Group 1 - Acuity Brands, Inc. (AYI) has a scalable business model and is targeting a market that is growing at a double-digit rate [2][51] - The company has made recent acquisitions, including assets from Current Lighting Solutions and KE2 Therm Solutions, indicating potential inorganic growth [2][34] - The lighting control system market is projected to grow significantly, with a compound annual growth rate of 16.8% from 2023 to 2032, which could enhance Acuity's net sales growth [35] Group 2 - Acuity Brands operates in two main segments: lighting controls and intelligent spaces, with a focus on low-consumption LED technology [3][4] - The intelligent spaces segment has shown double-digit net sales growth and an adjusted operating profit margin of approximately 32% [4][25] - The company reported a quarterly adjusted operating profit increase of nearly 2% year-over-year [3] Group 3 - The fiscal 2024 outlook includes net sales projected between $3.7 billion and $4 billion, with adjusted diluted EPS expected to be between $14.75 and $15.50 per share [28][29] - Recent earnings per share (EPS) were better than expected, and several analysts have raised their EPS forecasts in the last 90 days, indicating optimism for future demand [26][51] - The company has $578 million in cash, providing liquidity for potential share repurchases or new acquisitions [31][36] Group 4 - Acuity Brands has a strong balance sheet with total current assets of $1.54 billion and total assets worth $3.52 billion, indicating financial stability [31][32] - The company has a current ratio greater than 2x, suggesting sufficient liquidity for ongoing operations [31] - Long-term debt is relatively low at $495 million, which supports the company's financial health [32] Group 5 - The incorporation of artificial intelligence capabilities into product offerings may enhance efficiency and drive demand for Acuity's products [38][51] - The company's growth strategy includes both organic scaling and strategic acquisitions to expand productive margins [34] - The competitive landscape is evolving due to advancements in artificial intelligence and automation technology, which may impact Acuity's market position [49][50]

Core Insights - The global commercial greenhouse market was valued at US$38.02 billion in 2023 and is projected to grow at a CAGR of 8.3% from 2024 to 2034 [1] Group 1: Market Drivers - Increasing focus on sustainable food production is driving the adoption of commercial greenhouse cultivation, which allows for efficient use of resources and promotes eco-friendly agriculture [2] - Rapid urbanization and land scarcity are leading to a demand for commercial greenhouses, enabling vertical farming and maximizing land use efficiency in urban areas [3] - The shift towards Controlled Environment Agriculture (CEA) is reshaping the agricultural landscape, allowing for year-round production of high-value crops [8] - Expansion of export opportunities due to globalization and increasing demand for high-quality produce from emerging markets is stimulating market growth [9] - Increasing investment in Agri-tech start-ups is fostering innovation in the commercial greenhouse market, optimizing resource use and improving crop productivity [10] - Government support and incentives for greenhouse farming are encouraging investment and technology adoption in the sector [11] Group 2: Impact of COVID-19 - The COVID-19 pandemic initially caused operational challenges for greenhouse growers, including labor shortages and logistical constraints, leading to production delays and financial instability [4] - The pandemic highlighted the importance of local food production, increasing demand for greenhouse-grown produce as consumers became more conscious of food safety [5] - The crisis accelerated the adoption of technology and automation in greenhouse farming, enhancing productivity and reducing labor costs [5] Group 3: Competitive Landscape - Major players in the commercial greenhouse market include Agra-tech, Inc., Berry Global Group, Inc., and Heliospectra AB, among others, employing strategies such as M&A, R&D investment, and regional expansion [12] - Recent developments include Berry Global's lightweight tube closure system aimed at reducing greenhouse gas emissions and Heliospectra's new software for optimizing energy savings in greenhouse operations [13]

Core Insights - Acuity Brands, Inc. (AYI) reported strong second-quarter fiscal 2024 results, with earnings and revenues exceeding the Zacks Consensus Estimate, marking the 16th consecutive quarter of earnings beats [1][2] Financial Performance - Adjusted earnings per share were $3.38, surpassing the consensus estimate of $3.11 by 8.7% and increasing 10.5% from the previous year's $3.06 [2] - Net sales reached $905.9 million, exceeding the consensus mark of $897 million by 1%, although this represented a 4% decline from the prior-year quarter due to lower volumes [2] Segment Performance - Acuity Brands Lighting and Lighting Controls (ABL) saw net sales decline 5.3% year over year to $843.5 million, slightly above the estimate of $837 million [3] - The Independent Sales Network's sales decreased 3.6% year over year to $612.3 million, while Direct Sales Network sales fell 1.8% to $93 million [3] - Retail sales dropped 7.9% to $46.4 million, and Corporate Accounts channel sales plummeted 38.1% to $29.4 million [3] - Despite the sales decline, adjusted operating profit in the segment increased 2.3% to $136.4 million, with an adjusted operating margin up 120 basis points to 16.2% [3] Intelligent Spaces Group - The Intelligent Spaces