Australia and New Zealand businesses have slowed. The total revenue growth for Asia-Pacific will continue to be bolstered by the acquired GWA Door and Access businesses. We expect inflationary pressures to continue for the remainder of the year. The Americas price increase put in place during the quarter has gained good traction and will continue to help mitigate the impacts of inflation. We are raising our reported earnings per share outlook to a range of $4.23 to $4.35 up from $4.15 to $4.35. And we're also raising adjusted earnings per share to $4.43 to $4.50, up from the previous range of $4.35 to $4.50. This represents adjusted EPS growth of approximately 12% to 14%. As Patrick stated, we are also affirming our cash flow outlook of $380 million to $400 million. The outlook assumes the full year tax rate to be approximately 14.5% and outstanding diluted shares of approximately 96 million. As noted, there is no change to our assumption for investment spend in the outlook. It remains at $0.15 per share. Please go to slide 15. As a summary of Allegion's Q3 performance, total revenue grew nearly 17%. Organic revenue grew 8.5%. Adjusted operating margins were down 140 basis points and were flat when excluding the impact of acquisitions. Adjusted EPS saw more than 20% growth in the quarter. End market fundamentals in the Americas remain strong. Now, I and Patrick will be happy to take your questions.

We will now begin the question-and-answer session. The first question comes from Julian Mitchell of Barclays. Please go ahead. Julian Mitchell - Barclays Capital, Inc.: Hi. Good morning. Maybe a first question around the margin impact of inflation relative to price and productivity, similar to Q2, it was a slight headwind, I guess, to margins in Q3. How are you thinking about that spread into Q4 and then, particularly, into next year as tariffs continue to rise? Patrick S. Shannon - Allegion Plc: Yeah. So, Julian, as you indicated, Q3 on a dollars basis, we're a little bit underwater, not significantly. So, I think the team, in aggregate, has done a really good job to help mitigate the inflationary headwinds with incremental pricing. And you saw the price realization come in extremely strong, particularly in Americas. So, really good progress there. As you're aware, we're starting to see the inflation, particularly as it relates to inputs on commodities, to be more stable. And with the incremental price realization, we'd anticipate Q4 to be slightly positive. So, we're starting to turn the corner is how I would suggest in Q4. As we look out going forward, the way I would think about it, you really need to look at the components of both price and your assumptions for inflation. As you saw in Q3, outstanding price realization, north of 2%, that provides a very good backdrop and tailwind, if you will, in terms of price improvement, particularly in the first half of next year, which you may recall this year, we only had about a 1% price improvement year-over-year in the first half. So, good tailwind there. In inflation, again, material stabilized. So if you assume there's not a big increase relative to the current spot rates, which if you look, by the way, whether it be steel, brass or zinc, the current spot rates are anywhere from 10% to 20% lower than the peak spot rates in earlier this year. So, I'd expect lower inflation next year. And so, what's the net of all this mean? It means that we should see significant improvement in terms of the price/cost dynamic in 2019 going forward, and that should help us in margin accretion for next year. I think it sets us up well. One other thing I'll note is that, keep in mind, you're seeing margin dilution from this price/cost dynamic because, essentially, we're holding flat, offsetting inflation with price. And the tyranny of the math, if you will, suggests that you're going to have margin dilution, maybe not dollars, but certainly margin dilution if you're not getting more than 20% north of your inflation. Julian Mitchell - Barclays Capital, Inc.: Thank you. That's very clear. And then, my second and last question will just be on the Americas region; in particular, noticed the higher investment spend as a headwind in Q3. When you think about the Americas overall as a region, is there anything that in terms of market structure or competition or investment requirements that means that your margins have kind of peaked or do you see a good path still for margin expansion in the medium term in the Americas? Patrick S. Shannon - Allegion Plc: Still see opportunity for margin expansion, just as I've mentioned, getting margin accretion associated with this price inflation dynamic. Also, the incremental margin on volume is still quite strong, 40-plus percent. Don't see any pressure as it relates to pricing that would deteriorate that going forward; and, the market fundamentals, extremely strong, particularly in Americas. So, there's nothing that I could see that would suggest any margin dilution or we're peaked on margin going forward. As you think about investments, we will continue to invest in the business. There's opportunities to drive the business faster, I would say, particularly around electronics in terms of demand creation. And we'll continue to look at those opportunities. And there'll be more color provided on next quarter's conference call. But I think we've got good opportunity to continue margin accretion as well – not only the base business, but the acquisitions as we continue to accelerate those and fold them into our specification writing capabilities, I think that's going to provide us good opportunities as well as operational excellence improvements. Julian Mitchell - Barclays Capital, Inc.: Thank you very much. David D. Petratis - Allegion Plc: Yes.

