Acuity Brands, Inc. (AYI) on Q3 2021 Results - Earnings Call Transcript
Operator: Welcome to the Acuity Brands 2021 Investor Day. Charlotte McLaughlin: Good morning, and welcome to the Acuity Brands 2021 Investor Day and Third Quarter Earnings Update. As a reminder, some of our comments today may be forward-looking statements based on management's beliefs and assumptions and information currently available to management at this time. These beliefs are subject to known and unknown risks and uncertainties, many of which may be beyond our control, including those detailed in our periodic SEC filings. Please note that the company's actual results may materially differ from those anticipated and we undertake no obligation to update these statements. Reconciliations of certain non-GAAP financial metrics with their corresponding GAAP measures are available in our 2021 third quarter earnings release. And in the appendix of the accompanying Investor Day 2021 presentation, both of which are available on our Investor Relations website at www.investors.acuitybrands.com. Today you will hear from our Chairman, President and Chief Executive Officer Neil Ashe. Our Senior Vice President and Chief Financial Officer Karen Holcom; our Business Presidents, Trevor Palmer and Peter Han, and a selection of our key senior executives who will give you an update on the Acuity Brands long-term strategy. in addition to providing information around the quarter performance. After our financial update, there will be an opportunity for you to ask questions. If you wish to participate in the Q&A, please submit your question, your name, and your company in the chat function. There is a live chat help function available to anyone experiencing technical difficulties. As a reminder, we are webcasting today's presentation live. Thank you for your interest in Acuity Brands. You will now hear from Neil Ashe. Neil Ashe: Welcome to the Acuity Brands investor update. We're really excited to be with you today to talk to you about the future of our company to introduce you to our team and to talk through the results of our fiscal third quarter 2021. So we're going to do it a little differently today. Rather than a couple of us and a lot of PowerPoint, we're going to introduce you to our broader team and we're excited to do it. So first, we're going to talk to you about our lighting and lighting controls business with the team who runs it, then we'll move on to our new intelligent spaces group, the team that's been assembled to develop and grow there is really impressive, and we're excited that you get to interact with them. Neil Ashe: So first, on our products and services, sustainability is what we do, it's at the core of who we are. We have made a pledge that are put in place products and services will mitigate the impact of 100 million metric tons of carbon by 2030. That's a really, really big number. Additionally, in our own operations, we've reached carbon neutrality over the course of the last year. We're releasing a white paper, which details how we're making that 100 million metric ton impact, so that others can learn from what we're doing. And hopefully, they can share with us things that they're learning and we can get better along the way. And then, as we think about the culture of our organization, we're building an organization where the best people come because they feel like they can do their best work here, because they're bought into our values. They're bought into our mission. They're bought into who we are and what we are doing. And they believe that they can make a positive contribution and they'll be rewarded for it. And then finally, over the course of the last year, we've made necessary governance changes from our board to our pay structure and everything in between, so that all of our interests are aligned, our shareholders, our associates, our customers, and our communities. Our ability to allocate capital effectively has been and will be a source of value creation for us going forward. So we think about our priorities for capital allocation, they're very straightforward. The first is we're going to grow the businesses we already have. The second is we're going to grow through mergers and acquisitions, both in our current businesses as well as entering new businesses. The third is that we are going to maintain our dividend; and then finally, share repurchase. We view share repurchase as the opportunity to create permanent value. We demonstrated over the course of the last year that if there is dislocation in the stock price, we can and will be aggressive to create value and we did. We bought back about 10% of the company for less than one year's free cash flow. So taken together, as we look forward, we are confident that our ability to effectively allocate capital will create long-term value for our company. So let me dive in and talk about our acquisition strategy. There are really two buckets there. First, is adding to our existing businesses. We're proud of the addition of OSRAM and the digital solutions business to our portfolio. What does that allow us to do? It allows us to: number one, control the technology in our luminaires and our ability to innovate faster and scale; the second is, it provides us a path to the rest of the market to participate in an OEM business that supplies other manufacturers; and finally, it allows our supply chain to be more robust and resilient going forward. Trevor Palmer: Acuity Brands lighting is the leader in lighting and lighting controls in the North American market. We've returned the company to growth and see a bright future ahead for us. Lights are essential to all spaces where there are people, there are lights and there is an opportunity for growth. The opportunity for growth is both in existing and new spaces greater than 85% of the planned indoor environments already built. In order for the world to meet broad sustainability goals, we will need to materially increase the retrofits of the built spaces with energy saving technology, lighting and lighting controls are a huge part of this. Lighting controls which provide functionality beyond illumination are growing in popularity. Neil Ashe: When we think about product vitality, moving forward, we can proxy it to luminaires, the contractor select portfolio architectural controls, but we really want to lead the technology curve of the industry, right, reinventing these portfolios faster. So what are some of your thoughts, maybe just go around the room? George McIlwraith: Well, from my perspective, I think that traditionally we've looked at product vitality, mainly focused on those exciting new products, and then technologies that we bring forth to the market. And I think we've know, going forward, we've really viewed this in a much broader context. You've often heard us use the expression that we have the industry's broadest portfolio. Well, we also have global competition today. And we have to keep that portfolio competitive every day, whether it's in performance or cost, as well as bringing the new and exciting technologies to the market. And typically we bring 75 plus new product families to the market every year, which is fantastic. But when we look at the broader portfolio capability that we have, whether it's to upgrade the performance of our products, think about when the LED chip improves, which it does have every 18 months. Now, we have to depopulate the luminaire of those chips, adjust the driver technology and now we can bring down the scale of the luminaire. And a great example of this and fill some value proposition that it brings is this new CPHP, which is a new high bay that we're bringing to the market for the warehouse and logistics market. And it's an 80% reduction in cubic volume and the name stands for Compact Pro High Bay, 80% reduction, if you just contemplate that. Think about the impact on raw material usage, think of the impact on freight, think of the impact on packaging, you think of the ease of installation, though, when you're handling something that's much, much smaller, it's almost a virtuous cycle of the customer base that is satisfied with that. And at the