Group (ISG) generated net sales of $68.1 million, a 17% year-over-year increase, exceeding the estimate of $67.6 million [4] - Adjusted operating profit for ISG rose 32.4% to $14.3 million, with an adjusted operating margin up 240 basis points to 21% [4] Operating Highlights - Adjusted operating profit increased 6.1% to $140.1 million, with an adjusted operating margin of 15.5%, up 150 basis points year over year [5] - Adjusted EBITDA rose 5.7% to $153 million, with an adjusted EBITDA margin expanding 160 basis points to 16.9% [5] Financial Position - At the end of the fiscal second quarter, Acuity Brands had cash and cash equivalents of $578.9 million, up from $397.9 million at the end of fiscal 2023 [6] - Long-term debt remained stable at $495.9 million [6] - Cash provided by operating activities totaled $292.6 million in the first half of fiscal 2024, down from $306.4 million in the prior-year period [6] - Free cash flow decreased 2.7% to $263.6 million in the first half of fiscal 2024 [6] - The company repurchased nearly 370,000 shares for $68 million during the first half of fiscal 2024 [6]

Financial Data and Key Metrics Changes - The company generated net sales of $906 million in Q2 2024, a decrease of $38 million or 4% compared to the prior year, primarily due to lower sales in the ABL business [17] - Adjusted operating profit increased by $8 million despite lower net sales, with an adjusted operating profit margin expanding to 15.5%, an increase of approximately 150 basis points from the prior year [18] - Adjusted diluted earnings per share rose to $3.38, an increase of $0.32 or 11% over the prior year, driven by higher net income and lower shares outstanding due to share repurchases [18] Business Line Data and Key Metrics Changes - ABL's net sales were $844 million, a decrease of around 5% compared to the prior year, with adjusted operating profit increasing 2% to $136 million and an adjusted operating profit margin of 16.2%, a 120 basis point improvement [19] - ISG's net sales for the second quarter were $68 million, an increase of 17%, with adjusted operating profit at $14 million and an adjusted operating profit margin of 21%, a 240 basis point improvement [19] Market Data and Key Metrics Changes - The order rates in both the Lighting business and the Spaces business are growing year-over-year, indicating a positive trend in demand [15] - The company is back to typical lead times in the lighting business, and absent the impact of sales from excess backlog last year, sales growth would have been experienced [16] Company Strategy and Development Direction - The company is focused on making spaces smarter, safer, and greener through its Intelligence Spaces business, expanding its addressable market geographically and by increasing control capabilities in build spaces [13][14] - Investments in product vitality and technology are aimed at improving product differentiation and operational efficiency, with a focus on expanding the horticulture product solutions [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning the lighting business to growth in a normalized environment, with expectations for continued margin improvement and strong cash flow generation [15][16] - The company raised its full-year expectations for adjusted diluted earnings per share to a range of $14.75 to $15.50, reflecting strong performance in the first half of the year [21] Other Important Information - The company has repurchased approximately 9.5 million shares at an average price of about $145 per share since the beginning of the fourth quarter of fiscal 2020, representing about 24% of the then shares outstanding [20] - The company increased its dividend per share by 15% during the quarter, indicating strong cash flow performance and confidence in future growth [20][27] Q&A Session Summary Question: Evidence of changes in commissions translating to better wins in infrastructure and SD&A - Management feels confident about positioning for larger projects, with strong orders expected to translate into sales over the next year or two [23] Question: Thoughts on cash balance and M&A pipeline - The company is pleased with cash flow performance and has a good pipeline for small to medium-sized acquisitions, focusing on expanding the Intelligence Spaces group [26][28] Question: New EPS guidance assumptions for sales - Management plans conservatively and expects the lighting business to return to growth, with no changes to revenue guidance [32] Question: Interest in controls and drivers of growth in ISG - There is strong demand for controls, with Distech perceived as a high-quality provider, and the company is expanding its addressable market [36] Question: Geographic expansion targets - The company is focused on expanding its Intelligence Spaces Group globally, with significant opportunities in North America and Europe [52] Question: Pricing strategy and market tone - Management is pleased with gross profit performance, strategically managing pricing while addressing input costs [55] Question: Sustainability of gross margins - Management feels confident about maintaining strong margins, driven by product vitality efforts and effective cost management [58] Question: Exposure to data centers - The company has significant exposure to data centers in both lighting and control segments, with ongoing opportunities for growth [61] Question: Back half guidance for gross margins - Management expects continued strong performance in the lighting business, with effective competition and margin management [66] Question: Nonresidential construction cycle outlook - Management believes the market is normalizing and feels confident in executing in various market conditions [72]