The next question comes from Josh Pokrzywinski of Morgan Stanley. Please go ahead. Joshua Charles Pokrzywinski - Morgan Stanley & Co. LLC: Hi. Good morning, guys. David D. Petratis - Allegion Plc: Good morning, Josh. Joshua Charles Pokrzywinski - Morgan Stanley & Co. LLC: Just maybe take a step back here for a second. I think at your Analyst Day last year, you reiterated your long-term EPS growth algorithm of 10%. And I know there are a lot of moving pieces, particularly around price/cost, and maybe a bit more macro agita than we had a quarter or two ago. But, Dave, you talked about still having strong visibility in institutional, that that continues into 2019. Is there any reason from what you see today that that shouldn't be still a reliable starting point for people to think about that EPS growth algorithm over the next, call it, year plus? David D. Petratis - Allegion Plc: We stand behind our long-term outlook in terms of EPS growth. We were strong this morning in our belief in end markets, and especially around the institutional piece. You can look at education, healthcare and areas that we do well in; I like the outlook for 2019. Joshua Charles Pokrzywinski - Morgan Stanley & Co. LLC: Great. And then, just a follow-up on an electromech, 30%'s a big number and I know not the most – the largest installed base out there, or the largest base, but anything new either on the product side or new channels that we should think about as maybe that 30% cascades out for a couple more quarters? David D. Petratis - Allegion Plc: I think... Joshua Charles Pokrzywinski - Morgan Stanley & Co. LLC: Something like it. David D. Petratis - Allegion Plc: Especially, in U.S. res, you see acceleration, because of new entrants, because of things like last-mile delivery. But I think the maturity of the keyless world continues to develop globally. We're extremely pleased with our electronic development globally, but a bright line shining on SimonsVoss and Interflex. We think this market has a decade run. And when you start thinking about access as an opportunity, smart devices, the proliferation of cell phone, smart credentials will redefine access in the next decade. And we think Allegion's in a great position, along with the security industry, to be able to take advantage of that. Patrick S. Shannon - Allegion Plc: Yeah. I would just add too, Josh, that if you think about the trend here, this is a, as we've indicated, low penetration on electronic locks and home, we'll call it high-single digits. And so, that provides for a good backdrop for continued growth. And just a reminder that we're not as dependent upon new construction in the resi market, a lot of our sell-through is DIY. And so, I just think there is significant opportunity, as homes become more connected, to accelerate this whole electronics growth. Good secular trend, not as dependent upon new construction going forward. Joshua Charles Pokrzywinski - Morgan Stanley & Co. LLC: Great. Appreciate the color, guys.

The next question comes from John Walsh from Credit Suisse. Please go ahead. John Walsh - Credit Suisse: Hi. Good morning. David D. Petratis - Allegion Plc: Good morning, John. John Walsh - Credit Suisse: Hey. So, wanted to ask a question about the strong free cash flow generation as we think about the deployment of that and maybe you can give us a little bit of color on how your pipeline looks. Obviously, you've been able to successfully get several deals here done in the year. But how does that look kind of going forward? And do you have the ability to kind of continue to do deals given that you are integrating a few right now, even though they're smaller? David D. Petratis - Allegion Plc: So, number one, pleased with the cash flow generation of the business, especially the core. We challenged our teams in January that we expected better inventory management on the core business, and they've done a good job to optimize that. And it's showing on the bottom line in terms of cash. Expect us to go in and drive improvements in the acquisition side of what we're acquiring as well. I think, two, when you move (32:21) how we'll deploy that cash, the acquisition pipeline continues to be active, robust. We did six acquisitions in the first half. So, we're in the process of digesting those, but our people continue to develop the relationships that complement that pipeline. I think we're more mindful in terms of the access in the future and how electronic, software and systems can help leverage our core business. With that said, assets are expensive in the M&A pipeline. And we've said that if we can't deploy that cash, we will return it in terms of share buybacks and dividends to our shareholders. John Walsh - Credit Suisse: Thank you. And then, maybe just following back on an earlier question around tariffs and the outlook going forward. Clearly, the spot rate today, obviously, if we run the math forward, but how would you contemplate or how would you react if we do see that List 3 kind of increase in – as we think about next year? Patrick S. Shannon - Allegion Plc: Yeah. So, the first point is that we do not have significant exposure on imports from China. It's predominantly on fighter brands, accessories, those type of things, because we do a lot of region insource and manufacturing. So, I'd say, low exposure from an overall perspective. On the materials that we do import here to the U.S., we have a couple alternatives to mitigate. One is find alternative sources of supply, which we're working on. And two is to mitigate it by a price increase. And with the products that are impacted by the L3, we have already gone out and announced a price increase effective December 1 and to help mitigate that. So when I look at the impact for 2019, I would say the expectation is it will be offset entirely, i.e., no impact; and then for the balance of this year, minimal impact, if any. David D. Petratis - Allegion Plc: I'd reemphasize, our North American supply chain is local, in North America. And it gives us some of the best margins in our industry that we continue to focus on to meet customer requirements and drive productivity. We think it's a good setup. We work to try and emulate that globally, where we can have competitive supply chains that helped us put up industry-leading margins. John Walsh - Credit Suisse: Great. Thank you.

