Acuity Brands, Inc. (NYSE:AYI) Q2 2022 Earnings Conference Call April 5, 2022 8:00 AM ET Company Participants Charlotte McLaughlin - Vice President, Investor Relations Neil Ashe - Chairman, President and CEO Karen Holcom - Senior Vice President and CFO Conference Call Participants Christopher Glynn - Oppenheimer Ryan Merkel - William Blair Christopher Snyder - UBS Josh Chan - Baird Jeffrey Osborne - Cowen & Company Miguel De Jesus - Goldman Sachs Operator Good morning, and welcome to the Acuity Brands Secon ...

Acuity Brands, Inc. (NYSE:AYI) Q1 2022 Earnings Conference Call January 7, 2021 8:00 AM ET Company Participants Charlotte McLaughlin - Vice President, Investor Relations Neil Ashe - Chairman, President and CEO Karen Holcom - Senior Vice President and CFO Conference Call Participants John Walsh - Credit Suisse Ryan Merkel - William Blair Jeffrey Sprague - Vertical Research Christopher Glynn - Oppenheimer Miguel De Jesus - Goldman Sachs Christopher Snyder - UBS Joseph O'Dea - Wells Fargo Jeffrey Osborne - Cow ...

Part I. FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Acuity Brands, Inc.'s unaudited consolidated financial statements and notes for periods ended November 30, 2021 [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) As of November 30, 2021, total assets were $3.61 billion, a slight increase from $3.58 billion at August 31, 2021, driven by higher cash and inventories, partially offset by a decrease in accounts receivable Consolidated Balance Sheet Highlights (in millions) | Account | Nov 30, 2021 (Unaudited) | Aug 31, 2021 | | :--- | :--- | :--- | | **Total Current Assets** | $1,599.9 | $1,544.3 | | Cash and cash equivalents | $504.0 | $491.3 | | Inventories | $439.7 | $398.7 | | **Total Assets** | **$3,605.6** | **$3,575.1** | | **Total Current Liabilities** | $695.2 | $692.2 | | Long-term debt | $494.5 | $494.3 | | **Total Liabilities** | **$1,532.7** | **$1,530.6** | | **Total Stockholders' Equity** | **$2,072.9** | **$2,044.5** | [Consolidated Statements of Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) For the three months ended November 30, 2021, net sales increased by 16.9% to $926.1 million, net income rose by 47.0% to $87.6 million, and diluted earnings per share increased by 56.7% to $2.46 Consolidated Statements of Comprehensive Income (in millions, except per share data) | Metric | Three Months Ended Nov 30, 2021 | Three Months Ended Nov 30, 2020 | | :--- | :--- | :--- | | Net sales | $926.1 | $792.0 | | Gross profit | $385.8 | $332.4 | | Operating profit | $115.1 | $85.7 | | **Net income** | **$87.6** | **$59.6** | | **Diluted earnings per share** | **$2.46** | **$1.57** | | Dividends declared per share | $0.13 | $0.13 | [Consolidated Statements of Cash Flows](index=5&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities for the three months ended November 30, 2021, was $83.7 million, a decrease from the prior year, primarily due to increased working capital, with cash and cash equivalents ending at $504.0 million Consolidated Statements of Cash Flows Highlights (in millions) | Cash Flow Activity | Three Months Ended Nov 30, 2021 | Three Months Ended Nov 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $83.7 | $123.9 | | Net cash used for investing activities | $(9.0) | $(14.1) | | Net cash used for financing activities | $(59.1) | $(164.1) | | **Net change in cash and cash equivalents** | **$12.7** | **$(53.7)** | | **Cash and cash equivalents at end of period** | **$504.0** | **$507.0** | [Notes to Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of the company's accounting policies and financial data, including segment information, acquisitions, debt structure, and a litigation settlement - The company operates through two business segments: Acuity Brands Lighting and Lighting Controls (ABL), which accounted for **~95% of revenue**, and the Intelligent Spaces Group (ISG), which accounted for **~5%**[18](index=18&type=chunk)[20](index=20&type=chunk)[21](index=21&type=chunk) - There were no acquisitions in fiscal 2022. In fiscal 2021, the company acquired ams OSRAM's North American Digital Systems business and Rockpile Ventures[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk) - The company has **$500.0 million** in **2.150%** senior unsecured notes due 2030 and a **$400.0 million** unsecured revolving credit facility, which was undrawn as of November 30, 