Acuity, Inc. Q2 FY2025 earnings call

• Changed company name from Acuity Brands to Acuity in March, representing evolution and scalability. • Updated segment names: Lighting segment is Acuity Brands Lighting (ABL), Intelligent Spaces segment is Acuity Intelligent Spaces (AIS). • ABL focused on electronics portfolio, including driver and lighting controls platform, with products like GOTHAM IVO recognized for innovation. • AIS had strong sales growth, including two months of QSC sales, with Atrius and Distech growing 12.2%, and QSC integration progressing. • Took strategic pricing actions in response to tariffs, focusing on managing dollar and margin impacts. • Highlighted cash flow performance, with $192 million of cash flow from operations year-to-date, and effective capital allocation including QSC acquisition.

For ABL: Delivered sales of $841 million, which was $3 million less than the prior year, primarily due to declines in retail and corporate accounts. However, adjusted operating profit increased $5 million to $141 million, with an adjusted operating profit margin of 16.8%, up 60 basis points compared to the prior year. For Acuity Intelligent Spaces (AIS): Generated sales of $172 million, an increase of $103 million. Atrius and Distech combined grew 12.2% during the quarter, with the remainder from two months of QSC performance. Adjusted operating profit in AIS was $32 million with a margin of 18.7%. Total Acuity net sales for the second quarter were $1 billion, $100 million or 11% above the prior year. Adjusted operating profit was $163 million, up around $23 million or 16% from last year, with an adjusted operating profit margin of 16.2%, an increase of 70 basis points from the prior year.

• No change in guidance from Q1 as modified to reflect QSC acquisition. • Will continue to execute accordingly for the remainder of the fiscal year, with confidence in maintaining performance as seen in prior periods.

• Tariffs present a supply shock, impacting dollar and margin management, with a lag in pricing actions and cash flow impact. • Competitive reactions to Acuity's strategies, as competitors are likely reacting on the margin to Acuity's differentiation.

Q: Thoughts on tariffs and competitive positioning given Mexico being mostly USMCA compliant and competitors from Asia?

A: Neil Ashe stated tariffs are a supply shock, focusing on managing dollar and margin impacts, confident in competitive position due to diversified global supply chain with significant portion from USMCA compliant Mexico and U.S. manufacturing.

Q: Follow-up on gross margin and price lag?

A: Karen Holcom said gross margin strong due to AIS contribution and ABL's product vitality strategy. Neil Ashe explained lag in price passing through due to order-to-shipment timeline, but will pass on at least $100 of price to cover tariff impact.

Q: Guidance and pricing approach on tariffs?

A: Karen Holcom said no change in guidance, Neil Ashe explained strategic pricing approach to cover tariff costs across different product segments.

Q: QSC margin and integration progress?

A: Karen Holcom said QSC margin aligns with AIS's margin profile, Neil Ashe mentioned QSC integration progressing well with good marketplace performance and culture fit.

Q: QSC integration progress and future synergies?

A: Neil Ashe said QSC fits well strategically, product-wise, and culturally, with good progress, and sees margin and growth opportunities longer-term.

Q: Competitors reacting to Acuity's strategies?

A: Neil Ashe said competitors are reacting on the margin, but Acuity's unique strategy, especially electronics portfolio, is hard to replicate.