Acuity Brands Reports Fiscal 2024 First-Quarter Results

Rhea-AI Summary

Acuity Brands, a market-leading industrial technology company (NYSE: AYI), delivered net sales of $935M, a 6% decline compared to the prior year. Operating profit grew to $133M, up 22% over the prior year, and adjusted EPS was $3.72, up 13% over the prior year. The company also generated $190M in cash flow from operations.

Insights

Financial Analyst

Acuity Brands, Inc.'s recent financial performance showcases a significant increase in operating profit and adjusted operating profit, despite a decline in net sales. This suggests a strong focus on cost management and operational efficiency. The substantial improvement in operating profit margin indicates that the company has successfully increased its profitability per dollar of sales, which is a positive sign for investors looking for companies with effective cost control measures in place.

The 40% increase in diluted EPS and the 13% rise in adjusted diluted EPS are particularly noteworthy for shareholders, as these metrics are often used to gauge a company's profitability and financial health. The growth in EPS could potentially lead to a positive market reaction, reflecting increased investor confidence in the company's earnings potential.

However, the 6% decline in net sales cannot be overlooked, as it may raise concerns about the company's top-line growth and market demand for its products. This could be a point of focus for investors and analysts trying to understand the long-term growth trajectory of Acuity Brands.

Market Research Analyst

The performance of Acuity Brands' two segments, ABL and ISG, presents a mixed picture. ABL's increased operating profit margin suggests resilience and an ability to maintain profitability despite lower sales, which could be attributed to a strong product mix or pricing power. On the other hand, ISG's increased sales but decreased operating profit margin could indicate competitive pressures or investment in growth initiatives that have yet to yield proportional returns.

Understanding these dynamics is critical for stakeholders to assess the company's strategic positioning and potential for future growth in different market segments. It also provides insight into how the company balances its portfolio and allocates resources across its business units.

Investment Strategist

The company's capital allocation strategy, including the repurchase of shares, demonstrates a commitment to returning value to shareholders and confidence in the company's intrinsic value. The share repurchase could signal management's belief that the stock is undervalued and represents a good investment opportunity. Additionally, the generation of $190 million in cash flow from operations reflects a solid liquidity position, which is crucial for sustaining operations, funding investments and navigating economic uncertainties.

Investors will likely assess the sustainability of these cash flows and whether they can support continued share repurchases and other shareholder-friendly activities. The long-term implications of these financial strategies on the company's growth prospects and financial stability are key considerations for current and potential investors.

Strong Execution Delivering Margin Expansion and EPS Growth

• Delivered Net Sales of $935M, a 6% Decline Compared to the Prior Year
• Grew Operating Profit to $133M, up 22% Over the Prior Year; Adjusted Operating Profit of $154M, up 10% Over the Prior Year
• Reported Diluted EPS of $3.21, up 40% Over the Prior Year; Adjusted Diluted EPS of $3.72, up 13% Over the Prior Year
• Generated $190M in Cash Flow from Operations

ATLANTA, Jan. 09, 2024 (GLOBE NEWSWIRE) -- Acuity Brands, Inc. (NYSE: AYI) (the "Company"), a market-leading industrial technology company, announced net sales of $934.7 million in the first quarter of fiscal 2024 ended November 30, 2023, a decrease of $63.2 million, or 6.3 percent, compared to the prior year.

"We continued to demonstrate strong execution in our fiscal 2024 first quarter," stated Neil Ashe, Chairman, President and Chief Executive Officer of Acuity Brands, Inc. "We increased our adjusted operating profit, adjusted operating profit margin and adjusted diluted earnings per share. We generated significant free cash flow, and we allocated capital effectively to drive value."

Operating profit was $132.9 million in the first quarter of fiscal 2024, an increase of $24.0 million, or 22.0 percent, compared to the prior year. Operating profit as a percent of net sales was 14.2 percent in the first quarter of fiscal 2024, an increase of 330 basis points compared to the prior year. Adjusted operating profit was $153.9 million in the first quarter of fiscal 2024, an increase of $13.8 million, or 9.9 percent, compared to the prior year. Adjusted operating profit as a percent of net sales was 16.5 percent in the first quarter of fiscal 2024, an increase of 250 basis points compared to the prior year.

Diluted earnings per share was $3.21 in the first quarter of fiscal 2024, an increase of $0.92, or 40.2 percent, compared to the prior year. Adjusted diluted earnings per share was $3.72 in the first quarter of fiscal 2024, an increase of $0.43, or 13.1 percent, from $3.29 in the prior year.

