Acuity Brands, Inc. (AYI) on Q2 2021 Results - Earnings Call Transcript
Operator: Ladies and gentlemen, thank you for standing by. And welcome to the Acuity Brands Second Quarter 2021 Earnings Conference Call. At this time, all participants’ lines are in listen-only mode. After today's presentation, there will be a formal question-and-answer session. At – please be advised that today’s conference may be recorded I’d now like to hand the conference over to your host today, Charlotte McLaughlin, Vice President, Investor Relations. Please go ahead. Charlotte McLaughlin: Thank you, Liz. Good morning and welcome to the Acuity Brands 2021 second quarter earnings call. As a reminder, some of our comments today maybe forward-looking statements. Based on management’s beliefs and assumptions and installation currently available to management at this time. These beliefs are subject to known and unknown risks and uncertainties, many of which maybe beyond our control. Increasing those details in our periodic SEC filings, please note that the company’s actual results may differ materially from those anticipated. I will undertake no obligation to update these statements. Reconciliations of certain non-GAAP financial metrics with our corresponding GAAP measures are available in our 2021 second quarter earnings release which is available on our investor relations website at www.investors.acuitybrands.com With me this morning is Neil Ashe, our Chairman, President and Chief Executive Officer; who will provide an update on our strategy and detail highlights from the last quarter and Karen Holcom, our Senior Vice President and Chief Financial Officer who will walk us through this quarter’s earnings performance. There will be an opportunity for Q&A at the end of the call. For those participating, please limit your remarks to one question and one follow if necessary. We are webcasting today's conference call live. Thank you for your interest in Acuity Brands. I will now turn the call over to Neil Ashe. Neil Ashe: Thank you, Charlotte. And good morning, everyone. Thank you for joining us to discuss Acuity Brands. I'm pleased with our Company's performance in the second quarter of fiscal 2021. We have delivered solid results, while continuing to make progress on our strategy. We've improved the way in which we serve our customers, expanded margins, and allocated capital effectively. As you know, the pandemic has created real challenges over the past several quarters. And we have yet to return to a steady state. The slowdown last year had a global impact on supply chains and logistics. And we continue to feel the impact of this in the economy in our and in our operations. Yet we have continued to have consistent and strong performance during this time. As we look forward, we are facing some new and existing challenges. As demand begins to rebound, global logistics, for example continues to encounter issues. New challenges include the global chip shortages, and the rising cost of some components. To be clear, these are good problems to have. We are managing these challenges aggressively, and our entire team will work tirelessly to deliver the best possible outcomes for our customers and continued high quality results. Karen Holcom: Thank you, Neil. I want to start by echoing Neil's initial comments regarding this quarters performance. Our associates pulled together to deliver a solid performance and the fourth consecutive quarter of gross profit margin over 42%. I'm proud of the changes and progress we continue to make. Moving to our second quarter results. Net sales were $777 million, a decrease of 5.8% compared to the prior year, which we believe was a very good performance in this market. Notably within our sales performance, our independent sales network and direct sales network were approximately flat with the prior year, as we continued to see strength in medium to large projects, offsetting some of the pressure in the commercial office space, which continues to be impacted by the COVID-19 pandemic. Operator: Our first question comes from John Walsh with Credit Suisse. John Walsh: Hi, good morning, everyone. Neil Ashe: Good morning, John. Karen Holcom: Good morning. John Walsh: First appreciate, the extra detail you're now providing in the prepared script. Found that very helpful. And wanted to kind of use that as a springboard for the first question here. So I guess one of your competitors was out with additional price increases. You talked about how the raws really haven't flowed through yet. But you have both this product and productivity benefit. You called out, can you provide a little bit more color around if you need to get more pricing if you need to kind of pull the product value engineering lever more or maybe the productivity level more? I mean, where will that offset come from as you see those raws flowing through? Neil Ashe: Yes, John, thanks for the question. And, obviously Karen was pretty deliberate about pointing out the team is focused on the relationship between price and cost. So we are extremely pleased with the benefits that we've seen from the improvements in our product and in productivity. And obviously that will continue as we as we go forward. So we saw the benefit of that in the second quarter. And that will continue on into the third quarter. An example of that is the Compact Pro High Bay, where that I mentioned which uses less material, delivers a higher quality customer experience and output. So that's what we mean when we say there are multiple levers. So that that product is not going to require more steel in the third or fourth quarter, for example. So we'll continue to see that. As it relates to price, we are -- our focus right now is on the on the successful implementation of the price increase we already announced. So as we -- as we look forward, we think that relationship and price and cost as Karen indicated, on an annualized basis, get us comfortable over the 42% gross margin which it's worth noting is significantly higher on a consistent basis than the company has been in the past. So, so we like where we would like where we are going into this process. But as a as we both mentioned, this is, the ramp up is going to have its challenges. There are, there are going to be our entire industry is going to be working through the supply chain, the supply chain challenges and costs. And, we feel really good about our team, but it's