Core Insights - Acuity Brands reported $905.9 million in revenue for the quarter ended February 2024, reflecting a year-over-year decline of 4% while EPS increased to $3.38 from $3.06 a year ago [1] - The revenue exceeded the Zacks Consensus Estimate of $897.01 million by 0.99%, and the EPS also surpassed the consensus estimate of $3.11 by 8.68% [1] Revenue Breakdown - Revenues from Eliminations were reported at -$5.70 million, better than the two-analyst average estimate of -$8.02 million, showing a year-over-year change of +5.6% [2] - Revenues from Acuity Brands Lighting (ABL) totaled $843.50 million, slightly above the two-analyst average estimate of $834.93 million, but represented a year-over-year decline of 5.3% [2] - Revenues from the Intelligent Spaces Group (ISG) reached $68.10 million, exceeding the two-analyst average estimate of $66.68 million, with a year-over-year increase of +17% [2] Profit Metrics - Adjusted operating profit for the Intelligent Spaces Group was $14.30 million, surpassing the average estimate of $10.31 million from two analysts [2] - Adjusted operating profit for Acuity Brands Lighting was reported at $136.40 million, exceeding the average estimate of $123.55 million from two analysts [2] Stock Performance - Acuity Brands shares have returned +2.1% over the past month, outperforming the Zacks S&P 500 composite's +1.5% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Company Performance - Acuity Brands reported quarterly earnings of $3.38 per share, exceeding the Zacks Consensus Estimate of $3.11 per share, and up from $3.06 per share a year ago, representing an earnings surprise of 8.68% [1] - The company achieved revenues of $905.9 million for the quarter ended February 2024, surpassing the Zacks Consensus Estimate by 0.99%, although this is a decrease from $943.6 million in the same quarter last year [1] - Over the last four quarters, Acuity Brands has consistently surpassed consensus EPS estimates four times and topped consensus revenue estimates two times [1] Stock Performance - Acuity Brands shares have increased approximately 27.8% since the beginning of the year, significantly outperforming the S&P 500's gain of 9.1% [2] - The current consensus EPS estimate for the upcoming quarter is $3.78, with expected revenues of $980.97 million, and for the current fiscal year, the consensus EPS estimate is $14.77 on revenues of $3.86 billion [4] Industry Outlook - The Building Products - Lighting industry, to which Acuity Brands belongs, is currently ranked in the top 39% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [5] - Another company in the same industry, LSI, is expected to report quarterly earnings of $0.16 per share, with revenues projected to be $105.71 million, reflecting a 10% decline from the previous year [5]

[Fiscal 2024 Second-Quarter Results Overview](index=1&type=section&id=Acuity%20Brands%20Reports%20Fiscal%202024%20Second-Quarter%20Results) Acuity Brands reported solid Q2 FY2024 results, achieving margin expansion and EPS growth despite a net sales decline [Financial Highlights](index=1&type=section&id=Financial%20Highlights) Acuity Brands achieved margin expansion and EPS growth in Q2 FY2024, with operating profit increasing despite a 4% net sales decline Q2 Fiscal 2024 Key Financial Metrics | Metric | Q2 FY2024 | Change vs. Prior Year | | :--- | :--- | :--- | | Net Sales | $906M | -4% | | Operating Profit | $118M | +6% | | Adjusted Operating Profit | $140M | +6% | | Diluted EPS | $2.84 | +11% | | Adjusted Diluted EPS | $3.38 | +11% | | YTD Cash Flow from Operations | $293M | N/A | - The company's management highlighted solid execution, leading to increased **adjusted operating profit**, **margin**, and **diluted EPS**, alongside strong **free cash flow generation** and effective **capital allocation**[2](index=2&type=chunk) Q2 FY2024 Profitability Analysis | Metric | Q2 FY2024 | Change vs. Prior Year | | :--- | :--- | :--- | | Operating Profit Margin | 13.0% | +120 bps | | Adjusted Operating Profit Margin | 15.5% | +150 bps | [Segment Performance](index=2&type=section&id=Segment%20Performance) The company's segments showed mixed results, with ABL sales declining but ISG achieving strong growth and margin expansion [Acuity Brands Lighting and Lighting Controls (ABL)](index=2&type=section&id=Acuity%20Brands%20Lighting%20and%20Lighting%20Controls%20(ABL)) The ABL segment experienced a 5.3% decrease in net sales but improved its profitability, with operating profit increasing by 1.9% ABL Segment Q2 FY2024 Performance | Metric | Q2 FY2024 | Change vs. Prior Year | | :--- | :--- | :--- | | Net Sales | $843.5M | -5.3% | | Operating Profit | $126.0M | +1.9% | | Operating Profit Margin | 14.9% | +100 bps | | Adjusted Operating Profit | $136.4M | +2.3% | | Adjusted Operating Profit Margin | 16.2% | +120 bps | [Intelligent Spaces Group (ISG)](index=2&type=section&id=Intelligent%20Spaces%20Group%20(ISG)) The ISG segment demonstrated strong growth in Q2 FY2024, with net sales increasing by 17.0% and significant margin expansion ISG Segment Q2 FY2024 Performance | Metric | Q2 FY2024 | Change vs. Prior Year | | :--- | :--- | :--- | | Net Sales | $68.1M | +17.0% | | Operating Profit | $9.1M | +$2.8M | | Operating Profit Margin | 13.4% | +260 bps | | Adjusted Operating Profit | $14.3M | +$3.5M | | Adjusted Operating Profit Margin | 21.0% | +240 bps | [Financial Condition and Capital Allocation](index=2&type=section&id=Financial%20Condition%20and%20Capital%20Allocation) Acuity