Segment Performance

Acuity Brands Lighting and Lighting Controls ("ABL")

ABL generated net sales of $876.4 million in the first quarter of fiscal 2024, a decrease of $70.7 million, or 7.5 percent, compared to the prior year.

ABL operating profit was $143.8 million in the first quarter of fiscal 2024, an increase of $25.7 million, or 21.8 percent, compared to the prior year. ABL operating profit as a percent of ABL net sales was 16.4 percent in the first quarter of fiscal 2024, an increase of 390 basis points compared to the prior year. ABL adjusted operating profit was $153.8 million in the first quarter of fiscal 2024, an increase of $15.0 million, or 10.8 percent, compared to the prior year. ABL adjusted operating profit as a percent of ABL net sales was 17.5 percent in the first quarter of fiscal 2024, an increase of 280 basis points compared to the prior year.

Intelligent Spaces Group ("ISG")

ISG generated net sales of $64.2 million in the first quarter of fiscal 2024, an increase of $7.4 million, or 13.0 percent, compared to the prior year.

ISG operating profit was $5.3 million in the first quarter of fiscal 2024, a decrease of $2.4 million compared to the prior year. ISG operating profit as a percent of ISG net sales was 8.3 percent in the first quarter of fiscal 2024, a decrease of 530 basis points compared to the prior year. ISG adjusted operating profit was $10.3 million in the first quarter of fiscal 2024, a decrease of $1.8 million compared to the prior year. ISG adjusted operating profit as a percent of ISG net sales was 16.0 percent in the first quarter of fiscal 2024, a decrease of 530 basis points compared to the prior year.

Cash Flow and Capital Allocation

Net cash from operating activities was $190.0 million for the first quarter of fiscal 2024, an increase of $3.4 million compared to the prior year.

During the first quarter of fiscal 2024, the Company repurchased approximately 0.3 million shares of common stock for a total of approximately $50 million.

Today's Call Details

The Company will host a conference call at 8:00 a.m. (ET) today, Tuesday, January 9, 2024. Neil Ashe, Chairman, President and Chief Executive Officer of Acuity Brands, Inc. will lead the call. The conference call and earnings release can be accessed via the Investor Relations section of the Company's website at www.investors.acuitybrands.com. A replay of the call will also be posted to the Investor Relations website within two hours of the completion of the conference call and will be available on the website for a limited time.

About Acuity Brands

Acuity Brands, Inc. (NYSE: AYI) is a market-leading industrial technology company. We use technology to solve problems in spaces, light, and more things to come. Through our two business segments, Acuity Brands Lighting and Lighting Controls (ABL) and the Intelligent Spaces Group (ISG), we design, manufacture, and bring to market products and services that make a valuable difference in people’s lives.

We achieve growth through the development of innovative new products and services, including lighting, lighting controls, building management solutions, and location-aware applications. We achieve customer-focused efficiencies that allow us to increase market share and deliver superior returns. We look to aggressively deploy capital to grow the business and to enter attractive new verticals.

Acuity Brands, Inc. is based in Atlanta, Georgia, with operations across North America, Europe, and Asia. The Company is powered by approximately 12,000 dedicated and talented associates. Visit us at www.acuitybrands.com

Non-GAAP Financial Measures

This news release includes the following non-generally accepted accounting principles ("GAAP") financial measures: “adjusted operating profit” and “adjusted operating profit margin” for total company and by segment; “adjusted net income;” “adjusted diluted EPS;” “earnings before interest, taxes, depreciation, and amortization (“EBITDA”);” and “adjusted EBITDA”. These non-GAAP financial measures are provided to enhance the reader's overall understanding of the Company's current financial performance and prospects for the future. Specifically, management believes that these non-GAAP measures provide useful information to investors by excluding or adjusting items for amortization of acquired intangible assets, share-based payment expense, loss on sale of business, and special charges associated with continued efforts to streamline the organization and integrate recent acquisitions.

We also provide “free cash flow" (“FCF”) to enhance the reader’s understanding of the Company’s ability to generate additional cash from its business.

Management typically adjusts for these items for internal reviews of performance and uses the above non-GAAP measures for baseline comparative operational analysis, decision making, and other activities. Management believes these non-GAAP measures provide greater comparability and enhanced visibility into the Company’s results of operations as well as comparability with many of its peers, especially those companies focused more on technology and software. Non-GAAP financial measures included in this news release should be considered in addition to, and not as a substitute for or superior to, results prepared in accordance with GAAP.

