Acuity Brands (AYI) 5 Apr 222022 Q2 Earnings call transcript

Good morning, and welcome to the Acuity Brands Second Quarter Earnings Call of Fiscal 2022. At this time, all participants are in a listen-only mode. After the speakers’ presentation, the Company will conduct a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Charlotte McLaughlin, Vice President of Investor Relations. ahead. go please Charlotte,

Good second welcome quarter Michelle. Brands the fiscal XXXX earnings morning, you, to and Acuity Thank call.

and are release, Executive management's in will As quarter materially comments SEC this a Investor control, actual Reconciliations These available last update on strategy filings. our metrics our morning earnings second risks and XXXX Chairman, Vice who beliefs an those through of highlights on on and update to this which which our may and Chief us those today differ Please results our available our that our Officer, our detailed website assumptions, the Ashe, available the to beliefs President including metrics at and Financial walk at their With beyond unknown There may with earnings we be are Relations management reminder, periodic our forward-looking be statements time. some of and and at information currently of is uncertainties, will call. known quarter; of who corresponding from to company's will subject note based www.investors.acuitybrands.com. me an is GAAP provide Q&A and and Chief opportunity President the be may obligation performance. financial our undertake from anticipated end Officer, in Senior certain Holcom, Karen no for the non-GAAP statements. many Neil these

remarks question necessary. to and one one So if those participating, limit follow-up your please

will interest now your you to I today's turn Brands. Neil We conference over are webcasting Thank Acuity Ashe. for live. the call in

Acuity And joining to everyone us Charlotte. to Brands. discuss you morning good Thank

XXXX. strong second Our performance in fiscal the team delivered of quarter another

And convert we the our quarter. profit second with we gross world complicated. to at maintained the into and profit cost growth delivered XX% our effectively The the XX%. and operating consecutive able challenges by diluted XX.X% first to net increased sales we compared last consistent remains were share Despite by expenses. For margin net income of sales year earnings we per growth quarter, operating leveraging

is the pressures strong, shortages. and dealing and component performing to volatile, be of In continuously from continues performance. on-going resulting this with our our spite environment costs ABL well, continue demand are global Both the we execute reflected team is our Although to and admirably. spaces in are this,

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our spaces. at Now, I and to progress want both talk ABL to to move

ABL, in was they returning who last hosted network, In to some that our and exceptionally we two next great back years ups happy years. sales be. with downs be of in-person to XX. our are It report three independent together First, conference performed I'm through things to used sales way the first in have March the to the

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is was by and delivering. event was hard great While the It to channel, person. enthusiasm we said time the virtually Acuity throughout incredibly the our some the consistency from of struck our and been working agents. energy have levels with quality in of productive it spend They together not feedback to be

to vitality our both that create allowed market and are investments have and have for service Our products prioritize same us us continue others when customers to investments to. our At the moving. in allowed have compelling unable innovative product to delivering been new time,

main areas. three quarter, we last said I As done focusing on have by this

lighting components supplier people, First, are has matters same making we by have us competitors. But industries. also you the the used that with. our time focusing investments all those largest larger are Consequently, advantages direct environment on Because we by do and we are relationships, business really strategic who company reminded it resources. certain current over in

have new ABL. head sourcing We recruited of for strategic a

key We are effective are in suppliers management, working investing with planning our and inventory. allocation on and we

existing over prioritize access while our supporting on-going across able also of our across empowering ensure by of continuity product to we Second, available on teams vitality have our many product cost to and efforts product been speed our supply components, lines, portfolio.

products At and Finally, lighting continue also redesign around their efforts same the as to significantly control components. to two quarter, managed these Herculean to said time, lighting or available introduce over have products XXX years. engineering the last teams I upgraded the new our last teams

We around future. access cost challenges expect components foreseeable to continue and the the to of into

a in leading engineering significant we Our our these why shortages part of of of expect strategy the vitality, around requirements are product and and this we the to teams continue the component dexterity and efforts. flexing been changing has market to

of important Another of is EarthLIGHT. strategy. on highlight part the our focus conference our EarthLIGHT an with next

the Our it's packaging about products, waste transportation improving consumption, efforts products also of not product and are redesigning vitality to and reduce energy efficiency. reducing just functionality about improving customer our

our a expanded significantly technology introducing of was we highlights initiative the products. for to a both scannable organization across with announced we food Next, event. brings QR our bags quarter new packing local our It XXXX code and Atlanta instructions agents. paper outreach one the that together of reduce also of At by sustainability This community use together by

Distech controls and with Canada and infrastructure growth; is In including and roadmap America leadership another education, North Controller and smarter, safer on a make to centers. built data the strong markets spaces the of technology a Now wins market win providers. in solid product of recognized last the two verticals to protocol of in in Group. continues and projects at significant have Distech Products, to largest greener. the and presence the the key Distech Spaces One moving now Distech building competition. is project to significant the Intelligence saw key we Through supplier a commercial, had curve both across cloud Distech open quarter, forefront and and key Atrius technology. against Spaces Eclipse quarter

We building and to platform, the develop Atrius over we to also continue insights, the expect portfolio expand on progress Atrius including time.