same time, it gives us -- it feeds right into carbon footprint reduction because you have the energy saving for the customer, which is fantastic. But now you have the energy used to -- this consumed to produce the lesser material, the lesser package, and the lower freight expense. And so I look at this as being a fantastic position for us to not only create new and exciting things, but to upgrade and improve and reduce the cost and then improve the value proposition for the broader portfolio. Trevor Palmer: It's kind of interesting the way you're thinking in terms of their portfolio and the CPHP, it's a great example of not only how you're creating a new product, but actually how you're thinking about the next generation of products and what they're going to look like in terms of kind of form factor content, technology, what's the customer experience going to be like, what's the contractor experience going to be like. George McIlwraith: And Trevor has been in the market now for about 90 days, and just what we've seen in the first 90 days with the acceleration, it won't just be one of our most successful products, it may be the most successful product launch we've had in the history of the company. And don't forget that it comes with the embedded controls capability. It's manufactured in multiple locations for service continuity, which is fantastic in these challenging times. And it's just an example though of how we're looking more fulsomely at the broad value proposition of not only the new and exciting, which is great, but the broad portfolio that constantly needs to be energized. Sarah Golish: It's just so interesting to see embedded controls really start to take off within all of our luminaire portfolios, right all the way from JOT, which is much more positioned to the contractor created with them in mind, all the way through to better controls that are driving your architectural platforms. Rich Earlywine: Yes. Our focus has been to be able to work directly with the architect and the lighting design community to be able to bring their visions for a given project alive. And with our embedded controls, we are able to do that. Classic cases right here in Atlanta, at Atlanta, Hartsfield Jackson International Airport, if you drive under the new canopies that they've created, you'll see that they're beautifully lit with white static light. But come July 4, it'll be red, white, and blue. And on St. Patrick's Day, it'll be green and perhaps pink during Breast Cancer Awareness. So that's just one of many opportunities where our challenges use that technology, whether it's Hartsfield Jackson, the 911 Memorial, the New York City, the new KPMG Learning Center in Orlando, that we've used our product and embedded controls, is a great opportunity for us to take that leading technology and work with that architect and lighting designer to deliver what they want out of that project. Trevor Palmer: It's very exciting to me to think of, we were talking about an industrial luminaire, right, just a few moments ago, and talking a little bit about controls, and how we can get technology do heavy lifting for the contractor and drive preference there with JOT. But also how, we're creating products that actually stimulate an emotional experience. When you think about, how beautiful a canopy is and what was done at the memorial in kind of New York City, I mean, those are things that, we should all feel very good about, right overall, and it's it kind of represents what's in our DNA as a lighting and lighting technology business. Rich Earlywine: The other important thing for every one of those projects, there's hundreds of K through 12 schools, healthcare facilities, office complexes, major retail establishments, that have our embedded technology and luminaires. And so it's not just the high profile, it's those everyday, major vertical markets that you see that we are able to be able to go and win the business there. Trevor Palmer: So, big part of big part of the opportunity we have in front of us is kind of having more influence or control over each one of the pieces. So whether it's the luminaire itself and redesigning to some of the new characteristics, what the next generation of these luminaires are going to look like it could be for the customer. The technology inside, of course, we can go through this product vitality discussion, where they're talking about the acquisition of OSRAM. So what that means in terms of our product vitality overall and controlling technology, et cetera, et cetera. Sarah Golish: Obviously, OSRAM is a big piece of our future as we go forward, our most recent acquisition, and it really allows us to expand that portfolio of drivers from eldoLED all the way now down across that portfolio, so broadens it, but lets us really work with the team, innovate, drive, where we want the products to go forward, as well as really be able to control the experience for our customers going forward, whether it's the technology inside as well as the entire luminaire. George McIlwraith: When you think of the heart of the system being the control system, and the heart of the luminaire being the driver and the integration of those two, we've seen it with nLight AIR and of course, the eldoLED brand now we expand that into OSRAM, which will take us into more industrial applications, more outdoor applications, the breadth of application that we can address now really aligns well with the breadth of the portfolio. And our ability now to think about how to highly optimize that. This gives us much more influence in those roadmaps to work closely with those technology providers. And when you start to allow your mind to work forward into what is potentially possible to optimize the solution, the system, the network, again, it's very exciting about where this is all heading. Sarah Golish: And it gives us scale, right, it starts to give us scale in a world where components and shortages are all over the place. This gives us more scale with our suppliers. George McIlwraith: Yes, absolutely. So when you think about the role of electronics today, in our industry, it's far, far greater than ever before. And we've witnessed that remember, the MOSFET shortage a few years back then the supply issues during the early days of COVID. And here now we are -- we're competing globally, with the expansion of the EV industry, the 5G telephone systems, and the demand for electronic components has never been greater. And this gives us much greater influence, to work with those large corporations worldwide, to see us as the industry leader in North America, and to want to support our future technology growth, and the continuity of our supply, especially in a world where there's allocations and such. So there's so many dimensions where this really fits in with making us not only a better business, but a better support mechanism to our entire customer base. Rick Earlywine: And let's not forget quality here, it gives us the opportunity to be able to really maintain the level of quality that we're used to from Acuity perspective, the ability to deal with customers, when they have problems directly. There's so many opportunities for us to continue to have premium quality. Trevor Palmer: The opportunity to become a key strategic supplier to the industry for -- in luminaire technology beyond just, our own form factors, that's very exciting opportunity for growth. What is growth look like in the context of kind of our product portfolios, where we're focused kind of in the future? And what are some of your thoughts, George? George McIlwraith: Well, you've really got to go to Sarah, because embedded control is our growth engine. And so I think that's really where we have to start, that is an incredible trend in our industry. And Trevor, you and I have debated many times, this has to become bigger than just where energy codes specify and that's the transition that we're seeing nationwide. Sarah Golish: It’s a simplification of controls, right by embedding them in the luminaire, it just makes it easier to install, it makes it easier to set things up, control it going forward. And then, on top of it as we look at