The most directly comparable GAAP measures for adjusted operating profit and adjusted operating profit margin for total company and by segment are “operating profit” and “operating profit margin,” respectively, for total company and by segment, which include the impact of amortization of acquired intangible assets, share-based payment expense, and special charges. Adjusted operating profit margin is adjusted operating profit divided by net sales for total company and by segment. The most directly comparable GAAP measures for adjusted net income and adjusted diluted EPS are “net income” and “diluted EPS,” respectively, which include the impact of amortization of acquired intangible assets, loss on sale of business, share-based payment expense, and special charges. Adjusted diluted EPS is adjusted net income divided by diluted weighted average shares outstanding. The most directly comparable GAAP measure for EBITDA is “net income”, which includes the impact of net interest expense, income taxes, depreciation, and amortization of acquired intangible assets. The most directly comparable GAAP measure for adjusted EBITDA is “net income”, which includes the impact of net interest expense, income taxes, depreciation, amortization of acquired intangible assets, share-based payment expense, special charges, and miscellaneous (income) expense, net. A reconciliation of each measure to the most directly comparable GAAP measure is available in this news release.

The Company defines FCF as net cash provided by operating activities less purchases of property, plant and equipment. A calculation of this measure is available in this news release.

The Company’s non-GAAP financial measures may not be comparable to similarly titled non-GAAP financial measures used by other companies, have limitations as an analytical tool, and should not be considered in isolation or as a substitute for GAAP financial measures. Our presentation of such measures, which may include adjustments to exclude unusual or non-recurring items, should not be construed as an inference that our future results will be unaffected by other unusual or non-recurring items.

Forward-Looking Information

This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (the “Act”). Forward-looking statements use words such as “expect,” “believe,” “intend,” “anticipate,” “indicative,” “projection,” “predict,” “plan,” “may,” “could,” “should,” “would,” “potential,” and words of similar meaning, as well as other words or expressions referencing future events, conditions, or circumstances. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Act. Statements that describe or relate to the Company’s plans, goals, intentions, strategies, or financial outlook, and statements that do not relate to historical or current fact, are examples of forward-looking statements. Forward-looking statements are not guarantees of future performance. Our forward-looking statements are based on our current beliefs, expectations, and assumptions, which may not prove to be accurate, and are subject to known and unknown risks and uncertainties, many of which are outside of our control. These risks and uncertainties could cause actual results to differ materially from our historical experience and management’s present expectations or projections. These risks and uncertainties are discussed in our filings with the U.S. Securities and Exchange Commission, including our most recent annual report on Form 10-K (including, but not limited to, Part I, Item 1A Risk Factors), quarterly reports on Form 10-Q, and current reports on Form 8-K. Any forward-looking statement speaks only as of the date on which it is made. You are cautioned not to place undue reliance on any forward-looking statements. Except as required by law, we undertake no obligation to publicly update or release any revisions to these forward-looking statements to reflect any events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events, whether as a result of new information, future events, or otherwise.

ACUITY BRANDS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In millions, except share data)
	November 30, 2023				August 31, 2023
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	513.3			$	397.9
Accounts receivable, less reserve for doubtful accounts of $1.6 and $1.3, respectively		517.1				555.3
Inventories		365.3				368.5
Prepayments and other current assets		78.4				73.5
Total current assets		1,474.1				1,395.2
Property, plant, and equipment, net		293.6				297.6
Operating lease right-of-use assets		79.1				84.1
Goodwill		1,097.5				1,097.9
Intangible assets, net		471.2				481.2
Deferred income taxes		0.7				3.0
Other long-term assets		47.7				49.5
Total assets	$	3,463.9			$	3,408.5
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	311.8			$	285.7
Current operating lease liabilities		19.3				19.7
Accrued compensation		71.5				103.3
Other current liabilities		198.0				186.7
Total current liabilities		600.6				595.4
Long-term debt		495.7				495.6
Long-term operating lease liabilities		70.0				75.5
Accrued pension liabilities		38.4				38.4
Deferred income taxes		56.5				59.0
Other long-term liabilities		138.6				129.2
Total liabilities		1,399.8				1,393.1
Stockholders’ equity:
Preferred stock, $0.01 par value; 50,000,000 shares authorized; none issued		—				—
Common stock, $0.01 par value; 500,000,000 shares authorized; 54,536,606 and 54,411,186 issued, respectively		0.5				0.5
Paid-in capital		1,070.5				1,066.8
Retained earnings		3,601.9				3,505.4
Accumulated other comprehensive loss		(114.1	)			(112.6	)
Treasury stock, at cost, of 23,652,280 and 23,362,196 shares, respectively		(2,494.7	)			(2,444.7	)
Total stockholders’ equity		2,064.1				2,015.4
Total liabilities and stockholders’ equity	$	3,463.9			$	3,408.5