2021[56](index=56&type=chunk)[57](index=57&type=chunk) - A shareholder class action lawsuit was settled for **$15.8 million**, which is expected to be fully funded by Directors and Officers liability insurance, resulting in no significant net loss or cash outflow for the company[71](index=71&type=chunk) Disaggregated Revenue by Sales Channel (in millions) | Sales Channel | Three Months Ended Nov 30, 2021 | Three Months Ended Nov 30, 2020 | | :--- | :--- | :--- | | **ABL Total** | **$883.6** | **$753.6** | | Independent sales network | $636.8 | $559.5 | | Direct sales network | $90.0 | $80.1 | | Retail sales | $46.9 | $56.0 | | **ISG Total** | **$46.4** | **$40.8** | | **Total Net Sales** | **$926.1** | **$792.0** | Segment Operating Profit (in millions) | Segment | Three Months Ended Nov 30, 2021 | Three Months Ended Nov 30, 2020 | | :--- | :--- | :--- | | ABL Operating Profit | $128.1 | $98.4 | | ISG Operating Profit (Loss) | $2.0 | $(0.1) | | Unallocated corporate amounts | $(15.0) | $(12.6) | | **Total Operating Profit** | **$115.1** | **$85.7** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the financial results for the first quarter of fiscal 2022, highlighting increased net sales and operating profit, strong liquidity, and capital allocation priorities Q1 FY2022 vs Q1 FY2021 Performance (in millions, except per share data) | Metric | Q1 FY2022 | Q1 FY2021 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $926.1 | $792.0 | 16.9% | | Gross profit | $385.8 | $332.4 | 16.1% | | Operating profit | $115.1 | $85.7 | 34.3% | | Net income | $87.6 | $59.6 | 47.0% | | Diluted EPS | $2.46 | $1.57 | 56.7% | - Net sales growth of **16.9%** was attributed to strong go-to-market activities, customer service focus, recovery in end markets, and price increases. Acquired companies contributed **less than 4%** to the sales increase[129](index=129&type=chunk) - Gross profit margin decreased slightly by **30 basis points** to **41.7%**, as price increases and productivity improvements were largely able to offset escalating material, conversion, and freight costs[130](index=130&type=chunk) - Operating profit margin improved by **160 basis points** to **12.4%** due to better leveraging of operating costs, despite higher SD&A expenses related to increased sales and acquisitions[131](index=131&type=chunk)[132](index=132&type=chunk) - The effective tax rate decreased to **19.6%** from **24.7%** YoY, primarily due to favorable discrete items related to excess tax benefits on share-based payments[134](index=134&type=chunk) - The company maintained a strong liquidity position with **$504.0 million** in cash and **$395.9 million** of additional borrowing capacity under its revolving credit facility[112](index=112&type=chunk)[115](index=115&type=chunk) - During the quarter, the company repurchased **0.3 million shares** for **$52.8 million** and paid dividends of **$4.7 million**[122](index=122&type=chunk)[123](index=123&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company reports no material changes to its exposure to market risks, including interest rates, foreign exchange rates, and commodity prices, since its last Form 10-K filing - There have been no material changes to the company's exposure to market risks (interest rates, foreign exchange, commodity prices) since the last Form 10-K filing[143](index=143&type=chunk) [Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of November 30, 2021, with no material changes to internal control over financial reporting during the quarter - The principal executive and financial officers concluded that the company's disclosure controls and procedures were effective as of November 30, 2021[145](index=145&type=chunk) - The assessment of internal control over financial reporting excluded the fiscal 2021 acquisitions of Rockpile Ventures and OSRAM DS, which collectively represented **less than 4%** of consolidated assets, equity, sales, and pre-tax income[146](index=146&type=chunk) Part II. OTHER INFORMATION [Legal Proceedings](index=28&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference information on legal proceedings from the 'Commitments and Contingencies' footnote in Part I, noting any new reportable developments - Information regarding legal proceedings is detailed in the 'Commitments and Contingencies' footnote of the Notes to Consolidated Financial Statements, which is incorporated by reference into this item[150](index=150&type=chunk) [Risk Factors](index=28&type=section&id=Item%201a.