the future from a list of controls perspective, which is obviously part of everything. It's about the software, right? How do we make it easier for our contractors to design, to install, how do we make all of our controls easier to operate, so that it becomes just sort of -- it's an everything, it just happens. Rick Earlywine: I think it's important because you said easy to install for the contractor. But we've also talked about the environment doing things like we've done with Hartsfield. And I think we're seeing that in the marketplace where the buying influence is bifurcated into, you still have the architect and the lighting designer driving specifications on plan and spec jobs and our ability to build new things like we have with the Fresco's and our technology that we have there is critical along with architectural luminaires. But on the other hand, you've got the contractor that's driving a lot of that design build type product that between the commercial product offering and some of the things that we're doing to make easier to install with architectural product. I think is critical so that we can attack as you see, the very buying influences change and the contractor having more influence our ability to build the service to them. Trevor Palmer: It's exciting to me that you look at some of the products and technology we're deploying, or we have deployed over the past year or so. So if I think of, just one touch from controls perspective, and that product and technology is really doing a lot of the heavy lifting that would need to be done by either the factory or an agent. And embedding it in our best-selling luminaires or the most used luminaires that's solving the contractors problem. And, let's face it, the customers vote with their wallet, right? And so it's very, it's very easy to understand why these new technologies and these new products are becoming so popular because we're solving real world problems. George McIlwraith: Sarah talked about making it simple and easy. The use of technology. A conference room, like the one we're in today, can be done with your standard high volume BLT luminaires, and a wall mounted switch that is JOT enabled. And the contractor needs no other help, no commissioning. And it'll operate with product he can buy straight off the shelf from the distributor. I think it's really important that we recognize when we all come together and what that ultimately means for value for the customer. Rick brought it earlier the canopies at Atlanta airport, without the technology in those color changing canopies, which are truly iconic now. You think about you forget that all the luminaires from our business were in the land side and the airside. Landside being the main terminal where you arrive, the airside being where the planes come in on the outside terminals A, B, C, and D. And you think every one of those luminaires internally had the eldoLED drivers, and the nLight AIR technology. And you start to see how the three businesses work together. And yes, there is a few luminaires in the airport that are not Acuity's, where the architect has specific things they wanted to achieve with those strange shapes and everything else. But they also all have Acuity's technology inside because it had to be a seamless technology experience. And I think that's just a great example of how it's not just a portfolio of products, it's solutions for customers applications and iconic facilities like Atlanta airport. Rick Earlywine: And that's what was the OSRAM acquisition and with where we've put the focus on the technology will allow us to continue to grow over the next three, five years is to be able to lead that technology curve and do it with the technology inside. There's things we can do optically. And you mentioned with the with the product itself, sustainability, and some things we can do there, but ultimately is going to come down to that technology that drives that overall project. And we're positioned well, to be able to lead in that area for the future. Sarah Golish: Our wireless portfolio and nLight AIR right there, right, it just gives that ability to easily renovate and retrofit the space. George McIlwraith: Look how quickly it's accelerated past the wired solutions. And at first, folks were a little bit apprehensive with wireless technology. And now, it's pretty ubiquitous everywhere. And we've figured out how to make the technology very, very robust. And utilizing whether it's Bluetooth or internet solutions, look at how our knowledge in that area has greatly expanded. Rick Earlywine: And software, you mentioned software that's become more and more prevalent in what we're doing from that perspective is leading on the software side of the business as well. Sarah Golish: On top of it, right, we don't just do lighting, or made investments, now the health, the safety, right, as the world starts to come back from COVID. We've made some great investments in GUV. Rick Earlywine: This positions us to grow in a lot of niche areas GUV, where we've rolled out the broadest portfolio in North America, to be able to make it safer for people to work and play, be at DC to DC with the modulus and other platforms that we're looking at. It's positioned us to be able to grow into the long-term future by having this technology backbone. George McIlwraith: I do want to add there though, just the Care222 technology in breakrooms, restrooms and the basic facilities that are in every building. I think that again, just gives us tremendous influence and the complete building specification. And I am really excited to see how this will go beyond just the period of time where we're thinking about the pandemic. But I think as folks think about how to be prepared if there's another such event in the future. I think that really puts lightning in a very good position and acuity at the center of that industry innovation. Trevor, how many times have you heard us use the expression that when Acuity puts that shoulder behind something, which is really us committing our people, that their enthusiasm to take on a challenge, be it technical, be it global competition, supply chain, all of those things. I'm always amazed by their ability to coalesce across any organizational boundaries and become one team. And when we focus and you watch the creativity and the ideas in almost any challenge we undertake there's never any doubt in the outcome. And I'm always amazed by how many times we surprise ourselves. Just look at how quickly contractor selectors come into the marketplace in two and a half years. And you look at the position that it takes in the market the growth this summer. And now, it's talked about as a common term like it's been here for all 75 years of Lithonia Lighting. Trevor Palmer: Yes, absolutely. Sarah Golish: That was a key project too, right. We brought people together from all the different groups, marketing, product, sales, and really just pushed out that launch. And that just taken off since then. Rick Earlywine: Now, I think the other thing we have there's not that questioning a customer on whether or you believe what they're telling you or whatever we take care of customers problems throughout the entire chain internal, external customers and there's a genuine desire throughout the organization to do the right thing. Trevor Palmer: Yes, I think even internally and that that culture is contagious and even going out and seeing members of our independent sales network. The agents they really see -- they really understand and thoroughly see, and they want to be a part of the culture, right, part of a winning team, which is Acuity. And they really see the opportunity to work with the people that they view as the best in the industry. And, I feel like, another really exciting opportunity for us is to kind of carry that forward and cultivate the talent. And really, I think that's a big part of our winning recipe. Sarah Golish: And I think we've got a lot of like, really great initiatives to help our associates be able to develop themselves going forward, right. We really put a focus on it over the last year. And as we go forward, just helping people, figure out