Brands maintained a strong financial position, generating significant cash flow and actively returning capital to shareholders [Financial Position](index=6&type=section&id=Financial%20Position) As of February 29, 2024, Acuity Brands' balance sheet remained strong with total assets increasing to $3.53 billion, driven by higher cash and cash equivalents Condensed Consolidated Balance Sheet Highlights (in millions) | Account | Feb 29, 2024 | Aug 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $578.9 | $397.9 | | Total current assets | $1,546.8 | $1,395.2 | | Total assets | $3,525.8 | $3,408.5 | | Total current liabilities | $597.9 | $595.4 | | Total liabilities | $1,376.2 | $1,393.1 | | Total stockholders' equity | $2,149.6 | $2,015.4 | [Cash Flow and Capital Allocation](index=2&type=section&id=Cash%20Flow%20and%20Capital%20Allocation) For the first half of fiscal 2024, the company generated $292.6 million in net cash from operating activities and repurchased approximately 370,000 shares - Net cash from operating activities for the first half of fiscal 2024 was **$292.6 million**, a decrease of **$13.8 million** compared to the prior year[7](index=7&type=chunk) - Year-to-date, the company repurchased approximately **370,000 shares** of common stock for about **$68 million**[7](index=7&type=chunk) Six Months Ended Cash Flow Summary (in millions) | Cash Flow Category | Feb 29, 2024 | Feb 28, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $292.6 | $306.4 | | Net cash used for investing activities | ($32.7) | ($29.2) | | Net cash used for financing activities | ($79.0) | ($159.4) | [Detailed Financial Performance](index=7&type=section&id=Detailed%20Financial%20Performance) The company's Q2 FY2024 saw a slight sales decrease but improved gross and operating profits, with varied performance across sales channels [Condensed Consolidated Statements of Comprehensive Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) For Q2 fiscal 2024, Acuity Brands reported lower net sales but improved gross profit, operating profit, and net income, leading to an 11% increase in diluted EPS Q2 Income Statement Summary (in millions) | Metric | Three Months Ended Feb 29, 2024 | Three Months Ended Feb 28, 2023 | | :--- | :--- | :--- | | Net sales | $905.9 | $943.6 | | Gross profit | $410.8 | $406.7 | | Operating profit | $118.1 | $111.5 | | Net income | $89.2 | $83.2 | Earnings Per Share (EPS) | Metric | Three Months Ended Feb 29, 2024 | Three Months Ended Feb 28, 2023 | | :--- | :--- | :--- | | Basic EPS | $2.89 | $2.60 | | Diluted EPS | $2.84 | $2.57 | [Disaggregated Net Sales](index=9&type=section&id=Disaggregated%20Net%20Sales) In Q2 FY2024, ABL segment sales declined across most channels, while the ISG segment achieved strong 17.0% growth Q2 Net Sales by Channel (in millions) | Channel | Q2 FY2024 | Q2 FY2023 | % Change | | :--- | :--- | :--- | :--- | | **ABL Total** | **$843.5** | **$890.8** | **(5.3)%** | | Independent sales network | $612.3 | $635.3 | (3.6)% | | Direct sales network | $93.0 | $94.7 | (1.8)% | | Retail sales | $46.4 | $50.4 | (7.9)% | | Corporate accounts | $38.1 | $54.0 | (29.4)% | | **ISG Total** | **$68.1** | **$58.2** | **17.0%** | | **Total Company** | **$905.9** | **$943.6** | **(4.0)%** | [Reconciliation of Non-U.S. GAAP Measures](index=10&type=section&id=Reconciliation%20of%20Non-U.S.%20GAAP%20Measures) Non-GAAP adjustments provide a clearer view of the company's improved operating profit and diluted EPS for both the total company and segments [Total Company Reconciliation](index=10&type=section&id=Total%20Company%20Reconciliation) For Q2 fiscal 2024, adjusted operating profit increased by 6.1% to $140.1 million, and adjusted diluted EPS rose by 10.5% to $3.38 Q2 Reconciliation of GAAP to Non-GAAP Operating Profit (in millions) | Metric | Q2 FY2024 | Q2 FY2023 | | :--- | :--- | :--- | | Operating profit (GAAP) | $118.1 | $111.5 | | Add-back: Amortization | $10.0 | $9.3 | | Add-back: Share-based payment | $12.0 | $11.3 | | **Adjusted operating profit (Non-GAAP)** | **$140.1** | **$132.1** | Q2 Reconciliation of GAAP to Non-GAAP EPS | Metric | Q2 FY2024 | Q2 FY2023 | | :--- | :--- | :--- | | Diluted EPS (GAAP) | $2.84 | $2.57 | | **Adjusted diluted EPS (Non-GAAP)** | **$3.38** | **$3.06** | [Segment Reconciliation](index=11&type=section&id=Segment%20Reconciliation) On an adjusted basis for Q2, the ABL segment's operating profit rose 2.3% to $136.4 million, while ISG's adjusted operating profit grew significantly by 32.4% to $14.3 million ABL Q2 GAAP to Non-GAAP Reconciliation (in millions) | Metric | Q2 FY2024 | Q2 FY2023 | | :--- | :--- | :--- | | Operating profit (GAAP) | $126.0 | $123.6 | | **Adjusted operating profit (Non-GAAP)** | **$136.4** | **$133.3** | | Operating profit margin (GAAP) | 14.9% | 13.9% | | **Adjusted operating profit margin (Non-GAAP)** | **16.2%** | **15.0%** | ISG Q2 GAAP to Non-GAAP Reconciliation (in millions) | Metric | Q2 FY2024 | Q2 FY2023 | | :--- | :--- | :--- | | Operating profit (GAAP) | $9.1 | $6.3 | | **Adjusted operating profit (Non-GAAP)** | **$14.3** | **$10.8** | | Operating profit margin (GAAP) | 13.4% | 10.8% | | **Adjusted operating profit margin (Non-GAAP)** | **21.0%** | **18.6%** | [Supplementary Information](index=2&type=section&id=Supplementary%20Information) Acuity Brands, an industrial technology company, provides context on its business, non-GAAP measures, and forward-looking statements [About Acuity Brands](index=2&type=section&id=About%20Acuity%20Brands) Acuity Brands is a market-leading industrial technology company focused on solving problems in spaces