Acuity Brands(AYI) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics - Net sales for Q4 2024 were $1 billion, a 2% increase YoY, driven by growth in both the lighting and spaces businesses [18] - Adjusted operating profit increased by$ 16 million YoY, with adjusted operating profit margin expanding to 17.3%, a 120 basis points improvement [18] - Adjusted diluted earnings per share for Q4 2024 were $4.30, an 8% increase YoY [19] - Full-year operating cash flow for fiscal 2024 was$ 619 million, a $41 million increase over fiscal 2023 [20] - The company ended the year with$ 846 million in cash [20] Business Line Performance - In the ABL (lighting) business, net sales increased by $11 million (1%) to$ 955 million, with adjusted operating profit margin reaching 18%, a 120 basis points improvement [19] - The Intelligent Spaces Group (ISG) saw net sales grow by 17% to $84 million, with adjusted operating profit margin exceeding 25% [19] - The company launched HOLOBAY by Holophane, a high bay lighting product for industrial environments, which is lighter and more configurable than alternatives [7][8] - The company also won recognition for several lighting solutions, including the Cyclone Crosswalk and Hydrel Tierra, in the 2024 Illuminating Engineering Society Progress report [9] Market Performance - In the refueling market, the company developed a new line of tailored product solutions, entering a vertical where it previously had no presence [10][42] - In the horticulture vertical, the company built a product portfolio through both organic and inorganic development [10] - The ISG business expanded its addressable market, particularly in France, where its products were used in several high-profile facilities during the summer [12] Strategy and Industry Competition - The company aims to grow its lighting business at a mid-single-digit rate over the long term, driven by market growth, market share gains, and entry into new verticals [14] - The company expects to add 50 to 100 basis points of adjusted operating profit margin annually in the lighting business [14] - The ISG business is focused on expanding its addressable market by leveraging disruptive technologies and delivering end-user outcomes [15] - The company has a pipeline of internal development and small-to-medium-sized acquisitions to support its vision of data interoperability [15] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to grow in fiscal 2025, with ABL expected to deliver low-to-mid-single-digit sales growth, and ISG expected to grow in the low-to-mid-teens [21] - The company expects full-year fiscal 2025 net sales to be in the range of$ 3.9 billion to $4.1 billion, with adjusted diluted earnings per share between$ 16 and $17.50 [21] - Management highlighted the company's strong cash position and its ability to invest in growth, increase dividends, and repurchase shares [26][28] Other Important Information - The company repurchased 454,000 shares at an average price of$ 194 per share, totaling $89 million [20] - Since Q4 2020, the company has repurchased approximately 9.5 million shares, representing about 24% of the then-outstanding shares [20] - The company increased its dividend per share by 15% [20] Q&A Session Summary Question: Current market conditions and ABL business trends [23] - Management noted that the ABL business returned to growth in Q4 and expressed confidence in fiscal 2025, expecting a strong calendar year 2025 [24] Question: Capital allocation priorities [25] - The company has a strong cash position and plans to continue investing in growth, increasing dividends, and repurchasing shares [26][28] - The company also has a pipeline of small-to-medium-sized acquisitions, with a focus on ISG [28] Question: Design Select adoption and trends [31] - The Design Select portfolio has received positive feedback from distributors and agents, with demand for more product families to be included [32][33] Question: Data center projects and ISG growth [34] - The ISG business saw strong growth in Q4, driven by large data center projects, and expects continued growth in this vertical [35] Question: Miscellaneous expense breakdown [36] - The$ 8 million miscellaneous expense was primarily due to foreign currency movements, particularly related to Distech's cash generation and lease liabilities in Mexico [37] Question: Outlook for calendar year 2025 and lighting growth algorithm [39] - Management expects a strong calendar year 2025, driven by a buildup of projects in the pipeline [40] - The lighting growth algorithm includes market growth, market share gains, and entry into new verticals, with a focus on strategic pricing [42][43] Question: East Coast port situation and inventory management [44] - The company has minimal exposure to East Coast ports, with most products coming through West Coast ports, and does not expect material impacts from the current situation [45] Question: Independent sales network trends and growth outlook [47] - The independent sales network, which represents about 60% of the lighting business, is expected to contribute to mid-single-digit sales growth in fiscal 2025 [48][50] Question: Gross margin and operating margin outlook [51] - The company expects to continue expanding gross margins and leveraging operating expenses, with a target of 50 to 100 basis points of adjusted operating profit margin improvement annually [52] Closing Remarks [55] - Management expressed confidence in the company's ability to continue growing its lighting and ISG businesses, expanding margins, and delivering strong cash generation for shareholders [55]