what those next steps are figuring out how do we move from like, my team to yours, George or yours, Rick, right? How do we really cultivate because we have some of the best people and the best talent in the industry. Rick Earlywine: And we've had to make a radical change. When we started we are block of with copper wrapped around it. Now we're, now we're a high-end technology company and the type of people we hire are coming from a different environment, be it software, be it the electronic side, and to be able to get those folks to be able to work together, I'm always impressed that that's continued. And we've continued to be able to maintain that environment here. Even as we pivoted and made the change to becoming a from a manufacturing company to a technology company and still being able to do that. George McIlwraith: I think a great example of our people, though, is we rallied around the notion of sustainability, and how we took it beyond just the traditional, what we do with our products, what we do with the energy of our customers, and that's fantastic from reducing the carbon footprint. But then you think about what they tried to do for their local community, to network themselves and the projects, they undertook the food banks, all the things that they've done there, and then even bringing it into the workplace in terms of our own facilities, water utilization, electricity, segregating the waste. I mean, I just see the way they enthusiastically embrace things. And you almost see an every avenue that we choose to focus on. Sarah Golish: Well, then think back to COVID, right, that hit and we -- our teams pivoted like immediate overnight, we kept everything running. I mean, we talked a lot out and talk to some of our agents in there, they did not feel like we missed a beat. And that's all because our people were ready to get on Teams and keep moving and it was pretty awesome. Trevor Palmer: Yes, you think about the change, I think it was around March, early March, maybe the second week of March. And we went from full time, nearly full time in office all the time which is great to flipping a switch to the following over the weekend to everybody working remotely. And I don't feel and again, this is a testament to the talent and the attitude of the individuals. It could have gone either way, right. But I feel like the exciting piece is the connectivity didn't change, the productivity output didn't change. You could even argue we got more done, right, in many ways, right? And it's that's that really culminates with kind of the attitude of the individuals here and the culture that's been cultivated over time. Rick Earlywine: And we've been rewarded for it because it gave us the opportunity to get more business. And I think the customers realize that we had the ability to do that that was an opportunity for us to grow. George McIlwraith: I'm amazed that during that whole period, our product vitality went up. So none of all the big innovative projects broadly across the portfolio slowed down, which really -- looking back on it, you would have assumed there would have been some type of delay but the notion that folks found a way once again and really you could ultimately see at the end of the day, our number one differentiation factor is the great folks that make up Acuity Brands Lighting. Sarah Golish: Well, I'm just excited to as we look forward, we're going to learn from all what we've learned through COVID and we're going to take that and we're going to build a culture for the future, which is going to be sort of this blend right of remote versus in-person for those roles that need to be and really set, I think a very modern work style going forward. George McIlwraith: Well, as you think about it there's never been a more exciting time to be in the lighting business and you've been in that long time. Rick Earlywine: The good news is, I've been asked why have you been here this long? It's because I like the people I work with. George McIlwraith: That's good. Trevor Palmer: I just wanted to spend a little bit of time with you talking about our thoughts on the channels to market moving forward and what opportunities we have for growth. So maybe I can start with you Jose, independent sales network, the agents have obviously been a big part of our past success and we see them as a big part of our future success. So what are you thinking through as you're planning today moving forward on what the agents mean to us and what the channel looks like? Jose Cordova: Absolutely. So if you think about the independent sales network, they are representative of manufacturers in the local market. What is great about the independent sales network is that they can adapt to the nuances of that local market. So call it, let's say, for example, a different construction code or an energy rebate which is important for that market might be sustainability. So the ability to adapt to the needs of this contractor or the specifier or the electrical distributors. It's very important to make some -- bring that value to the local market. So it's critical for them to make sure that they have the right products to offer and the right service model to offer and to serve the needs of those individuals. I would say for us, I mean we've had a very strong relationship with them for over 30 years, we've been together and a relationship --. Trevor Palmer: Is that the average tenor? Jose Cordova: It's about the average -- Trevor Palmer: Actually average tenor, very strong relationships then. Jose Cordova: Yeah, and it's I would say is a great relationship in the sense that we need them as much as they need us. Jeff Teasley: Being in a Los Angeles market, being in California where energy codes are so important to us, their investment in the digital transformation in LED product and in the ability to control those fixtures at a level that no one else in the industry can do has been so key to our success. They are continuing to separate themselves from other people in the marketplace and are going to maintain a significant leadership position in the market as we move forward. That is going to allow performance lighting and other agents to continue to distance ourselves from our competitors in each of our markets. Jose Cordova: So just to put it in simple words, I mean we've always want to make products that serve to be chosen and they have the responsibility to ensure that those products are in fact chosen. So as you can see it's -- we need each other. When you look at just agents in general, they want to bring that differentiated value to that local market and we have those products and we have those broad portfolio products of Lighting and Lighting Controls and that offering. So at the end, what I would say is that their local relationships, combined with our broad product offering is really what makes us the leader in the market. Trevor Palmer: Awesome. Well, likewise for retail, right, retail is another channel of interest for us. We obviously have the contractor select product range. I know you've been doing some great work to kind of cultivate the relationship even further. What plans do you have? What can you tell us about where you are with that? Terrance Oliver: Thanks Trevor. So the most important thing about retail is ensuring that we have the best products at the best price at the right placement in our retailers platforms. I've been working pretty relentlessly with our partners to ensure that we pick the best products to go on their shelves. Because it's important because of the customers and end users are crossing multiple channels. Some of them are in the agency network as well as online and we saw this during the COVID times of last year where lots of customers were shopping across multiple channels. They are expected to get packages at their home, at their place of work, even on a job site. So it's important that these channels co-exist and work together because customers are starting to expect it and we need to meet the customer exactly where they're at, where, when, or wherever they're at. Trevor Palmer: Yes, that sounds, I mean so classic. Right product, right price, right place, kind