%20Risk%20Factors) The company reports no material changes in its 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[151](index=151&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=28&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the quarter ended November 30, 2021, the company repurchased 300,426 shares of common stock at an average price of $175.75 per share, with 3.5 million shares remaining available for repurchase Share Repurchase Activity (Quarter Ended Nov 30, 2021) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Sep 2021 | 248,779 | $174.51 | | Oct 2021 | 51,647 | $181.73 | | Nov 2021 | 0 | $0.00 | | **Total** | **300,426** | **$175.75** | - As of November 30, 2021, **3.5 million shares** were still available for repurchase under the authorized program[153](index=153&type=chunk) [Other Information](index=28&type=section&id=Item%205.%20Other%20Information) On January 6, 2022, the Board of Directors declared a quarterly dividend of $0.13 per share, payable on February 1, 2022 - A quarterly dividend of **$0.13 per share** was declared on January 6, 2022[155](index=155&type=chunk) [Exhibits](index=28&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO, and various corporate governance and compensation plan documents - The report includes a list of filed exhibits, such as CEO/CFO certifications (Exhibits 31, 32) and compensation plan documents (Exhibit 10)[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk)

Acuity Brands, Inc. (NYSE:AYI) Q3 2021 Earnings Conference Call July 1, 2021 9:00 AM ET Corporate Participants Charlotte McLaughlin - Vice President of Investor Relations Neil Ashe - Chairman, President and Chief Executive Officer Trevor Palmer - President, Lighting and Lighting Controls George Mcllwraith - Senior Vice President, Commercial Products Sarah Golish - Senior Vice President, Digital Lighting Networks Rick Earlywine - Senior Vice President, Architectural Products Jose Cordova - Vice President, Sa ...

Acquisitions and Business Realignment - The company completed a realignment of operations and structure in Q3 fiscal 2021, now reporting financial results in two segments: Acuity Brands Lighting and Lighting Controls (ABL) and Intelligent Spaces Group (ISG)[118] - The company signed a definitive agreement to purchase ams OSRAM's North American Digital Systems (DS) business on June 4, 2021, expected to close by July 1, 2021[119] - The company acquired Rockpile Ventures on May 18, 2021, to enhance its Edge AI capabilities[120] - The company acquired The Luminaires Group (TLG) on September 17, 2019, adding niche lighting brands to its portfolio[120] - The company acquired LocusLabs, Inc. on November 25, 2019, expanding its navigation software platform[121] Financial Performance and Cash Flow - The company's cash position increased to $593.5 million as of May 31, 2021, up $32.8 million from August 31, 2020[131] - The company generated $316.2 million in net cash flows from operations during the nine months ended May 31, 2021[131] - The company repurchased 3.3 million shares of common stock during the first nine months of fiscal 2021, with 4.4 million shares remaining under the repurchase program[126] - The company issued $500.0 million in 2.150% senior unsecured notes on November 10, 2020, with net proceeds of $493.9 million[133] - The company's net sales for the nine months ended May 31, 2021, were $2,046.7 million, with a gross profit of $889.1 million and net income of $204.7 million[137] - Consolidated stockholders' equity decreased by $88.4 million to $2.0 billion at May 31, 2021, from $2.1 billion at August 31, 2020, primarily due to stock repurchases and dividend payments[140] - Debt to total capitalization ratio increased to 19.6% at May 31, 2021, from 15.9% at August 31, 2020[140] - Net sales for the three months ended May 31, 2021 increased by $123.5 million (15.9%) to $899.7 million compared to $776.2 million in the prior-year period[144] - Net income for the three months ended May 31, 2021 increased by $25.3 million (41.9%) to $85.7 million compared to $60.4 million in the prior-year period[144] - Diluted earnings per share increased by 55.9% to $2.37 for the three months ended May 31, 2021, compared to $1.52 in the prior-year period[144] - Gross profit for the third quarter of fiscal 2021 