The next question comes from David MacGregor of Longbow Research. Please go ahead. Robert Aurand - Longbow Research LLC: Hi, good morning. Rob Aurand, on for David today. David D. Petratis - Allegion Plc: Good morning. Robert Aurand - Longbow Research LLC: I guess just looking at mix within the Americas, can you talk about kind of the growth you're seeing in the premium brands versus the fighter brands? Patrick S. Shannon - Allegion Plc: Yeah. I would say, similar across the board, premium may be a little bit stronger, particularly as institutional markets recover. And that, as you know, is a really good trend from an overall market demand, because we got favorable mix there. Strength across all the brands and product categories, maybe the premium brands doing a little bit better than the fighter brands. But we're seeing good growth, particularly as it relates to our channel-led initiative on the discretionary business here in the U.S., which is more of a lower price point type of product. So, overall, strong growth in all the brands and products. Robert Aurand - Longbow Research LLC: Okay. Thank you. And obviously, acquisitions are dilutive right now. Can you give us a sense of when could the current acquisitions become accretive to margins? Patrick S. Shannon - Allegion Plc: So, the expectation is that we would begin to see some benefits next year as we continue to integrate those businesses and leverage a little bit more on top-line growth. So, I would expect some year-over-year improvement. The margin profile of those acquisitions collectively aren't at the aggregate margins that we see today, but they should begin to show some positive incremental improvement next year, if you're looking at it a year-over-year basis. Robert Aurand - Longbow Research LLC: Okay, thank you.

The next question comes from Tim Wojs of Baird. Please go ahead. Timothy Ronald Wojs - Robert W. Baird & Co., Inc.: Hey, guys. Good morning. David D. Petratis - Allegion Plc: Good morning, Tim. Timothy Ronald Wojs - Robert W. Baird & Co., Inc.: Hey, just circling back to the electronics growth. Just that 30%, that's an organic number? Patrick S. Shannon - Allegion Plc: Yes. Timothy Ronald Wojs - Robert W. Baird & Co., Inc.: Okay. And then, is there a way just to think about how the growth rate kind of compares on the residential side and maybe the commercial side within electronics? Patrick S. Shannon - Allegion Plc: Yeah. So, we're not going to give specific numbers, but resi a little bit higher than the non-resi piece. Timothy Ronald Wojs - Robert W. Baird & Co., Inc.: Okay. Okay. And then just my follow up, you talked about some pretty strong institutional visibility. How about some of the commercial markets as you go into 2019? David D. Petratis - Allegion Plc: I think it's no secret that the commercial environment is peaked. We still see opportunities in that market. 800 hotel rooms announced last Sunday here in Indianapolis would be an example of that. We think our product positioning gives us the opportunity to continue the growth along with our channel initiatives. But as you think about 2019, healthcare, education look favorable. Our quotation activity looks favorable and we'll continue to take what the commercial market gives us as we move forward. Timothy Ronald Wojs - Robert W. Baird & Co., Inc.: Great. Well, good luck on the rest of the year, I guess. Thanks. Patrick S. Shannon - Allegion Plc: See you in a couple of weeks. Timothy Ronald Wojs - Robert W. Baird & Co., Inc.: Definitely.

The next question comes from Rich Kwas of Wells Fargo Securities. Please go ahead. Ron J. Jewsikow - Wells Fargo Securities LLC: Yeah. Good morning. This is Ron Jewsikow on for Rich. Patrick S. Shannon - Allegion Plc: Good morning. Ron J. Jewsikow - Wells Fargo Securities LLC: Good morning. Just drilling down a bit further on the M&A dilution in the Americas, because it was a pretty sizable step-up versus last quarter's headwind, we're calculating an operating margin on the acquired business a little under 10%. First, is that correct? And second, what's included in that figure such as (39:29) or integration cost or anything like that? Patrick S. Shannon - Allegion Plc: Yes. So, that would be fairly close. Keep in mind, there's heavy amortization expense associated with intangibles. So, really, on a cash basis, EBITDA is the mid-teens – mid to high teens. And so, hey, look, the performance of the business under a little bit of pressure, like we mentioned, associated with the base business in terms of higher inflation, those type of things. And I would expect those businesses, again, as that subsides a little bit more, to improve margins going forward. Ron J. Jewsikow - Wells Fargo Securities LLC: Okay. Appreciate that color. And then, just a follow up. I know you guys have been hesitant to give this in the past, but given where we are right now I think for resi, can you provide new construction versus reno split, or how much of resi sales are direct to the builder channel? Patrick S. Shannon - Allegion Plc: Yeah. Ron, when you look at our residential business, we're more aftermarket than new construction. So definitely, north of 50% is aftermarket, the biggest channel being through big-box retailers. We don't give the exact amount, but as you think of our business, it's not as tied to new build at all. Ron J. Jewsikow - Wells Fargo Securities LLC: Okay. Appreciate that. Thanks, guys.