of one-on-one basics and getting those basics really right is going to make our customer and our channels more efficient and gives us a better opportunity for growth moving forward. You can't think about these things and what we're doing overall with our channels to market and the business without introducing technology, right. This is kind of thematically what we're doing within the business is applying software and data. So if I can go to you again and say how do you think data and software creates a bigger opportunity for the retail channel to market. Terrance Oliver: Trevor, my background is in the e-commerce. And technology and data empowers the business. We're seeing that today and we're going to double down on that as our business continues to progress. If you think about the digital website content is king, the item page, videos -- installation videos all those key components to explain what the features and benefits are for the customer. So technology will help enable that as we scale our retailers as well as our agency network using forecasting models. Forecasting is going to be amazing discipline driven by algorithms that allow us to predict and be more predictable in the future. So that we understand demands again around understanding what products and where they need to be placed. The key part, there is going to enable a more profitable business for us. Trevor Palmer: Yes, I mean the great thing is getting those things great for the retail market, right. You think of retail and how that leads into distribution, how that can make that better, but also how we can service and serve our agency, our agency channel to market. So what are your -- some of your thoughts on when we think about technology and kind of some of these product and distribution basics how does that affect our independent sales network? Jose Cordova: It is a good question Trevor and Terrance touches some of those things. So if you think about an agent -- let’s think about the local market in the segments, right. So we have the construction segment and then we have what we would call stock and flow segment, the construction segment is a typical segment that goes through certain phases of construction phase as we have the planning phase, we have the design phase that we go into the bid phase. And then, finally the built which is the construction. Then on the stock and flow, I would say that's more of a maintenance type work, maybe some small jobs that you don't have necessarily an architect involved. So, I was going through that construction phase, and I'm just going to go quickly just described through it and I'm going to go fast. Typically, this is a not as easy you describe it, but just so we understand and then how we can better service it through technology is you ask. So let's do an example. So let's think about, for example, a healthcare facility and they're trying to increase the patient capacity, they want to offer other services. So the owner says okay, we got to do this. So they're going to assign somebody either to manage the project or they find a owners rep. So they go through that and they say okay, let's go into the planning phase and the planning phases they look at different proposals. So high level just how things look like. And then from that they say, okay, I think I'd like this concept, I want to pick this concept and then they go from planning into design. In the design phase, you're going to start seeing there's architects, there are sliding designers, there could be interior designers, there could be electrical engineers, mechanical engineers, and all that. And they really get into the details of the plants and the building. Those details are then used for the bidding process, which is where the contractors basically say I can do that work for this much simple as that. And then they pick one, and then you built. So where in that process, where do our independent sales network get involved, right? Planning and design critical. We want to make sure -- they want to make sure that the architects, the engineers have the right understanding of our products or technology, so they can in turn offer that to the owners and show the owners what is possible, but also make sure that we meet their needs. So having that information in their hands is very critical. Understand, they have the right information and also make sure that we meet certain budget criteria and things like that. Then we go into the other section, which is the bid part and I want to link it a little bit with the build, because at that point is, yes, you talk about pricing and make sure you maintaining to the budget, but there is a lot of iterations in the process. Now if you can think about this throughout that cycle, the independent sales network has visibility of certain demand, this is going to happen. Somebody -- there's is a construction, there's a budget, this things just but moving forward. So the better connected we are with them, the better we can understand you talked about forecasting, we can understand what's coming in some of the trends, right. And we can also make sure that at the end where the construction starts and there's construction schedules we have that right product at the right place at the right price. So that's to me -- that's a way to enable the independent sales network through our tools that will help us better service their customers. Then you have the other piece and the other segment and the other segment is a little bit, it's look different and because some of it's speculative sale right, you're putting product, assuming that somebody is going to come in and buy it. Trevor Palmer: This is traditional stock business, in other words, yes. Jose Cordova: Absolutely. So you're trying to drive the preference into the contractors and you look at your electrical distributor partners and your agencies to try that preference. And that's where you go, it gets interesting in the sense that that's what you really want to make sure you have the right products and at the right time because it's typically shorter lead times. There's not a whole lot of planning and visibility like you have on the construction cycle. So it's a different ballgame. Trevor Palmer: So when you think about how much of an opportunity we have to use technology to connect with the industry of those different critical points, be it a speculative project that's maybe design assist or whether it's a bid situation, technology can provide the right information, they can provide status to contractors, they can provide greater visibility and design assistance to in the hands of the agents like there is a lots of different places where we can look for more opportunities for software and data to give us more visibility. Is that --. Terrance Oliver: Absolutely. Trevor Palmer: So I think about -- if I go from retail and then I start to think about these big distributors this big national distributors, which have presence in local markets as well. What do we think of that part of the ecosystem? Maybe I'll start with you, Jose. Jose Cordova: Yes, our approach has to be different. And we are the manufacturer products and we stock their products, their sales up right. But we did not necessarily understand, what are their behaviors that are happening at the local counter? What are people buying our products moving faster than others? So we might get a lot of that data, but it might be months and months later and it is not like real life. Terrance Oliver: Similarly in the retail channel, the distributors have a limited amount of space to stock the products. So it's important, we get the products right. So all the work we're doing to ensuring we have the highest-velocity items from our opening price point, all the way to premium is going to be critical in that space, but it all starts with data, right. We have to understand the demand that's happening, so that we can anticipate the needs and I'm pretty sure our distributors are going to love the ability for us to help manage their inventory, which is real dollars that they can put into the bank. And lastly, we're learning more by millions of touch points that we're having with the