Acuity Brands, Inc. Q1 FY2026 earnings call

Performance Overview

• Delivered strong performance in fiscal 2026 first quarter with net sales growth, expanded adjusted operating profit and margin, and increased adjusted diluted earnings per share. Generated strong cash flow and allocated capital effectively.

ABL Highlights

• Performed well in tepid lighting market due to product vitality, service levels, technology use. Launched new EAX area luminaire product family by Lithonia. Nightingale brand won awards for patient-centric product design.

AIS Highlights

• Continued strong performance. Atrius, Distech, and QSC driving productivity. Combined Distech Resets Move and Q SYS platform for autonomous room experience. Recognitions for product portfolios including Atrius Facilities winning smart buildings award, Q SYS full stack AV platform winning Excellence in Product Innovation Award, and Q SYS Core 24F processor winning ProAV Best in Market award.

Refuel Segment

• Expanded and upgraded lighting solutions, incorporating AIS products like Atrius software and Distech controls to create value throughout convenience store locations.

For Acuity Brands Lighting (ABL), net sales were $895 million, an increase of $9 million or 1% versus the prior year. Adjusted operating profit increased $6 million to $160 million, with an adjusted operating profit margin of 17.9%, up 60 basis points compared to the prior year. ABL's revenue contribution is approximately 81.36% of total net sales. For Acuity Intelligent Spaces (AIS), sales for the first quarter were $257 million, an increase of $184 million with the inclusion of three months of QSC. Adjusted operating profit in Intelligent Spaces was $57 million, with an adjusted operating profit margin of 22%, up 100 basis points compared to the prior year. AIS's revenue contribution is approximately 23.36% of total net sales.

No new guidance provided, same as fourth quarter. Seasonality expected with Q2 potentially down more than normal due to backlog normalization as higher backlog from prior periods impacts the first quarter and Q2 may be more in line with normal seasonality.

• Tariffs and their inconsistent implementations affecting gross margin, with noise in the income statement due to tariff reactions.

Q: Typically, gross margin peaks in Q3 and then has step downs. Any color on whether the business is positioned to deliver typical gross margin seasonality including step up into back half of year?

A: Neil states there's noise from tariffs, they've reacted by driving productivity and taking price strategically, confident in ability to drive margins long-term though not every quarter will be up. Karen adds OpEx was realigned in prior periods which affected Q4 to Q1 step down.

Q: Any gaps in product portfolio for cross-sell between ABL and AIS?

A: Neil says cross-sell opportunities should be customer-driven. Highlighted cross-sell between Distech portfolio and QSC portfolio for autonomous room experience, and refuel solution combining lighting and refrigeration controls, noting some areas not provided but teams working together.

Q: Is the elevated backlog behind us and will there be slower growth in next couple of quarters?

A: Karen says seasonality is skewed with Q2 likely down more than normal as higher backlog from prior periods impacts first quarter and Q2 is more normal seasonality.

Q: Thoughts on tariffs with Supreme Court ruling coming up? How would rollback of tariffs affect pricing and channel response?

A: Neil says working hypothesis is things will stay mostly the same, if tariffs ruled illegal, practical implications would involve how benefits would flow through channel, expecting adaptation to new market if ruling is adverse.

Q: Gross margin on AIS at 60%, any more potential to increase?

A: Neil says they feel good about 60%, will focus on strategic value of controls and may add business models to balance margin but net net feel good about where it is.

Q: Any change in quoting environment with backlog?

A: Neil says lighting market is tepid but ABL is holding or accelerating position, AIS disruptive businesses are growing through market environments despite overall backdrop.