Financial Data and Key Metrics Changes - The company generated net sales of $1 billion in Q2 2025, an increase of $100 million or 11% year-over-year, driven by growth in intelligent spaces and the inclusion of QSC sales [27] - Adjusted operating profit was $163 million, up $23 million or 16% from the previous year, with an adjusted operating profit margin of 16.2%, an increase of 70 basis points [28] - Adjusted diluted earnings per share increased by 35 cents or 10% to $3.73 [28] Business Line Data and Key Metrics Changes - Acuity Brands Lighting (ABL) reported sales of $841 million, a decrease of $3 million from the prior year, primarily due to declines in retail and corporate accounts [29] - Adjusted operating profit for ABL increased by $5 million to $141 million, with an adjusted operating profit margin of 16.8%, up 60 basis points [30] - Acuity Intelligent Spaces (AIS) achieved sales of $172 million, an increase of $103 million, with an adjusted operating profit of $32 million and an adjusted operating profit margin of 18.7% [31] Market Data and Key Metrics Changes - The company noted uncertainty in the market affecting order volumes, particularly in the lighting segment, which experienced some project freezing due to cost uncertainty [45][46] - The company has a diversified global supply chain, with approximately 18% of products sourced from Asia and about half from Mexico, which is largely USMCA compliant [40][55] Company Strategy and Development Direction - The company aims to grow through strategic pricing, product vitality, and expanding its addressable market while managing the impact of tariffs [23][22] - The integration of QSC is expected to enhance the company's intelligent spaces strategy, focusing on smarter, safer, and greener solutions [18][92] - The company is positioned to react to market changes and continue executing its strategy effectively [25][106] Management's Comments on Operating Environment and Future Outlook - Management acknowledged uncertainty in the marketplace due to tariffs and indicated that pricing actions have been taken to manage the financial impact [21][22] - The company remains confident in its ability to execute its strategy and deliver value despite market challenges [25][130] - Management emphasized the importance of maintaining a high-performing supply chain to navigate the evolving tariff landscape [40][44] Other Important Information - The company closed the acquisition of QSC during Q2 2025, financing it with $600 million of additional debt and cash on hand [26][33] - The company increased its dividend by 13% to 17 cents per share and allocated $23 million for share repurchases [33] Q&A Session Summary Question: Impact of tariffs on the company - Management views tariffs as a supply shock and is focused on managing the dollar and margin impacts while maintaining a strong supply chain [38][39] Question: Market conditions and project activity - Management noted that there was some market uncertainty affecting order volumes, particularly in the lighting segment, but they expect to see a clearer demand picture as the year progresses [47][49] Question: Competitive positioning regarding tariffs - Management believes the company is advantaged compared to competitors due to its diversified supply chain and USMCA compliance [52][55] Question: Pricing strategy in response to tariffs - The company employs strategic pricing to cover cost increases due to tariffs, evaluating pricing across different product lines [76][77] Question: Integration progress of QSC - Management expressed enthusiasm about the integration of QSC, noting that it aligns well with the company's strategy and has already shown positive marketplace performance [92][93] Question: Future acquisition plans - Management confirmed that while there are no immediate large-scale acquisitions planned, they remain open to attractive opportunities in the future [111][112] Question: Customer behavior regarding orders - Management indicated that customers often accelerate orders in response to price increases, but the overall impact of tariffs on demand remains uncertain [85][88]

Economic Environment - The US effective tariff rate increase continues to create uncertainty in the market, with unclear long-term implications from the Trump administration [1] - The Volatility Index remains in the 20s, Treasury yields are fluctuating, and stock prices are nearing correction territory [2] Consumer Sentiment - Consumer confidence has declined, with cautionary guidance from companies during Q4 earnings calls [4] - The Johnson Redbook Index indicates steady year-over-year same-store sales growth in the 4% to 7% range since late 2023 [5] - Bank of America reported a 2.4% annualized increase in consumer spending for February 2025 [5] Corporate Performance - Delta Air Lines, American Airlines, and Southwest Airlines have lowered their earnings projections due to weaker travel demand [5][6] - Walmart reported strong Q4 earnings but provided guidance below market expectations, leading to a significant drop in its share price [6] - Lululemon is set to report Q4 earnings, with expectations of net revenue between $3.56 billion and $3.58 billion, reflecting an 11% to 12% increase year-over-year [11] Market Trends - Lululemon's stock has decreased from $423 to just above $325, mirroring broader retail sector weaknesses [10] - Disney's upcoming annual shareholder meeting is anticipated to provide insights into its streaming service and theme park performance, amid a 10% year-to-date stock decline [14][15] Future Outlook - The upcoming earnings reports from Lululemon and Disney are expected to shed light on consumer spending trends and overall economic health [16]