end user, to understand how do we feed that information right back into our products, right. Take those ratings and reviews add them directly back into the product teams so they can understand what enhancements need to made or where we can improve on the product. I think all of those things are enabled by data. We talked about pricing earlier. Pricing algorithms are going to be critical to have real-time data to be able to react to the market as we're seeing with commodity prices today it's important we stay sharp as well as understand where the market is headed. Trevor Palmer: So when I just listening to this conversation and as we're going through it, I can think of other kind of pieces you know and it brings back to -- you bring the portfolio question right, which is, you get the shelf space by having a relevant portfolio right product, right price, right place, you maintain that portfolio with a high vitality rate and continuously refreshing as you go forwards. I'm really excited about the opportunities we have in front of us and to continue to drive the growth. Trevor Palmer: There is a couple of things I want to cover this morning if we can. And I'd like to start with kind of pricing. So we all know, in the lighting industry pricing is a complicated animal and in this environment particularly its a dynamic thing which we have to adjust to more rapidly. So it's great that we're together talking about kind of how data and software can help us in the context of price and some of the projects we're working on to help us in that department. So maybe Amra, you can tell us a little bit about what we're doing and where we're going? Amra Boucher: Yes, sure. You make a great point. It's a very dynamic time and pricing in and of itself and in our industry is -- it has a lot of complicating factors at times and what we're doing is, we're challenging the way we've done things in the past. In some ways we're challenging some of those complicating layers, some of that was probably self-imposed, right. So we're looking at areas to peel back some of the things that we've done in the past. A great example there is that we've been working with Vijay's team on reducing when we manually touched orders for no reason it just became kind of a push of a button and we found that we didn't have to do that 50% of the time. So we've removed that. So that's a nice efficiency gain, but we're reapplying that time into more value-added activities for the team and enabling them to make better decisions at their desk, we call it the deal desk. And we segment our business in different areas at that project deal desk and then our contractor select business but by enabling them to make better decisions using data to drive those decisions, they are meeting customer needs, they are meeting needs of the business and then we're also working on projects for the future. Developing even better tools to enable what they're doing and change what they're doing in the future. We're working on pricing optimization engine for example to help enable that decision-making and the collaborative nature of which we're working with both Vijay's team and the product teams to develop these things and will be very impactful for the business and for the customer base. Trevor Palmer: So that's a really good point. So when I think back to six years ago when I first joined the business thinking through sitting at understanding what the Acuity quote desk, AQD and understanding what the pricing team actually did right and sitting at the deal desk and understanding the tools that they had and dawning on me, there is an opportunity for us to improve this. Vijay Raghavendra: Absolutely. As Amra mentioned, we are working in a very different way and what I'm most excited about is really that way of working and using data, machine learning, AI is enabling us to drive very different kind of outcomes than we were able to previously. The engineering, data science teams, the product teams and Amra's teams are all working together as one team to iterate on the products that we're building for pricing and for the deals desk. So we start with data about our products and deep data through our product catalog that helps us understand our products better, but also helps us match it to our customers products. And we are using technology to understand competitive pricing in near real-time that then allows us to feed that data into the algorithms, which can then dynamically help us manage pricing, so we can then really meet the needs of our customers in a much, much better way than we were able to do in the past. Trevor Palmer: Yes. So fundamentally, we're making a lot of change in terms of price using technology, but what -- when I think of moving forward, what's the opportunity for us? And how does that help make us better? Amra Boucher: Well, by utilizing technology and data right. We're utilizing information in a more predictive way and so if you think about -- when we quote something we're quoting something that's not probably not going to turn into an order that day or the nature of our business, depending on the channel and the customer type in all of those things but we're quoting for the future. So you really have to have that predictive element to make the best decision possible and to set ourselves up from a business success standpoint and also success with our customers and what they're expecting. Trevor Palmer: Good stuff. So I would say we can't talk about kind of data, data science, software, technology and think about and not talk about the supply chain. And because I know there's been some fundamental changes there in the way we're kind of operating over the past year and we've learned a lot. So Tyler maybe talk to us a little bit about those -- the types of things that are going to help us -- that have helped us before but also going to help us move into the future and create opportunity. Tyler Moon: Yes, so this last year has been a real challenge for us in the supply chain as you know, Trevor. And one of the things that taught us about ourselves was we never stop improving, so during the year, we've literally had to reinvent the way we do things across the business and across the plants. We had to learn to stay connected in a better, smarter faster type of way and stay connected, not just with ourselves, but also with our customers about our ability to deliver and our status of orders, along the process with material challenges and material flow but also health concerns, we actually redesign material flow in all of our plants. So when we looked at the processes and we had to keep people and material flowing, but in a safe manner. We actually found an opportunity to create some productivity improvement. So by doing that we not just netted productivity but we netted capacity. So coming out of the backside and now seeing improved business opportunities, we feel like we are ready to scale for the future. Trevor Palmer: Yes. So as we've learned a lot over the past kind of 14 months. So as the market has been returning and returning it is right, what do you see from a technology standpoint that we're going to use to help increased service levels or help us grow moving forward? Tyler Moon: So as we've experienced those challenges, we've got 18 different manufacturing locations globally and seven distribution point. So we like to compete globally for cost, but we compete locally for service. So staying connected across all those locations and with the challenging environment for materials we are digitally connected every day. So by extending that to our customers now we can be more transparent about our ability to deliver in this environment and it helps our customers be more efficient as well when they plan for resources on the job site. Trevor Palmer: So thinking through this. And you've been involved in a number of technology projects that we have going on that are improving the supply chain. So what can you tell us about how we've used on kind of the processes and what some of the status of those projects are? Vijay Raghavendra: Yes. So as Tyler mentioned one of the challenges we have is just the scale at which we operate. 