and light through its ABL and ISG segments - Acuity Brands is an industrial technology company focused on solving problems in spaces and light through its two business segments: **ABL** and **ISG**[9](index=9&type=chunk)[10](index=10&type=chunk) - The company's growth strategy involves developing **innovative new products and services**, increasing **market share** through customer-focused efficiencies, and aggressively deploying capital into the business and new verticals[10](index=10&type=chunk) [Non-GAAP Measures and Forward-Looking Statements](index=3&type=section&id=Non-GAAP%20Measures%20and%20Forward-Looking%20Statements) This section clarifies the use of non-GAAP financial measures for enhanced performance understanding and highlights the inherent risks in forward-looking statements - The company uses non-GAAP measures to enhance understanding of current financial performance by excluding items like **amortization**, **share-based payment expense**, and **special charges**[11](index=11&type=chunk) - Management uses these non-GAAP measures for **internal performance reviews**, **comparative analysis**, and **decision-making**[12](index=12&type=chunk) - The press release includes forward-looking statements that are not guarantees of future performance and are subject to known and unknown **risks and uncertainties**[16](index=16&type=chunk)

Part I. [FINANCIAL INFORMATION](index=3&type=section&id=Part%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Acuity Brands' unaudited consolidated financial statements detail financial position, operations, and cash flows, highlighting increased cash and net income Consolidated Balance Sheet Summary (in millions) | Account | Feb 29, 2024 (Unaudited) | Aug 31, 2023 | | :--- | :--- | :--- | | **Total Assets** | **$3,525.8** | **$3,408.5** | | **Cash and cash equivalents** | **$578.9** | $397.9 | | **Inventories** | $375.8 | $368.5 | | **Goodwill** | **$1,097.1** | **$1,097.9** | | **Total Liabilities** | **$1,376.2** | **$1,393.1** | | **Long-term debt** | **$495.9** | $495.6 | | **Total Stockholders' Equity** | **$2,149.6** | **$2,015.4** | Consolidated Statement of Comprehensive Income Summary (in millions) | Account | Three Months Ended Feb 29, 2024 | Three Months Ended Feb 28, 2023 | Six Months Ended Feb 29, 2024 | Six Months Ended Feb 28, 2023 | | :--- | :--- | :--- | :--- | :--- | | **Net sales** | **$905.9** | $943.6 | **$1,840.6** | $1,941.5 | | **Gross profit** | $412.4 | $406.7 | $840.8 | $823.2 | | **Operating profit** | **$118.1** | $111.5 | **$251.0** | $220.4 | | **Net income** | **$89.2** | **$83.2** | **$189.8** | **$158.1** | | **Diluted EPS** | **$2.84** | $2.57 | **$6.05** | $4.86 | Consolidated Statement of Cash Flows Summary (in millions) | Account | Six Months Ended Feb 29, 2024 | Six Months Ended Feb 28, 2023 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | **$292.6** | $306.4 | | **Net cash used for investing activities** | $(32.7) | $(29.2) | | **Net cash used for financing activities** | $(79.0) | $(159.4) | | **Net change in cash and cash equivalents** | **$181.0** | $115.8 | [Note 1 — Description of Business and Basis of Presentation](index=6&type=section&id=Note%201%20%E2%80%94%20Description%20of%20Business%20and%20Basis%20of%20Presentation) Acuity Brands operates two segments, **ABL** for lighting and **ISG** for intelligent building solutions, with typical seasonality in later fiscal quarters - The company operates through two business segments: **Acuity Brands Lighting and Lighting Controls (ABL)** and the **Intelligent Spaces Group (ISG)**[19](index=19&type=chunk) - The **ABL segment's** portfolio includes commercial, architectural, and specialty lighting, primarily using LED technology, sold through various channels including **electrical distributors** and **retail home improvement centers**[20](index=20&type=chunk) - The **ISG segment** offers building management solutions for **HVAC, lighting, and access control**, aiming to make spaces **smarter, safer, and greener**[22](index=22&type=chunk) [Note 3 — Acquisitions and Divestitures](index=7&type=section&id=Note%203%20%E2%80%94%20Acquisitions%20and%20Divestitures) The company acquired **Arize** horticulture lighting assets in **FY2024** and **KE2 Therm** in **FY2023**, while divesting **Sunoptics** in **FY2023** with a pre-tax loss - On **January 19, 2024**, the company acquired certain assets related to **Arize® horticulture lighting products**, which were included in the **ABL segment's** results[29](index=29&type=chunk) - The acquisition of **KE2 Therm** in **May 2023** resulted in **preliminary goodwill** of **$15.0 million** within the **ISG segment** and **preliminary gross intangible assets** of **$18.0 million**[31](index=31&type=chunk)[32](index=32&type=chunk) - In **November 2022** (**fiscal 2023**), the company sold its **Sunoptics business**, resulting in a pre-tax loss of **$11.2 million**[34](index=34&type=chunk) [Note 8 — Goodwill and Intangible Assets](index=10&type=section&id=Note%208%20%E2%80%94%20Goodwill%20and%20Intangible%20Assets) **Goodwill** slightly decreased to **$1,097.1 million** due to currency adjustments, while **amortization expense** for intangibles was **$19.9 million** for six months Goodwill by Segment (in millions) | Segment | Aug 31, 2023 | Feb 29, 2024 | | :--- | :--- | :--- | | **ABL** | **$1,014.4** | **$1,013.8** | | **ISG** | **$83.5** | **$83.3** | | **Total** | **$1,097.9** | **$1,097.1** | Amortization Expense of Definite-Lived Intangibles (in millions) | Period | Three Months Ended | Six Months Ended | | :--- | :--- | :--- | | **FY 