going to be this is hard work, and the team is up for it. John Walsh: Great. And then, as a follow up to that was just wondering if you could talk a little bit about the competitive nature in the quarter, we can all see the supply chain bottlenecks and higher freight that maybe some of the Asian imports or importers will feel coming into the U.S. But have you been able to use delivery times or other things to actually take market share? And, is that actually a correct premise that maybe some of the importers haven't been able to fulfill demand? Neil Ashe: Well, I mean, of course, we're going to use John, every advantage we have in the marketplace to, to deliver the highest customer experience, and that is our priority. So, as it relates to as it relates to service levels, yes, we have consistently throughout the pandemic, when there were other challenges been able to, to smooth those challenges to the benefit of our customers. And we believe that that has accrued to increase market share for us. And we'll continue to do that, too. We'll continue to do that going forward. And it's worth just spending one second on the balance in our supply chain. So we have, as you know, we have about 20%, imported from, from Asian finished goods, about 60%, manufactured in our facilities in Mexico, and the remaining 20%, manufactured in our facilities in the U.S. and a little bit in Canada. So that gives us more dexterity, often than, many of our competitors, and we're definitely using that to our advantage. John Walsh: Great. appreciate all the color. Thank you. Neil Ashe: Thanks, john. Operator: Our next question comes from Ryan Merkel with William Blair. Ryan Merkel: Hey, everyone, congrats on the quarter. Karen Holcom: Thank you, Ryan. Ryan Merkel: So I guess first off, can you dig a little bit more into your comments about end markets improving? I've heard in some of my checks that agents and distributors have a backlog and quoting bill the past couple months. So are you seeing the same thing? And what do you think are the main drivers? Karen Holcom: Sure, Ryan, we continue to be impressed with how our agents have performed really early on in the pandemic. And also as we continue to see improvements in our end markets. So in the first quarter, we mentioned that we saw in consistencies across geographies, and we continue to see that same performance today just can be very inconsistent across the different geographies that we serve. We've seen some improvements due to activity for warehouses and logistics is a really strong areas for us as where as well as K through 12 performance. And that's helping us kind of manage where we see some softness in the market. So, we still see some optimism, and we're just cautiously optimistic about the ramp up that we're seeing currently. Ryan Merkel: Okay, perfect. And then, Neil, can you articulate why you see a growth story in intelligent buildings? Just talk about what's changed first, a few years ago? And then what are the main use cases? Neil Ashe: Yes, Ryan. So let's, let's kind of frame this first. First, with this deck. And I mentioned this in my comments. We have an attractive asset that's uniquely positioned in the market. It's from a technology perspective, it's built on open protocols. And from a distribution perspective, it's distributed with independent systems integrators. That gives Distech the opportunity to really have present building owners with the opportunity to adapt to a number of different scenarios going forward. With Atrius, we've pivoted the focus then to really be about the applications largely in the cloud, which deliver real business value to, to around buildings, around people and around into independent use cases, which are different than really we can see anybody in the marketplace doing right now. For a long time, IoT has been a solution in search of a problem, in my opinion. And what we're really focused on are what are these applications that can deliver demonstrable value for our customers. So we're in the cat, we're in the course of building that out and so over time, what you will see with this group is you will see a high quality product business in Distech. And a high quality technology application solutions business with Atrius which should deliver continuous, recurring revenue and, and growth. But as I said, Atrius is still an option at this point. We are obviously recruiting for a very impressive talent to, to, to take this where we are pivoting it to go. But it's still early. So that will so but when you summarize that Distech will continue to grow and you'll see that more later in the year as we provide more transparency, and Atrius we believe can grow to be a meaningful recurring revenue business. Ryan Merkel: Very helpful. I'll pass it on. Thanks. Neil Ashe: Thank you, Ryan. Operator: Our next question comes from Chris Snyder with UBS. Chris Snyder: Thank you. First, on gross margin, can you provide a bit more color on the sequential improvement in the quarter? I know the company called out productivity improvement, but the like a, a sharp kind of sequential improvement. And then, what level of pricing improvement if any, is embedded into the, 42% plus target going forward? Karen Holcom: Alright, Hi, Chris, how are you? Chris Snyder: Good. How are you? Karen Holcom: If we look over the past several quarters, for the past eight quarters, we've delivered gross profit margins above 40%. And six of those eight quarters have been above 42%. So you're right, this was a sequentially strong quarter at 43.4. But as we mentioned, we continue to work on product and productivity improvements. And some of those good yield results a bit faster than we expected, which really positioned us well, for what we see ahead. Given our current gross profit margin improvement, we think that we can achieve the gross profit of above 42%, for the balance of the fiscal year. Chris Snyder: But I guess on that, is there any, that's that 42% plus for the balance of the year, does that embed, or what level of pricing improvement does that embed? Karen Holcom: Sure, we announced the price increase, and it'll be effective, it was effective in March. And we'll feel the benefits of that probably later in the third quarter. We are focused on full capture of the price increase in just taking advantage of the price increase to offset some of the costs that we see ahead of us. Neil, anything you want to add? Neil Ashe: Chris, it's just worth noting that we consistently have the highest gross margin in the industry. So this positions us well, competitively as we, as we look forward. So, as we've, as we've been saying, for really, every quarter since I've gotten here, we are working on these products and productivity improvements to make this company more predictable and reliable. Number one, and this goes back to the earlier question about the supply chain number one, to a customer's and in the marketplace, we want, we want the entire marketplace to know that they can rely on Acuity Brands to solve their needs. And in so doing, we've been able to increase the quality and the margin profile of our products, and the how we make them and deliver them, which is delivering these productivity improvements. So, as we said, there's the ramp back up is, is going to be bumpy for the entire industry, frankly, for the entire economy. So we don't want to get out in front of ourselves, which is why we've done so much hard work to position ourselves for, for where we're going to be for the remainder of the year. Chris Snyder: Appreciate that. And then I guess the second question, for then thinking about non-rez new construction business, could you provide some color on when you think revenues there could bottom, assuming they haven't already, just because when we looked at the start data, the comps are turning easier, and it's definitely getting better. But, given a lighting lag, just be helpful for when we're trying them all out to, hear when you guys think that could bottom? Neil Ashe: Yes, Karen, Karen addressed this in, in her comments. But, as we said in the last call, it's, it's helpful to see the disaggregated revenue in our lighting, explanation and the C&I independent sales network has been incredibly consistent at a level through the, through the, through the pandemic, obviously, that's starting to increase. And Chris, that's a that's a combination of a number of different a number of different verticals and products. And as Karen mentioned some inconsistency and round regions across the country. So we think that return will be a little bit bumpy as a result as a result of that, but there's there's no question that there's demand. As we look to external kind of indicators which are kind of spot on, we've, we've talked about this in the past. It really is around, it really is around total construction. And as you as you look forward and think about kind of where we're going to be over the next several years, I just want to emphasize a, a really simple yet pretty obvious point, which is that you can't build anything, or renovate anything without lights. So whether it's a highway, a building, a warehouse, a school, hospital, an office, etcetera. A home, nothing, you can't build anything or change anything without life. So, we feel we feel like we have a, we have a place to play in, in the economy over the foreseeable future. Chris Snyder: Appreciate that. Thanks for the time, guys. Operator: Thanks. Our next question comes from Jeff Sprague with Vertical Research. Jeffrey Sprague: Thank you. Good morning, everyone. I guess, if we could just talk about supply chain a little bit more, Neil. So the semiconductor thing is pretty well understood, as maybe obvious and enough of the challenge for everyone. But is there? Are there any particular other areas where, you see constraints that you're trying to get ahead of? And, is there knows what the future brings in terms of end demand? But do you actually see kind of supply governing your revenue trajectory here's called the next to the four quarters? Neil Ashe: Yes, Jeff that's a really good question. So, the global chip shortage goes all the way back to the fab. So this is, this is a, this is a problem, which spans everyone that impacts largely our controls business. So we're working our way through that. Obviously, we're the largest supplier in the lighting business. So we can, we can use that to our advantage. But we're small when you compare us to say, the auto industry, for example. So there's, so we're, we will do the best we can, and I'm confident our team is, is working incredibly hard to and they will do better than better than most. The as you think about kind of other challenges. There are, kind of discrete, there's some discrete items, which are maybe unique to some of our products, but there isn't, there won't be a systemic kind of impact to everything that we do. So yes, it will, it may create some bumpiness in our, in our shipments over the course of the next several quarters. But we are, as I said earlier, we're doing the best we can. And we've demonstrated working really hard, as we've demonstrated through the pandemic that we'll be will be better than most and and, and our team is primarily focused on how can we be as consistent and predictable as possible to our customers and end users so that, over time we continue to drive preference to Acuity. Jeffrey Sprague: Great? And could you just elaborate a little bit more on this sales agency change in the northeast, a little more color on what you attempt to accomplish with this change? And is this something that would be happening across the country, if you can get the stars to align? How it might impact just kind of the front end of your business would be interesting? Neil Ashe: Yes, Jeff, it's a really good question. So it's worth a little bit of background here. The New York market was a bit of an odd duck in our go-to-market strategy, and that it was an owned agency. The only other place we have that is in Toronto, and everywhere else we rely on independent sales agents. The so we saw two things that happened as a result of that. First, we were constrained in the New York City Market on our ability to serve, to serve projects where, where designers and specifiers may want, I don't know why they would but may want a product that wasn't made by Acuity. So the logic of these independent sales agents is that they can they can, they can curate a collection of products that allows us to have a higher success ratio when it comes to bid day and we can win more projects and as a result grow market share. So we were pretty hamstrung in the New York market. At the same time, we saw that, that we needed to provide some consistency to contractors that did business across New York, New Jersey and Philadelphia. So that effectively from their perspective is a single market