Acuity, Inc. Q4 FY2024 earnings call

• Fiscal 2024 fourth quarter performance was strong with net sales growth in Lighting and Space, margin expansion, and increased earnings per share. - In ABL, grew net sales $11 million, adjusted operating profit by $13 million, and expanded adjusted operating profit margin to 18% driven by strategies like increasing product vitality, elevating service levels, using technology. - Combined lighting and supply chain organizations under Sach Sankpal. - Recent product launches like HOLOBAY by Holophane, and multiple lighting solutions recognized for innovation. - In Lighting business, evolved product portfolios and invested in new verticals like refueling and horticulture. - Intelligent Spaces Group delivered impressive growth and margin performance, with products used in Paris facilities, expanding addressable market.

In the Lighting business (ABL), net sales were $955 million, an increase of $11 million or around 1%. Adjusted operating profit increased to $172 million, with an adjusted operating profit margin of 18%, a 120 basis point improvement over the prior year. For the Intelligent Spaces Group (ISG), net sales in the fourth quarter were $84 million, an increase of 17%. Adjusted operating profit in ISG was $22 million with an adjusted operating profit margin over 25%. Total AYI net sales in the fourth quarter were $1 billion, $22 million or 2% above the prior year, driven by growth in both Lighting and Spaces businesses.

• Full year fiscal 2025 net sales expected to be within the range of $3.9 billion and $4.1 billion for total AYI. - ABL to deliver low to mid-single digit sales growth, more back-half weighted in 2025. - ISG to generate sales growth in the low to mid-teens. - Expect to deliver adjusted diluted earnings per share within the range of $16 to $17.50.

• Foreign currency movements impacted miscellaneous expense, with significant impact from Distech's Canadian dollar cash and Mexico lease liabilities. - Monitoring port situation, with most products coming in via West Coast ports but currently no material impact expected.

Q: How is the current market conditions affecting quoting, ordering, and release activity in the ABL business?

A: Neil Ashe said conditions are relatively normal on ABL side, focused on growth algorithm, and fiscal 2025 is reasonably confident with calendar year 2025 expected to be strong.

Q: Update on capital allocation priorities given the cash pile?

A: Karen Holcom said they are pleased with cash flow generation, have invested in current businesses, have a healthy M&A pipeline, increased dividend, and repurchased shares; Neil Ashe added they have capacity to invest for growth, expand businesses via M&A, with priority on ISG for disruptive technologies.

Q: Update on Design Select reception and independent agency adoption?

A: Neil Ashe said reaction to Design Select is universally positive, distributors and agents want more of it faster, and they are methodically rolling it out.

Q: Drivers behind calendar year 2025 being strong and breakdown of lighting growth algorithm?

A: Neil Ashe said data analysis shows general activity on horizon, lighting business is largest in North America, will take share, and has underpenetrated verticals; growth algorithm includes market growth, outgrowth, and strategic pricing.

Q: Color on East Coast port situation and inventory?

A: Karen Holcom said most products come in via West Coast ports, they feel good about inventory position on specific East Coast products with no material impact expected currently.

Q: Trends in independent sales network and growth outlook for 2025?

A: Neil Ashe said independent sales network is 60% of lighting business, has 80 agents with 4,000 sales support professionals, performing consistently, and is a contributor to mid-single digit growth in lighting business.

Q: Gross margin guidance and leverage sources for fiscal 2025?

A: Neil Ashe said gross margin performance has been strong, 50 to 100 basis point annual margin expansion target is a mix of gross margin expansion and OpEx leverage.