18 different locations, many, many products, which in turn use a number of different components combined with really the labor and really managing all of that is what really goes into building the products that we eventually deliver to our customers. So we are starting with the foundation of really building good data. Good data is data that is complete. Good data is data that is timely. And good data is data that allows us to have a complete view of not just the products but all of the components and the interdependencies that go together. And by starting with that and then applying machine learning and AI on top, we are now -- we will then be able to really drive the outcomes that we want. So for example, how do we then ensure that we can forecast both the demand and some of the supply challenges that we may have. So we can then adapt to it better then meet the service levels that we've committed to our customers. So really data then becomes the foundation for us to do not just demand planning but forecasting and then managing every aspect of what goes into building the products including helping us manage the workforce. And the folks that we need to build these products better. So ultimately it's all in-service of meeting the supplier, the service levels that we commit there. Tyler Moon: And you know Vijay the accuracy of that forecasting as we connect with our supply base, we have to understand the market and what the changes are going to be in the future, Trevor. So our suppliers are needing more visibility and being connected and being better able to forecast the future we would be able to help our suppliers be better suppliers. Trevor Palmer: Yes, that's true thinking through -- thinking through some of the changes and the actual technology projects that have come out, the first one I go to is, is kind of the Pizza Tracker, right. So the order tracker. And if you think of what that used to look like for a customer. Maybe you can talk a little bit about that. Tyler Moon: Yes. So we had to think of a new way to do things. So we taught these teams and we pulled together people who actually do the work so they understand the work and allowing their creativity, they looked at the way they consume goods like a pizza, so they can see the status of their pizza order all the way through the process into it arrives at their door and they thought, well, why can't we do that for our customers. So we developed a similar tool to a Pizza tracker to where a distributor, a contractor can actually see the status of their order all the way through our complexity of our supply chain until it serviced locally. There was one example that came up early in the development of that tool where we discovered this job down in Texas. It was a multifamily residential housing authority job and we realized by looking at the order status on the Pizza tracker, we're going to miss this delivery schedule for this contractor. And so we were running the risk of really disappointing a customer and possibly damaging relationship, but we were able to navigate that through this new technology and find a solution that works for everybody. So it's been really helpful to have this woven into what we always did. As Amra mentioned, we used to touch orders, a lot of times and now by being able to see the status of the order at a glance and having us connected digitally, we don't have to touch it so many times and we still can satisfy the customer. Vijay Raghavendra: Yes, by working with Tyler's team what we did was really build near real-time visibility into every aspect of the order and the ability -- we also added the ability for various stakeholders, distributors, contractors, agents and so on to subscribe to this ongoing status of the order. So this then gets us to a complete transparency that we can then enable for our customers. Amra Boucher: It's all about enabling the customer experience at the end of the day. And so by being able to deliver personalized relevant content to various customer types when, how, when they want it, we enable that ultimate customer satisfaction and by enabling our people to have better information then we can deliver that to the customer ultimately. Trevor Palmer: Completely agree Amra. So it's been great spending some time this morning team, love the progress super excited on where we're going. People give spaces meaning. Throughout history, we've shaved and transformed the physical world to create spaces with purpose, spaces defined by our intentions. civilizations emerged with new needs, desires, ideas, and ways of interacting that created demand for more sophisticated spaces that could help us do more. From Stone Age caves to modern architectural marvels, the evolution of the built environment is a reflection of human ingenuity and creativity, spaces for learning, working, relaxing, inventing, exploring, living comfortably and enjoying the company of others, spaces for us to thrive in. Each generation stands on the shoulders of those before us strengthening the foundations they've built with new knowledge and innovating towards a smarter, brighter tomorrow. Intelligent Spaces Group is reimagining the built environment and everything it's capable of. We're designing a future where technology enhanced spaces empower people to achieve more than we ever thought possible. Everywhere we live, work and play, the new paradigm for intelligent spaces that sense, think, and act is here. Peter Han: I came to Acuity to help drive change at scale. The two sides that together are what excitement me. Impact for a purpose, impact with innovation. Intelligent Space is the business I lead is in one sense a start-up, on the other hand it already has material revenue, healthy growth, healthy margins, and that comes from serving customers across a wide variety of industries, retail, hospitality, aviation, enterprise campuses, we're meeting customers where they are on their digital transformation journey. Between Distech and Atrius, we have two real pieces of the puzzle in delivering Edge to cloud Solutions really helping customers transform their business processes. When I look at retail, as an example, I see a customer journey that we can assist in a variety of ways. Think about the shopper walking into a store and seeing digital signage upfront, changing offers on a regular basis that shopper may stroll up and down isles where they see goods on the shelves that need to be replenished with inventory management solutions. And then as they check out, they'll walk through digital kiosk. Of course, the entire experience is bracketed by security and surveillance solutions that ensure safety. Spaces should be smarter, safer, and greener. In enterprise offices, for example, we help customers with analytics on their infrastructure that help them understand what's happening in the space and how to take them forward. We also help those spaces get greener with heating and cooling solution that adjust temperatures automatically holding utility bills down and lowering the environmental footprint. That ability to drive change is what again accelerates the opportunity. Things are in place, things that will bring to the mix. So we can really scale this business over a period of time. When I think about our business with Intelligent Spaces, of course there is a ton of customer stuff and technology stuff problems that we're solving that really excite me, but of course, I can't forget about team. I mean just seeing you all thinking about the teams you represent. I'm really excited about the people we're bringing together. And I guess I would start by throwing into one of you who've been around a little bit longer and seen the way Acuity and Intelligent Spaces has built up, how you see the talent coming together in the team? Eugene Mazo: Seeing the digital transformation that Acuity has been going through in sort of watching the team's evolve. Looking at the combination of the existing talent that we've had because that's been with us through the years, and the new talent that's coming in, we have a really diverse set of people from various industries, we have people from various sized companies. When