and it was ineffective for them to be doing business with multiple of our different agencies. So we see, we see the consolidation of these agencies as a way for us to better serve the New York design and specification community which we hope will carry specifications across the country number one, and then number two, better serve and more consistently serve these contractors that are working in New York, New Jersey and Philadelphia. So, so we feel really good about this. It doesn't necessarily portend similar changes across the country because we don't own any agencies in other markets, but we've been underperforming in the largest market in North America as a result of this own agency so it was a pretty important for us to get this sorted out. And then finally, I do want to emphasize that this is this is demonstrating our commitment to this independent sales network which we believe to be the strongest in the industry. We'll continue to work with the independent sales network to improve their performance and we will continue to drive for better outcomes for both them and for us in other markets across the country. Jeffrey Sprague: Great. Thank you. Operator: Our next question comes from Christopher Glynn with Oppenheimer. Christopher Glynn: Thanks, good morning and congrats on the results. Was curious about capital you know the repurchase sounds like the high level repurchase is kind of done. You're quite asset like and you have no net debt lot of cash, so it kind of shines a light on the pipeline question what are your seen what are your tense for deals over the next say a year and a half or so? Neil Ashe: Yes thanks for the question, and your observations are spot on and are a large part of the reason why I'm here in the first place. So if we kind of do a check in, we talked about the durability and of our lighting and lighting controls business and the opportunity to transform that business I feel really good about where we are going there. We talked about the opportunity and the option to build a technology business with Atrius and as I indicated earlier, it's still early stages but we're assembling a rockstar team there that we believe can can make a real difference which gives us the opportunity then to focus on how can we, the company is in a position to process and how can we focus on how to continue to grow the company through acquisitions. That'll flow into two big camps, the first would be bolt-on acquisitions to our existing businesses so we have a healthy pipeline now of opportunities that are relatively small but we which we feel like we can do in the foreseeable future around our existing businesses and then we'll start to turn our attention and it's very early and we don't have a lot to share on this on what other areas we would invest in post that. But our objective as I said earlier was to be a technology company that that solves problems and spaces in light and we see the opportunity to expand to additional areas over time. And so I would expect kind of bolt-ons for the in the immediate future and then we'll start to focus on larger things after that. Christopher Glynn: Great. And I was curious a lot of border topics in the news lately and maybe the word chaos comes to mind a little bit I'm not sure how the Maquiladoras regions intersect with some of the border issues but could you update us on the security, the visibility and risk factor of you know just sustaining all your output out of Mexico? Neil Ashe: Yes, that's a great question. So let me start at the border and obviously there's we move a lot of products from Mexico to the U.S. We actually, we haven't seen challenges as a result of some of the stuff that you're referencing in the news. We did see them in the when the storms went through that region and you know Texas shut off natural gas to Mexico which cost us a couple days of production in Mexico which was I personally didn't see that one coming. But the as we think about the Maquiladoras, they're obviously incredibly important to the economic infrastructure of really all of Mexico and so our leadership team in Monterrey is highly visible and highly relevant to the industry group of the Maquiladoras. We meet regularly with the key members of the government there to ensure that that there is continuity and we have been for example really helpful excuse me on the at throughout the pandemic on health and safety issues. We've developed them in our facility, shared them with the other Maquiladoras, shared them back with the health and labor secretaries as we as we progress there. So I would say that we work very hard at making that that area of the world as stable as possible for so that we can continue and we feel pretty good about where that stands right now. Christopher Glynn: Nice answer. Thank you. Operator: Our next question comes from Tim Wojs with Baird. Timothy Wojs: Hey, Hey, everybody. Good morning. Nice, nice job. I guess my first question just on productivity? Could you just I guess give us a little bit more color of detail about maybe what's really changed on the productivity side? Because it sounds like things have and it's always been a lever that's been available to Acuity for a long time. So just are you doing just more on the productivity front than before? Is there more structure or maybe some internal incentives around it internally, just just try to understand it, it does seem like there's more emphasis on that I'm just trying to understand if there's anything that's really changed behind the scenes. Neil Ashe: Yes, Tim. So a lot has changed. So we've been able to, we've been able to optimize our productivity around specific facilities. So we've consolidated one facility, we've, we've changed the flow through several of our facilities. On the manufacturing side, we, transparently as a result of COVID, we were forced to rethink many, many things. And so we re-architected the cell, cell structure to keep people distanced, and we were able to process the, frankly, the same amount of output, as you seen, with a with a smaller base. And, and, and the, kind of never missed the opportunity presented in a crisis to improve our to improve our operations. And then on the on the distribution side through we've increased the throughput of our, of our distribution facilities, so we can process more through on our Asian finished goods. We've changed how we distribute those. So in addition to we've spread the