The next question comes from Jeff Kessler of Imperial Capital. Please go ahead. Jeffrey Ted Kessler - Imperial Capital LLC: Thank you. At the GSX conference where you folks demonstrated some of your new products and businesses, one of the things that we spent a lot – a long time on was your Overtur spec-writing system. To the extent that you can talk about it, number one, what is the game plan in terms of integrating existing, want to call it, organic company with new acquisitions into that spec, you want to call it, collaborative spec-writing capability? And number two, what markets do you think that this new system will affect first as we take a look at what seems to be a technology step ahead of the competition? David D. Petratis - Allegion Plc: So, thanks for pointing out our development of Overtur. It's a system that helps our spec writers connect with architects and designers. It's something that we've been developing over the last year here at Allegion. Number one, look for us to expand that into acquisitions integrations as we move forward. Number two, if you think about the world of specification, especially with architects, new architects entering the space expect to be connected digitally. And we think Overtur is a nice step up for that. It provides features that drive efficiencies in terms of the design and project management, and it will help us put, what I would describe, hooks in that design phase and build on the competitive advantage that already exist. Allegion, particularly in the Americas, has one of the strongest spec-writing capabilities and investing in digital tools to advance that's the right step. We like our position there. Jeffrey Ted Kessler - Imperial Capital LLC: Okay. Also, if I could just ask a question about one of the smaller acquisitions that you made, a company that we've worked with in the past, ISONAS. They're known for essentially having, if you want to call it, their power reader-controllers, basically supplanting one big box that you had to put at the door. What markets are they, or you in conjunction now, working toward to start introducing that product through Allegion? David D. Petratis - Allegion Plc: So, I don't know that I'd want to show my hand there, but we believe, around the institutional markets advancing our wireless access technologies, that that's a perfect fit for us. And you think about the sets of products that we have in terms of wireless access design, we like how that can advance us in our growth in that segment, Jeff. Jeffrey Ted Kessler - Imperial Capital LLC: Okay. I don't have a third question to ask, but I will get you guys back on this later. Thank you very much. David D. Petratis - Allegion Plc: Maybe you can appreciate that I just don't want to throw my cards on the table there. Jeffrey Ted Kessler - Imperial Capital LLC: I understand that. Okay. Thank you. David D. Petratis - Allegion Plc: Thank you. Mike Wagnes - Allegion Plc: Andrew, do we have another caller in the queue?

Yes. We do have a question from Joe Ritchie from Goldman Sachs. Joe Ritchie - Goldman Sachs & Co. LLC: Thanks. Good morning, guys. David D. Petratis - Allegion Plc: Good morning, Joe. Joe Ritchie - Goldman Sachs & Co. LLC: Hey. So, just talking about that 30% growth in electronics this quarter, obviously, nice uptick. Maybe – if you could maybe just provide a little bit more color. What do you think is really driving that growth? Is this kind of like a new normal? Is there any color around whether it's product introductions or different channels that you're selling through would be helpful. David D. Petratis - Allegion Plc: So, I'd point to a couple areas, (45:42) overall broad awareness. Last mile delivery, smart doorbells, all starts with dialog, does your front door connect as well as my front door. I think second is the advancement of e-commerce. Whether it's Home Depot, Amazon, our e-commerce channels are growing extremely nicely, and this is a click-and-play type product. I think our brand is significant here. There has been some research out in the market that talks about the importance of brand awareness in the market. And we think the Schlage brand, our star ratings, if you look into some of that, the highest star ratings with the most reviews on our products are things that line up nicely for Allegion. Joe Ritchie - Goldman Sachs & Co. LLC: Got it. No, that makes sense, Dave. And maybe since you brought it up, any color you can give on Amazon Key, your product introductions, I think, you're still scheduled for later this year. Any update on that would be helpful. David D. Petratis - Allegion Plc: We will have a product available imminently that's compatible with Amazon Key. That was our commitment, and we're there. Joe Ritchie - Goldman Sachs & Co. LLC: Okay. Great. Thanks, guys. David D. Petratis - Allegion Plc: And let me add a little bit to that. We are compatible with a variety of operating systems, and we'll have a release in this quarter that connects with a world that's moving all the time.

This concludes our question-and-answer session. I would like to turn the conference back over to Mike Wagnes for any closing remarks. Mike Wagnes - Allegion Plc: We'd like to thank everyone for participating in today's call. Please contact me for any further questions, and have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.