ACUITY BRANDS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In millions, except per share data)
	Three Months Ended
	November 30, 2023			November 30, 2022
Net sales	$	934.7		$	997.9
Cost of products sold		506.3			581.4
Gross profit		428.4			416.5
Selling, distribution, and administrative expenses		295.5			300.7
Special charges		—			6.9
Operating profit		132.9			108.9
Other expense:
Interest expense, net		0.9			6.6
Miscellaneous expense, net		1.1			9.1
Total other expense		2.0			15.7
Income before income taxes		130.9			93.2
Income tax expense		30.3			18.3
Net income	$	100.6		$	74.9
Earnings per share(1):
Basic earnings per share	$	3.25		$	2.32
Basic weighted average number of shares outstanding		31.005			32.308
Diluted earnings per share	$	3.21		$	2.29
Diluted weighted average number of shares outstanding		31.365			32.704
Dividends declared per share	$	0.13		$	0.13

(1)	Earnings per share is calculated using unrounded numbers. Amounts in the table may not recalculate exactly due to rounding.

ACUITY BRANDS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In millions)
	Three Months Ended
	November 30, 2023				November 30, 2022
Cash flows from operating activities:
Net income	$	100.6			$	74.9
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization		22.7				26.5
Share-based payment expense		11.1				10.7
Loss on sale of property, plant, and equipment		0.4				—
Asset impairment		—				4.3
Loss on sale of a business		—				11.2
Changes in operating assets and liabilities, net of acquisitions and divestitures:
Accounts receivable		37.8				81.6
Inventories		3.2				(5.8	)
Prepayments and other current assets		(5.3	)			(8.5	)
Accounts payable		28.7				20.3
Other operating activities		(9.2	)			(28.6	)
Net cash provided by operating activities		190.0				186.6
Cash flows from investing activities:
Purchases of property, plant, and equipment		(14.6	)			(18.2	)
Other investing activities		0.1				3.9
Net cash used for investing activities		(14.5	)			(14.3	)
Cash flows from financing activities:
Repayments on credit facility, net of borrowings		—				(18.0	)
Repurchases of common stock		(48.2	)			(76.5	)
Proceeds from stock option exercises and other		1.6				0.9
Payments of taxes withheld on net settlement of equity awards		(9.0	)			(12.5	)
Dividends paid		(4.1	)			(4.3	)
Net cash used for financing activities		(59.7	)			(110.4	)
Effect of exchange rate changes on cash and cash equivalents		(0.4	)			(1.0	)
Net change in cash and cash equivalents		115.4				60.9
Cash and cash equivalents at beginning of period		397.9				223.2
Cash and cash equivalents at end of period	$	513.3			$	284.1

ACUITY BRANDS, INC. DISAGGREGATED NET SALES (In millions)

The following tables show net sales by channel for the periods presented:

	Three Months Ended
	November 30, 2023				November 30, 2022				Increase (Decrease)				Percent Change
ABL:
Independent sales network	$	625.2			$	673.7			$	(48.5	)		(7.2	)%
Direct sales network		97.4				106.4				(9.0	)		(8.5	)%
Retail sales		55.6				49.9				5.7			11.4	%
Corporate accounts		41.5				49.1				(7.6	)		(15.5	)%
Original equipment manufacturer and other		56.7				68.0				(11.3	)		(16.6	)%
Total ABL		876.4				947.1				(70.7	)		(7.5	)%
ISG		64.2				56.8				7.4			13.0	%
Eliminations		(5.9	)			(6.0	)			0.1			(1.7	)%
Total	$	934.7			$	997.9			$	(63.2	)		(6.3	)%

ACUITY BRANDS, INC. Reconciliation of Non-U.S. GAAP Measures

The tables below reconcile certain GAAP financial measures to the corresponding non-GAAP measures for total Company as well as our reportable operating segments (in millions except per share data):