distribution out throughout the country, so that we're, we're delivering materials from Asia to the east coast, as well as to the west coast. So it's a series of it's a cumulative series of things. And you know, that I say a lot about transformation around here, Tim, is is oftentimes, we think that there are really things but the queue, really large things, but the cumulative impact of small things can be really meaningful and differentiated. And I would say that this, this, this both product and productivity improvement point to the accumulation of a number of small things, which have been really impactful. Timothy Wojs: Okay, okay. Okay. Great. That's really helpful. Thanks for that. And then, maybe on a go-forward basis. I mean, you did talk about the 42% plus gross margin Target, how are you thinking about SG&A in just leverage, because, that's been a source of opportunity over time, kind of pre pandemic, you were in this kind of 26 or so percent of revenue as a percent of sales, you know, for SG&A. And that's obviously migrated higher with the pandemic. I mean, is 26% still a target or attainable as you as you see the end markets recover, and you don't have to put as much SG&A back into the business? Karen Holcom: Yes, Tim, that's a great question. We have been managing costs very closely during the pandemic. As you know, some of these costs came down naturally, as we travelled less, we held less than person events. And as the market comes back, we see that starting to increase a bit, but we really are going to manage this carefully and not invest ahead of the market recovery. So we'll continue to work with our associates to make sure when they are traveling, and when we're doing these marketing events, that they are the right ones and are delivering a return for us. But I could see a sequentially start to increase just a little bit throughout the balance of the year, but probably not to the full level of dollar spend that we were pre pandemic. Timothy Wojs: Okay, but from a dollar perspective, you see, sorry, Neil go ahead. Neil Ashe: Yes, no, Tim, I just wanted to add in to Karen's point there. And we want to prioritize our reinvestment going forward because and I want to make sure we put a marker out there that we are going to reinvest going forward. And we're going to prioritize a lot of that reinvestment around things which we consider investments as opposed to expenses predominantly around the software development and other changes that we want to make as part of the transformation. So we will be adding back some expenses expenses going forward, but we believe those are investments as opposed to spend dollars. Timothy Wojs: Right. Okay. Okay, great. Well, nice job again, and good luck on the rest of you guys. Neil Ashe: Thank you. Operator: Our next question comes from Brian Lee with Goldman Sachs. Brian Lee: Thank you and thanks for taking the call. Good morning. Most of my questions have been answered but maybe just could you give us a sense on the, I knew I know you came in with a big view on the digitalization opportunity here for the company, tier three for Atrius type solutions, you sort of alluded to building that out here as well. Can you also kind of put that into the context of the corporate channel here? How does the, the mix shift? You guys have been struggling kind of in that channel here, through the pandemic, but even before the pandemic, it seemed like that channel was, was struggling to grow. Is it fair to assume that a lot of the digitalization opportunities through that channel is trying to understand where it shows up in your new quota sort of segment breakouts? Neil Ashe: Yes, Brian. Well, we have, we've addressed this in the past. And so let me just spend a second on generally, what enterprise accounts are obviously the largest accounts we have, there are retail accounts they are, and we've had a lot of success with some of the most important retailers in North America. The results have been we've said consistently, that those results will be inconsistent based on the need for those customers to manage access to their buildings. And you've seen that throughout the pandemic. So a lot of the drop off, you've seen and if you look at it on a sequential basis, it's literally a drop off. It's not a --it's not a declining curve, is the result of that the reality that throughout the pandemic, their priority was only having their associates and their customers in their facilities. But as you know, these entities can't go on forever without renovation. So retailers are generally on a seven to 10 year ish kind of renovation schedule. So, so this will come back. And, and we're, and we will participate in it when it does. We’re I think the best position to the industry for that segment. The second part of that question that we've said, or I've said consistently, since I got here is that what's interesting about the luminaire and lighting is that it's a capital efficient way to introduce technology to spaces. But that is the incremental cost of the technology is relatively low. And the real cost is is around the installation of that technology and the changes necessary in that process. So when you're renovating, it's a very efficient time to introduce new technology into spaces which we have done and we will continue to do going forward. And then so you will see the manifestation of that to your question, as we think about the lines of business through sales of Atrius enabled luminaires lighting control products through and products through the ABL channel. As we start to develop applications, which drive business value, you will see those applications show up in Atrius and see those in our spaces in the conversation about our spaces group. So, so the synopsis of that is that lighting and luminaires and the renovation opportunities around them provide a capital efficient way to introduce new technology to spaces will benefit from that by having the highest quality technology. And then second, we will use that technology to power as a part of the powering of applications which deliver real business value to to our customers through Atrius. Brian Lee: Okay, great, that's helpful. And then maybe just a quick one. I know the inks not even dry on this. But have you guys had a chance to sort of sift through the President Biden's infrastructure agenda? I think he's out this afternoon outlining it in a speech but the White House has