Acuity Brands(AYI) - 2024 Q2 - Quarterly Results

Fiscal 2024 Second-Quarter Results Overview Acuity Brands reported solid Q2 FY2024 results, achieving margin expansion and EPS growth despite a net sales decline Financial Highlights 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] 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 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) 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) 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 Acuity Brands maintained a strong financial position, generating significant cash flow and actively returning capital to shareholders Financial Position 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 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] - Year-to-date, the company repurchased approximately 370,000 shares of common stock for about $68 million[7] 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 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 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 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 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 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 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 Acuity Brands, an industrial technology company, provides context on its business, non-GAAP measures, and forward-looking statements About Acuity Brands 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][10] - 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] Non-GAAP Measures and Forward-Looking Statements 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] - Management uses these non-GAAP measures for internal performance reviews, comparative analysis, and decision-making[12] - 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]