	Three Months Ended
	November 30, 2023							November 30, 2022						Increase (Decrease)				Percent Change
Net sales	$	934.7						$	997.9					$	(63.2	)		(6.3	)%
Operating profit (GAAP)	$	132.9						$	108.9					$	24.0			22.0	%
Percent of net sales					14.2	%						10.9	%		330			bps
Add-back: Amortization of acquired intangible assets(1)		9.9							13.6
Add-back: Share-based payment expense		11.1							10.7
Add-back: Special charges		—							6.9
Adjusted operating profit (Non-GAAP)	$	153.9						$	140.1					$	13.8			9.9	%
Percent of net sales (Non-GAAP)					16.5	%						14.0	%		250			bps
Net income (GAAP)	$	100.6						$	74.9					$	25.7			34.3	%
Add-back: Amortization of acquired intangible assets(1)		9.9							13.6
Add-back: Share-based payment expense		11.1							10.7
Add-back: Loss on sale of a business		—							11.2
Add-back: Special charges		—							6.9
Total pre-tax adjustments to net income		21.0							42.4
Income tax effects		(4.8	)						(9.8	)
Adjusted net income (Non-GAAP)	$	116.8						$	107.5					$	9.3			8.7	%
Diluted earnings per share (GAAP)	$	3.21						$	2.29					$	0.92			40.2	%
Adjusted diluted earnings per share (Non-GAAP)	$	3.72						$	3.29					$	0.43			13.1	%
Net income (GAAP)	$	100.6						$	74.9					$	25.7			34.3	%
Interest expense, net		0.9							6.6
Income tax expense		30.3							18.3
Depreciation		12.8							12.9
Amortization(1)		9.9							13.6
EBITDA (Non-GAAP)		154.5							126.3						28.2			22.3	%
Share-based payment expense		11.1							10.7
Miscellaneous expense, net		1.1							9.1
Special charges		—							6.9
Adjusted EBITDA (Non-GAAP)	$	166.7						$	153.0					$	13.7			9.0	%

(1)	Amortization expense for fiscal 2023 includes accelerated amortization of $4.0 million for certain discontinued brands.

		Three Months Ended
ABL		November 30, 2023				November 30, 2022				Increase (Decrease)				Percent Change
Net sales		$	876.4			$	947.1			$	(70.7	)		(7.5	)%
Operating profit (GAAP)		$	143.8			$	118.1			$	25.7			21.8	%
Add-back: Amortization of acquired intangible assets(1)			6.5				10.5
Add-back: Share-based payment expense			3.5				3.3
Add-back: Special charges			—				6.9
Adjusted operating profit (Non-GAAP)		$	153.8			$	138.8			$	15.0			10.8	%
Operating profit margin (GAAP)			16.4	%			12.5	%			390			bps
Adjusted operating profit margin (Non-GAAP)			17.5	%			14.7	%			280			bps

(1)	Amortization expense for fiscal 2023 includes accelerated amortization of $4.0 million for certain discontinued brands.

 

		Three Months Ended
ISG		November 30, 2023				November 30, 2022				Increase (Decrease)				Percent Change
Net sales		$	64.2			$	56.8			$	7.4			13.0	%
Operating profit (GAAP)		$	5.3			$	7.7			$	(2.4	)		(31.2	)%
Add-back: Amortization of acquired intangible assets			3.4				3.1
Add-back: Share-based payment expense			1.6				1.3
Adjusted operating profit (Non-GAAP)		$	10.3			$	12.1			$	(1.8	)		(14.9	)%
Operating profit margin (GAAP)			8.3	%			13.6	%			(530	)		bps
Adjusted operating profit margin (Non-GAAP)			16.0	%			21.3	%			(530	)		bps

	Three Months Ended
	November 30, 2023				November 30, 2022				Increase (Decrease)			Percent Change
Net cash provided by operating activities (GAAP)	$	190.0			$	186.6			$	3.4		1.8	%
Less: Purchases of property, plant, and equipment		(14.6	)			(18.2	)
Free cash flow (Non-GAAP)	$	175.4			$	168.4			$	7.0		4.2	%

Investor Contact:
Charlotte McLaughlin
Vice President, Investor Relations
(404) 853-1456
investorrelations@acuitybrands.com

Media Contact:
April Appling
Vice President, Corporate Communications
corporatecommunications@acuitybrands.com

FAQ

What were Acuity Brands' net sales in the first quarter of fiscal 2024?

Acuity Brands reported net sales of $934.7 million in the first quarter of fiscal 2024, a decrease of 6.3 percent compared to the prior year.

What is the ticker symbol for Acuity Brands?

The ticker symbol for Acuity Brands is AYI and it is listed on the NYSE.

Who is the Chairman, President, and CEO of Acuity Brands?

Neil Ashe is the Chairman, President, and CEO of Acuity Brands.

What was the percentage increase in operating profit for Acuity Brands in the first quarter of fiscal 2024?

The operating profit for Acuity Brands increased by 22.0 percent in the first quarter of fiscal 2024.

What was the percentage increase in adjusted diluted earnings per share for Acuity Brands in the first quarter of fiscal 2024?

The adjusted diluted earnings per share for Acuity Brands increased by 13.1 percent in the first quarter of fiscal 2024.

Where can I access the conference call and earnings release for Acuity Brands?

The conference call and earnings release can be accessed via the Investor Relations section of the Company's website at www.investors.acuitybrands.com.