put out some high level markers around different parts of the package here any impact or tailwinds that you'd be anticipating from what you've seen thus far? Neil Ashe: Yes, unfortunately, we haven't had the time to dig through it. You know, obviously, if that were to happen, it would be a benefit for the economy. And as I mentioned earlier, it's impossible, impossible to build anything without lights. So whether it's a highway or school or a VA hospital as the tree tops view I saw early this morning, all of those things will, will need lights, and so we’ll continue to use this as an opportunity to drive our product and productivity improvement. So that we're best positioned for whatever that ends up being. Brian Lee: Alright, thanks a lot. I'll pass it on. Operator: Our next question comes from Jeff Osborne with Cowen. Jeffrey Osborne: Yes. Good morning. Just one question on my end. I was curious if you could update us on what the status is of the UV lights, any momentum there with the acquisitions, you've done in new product introductions? Neil Ashe: Yes thanks Jeff. We are we are now officially in the market with those as I mentioned earlier around the 254 nanometre and light luminaires, which are interesting and I didn't explain them perfectly but they include the 254 nanometer technology. They circulate air above the fixture too so that they work in a situation where people are present or not present which is unique for the 254 nanometer technology. That's now in the marketplace. We've obviously as I mentioned, we're eating our own cooking so we've installed that throughout our supply chain facilities and it's having a positive impact so you know we expect kind of revenues in the third and fourth quarter from that going forward. And then we'll layer in the rest of the rest of the products that we that you've heard as mentioned before. Jeffrey Osborne: Perfect. That's all I had. Thank you. Neil Ashe: Thanks Jeff. Operator: That concludes today's question and answer session. I'd like to turn the call back to Neil Ashe for closing remarks. Neil Ashe: Thank you Liz. We're pleased with our results in the second quarter. Our team is hard at work dealing with the challenges that we've been discussing are ramping up. And our focus will remain on serving the needs of our customers and on delivering quality results. So I'd like to thank you all for joining us today as we said we will be providing deeper insight into our lines of business later this year and we intend to host an investor day so please sign up at the investor website and be in touch with Charlotte and for updates and we'll announce that date soon. So with that, thank you for your time and thank you for your interest in Acuity Brands, and we hope you have a great rest of your day. Thanks Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
Acuity Brands Surges 7% After Blowout Q3 Results Top Expectations
Shares of Acuity (NYSE:AYI) jumped more than 7% intra-day today after the firm posted third-quarter earnings and revenue that significantly exceeded Wall Street estimates, fueled by strong demand across its core segments.
The Atlanta-based provider of lighting and building management solutions reported adjusted earnings per share of $5.12, well above the consensus estimate of $4.30. Revenue came in at $1.2 billion, topping analyst projections of $1.15 billion.
Growth was driven by continued strength in the company’s Lighting and Spaces divisions, reflecting solid execution and healthy customer demand.
The earnings beat and positive top-line surprise sent shares sharply higher, as investors welcomed the robust performance in a generally cautious industrial sector backdrop.
Acuity Brands, Inc. (NYSE: AYI) Reports Impressive Q3 Financial Results
Acuity Brands, Inc. (NYSE: AYI) is a leading entity in the industrial technology sector, focusing on innovative solutions in lighting and intelligent spaces. The company operates through two main segments: Acuity Brands Lighting (ABL) and Acuity Intelligent Spaces (AIS). Acuity leverages technology to address challenges in lighting solutions, controls, and building management systems, aiming to enhance customer outcomes and drive growth.
On June 26, 2025, AYI reported impressive financial results for the third quarter, with earnings per share (EPS) of $5.12, surpassing the estimated $4.44. This performance represents a significant earnings surprise of 15.84%, as highlighted by Zacks. The company also reported revenue of approximately $1.18 billion, exceeding the estimated $1.15 billion, marking a 3.02% beat over the Zacks Consensus Estimate.
Acuity's strong financial performance is further underscored by its consistent ability to outperform consensus EPS estimates over the past four quarters. The company has achieved this feat four times and has surpassed revenue estimates twice. In the previous quarter, Acuity exceeded expectations with earnings of $3.73 per share against an anticipated $3.66, delivering a 1.91% surprise.
Despite a 4% decline in operating profit to $140 million, Acuity successfully grew its adjusted operating profit by 33% to $222 million. The adjusted diluted EPS rose by 23% to $5.12, even though the diluted EPS decreased by 14% to $3.12. Neil Ashe, Chairman, President, and CEO, expressed satisfaction with the company's performance, highlighting growth in net sales and adjusted operating profit.
Acuity's financial health is reflected in its key metrics. The company has a price-to-earnings (P/E) ratio of approximately 22.62, indicating investor confidence. Its price-to-sales ratio stands at about 2.38, and the enterprise value to sales ratio is around 2.58. With a debt-to-equity ratio of approximately 0.47 and a current ratio of about 1.95, Acuity demonstrates good short-term financial health and a moderate level of debt relative to equity.
Acuity Brands, Inc. (NYSE:AYI) Financial Overview and Market Position
- Acuity Brands has shown a stable consensus price target with a slight increase in the last month, indicating a consistent and slightly positive outlook from analysts.
- The company anticipates an 18% year-over-year revenue increase to $1.15 billion and an earnings per share growth to $4.39 in its upcoming earnings announcement.
- Despite a decline in shares following fiscal second-quarter results, Acuity's strategic acquisition and robust net sales growth underscore its strong market position and potential for future growth.