you think about the industries that we have and the breadth of knowledge that's now available within our team. You look at, people that have come from IoT, from OT, IT, from building intelligence, there is really a pretty rich knowledge base that exists here, but we also have sort of the difference in processes. You have people that are coming from start-ups that are used to really nimble really quick operations. You have people that are coming from enterprise technology and large enterprises that are very disciplined in terms of processes and they are really set up for that scalability. So, if you like this mix of all of the capability that we have from a team perspective really makes us a very, very, very strong organization to be able to be go and execute. Martin Villeneuve: Eugene, I cannot agree more with you. With my 22 years at Distech, I've seen many people joining the organization having brought with them the technical expertise, the domain expertise of the technology as well as the geographical diversity in order to reach the customer where they are in order to understand their needs and develop the different market over the years. Hannah Greinetz: Yes, I would totally echo that. Having been here since we were more in start-up phase and seen us join a larger company culture, it's been really great to see us sort of grow with the stability of a larger company backing us, but we've really come a long way in terms of building our processes and our standard procedures and all that and really being able to serve our customers better with more tools and resources. Sandeep Modhvadia: What's really interesting to see is like you get all those different viewpoints coming in from tech, IT, OT for me as a relatively new starter joining mid-pandemic what was super interesting was the infrastructure was built out to be super productive from anywhere. People working remote, people working from home, the fact that we are truly a global team and distributed. And just as productive as ever was very, very, I would say it's very interesting coming in. Peter Han: When I think about platforms and payloads this notion of solving our customers' problems and spaces, Sandeep, from a product standpoint, how would you think about how that's playing out? Sandeep Modhvadia: Yes, I think thing it is playing out really well. We have a strong collection of assets already. And if you think about the payload first, the payload really is the application, the consumable that our customers care about and that's where they derive the maximum value. Are we able to solve the actual problem? The platform underneath is then what allows us to scale to pre-enterprise friendly to be able to support global customers to be able to deliver than that capability. So really the two of them working in combination, a dependable platform and then the payload that solves the problem is really how we actually meet our customers' needs. As you think long-term, though and the capabilities that you need I retrace anchor ourselves around what does it mean to be an Intelligent Space. An Intelligent Space is in my mind one that is truly humanized and you think about human decision making, you sense, you think, and then you act. And that's how our technology is being built out with sensors that are ubiquitous and then across an entire building. So you really understand what's happening. The think piece is kind of the AI or the cloud coming in, the software that allows you to then take a decision and draw inference from that data and then act as the OT hardware within the physical infrastructure allows you to kind of close that loop and then take action in the building. So you think about kind of scale, solve a problem, and then solve a problem with the ability to sense, think and act. That's really how we come together on this. Peter Han: Those exact pieces putting together, Martin, I'm going to bring it to you because obviously as the leader of Distech, this business is built up over years and has a really nice installed base of customers around the world. I'd love to just hear in your voice how you see the Distech part of this equation. Martin Villeneuve: Yes. This is a good point. With more than 600 system integrators, distributors, and OEM customers in over 55 countries, they have been engineering, programing, and installing our intelligent building management product and solution for more than two decades. And I believe the secret of the success of the tremendous growth has been the one, the true open technologies and two, the open distribution. So, when I speak about the open technologies, first, we were founded on BMS open protocols such as LONWORKS and BACnet to start with, integrating now with the application that we talked about, IoT applications protocols. And open is a key differentiator that it's important to understand that most of our competitors are not and they keep a level of proprietary technologies. And then, on the open distribution side of things, from the lens of the building owner, the independent system integrator can unlock the building owners and facility managers from single providers. Peter Han: That open nature of Distech's platform is certainly a huge differentiator. We all agree with you there. And of course, it invites in the payload of all kinds of Atrius services and partner services. And Hannah, working on customer success, I'd actually love to hear about your experience of how customers are experiencing different building management services, some of those payloads through Martin's platform. Hannah Greinetz: Yes, absolutely. So our customers are what drive what we do every day. And we are able to see their data coming into the platform and they're really successful in building off of that finding insights, being able to find actionable actions they can take in order to make their buildings more efficient and hit metrics that they need to hit either for standards, for benchmarks, for energy management goals, for driving down costs and sustainability. We see great results on the operation side and we're really able to use the tools that the platform provides to see results. Peter Han: And those impacts in terms of environmental footprint and energy savings are a huge part of, I think, some of the different services. I mean, Sandeep, do you want to talk about how you see that playing out in building management and other spaces? Sandeep Modhvadia: Yes. So, from a building management perspective, we really look at two major outputs from a customer lens perspective. One is customers want to just save on dollars, like help me manage my building, help me manage my fleets of buildings in a more cost-effective way. The second is, I don't just want to manage my buildings in a cost-effective way but I want the buildings themselves to be efficient. So how do I drive toward more sustainable more green outcomes? Now, those two things on actually mutually exclusive, like you can drive towards a common purpose and a common goal across both of them. One great example is, how can I optimize my energy usage and optimize towards occupant comforts, facilities management and minimize my emissions in the same -- all in the same breadth. And so, some of our technologies like our building insights product allows us to do that. We can measure and track all of the energy being utilized across the entire building. We can then benchmark that and then we can round trip that back down to your controllers, back down to your on-site infrastructure to then take action. So, again, going back to that sense, think and act notion, we understand the energy being used, we're able to intelligently act upon it based on the constraints of the customers put in place and then we're able to act and put that motion into practice. Eugene Mazo: And this is a really excellent point, I think. It's fairly easy to just cut all energy cost, right, make the building super-efficient, just turn everything off, super easy. I think the key constraint here is, how do you keep the occupant comfortable? How do yAYI Ratings Summary
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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.