2024** | **$10.0** | **$19.9** | | **FY 2023** | **$9.3** | **$22.9** | [Note 10 — Debt and Lines of Credit](index=12&type=section&id=Note%2010%20%E2%80%94%20Debt%20and%20Lines%20of%20Credit) **Long-term debt** is **$500.0 million** in unsecured notes, with a **$600.0 million** undrawn revolving credit facility and **$596.2 million** available capacity - **Long-term debt** is comprised of **$500.0 million** aggregate principal amount of **2.150% senior unsecured notes** due **December 15, 2030**[59](index=59&type=chunk) - The company has a **$600.0 million five-year unsecured revolving credit facility** with an option to request an additional **$400.0 million**[60](index=60&type=chunk) - As of **February 29, 2024**, there were no borrowings outstanding under the **Revolving Credit Facility**, and **available borrowing capacity** was **$596.2 million**[60](index=60&type=chunk) [Note 11 — Commitments and Contingencies](index=12&type=section&id=Note%2011%20%E2%80%94%20Commitments%20and%20Contingencies) **Product warranty and recall liabilities** increased to **$40.1 million**, and a data security **class action lawsuit** reached a **non-material proposed settlement** Changes in Product Warranty and Recall Liabilities (in millions) | | Six Months Ended Feb 29, 2024 | Six Months Ended Feb 28, 2023 | | :--- | :--- | :--- | | Beginning balance | $31.6 | $27.3 | | **Warranty and recall costs** | **$28.7** | $19.1 | | Payments and other deductions | $(20.2) | $(18.4) | | **Ending balance** | **$40.1** | **$28.0** | - A **proposed settlement** was reached on **December 1, 2023**, for a **class action lawsuit** concerning **data security incidents**; the impact of the settlement is **not material**[68](index=68&type=chunk) [Note 13 — Revenue Recognition](index=15&type=section&id=Note%2013%20%E2%80%94%20Revenue%20Recognition) Revenue is recognized upon **transfer of control**, with **ABL sales** decreasing and **ISG sales** increasing across disaggregated channels Disaggregated Revenues by Sales Channel (in millions) | Channel | Three Months Ended Feb 29, 2024 | Three Months Ended Feb 28, 2023 | Six Months Ended Feb 29, 2024 | Six Months Ended Feb 28, 2023 | | :--- | :--- | :--- | :--- | :--- | | **ABL Total** | **$843.5** | **$890.8** | **$1,719.9** | **$1,837.9** | | **Independent sales network** | $612.3 | $635.3 | $1,237.5 | $1,309.0 | | **Direct sales network** | $93.0 | $94.7 | $190.4 | $201.1 | | **Retail sales** | $46.4 | $50.4 | $102.0 | $100.3 | | **ISG Total** | **$68.1** | **$58.2** | **$132.3** | **$115.0** | | **Total Net Sales** | **$905.9** | **$943.6** | **$1,840.6** | **$1,941.5** | [Note 16 — Special Charges](index=17&type=section&id=Note%2016%20%E2%80%94%20Special%20Charges) No **special charges** were recognized in **H1 FY2024**, contrasting with **$6.9 million** in **FY2023** for **Sunoptics divestiture-related costs** - No **special charges** were recognized during the first six months of **fiscal 2024**[92](index=92&type=chunk) - In the first quarter of **fiscal 2023**, the company recognized **$6.9 million** in **special charges** related to the **Sunoptics divestiture**, including **$4.3 million** for **asset impairments** and **$2.6 million** for **severance and other costs**[92](index=92&type=chunk) [Note 18 — Earnings Per Share](index=18&type=section&id=Note%2018%20%E2%80%94%20Earnings%20Per%20Share) **Basic EPS** was **$2.89** and **diluted EPS** **$2.84** for **Q2 FY2024**, with both increasing year-over-year due to higher **net income** and fewer shares Earnings Per Share | Metric | Three Months Ended Feb 29, 2024 | Three Months Ended Feb 28, 2023 | Six Months Ended Feb 29, 2024 | Six Months Ended Feb 28, 2023 | | :--- | :--- | :--- | :--- | :--- | | **Basic EPS** | **$2.89** | $2.60 | **$6.13** | $4.91 | | **Diluted EPS** | **$2.84** | $2.57 | **$6.05** | $4.86 | | **Basic weighted average shares (millions)** | 30.864 | 32.048 | 30.940 | 32.178 | | **Diluted weighted average shares (millions)** | 31.399 | 32.386 | 31.388 | 32.545 | [Note 20 — Segment Information](index=19&type=section&id=Note%2020%20%E2%80%94%20Segment%20Information) **Q2 FY2024** saw **ABL sales** decrease but **profit** increase, while **ISG sales** and **profit** both grew, reflecting similar trends for the six-month period Segment Financial Information (in millions) | Segment & Metric | Three Months Ended Feb 29, 2024 | Three Months Ended Feb 28, 2023 | Six Months Ended Feb 29, 2024 | Six Months Ended Feb 28, 2023 | | :--- | :--- | :--- | :--- | :--- | | **ABL Net Sales** | **$843.5** | **$890.8** | **$1,719.9** | **$1,837.9** | | **ABL Operating Profit** | **$126.0** | $123.6 | **$269.8** | $241.7 | | **ISG Net Sales** | **$68.1** | **$58.2** | **$132.3** | **$115.0** | | **ISG Operating Profit** | **$9.1** | $6.3 | **$14.4** | $14.0 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) **Q2 FY2024 net sales** decreased **4.0%** to **$905.9 million**, but **gross profit margin** improved, leading to a **5.9% increase** in **operating profit**, with strong liquidity and **ISG growth** [Financial Condition, Capital Resources, and Liquidity](index=21&type=section&id=Financial%20Condition%2C%20Capital%20Resources%2C%20and%20Liquidity) The company's financial condition is strong, with **cash** increasing to **$578.9 million**, **total liquidity** at **$1.2 billion**, and **$495.9 million** in unsecured debt - **Cash position** increased by **$181.0 million** from **August 31, 2023**, to **$578.9 million** at **February 29, 2024**[116](index=116&type=chunk) - **Net cash provided by operating activities** was **$292.6 million** for the six months ended **February 29, 2024**, a decrease from **$306.4 million** in the prior-year period[116](index=116&type=chunk) - **Total liquidity**, combining **cash on hand** (**$578.9 million**) and **available borrowing capacity** (**$596.2 million**), totaled approximately **$1.2 billion** as of **February 29, 2024**[119](index=119&type=chunk) [Capital Allocation Priorities](index=22&type=section&id=Capital%20Allocation%20Priorities) **Capital allocation priorities** included **$29.0 million** in **capex**, **Arize acquisition**, **$8.8 million** in **dividends**, and **$67.6 million** in **share repurchases** - Invested **$29.0 million** in **property, plant, and equipment** during the first six months of **fiscal 2024**[124](index=124&type=chunk) - Paid **dividends** of **$8.8 million** (**$0.28 per share**) during the first six months of **fiscal 2024**[129](index=129&type=chunk) - Repurchased **0.4 million shares** of **common stock** for **$67.6 million** in the first six months of **fiscal 2024**. As of **February 29, 2024**, **3.9 million shares** remained available for **repurchase**[130](index=130&type=chunk) [Results of Operations - Second Quarter](index=25&type=section&id=Results%20of%20Operations%20-%20Second%20Quarter) **Q2 FY2024 net sales** decreased **4.0%** to **$905.9 million**, but improved **gross profit margin** led to a **5.9% increase** in **operating profit** and higher **diluted EPS** Q2 FY2024 vs Q2 FY2023 Performance (in millions) | Metric | Q2 FY2024 | Q2 FY2023 | Change (%) | | :--- | :--- | :--- | :--- | | **Net Sales** | **$905.9** | $943.6 | **(4.0)%** | | **Gross Profit** | $412.4 | $406.7 | **1.4%** | | **Gross Profit Margin** | **45.5%** | 43.1% | **+240 bps** | | **Operating Profit** | **$118.1** | $111.5 | **5.9%** | | **Operating Profit Margin** | **13.0%** | 11.8% | **+120 bps** | | **Net Income** | **$89.2** | **$83.2** | **7.2%** | | **Diluted EPS** | **$2.84** | $2.57 | **10.5%** | [Segment Results - Second Quarter](index=26&type=section&id=Segment%20Results%20-%20Second%20Quarter) **Q2 FY2024** saw **ABL net sales** decline but **operating profit** increase, while **ISG net sales** and **operating profit** both grew significantly Q2 FY2024 Segment Performance (in millions) | Segment | Net Sales | Operating Profit | Operating Margin | | :--- | :--- | :--- | :--- | | **ABL** | **$843.5** (**-5.3%** YoY) | **$126.0** (**+1.9%** YoY) | **14.9%** (**+100 bps**) | | **ISG** | **$68.1** (**+17.0%** YoY) | **$9.1** (**+44.4%** YoY) | **13.4%** (**+260 bps**) | [Results of Operations - First Six Months](index=27&type=section&id=Results%20of%20Operations%20-%20First%20Six%20Months) **H1 FY2024 net sales** decreased **5.2%** to **$1.84 billion**, but **gross profit margin** expanded, leading to a **13.9% increase** in **operating profit** and higher **diluted EPS** YTD FY2024 vs YTD FY2023 Performance (in millions) | Metric | YTD FY2024 | YTD FY2023 | Change (%) | | :--- | :--- | :--- | :--- | | **Net Sales** | **$1,840.6** | $1,941.5 | **(5.2)%** | | **Gross Profit** | $840.8 | $823.2 | **2.1%** | | **Gross Profit Margin** | **45.7%** | 42.4% | **+330 bps** | | **Operating Profit** | **$251.0** | $220.4 | **13.9%** | | **Operating Profit Margin** | **13.6%** | 11.4% | **+220 bps** | | **Net Income** | **$189.8** | **$158.1** | **20.1%** | | **Diluted EPS** | **$6.05** | $4.86 | **24.5%** | [Segment Results - First Six Months](index=28&type=section&id=Segment%20Results%20-%20First%20Six%20Months) **H1 FY2024 ABL net sales** declined but **operating profit** grew, while **ISG net sales** increased significantly, though its **operating profit growth** was modest YTD FY2024 Segment Performance (in millions) | Segment | Net Sales | Operating Profit | Operating Margin | | :--- | :--- | :--- | :--- | | **ABL** | **$1,719.9** (**-6.4%** YoY) | **$269.8** (**+11.6%** YoY) | **15.7%** (**+250 bps**) | | **ISG** | **$132.3** (**+15.0%** YoY) | **$14.4** (**+2.9%** YoY) | **10.9%** (**-130 bps**) | [Quantitative and Qualitative Disclosures about Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) No material changes occurred in the company's exposure to **market risks**, including **interest rates**, **foreign exchange**, and **commodity prices** - There have been no **material changes** to the company's exposure from **market risks** (**interest rates**, **foreign exchange rates**, **commodity prices**) from those disclosed in the **Form 10-K**[160](index=160&type=chunk) [Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded **disclosure controls** were effective as of **February 29, 2024**, with no **material changes** to **internal control over financial reporting** - The **principal executive and financial officers** concluded that the company's **disclosure controls and procedures** were effective as of **February 29, 2024**[163](index=163&type=chunk) - The evaluation of controls excluded **KE2 Therm Solutions, Inc.**, which was acquired during **fiscal 2023** and constituted **less than 2%** of total assets[163](index=163&type=chunk) - No changes in **internal control over financial reporting** occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, **internal controls**[165](index=165&type=chunk) Part II. [OTHER INFORMATION](index=31&type=section&id=Part%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=31&type=section&id=Item%201.