Acuity Brands, Inc. (NYSE:AYI) is a prominent player in the lighting and building management solutions industry, operating primarily through its two segments: Acuity Brands Lighting and Lighting Controls (ABL), and the Intelligent Spaces Group (ISG). The ABL segment provides a diverse range of lighting solutions and controls, while the ISG segment focuses on building management systems and location-aware applications.
The consensus price target for Acuity Brands' stock has shown stability over the past year, with a slight increase in the last month. Last month, the average price target was $315, compared to $302 in the previous quarter and $314.17 last year. This stability suggests a consistent outlook from analysts, with a slight positive adjustment recently.
Acuity's financial performance supports this stable outlook. The company is set to announce its earnings on June 26, 2025, with analysts forecasting an 18% year-over-year revenue increase to $1.15 billion. Earnings per share are expected to rise to $4.39, up from $4.15 in the same quarter last year. This anticipated growth reflects confidence in Acuity's business model and market position.
Despite recent challenges, such as a decline in shares following fiscal second-quarter results that fell short of expectations, Acuity has demonstrated consistent growth in revenue per share and margins. The company's acquisition of QSC for $1.115 billion enhances its portfolio, potentially boosting future cash flow. This strategic move aligns with Acuity's goal of strengthening its market position and supporting future growth.
Acuity's recent earnings report showed a robust performance, with net sales of $1 billion, marking an 11% increase compared to the previous year. Although operating profit declined by 7% to $110 million, adjusted operating profit rose by 16% to $163 million. The company's effective capital allocation and improved margins set the stage for growth in 2025, with projected pro forma sales reaching approximately $4.5 billion.
Acuity Brands, Inc. (NYSE:AYI) Surpasses Earnings Expectations
- Acuity Brands, Inc. (NYSE:AYI) reported an EPS of $3.73, exceeding the estimated $3.66.
- Revenue reached $1.006 billion, indicating an 11.1% year-over-year growth despite falling short of estimates.
- The company's financial health is strong, with a P/E ratio of 18 and a debt-to-equity ratio of 0.23.
Acuity Brands, Inc. (NYSE:AYI), a leading name in the lighting and building management solutions industry, continues to outshine competitors with its focus on innovation and sustainability. Competing against giants like Signify and Hubbell, Acuity has maintained a robust market presence through its extensive range of lighting fixtures and systems.
On April 3, 2025, Acuity announced an earnings per share (EPS) of $3.73, surpassing the consensus estimate of $3.66 and marking a 1.91% positive surprise. This performance not only exceeded market expectations but also showed an improvement from the $3.38 EPS reported in the same quarter of the previous year, demonstrating consistent profitability growth.
Despite the impressive EPS, Acuity's quarterly revenue of $1.006 billion was slightly below the anticipated $1.028 billion, resulting in a 1.60% negative surprise. Nevertheless, this figure represents a significant 11.1% increase from the year prior, underscoring strong year-over-year growth.
The company's valuation and financial health are further highlighted by its financial metrics. With a price-to-earnings (P/E) ratio of approximately 18 and a price-to-sales ratio of 2, Acuity demonstrates a balanced market valuation and investor confidence in its revenue capabilities. Moreover, a debt-to-equity ratio of 0.23 and a current ratio of nearly 2.98 indicate a solid financial foundation, low debt levels, and robust liquidity, positioning Acuity for sustained growth in the competitive lighting industry.
Acuity Brands, Inc. (NYSE:AYI) Surpasses Earnings Expectations
- Acuity Brands, Inc. (NYSE:AYI) reported an EPS of $3.73, exceeding the estimated $3.66.
- Revenue reached $1.006 billion, indicating an 11.1% year-over-year growth despite falling short of estimates.
- The company's financial health is strong, with a P/E ratio of 18 and a debt-to-equity ratio of 0.23.
Acuity Brands, Inc. (NYSE:AYI), a leading name in the lighting and building management solutions industry, continues to outshine competitors with its focus on innovation and sustainability. Competing against giants like Signify and Hubbell, Acuity has maintained a robust market presence through its extensive range of lighting fixtures and systems.
On April 3, 2025, Acuity announced an earnings per share (EPS) of $3.73, surpassing the consensus estimate of $3.66 and marking a 1.91% positive surprise. This performance not only exceeded market expectations but also showed an improvement from the $3.38 EPS reported in the same quarter of the previous year, demonstrating consistent profitability growth.
Despite the impressive EPS, Acuity's quarterly revenue of $1.006 billion was slightly below the anticipated $1.028 billion, resulting in a 1.60% negative surprise. Nevertheless, this figure represents a significant 11.1% increase from the year prior, underscoring strong year-over-year growth.
The company's valuation and financial health are further highlighted by its financial metrics. With a price-to-earnings (P/E) ratio of approximately 18 and a price-to-sales ratio of 2, Acuity demonstrates a balanced market valuation and investor confidence in its revenue capabilities. Moreover, a debt-to-equity ratio of 0.23 and a current ratio of nearly 2.98 indicate a solid financial foundation, low debt levels, and robust liquidity, positioning Acuity for sustained growth in the competitive lighting industry.
