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.
Wells Fargo Sets New Price Target for Acuity Brands
- Joseph O'Dea of Wells Fargo has set a new price target for Acuity Brands at $260, indicating a potential upside of 7.21%.
- Acuity Brands reported earnings of $4.15 per share for the quarter ending in May 2024, surpassing the Zacks Consensus Estimate.
- The company's stock performance has shown significant volatility, with a substantial market capitalization of approximately $7.47 billion.
Joseph O'Dea of Wells Fargo set a new price target for Acuity Brands (NYSE:AYI) at $260 on June 28, 2024, suggesting a potential upside of 7.21% from its current trading price of $242.51. This adjustment came alongside a downgrade in the company's stock rating to Equal Weight from Overweight, as reported by TheFly. Acuity Brands, a leading name in the lighting and building management solutions sector, has been under the investor's radar for its performance and market position against competitors.
The recent earnings report for the quarter ending in May 2024 has been a focal point for assessing Acuity Brands' financial health and operational efficiency. The company reported earnings of $4.15 per share, surpassing the Zacks Consensus Estimate of $4.10 per share and marking an improvement from the $3.75 per share recorded a year ago. This performance indicates a solid execution of strategies leading to operating margin expansion and earnings per share growth.
The reported earnings highlight not only the company's ability to exceed Wall Street expectations but also its year-over-year growth. Such financial achievements are crucial for investors and analysts when evaluating the company's stock potential and future growth prospects. The positive earnings report could be a contributing factor to Wells Fargo's decision to set a higher price target for AYI, despite the downgrade in its stock rating.
Acuity Brands' stock performance has shown significant volatility over the past year, with prices ranging from a low of $155.34 to a high of $272.74. The company's market capitalization of approximately $7.47 billion, coupled with a trading volume of 677,836 shares, reflects its substantial presence in the market. The recent increase in stock price by 1.14% to $242.51, as observed in the trading session, underscores the market's positive reaction to the company's financial results and operational achievements.
The fiscal 2024 third-quarter results, showcasing operating margin expansion, EPS growth, and strong operating cash flow, underline Acuity Brands' effective strategies and operational efficiency. These factors are essential for investors considering the company's stock, especially in light of the new price target set by Wells Fargo. The detailed financial metrics and performance against Wall Street estimates provide a clearer picture of Acuity Brands' standing in the competitive landscape, making it a noteworthy consideration for potential investors.
Acuity Brands, Inc. Earnings Preview: Fiscal Q3 2024
- Acuity Brands is set to release its fiscal third-quarter 2024 earnings on Thursday, June 27, before the market opens, continuing its streak of surpassing Wall Street's expectations.
- Analysts expect a significant 12% increase in EPS to $4.20 and a modest revenue growth of 1.6% to $1.02 billion.
- The company's strong valuation metrics, including a P/E ratio of 19.41 and robust liquidity with a current ratio of 2.59, highlight its financial health and market confidence.
Acuity Brands, Inc. (NYSE:AYI) is gearing up to release its fiscal third-quarter 2024 earnings report on Thursday, June 27, before the market opens. This event is highly anticipated by investors and analysts alike, given the company's track record of surpassing Wall Street's expectations. Acuity Brands, a leading name in the lighting and building management solutions sector, has consistently outperformed earnings estimates for the last 16 quarters. This trend underscores the company's operational efficiency and its ability to navigate the complexities of the market.
For the quarter ending in May 2024, analysts have set the bar high, with an earnings per share (EPS) expectation of $4.20. This figure represents a significant 12% increase from the $3.75 per share reported in the same quarter of the previous year. Moreover, revenue is projected to hit $1.02 billion, marking a modest growth of 1.6% from the $1 billion reported in the year-ago period. These projections reflect analysts' confidence in Acuity Brands' ability to maintain its growth trajectory amidst the challenges in the market.
The company's financial health is further highlighted by its valuation metrics. Acuity Brands boasts a price-to-earnings (P/E) ratio of approximately 19.41, indicating investors' willingness to pay a premium for its earnings. Additionally, its price-to-sales (P/S) and enterprise value-to-sales (EV/Sales) ratios stand at about 1.90, suggesting a strong market valuation of its sales. The enterprise value to operating cash flow (EV/OCF) ratio of nearly 12.97 further emphasizes the market's positive outlook on the company's cash flow generation capabilities.
Moreover, Acuity Brands' debt-to-equity (D/E) ratio of approximately 0.24 demonstrates a prudent financing strategy, balancing debt and equity to fund its operations while maintaining financial flexibility. The current ratio of about 2.59 indicates the company's robust liquidity position, ensuring it can meet its short-term obligations without difficulty.
As Acuity Brands prepares to unveil its earnings, the stability in the consensus EPS estimate over the past 60 days signals analysts' agreement on the company's financial prospects. This consensus is crucial as it influences investor sentiment and can impact the stock's performance in the short term. With its strong financial indicators and a history of earnings outperformance, Acuity Brands is closely watched by the market as it approaches its upcoming earnings announcement.
Acuity Brands, Inc. Reports Mixed Fiscal Q2 Earnings, Faces Stock Decline
Acuity Brands, Inc. Fiscal Second-Quarter Earnings Report
On Wednesday, April 3, 2024, Acuity Brands, Inc. (AYI:NYSE) reported its fiscal second-quarter earnings, revealing a mixed financial performance that caught the attention of investors and market analysts. The company announced earnings per share (EPS) of $2.84, falling short of the anticipated $3.11. Additionally, AYI's revenue for the quarter was $905.9 million, slightly below the expected $907.75 million. This news led to a 1.6% decline in AYI's stock value early Wednesday, as reported by Market Watch. Despite this, the company managed to surpass profit expectations but faced challenges in meeting sales estimates.