%20Legal%20Proceedings) Information on **legal proceedings** is incorporated by reference from the **Commitments and Contingencies footnote** in **Part I** of this report - Information regarding **legal proceedings** is contained in the **Commitments and Contingencies footnote** of the Notes to Consolidated Financial Statements and is incorporated by reference[167](index=167&type=chunk) [Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) No **material changes** occurred in the company's **risk factors** from those disclosed in its **Annual Report on Form 10-K** - There have been no **material changes** in **risk factors** from those disclosed in the company's **Form 10-K**[168](index=168&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **84,546 shares** in **Q2 FY2024** at **$207.87 average**, with **3.9 million shares** remaining available after a new authorization Purchases of Equity Securities (Q2 FY2024) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Dec 2023 | 53,277 | $188.27 | | Jan 2024 | 10,539 | $236.86 | | Feb 2024 | 20,730 | $243.50 | | **Total** | **84,546** | **$207.87** | - On **January 25, 2024**, the **Board** authorized the repurchase of an additional **three million shares** of **common stock**[169](index=169&type=chunk) - As of **February 29, 2024**, the maximum number of shares that may yet be repurchased under the program was **3.9 million**[169](index=169&type=chunk) [Other Information](index=31&type=section&id=Item%205.%20Other%20Information) No directors or **Section 16 officers** adopted or terminated **Rule 10b5-1 trading arrangements** during **Q2 FY2024** - During **Q2 FY2024**, no directors or **Section 16 officers** adopted or terminated any **Rule 10b5-1 trading arrangements**[171](index=171&type=chunk) [Exhibits](index=31&type=section&id=Item%206.%20Exhibits) This section refers to the **Index to Exhibits**, listing all exhibits filed or incorporated by reference into this **Form 10-Q** - A list of all exhibits filed as part of the **Form 10-Q** is provided in the **Index to Exhibits**[172](index=172&type=chunk)

Core Viewpoint - Acuity Brands, Inc. is set to announce its second-quarter fiscal 2024 results on April 3, with expectations of a decline in revenues and mixed earnings outlook based on recent performance and market conditions [1][2]. Financial Performance - In the last reported quarter, Acuity Brands' adjusted earnings exceeded the Zacks Consensus Estimate by 20.4% and increased by 13.1% year over year, while revenues fell by 6.3% compared to the previous year [1]. - The Zacks Consensus Estimate for earnings per share for the upcoming quarter is stable at $3.13, reflecting a 2.3% increase from $3.06 in the same quarter last year [2]. - Revenue expectations for the upcoming quarter are pegged at $899.34 million, indicating a 4.7% decrease from $943.6 million reported a year ago [2]. Segment Analysis - The decline in revenues is primarily attributed to challenges in the Acuity Brands Lighting (ABL) segment, which is expected to see a 6% year-over-year revenue decline to $837 million [3]. - Within the ABL segment, various sales channels are projected to experience declines: Independent Sales Network (-5.4%), Direct Sales Network (-2.1%), Retail Sales (-6.2%), Corporate Accounts (-19.9%), and Other revenues (-6.2%) [3]. - Conversely, the Intelligent Spaces Group (ISG) segment is anticipated to grow by 16.1% year over year to $67.6 million, driven by innovative product offerings [4]. Margin and Cost Management - Increased pricing and cost containment efforts are expected to support margins, although the adjusted operating margin is predicted to decline by 20 basis points year over year to 13.8% [4]. Earnings Prediction Model - The current model indicates that Acuity Brands may not achieve an earnings beat this quarter, with an Earnings ESP of -5.11% and a Zacks Rank of 3 (Hold) [5].

Core Insights - Zacks Premium offers various tools for investors to enhance their stock market engagement and confidence [1] - The Zacks Style Scores are designed to help investors select stocks with the highest potential to outperform the market in the short term [2] Zacks Style Scores Overview - The Style Scores categorize stocks into four types: Value Score, Growth Score, Momentum Score, and VGM Score, each focusing on different investment strategies [2][3][4] - Value Score identifies undervalued stocks using financial ratios like P/E and Price/Sales [2] - Growth Score emphasizes a company's financial health and future growth potential based on earnings and cash flow [3] - Momentum Score tracks price trends to identify favorable investment opportunities [3] - VGM Score combines all three styles to provide a comprehensive assessment of stocks [4] Zacks Rank and Style Scores Interaction - The Zacks Rank is a proprietary model that uses earnings estimate revisions to evaluate stocks, with 1 (Strong Buy) stocks historically yielding an average annual return of +25.41% since 1988 [5] - To maximize returns, investors should focus on stocks with a Zacks Rank of 1 or 2 and Style Scores of A or B [6] - Stocks with lower ranks, even with high Style Scores, may indicate a downward trend in earnings and potential price decline [6] Company Spotlight: Acuity Brands (AYI) - Acuity Brands, headquartered in Atlanta, GA, specializes in manufacturing and distributing lighting fixtures and related components [7] - AYI holds a Zacks Rank of 3 (Hold) and has a VGM Score of A, making it a potential candidate for growth investors [7] - The company is projected to achieve a year-over-year earnings growth of 5.3% for the current fiscal year [8] - Recent earnings estimates for AYI have been revised upward, with the Zacks Consensus Estimate increasing by $0.35 to $14.79 per share [8] - AYI has an average earnings surprise of 13.9%, indicating strong performance relative to expectations [8]