increased by $59.0 million (18.0%) to $386.6 million, with gross profit margin increasing by 80 basis points to 43.0%[149] - Operating profit for the third quarter of fiscal 2021 increased by $35.1 million (42.3%) to $118.1 million, with operating profit margin increasing by 240 basis points to 13.1%[152] - Adjusted operating profit for the third quarter of fiscal 2021 increased by $31.9 million (30.4%) to $136.8 million, with adjusted operating profit margin increasing to 15.2%[152] - Adjusted diluted earnings per share increased by 42.8% to $2.77 for the three months ended May 31, 2021, compared to $1.94 in the prior-year period[147] - Net income for the third quarter of fiscal 2021 increased by $25.3 million, or 41.9%, to $85.7 million compared to $60.4 million in the prior-year period[155] - Diluted earnings per share for the three months ended May 31, 2021 increased by $0.85, or 55.9%, to $2.37 compared to $1.52 in the prior-year period[155] - Net sales for the nine months ended May 31, 2021 increased by 1.4% to $2.47 billion compared to $2.44 billion in the prior-year period[162] - Net income for the nine months ended May 31, 2021 increased by $33.6 million, or 19.2%, to $208.2 million compared to $174.6 million in the prior-year period[162] - Diluted earnings per share for the nine months ended May 31, 2021 increased by 28.6% to $5.66 compared to $4.40 in the prior-year period[162] - The effective income tax rate for the three months ended May 31, 2021 decreased to 21.5% compared to 23.1% in the prior-year period[154] - Net sales for the nine months ended May 31, 2021 increased by $33.2 million (1.4%) to $2.47 billion compared to $2.44 billion in the prior-year period[167] - Gross profit for the nine months ended May 31, 2021 increased by $28.4 million (2.8%) to $1.06 billion, with a gross profit margin of 42.8% compared to 42.2% in the prior-year period[168] - Operating profit for the nine months ended May 31, 2021 increased by $46.8 million (18.9%) to $294.8 million, with an operating profit margin of 11.9% compared to 10.2% in the prior-year period[171] - Adjusted operating profit for the nine months ended May 31, 2021 increased by $24.3 million (7.5%) to $349.9 million, with an adjusted operating profit margin of 14.2% compared to 13.4% in the prior-year period[171] - Net income for the nine months ended May 31, 2021 increased by $33.6 million (19.2%) to $208.2 million, with diluted earnings per share increasing by $1.26 (28.6%) to $5.66[175] - Adjusted net income for the nine months ended May 31, 2021 increased by $19.5 million (8.3%) to $254.0 million, with adjusted diluted earnings per share increasing by $0.99 (16.8%) to $6.90[175] - SD&A expenses for the nine months ended May 31, 2021 decreased by $8.1 million (1.1%) to $759.4 million, with adjusted SD&A expenses of $705.8 million (28.6% of net sales) compared to $702.9 million (28.9% of net sales) in the prior-year period[169] - Pre-tax special charges for the nine months ended May 31, 2021 were $1.5 million compared to $11.8 million in the prior-year period[170] Segment Performance - ABL net sales for the three months ended May 31, 2021 increased by 14.6% to $850.0 million compared to $741.6 million in the prior-year period[158] - ABL operating profit for the three months ended May 31, 2021 increased by $27.9 million, or 28.3%, to $126.5 million compared to $98.6 million in the prior-year period[158] - ISG net sales for the three months ended May 31, 2021 increased by 46.9% to $55.4 million compared to $37.7 million in the prior-year period[159] - ISG operating profit for the three months ended May 31, 2021 increased by $7.4 million to $7.2 million compared to a $0.2 million loss in the prior-year period[159] - ABL segment net sales for the nine months ended May 31, 2021 increased by $12.6 million (0.5%) to $2,340.4 million, with operating profit increasing by $22.9 million (7.5%) to $326.9 million[177] - ABL segment adjusted operating profit for the nine months ended May 31, 2021 increased by $19.5 million (5.8%) to $356.0 million, with an adjusted operating profit margin of 15.2% compared to 14.5% in the prior-year period[177] - ABL net sales for the nine months ended May 31, 2021 increased by 0.5% compared to the prior-year period, driven by higher sales volumes through independent and direct sales networks[178] - ABL operating profit for the nine months ended