AYI, a leader in the lighting and lighting controls industry, experienced a 4% decrease in net sales compared to the same period in the previous year, totaling $906 million for the quarter ended February 29, 2024. However, the company demonstrated resilience by achieving a 6% increase in operating profit, reaching $118 million, and an adjusted operating profit of $140 million, also up by 6% over the prior year. This growth in profitability, despite the sales decline, underscores AYI's effective cost management and operational efficiency.
The company's financial health was further highlighted by an 11% increase in diluted EPS, rising to $2.84, and an adjusted diluted EPS of $3.38, reflecting the same 11% growth compared to the previous year. AYI also reported a strong year-to-date cash flow from operations of $293 million, indicating robust financial health and the ability to generate significant cash flow despite market challenges.
Neil Ashe, Chairman, President, and Chief Executive Officer of Acuity Brands, emphasized the quarter as a period of solid execution for the company. He pointed out the increase in adjusted operating profit, adjusted operating profit margin, and adjusted diluted earnings per share, alongside the generation of strong free cash flow. This statement reflects the company's focus on maintaining profitability and cash flow generation, even in the face of sales headwinds.
AYI's financial metrics provide a comprehensive view of its market valuation and financial stability. With a price-to-earnings (P/E) ratio of approximately 21.63, investors show their willingness to pay for AYI's earnings, reflecting confidence in the company's future growth prospects. The price-to-sales (P/S) ratio of about 2.12 and an enterprise value-to-sales (EV/Sales) ratio close to 2.12 indicate the market's valuation of the company's sales, taking into account its debt and cash levels. Additionally, the enterprise value-to-operating cash flow (EV/OCF) ratio of approximately 17.68 highlights the company's valuation in comparison to its operating cash flow, showcasing its efficiency in generating cash from its operations. The debt-to-equity (D/E) ratio of around 0.27 demonstrates a balanced approach to financing, while the current ratio of about 2.59 signifies AYI's strong liquidity position, ensuring its ability to cover short-term liabilities with short-term assets.
Acuity Brands Reports Better Than Expected Q1 Results
Acuity Brands (NYSE:AYI) reported its Q1 results, with EPS of $3.29 coming in better than the Street estimate of $3.02. Revenue was $997.9 million, compared to the Street estimate of $984.6 million.
Gross margin was flat year-over-year and sequentially vs. expectations for slight pressure. The company had indicated peak capitalized freight costs and metals working through inventory layers, but pricing was a bit stronger than expected and plant performance was solid.
Analysts at Oppenheimer expect gross margin headroom potential/likelihood in H2 on improving supply chain and electronic components procurement, which should support improved factory planning/level-loading, alongside improved cost position in inventory layers.
Acuity Brands Reports Better Than Expected Q4 Results
Acuity Brands, Inc. (NYSE:AYI) reported its Q4 results, with EPS of $3.95 coming in better than the Street estimate of $3.61. Revenue was $1.11 billion, compared to the Street estimate of $1.08 billion.
Contractor Select continues to outgrow the broader portfolio, launched a few years ago to revitalize (cost, form factors, quality, manufacturability) the most important everyday lighting and control products as a key foundational portfolio layer into channels.
The company also notes product vitality ranging 20–30% of sales (NPIs, improvements to existing), dramatically improved vs. a few years back; combined with more differentiated service level competitive separation (supplier of year awards from two largest industry buying groups) and industry-best channel positions, notes improved balance to drive volume/price/mix runways.
Acuity Brands’ Review by Oppenheimer
Oppenheimer analysts provided a company update on Acuity Brands, Inc. (NYSE:AYI), reiterating their outperform rating and $210 price target on the company’s shares.
The company has built abnormal levels of backlog/inventory and delivered exceptionally well in Q3, alleviating some past due as components inventory and timing converged favorably. Notwithstanding the step-out level of Q3 sales, the backlog was relatively unchanged.
Despite some supply chain frictions improving and nice Q3 WIP inventory converting to finished goods and out the door, shortages continue hanging around.
Considering the relative scale of the company’s Q3 sales and slower summer construction indicators, the analysts see Q3 performance as above trend. The analysts are now basing Q4 estimates less relative to that and viewing H1 as more trend-informative (Q1/Q2 each delivered revenue/EPS beats followed by upward estimate revisions). For Q4, the analysts adjusted their EPS estimate to $3.52 from $3.70.
Acuity Brands’ Review by Oppenheimer
Oppenheimer analysts provided a company update on Acuity Brands, Inc. (NYSE:AYI), reiterating their outperform rating and $210 price target on the company’s shares.
The company has built abnormal levels of backlog/inventory and delivered exceptionally well in Q3, alleviating some past due as components inventory and timing converged favorably. Notwithstanding the step-out level of Q3 sales, the backlog was relatively unchanged.
Despite some supply chain frictions improving and nice Q3 WIP inventory converting to finished goods and out the door, shortages continue hanging around.
Considering the relative scale of the company’s Q3 sales and slower summer construction indicators, the analysts see Q3 performance as above trend. The analysts are now basing Q4 estimates less relative to that and viewing H1 as more trend-informative (Q1/Q2 each delivered revenue/EPS beats followed by upward estimate revisions). For Q4, the analysts adjusted their EPS estimate to $3.52 from $3.70.