Acuity Brands, Inc. (NYSE:AYI) Overview and Financial Highlights
- Acuity Brands, Inc. (NYSE:AYI) has seen a fluctuation in its stock target price, with a recent decrease to $290.
- The company's strategic acquisition of QSC for $1.115 billion aims to enhance its technology portfolio and support higher revenue.
- Projected pro forma sales for 2025 are approximately $4.5 billion, with earnings estimated between $17 and $18 per share.
Acuity Brands, Inc. (NYSE:AYI) is a leading entity in the lighting and building management solutions industry, boasting a significant footprint in North America and international markets. The company operates through two primary segments: Acuity Brands Lighting and Lighting Controls (ABL) and Intelligent Spaces Group (ISG). ABL is renowned for its diverse range of lighting solutions under esteemed brands like Lithonia Lighting and Holophane, catering to various sectors including electrical distributors and retail home improvement centers. Meanwhile, ISG specializes in building management systems and location-aware applications, serving enterprises such as retail stores and airports with brands like Distech Controls and Atrius.
The stock target price for Acuity Brands has experienced fluctuations over the past year. Initially, the consensus price target was $312.73, which increased to $331.5 last quarter, before recently decreasing to $290. This decline may be attributed to changing market conditions or company performance. Despite this, Acuity Brands is currently rated as a 'hold' due to its fair valuation and recent growth, as highlighted by its Q1 2025 results showing revenue and profit growth.
Acuity Brands' strategic acquisition of QSC for $1.115 billion is a pivotal move that bolsters its portfolio with a cloud-first platform for audio, video, and control technologies. This acquisition is anticipated to augment future cash flow and bolster revenue for the year. Analyst Joseph O'Dea from Wells Fargo has set a price target of $320 for Acuity Brands, reflecting confidence in the company's strengthened market position and growth prospects.
The company's enhanced margins and effective capital allocation have paved the way for growth in 2025. With projected pro forma sales reaching approximately $4.5 billion and earnings estimated between $17 and $18 per share, Acuity Brands is well-positioned for future success. The first quarter of 2025 has demonstrated modest sales growth and improved margins, with full-year guidance meeting expectations despite economic uncertainties.
Acuity Brands has witnessed a 4.8% increase in its stock price since its last earnings report, released 30 days ago. This positive movement suggests investor confidence in the company's performance and future prospects. As Acuity Brands continues to navigate the lighting and building management industry, investors should monitor its performance and any industry developments that could impact its stock price.
Acuity Brands, Inc. (NYSE:AYI) Overview and Financial Highlights
- Acuity Brands, Inc. (NYSE:AYI) has seen a fluctuation in its stock target price, with a recent decrease to $290.
- The company's strategic acquisition of QSC for $1.115 billion aims to enhance its technology portfolio and support higher revenue.
- Projected pro forma sales for 2025 are approximately $4.5 billion, with earnings estimated between $17 and $18 per share.
Acuity Brands, Inc. (NYSE:AYI) is a leading entity in the lighting and building management solutions industry, boasting a significant footprint in North America and international markets. The company operates through two primary segments: Acuity Brands Lighting and Lighting Controls (ABL) and Intelligent Spaces Group (ISG). ABL is renowned for its diverse range of lighting solutions under esteemed brands like Lithonia Lighting and Holophane, catering to various sectors including electrical distributors and retail home improvement centers. Meanwhile, ISG specializes in building management systems and location-aware applications, serving enterprises such as retail stores and airports with brands like Distech Controls and Atrius.
The stock target price for Acuity Brands has experienced fluctuations over the past year. Initially, the consensus price target was $312.73, which increased to $331.5 last quarter, before recently decreasing to $290. This decline may be attributed to changing market conditions or company performance. Despite this, Acuity Brands is currently rated as a 'hold' due to its fair valuation and recent growth, as highlighted by its Q1 2025 results showing revenue and profit growth.
Acuity Brands' strategic acquisition of QSC for $1.115 billion is a pivotal move that bolsters its portfolio with a cloud-first platform for audio, video, and control technologies. This acquisition is anticipated to augment future cash flow and bolster revenue for the year. Analyst Joseph O'Dea from Wells Fargo has set a price target of $320 for Acuity Brands, reflecting confidence in the company's strengthened market position and growth prospects.
The company's enhanced margins and effective capital allocation have paved the way for growth in 2025. With projected pro forma sales reaching approximately $4.5 billion and earnings estimated between $17 and $18 per share, Acuity Brands is well-positioned for future success. The first quarter of 2025 has demonstrated modest sales growth and improved margins, with full-year guidance meeting expectations despite economic uncertainties.
Acuity Brands has witnessed a 4.8% increase in its stock price since its last earnings report, released 30 days ago. This positive movement suggests investor confidence in the company's performance and future prospects. As Acuity Brands continues to navigate the lighting and building management industry, investors should monitor its performance and any industry developments that could impact its stock price.