May 31, 2021 was $326.9 million, a 14.0% margin, up from $304.0 million (13.1% margin) in the prior-year period[178] - ISG net sales for the nine months ended May 31, 2021 increased by 20.2% to $139.5 million compared to $116.1 million in the prior-year period[179] - ISG operating profit for the nine months ended May 31, 2021 was $7.9 million, compared to a $2.3 million loss in the prior-year period[179] - Adjusted operating profit for ISG increased by $6.8 million to $19.6 million, a 53.1% increase compared to the prior-year period[179] Sales Channels and Market Trends - Sales through the independent sales network and direct sales network increased by 14% and 39%, respectively, while retail sales declined by 26%[148] - The company expects continued improvements in end markets but anticipates volatility in raw material costs and labor availability[180] - The company plans to continue investing in its business to become a larger, more dynamic company[180] Debt and Capital Structure - The company's long-term debt as of May 31, 2021, included $500.0 million of senior unsecured notes, with a 10% increase in market interest rates potentially decreasing their fair value by approximately $9.9 million[185] - The company had no borrowings outstanding under the Revolving Credit Facility or the Term Loan Facility as of May 31, 2021[185]

Financial Data and Key Metrics Changes - Net sales for Q1 2021 were $792 million, a decrease of 5% compared to the prior year, primarily due to a 4% decrease in product prices and mix, and a 1% decrease in sales volume [11][12] - Gross profit margin remained consistent at 42%, despite lower sales, with reported operating profit of $86 million compared to $84 million in the prior year [14][15] - Diluted earnings per share increased by 9% to $1.57, while adjusted diluted EPS was $2.03, a decrease of $0.10 from the prior year [15][16] Business Line Data and Key Metrics Changes - Independent sales network net sales were $599 million, down 3% due to pandemic impacts [12] - Direct sales network experienced a 9.5% decline to $76 million, attributed to postponed large industrial projects [12] - Retail sales channel saw a 3% increase to $55 million, driven by higher demand for residential products [12] Market Data and Key Metrics Changes - The company noted broad disparity in performance across geographies, with sales regions ranging from up 15% to down 13% [56] - The backlog remains strong, with optimism for project releases as conditions improve [29] Company Strategy and Development Direction - The company plans to reorganize into two units: Acuity Brands Lighting and Intelligent Buildings, to better meet customer needs and enhance innovation [24] - Focus on digital transformation to improve customer-centric sales and operations, including enhancements to product catalog and communication with contractors [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for improvement in 2021, despite ongoing uncertainty in end markets [23] - The company is committed to maintaining gross margins and managing costs effectively while continuing to invest in product development [18][34] Other Important Information - The company repurchased 2.6 million shares for approximately $255 million, with a remaining authorization for 5.1 million shares [16][23] - The company successfully issued a $500 million bond at a 2.15% coupon rate to refinance existing debt [8][23] Q&A Session Summary Question: Commentary on the environment and backlog - Management noted consistent performance in the independent sales network and a strong backlog, with optimism for project releases despite pandemic-related delays [28][29] Question: Pricing and cost inflation outlook - Management indicated plans to manage price increases to offset rising input costs, particularly in steel and aluminum [33][34] Question: Margin outlook amidst commodity impacts - Management expressed confidence in maintaining gross profit margins despite commodity cost pressures, with proactive pricing strategies in place [44][46] Question: Share repurchase strategy - Management stated intentions to continue share repurchases opportunistically, depending on market conditions and stock price dislocations [47][49] Question: Stability in end markets - Management highlighted flexibility in product offerings to adapt to various end markets, with cautious optimism for recovery in 2021 [52][54]