We continue to talent add to team. this

Finally, you I capital want update allocation. on our to

capital the Our allocation priorities remain same.

allocate shareholders. prioritize to when share expect continue investments acquisitions, to growth businesses, there to and current repurchases our value to is capital in create an to We our to in our for maintain to for dividend opportunity invest permanent

the lead better, Growth authorized deploy shares. of operating XXXX, Since to share X and our our authorization Sach us distinguished manage like to outstanding. for faster Sach shares Trimble repurchased system at including integration excited we approximately million Honeywell; of million May leading our Transformation. with future to of joins for appointment and XX% X on have we're and companies I our This Directors repurchases experience Vice smarter, have Senior organization, our remaining us Sankpal, comes acquisitions. technology company efforts Board to to to the of team. quarter, our to additional capacity the also Sach to President Sach from of would announce increase

take will remarks. will for turn we faced our Karen, us on to service to continued dive is want thank and quarter, And our I our to continues product allowing call challenges and for in Each advantage to deliver new team and vitality take on-going with focus Q&A strong back As I later once I'll deeper environment. now quarter closing I a team close, some demand the are of for efforts. their again into over the performance. call be who the our

second talk a sequentially our basis as the more cost recovery an service offsetting increase were of of current managed of sales Neil. $XXX of points costs and I profit results. to net profit first XX.X%, Reported quarter the cost net Gross driven XXXX. over the through quarter was XX.X% in operating last the This of in flat by in XX% delivered profit million, volatile second prior from million, was million price by the performance ability an Adjusted for leveraging growth, later over compared of by to of the was input a margin prior from our drive in profit operating operating and offset sales sales, was of sales to you, and and increase We benefits decrease by year, our increase improvements. of and on in strong Net increases on prior XX.X% XXXX. both increases prior price This was operating basis increase a gross of vitality, a recent will XXX segments, $XXX want of profit we year quarter. XX.X% in of the I our despite and $XX flexibility decline markets an margin Reported $XX performance year. significant profit about driven by the improvement sales, the environment the was of percent reiterating or $XXX so the margin end an points call. start of million XX I'm the the year. Thank million, XXXX, for against XX the effectively their operating a acquisitions. decrease as over profit of impressed was expenses. focus levels grew than expenses. revenue business leveraged environment thanks product was the points the prior XX% to continued $XX and Adjusted was their year. by but million, a was fiscal or year. of and basis net operating productivity lower a prior partially XX% million, We margins team work Adjusted the prior product year. operating Gross we over decrease margin $XXX quarter year. over profit prior or increase XX%

over fiscal earnings XX% continued prior for the $X.XX improvement quarter XX% the XXXX. increased over diluted earnings EPS the Finally, share or $X.XX year. saw Diluted adjusted we $X.XX second year, increased or in per $X.XX, of per and diluted of prior share

$X.XX. Our diluted share repurchase EPS program adjusted favorably by impacted

Now moving on to our Segment.

Control Lighting Lighting XX% increase of prior $XXX grew and network, the saw by was our segments the sales sales independent which to X% increase an our our driven approximately sales and This quarter, improvements direct million in the network. over year. XX% During within

Recall year. over can That pandemic. paused from activity prior quarter. their account now that Additionally, growth XXX% renovations the to as last see channel this approximately sales increased the restarted due had corporate has the customers year, the you in

in declining prior operating primarily channel ABLs OSRAM. quarters. was quarter in retail increase second prior upcoming current million, the had margin of the the our being with times basis should year, XXXX in This channel XX% XX improved of the resulting has channel in ABL anticipated. XX% their XX.X%. to port, operating versus quarter. our profits in the also up adjusted over of acquisition demonstrated million, expenses. growth was to XX.X%. inventory of while lead grow start for X% operating operating the to in points $XXX Adjusted due to We declining this declined prior profit versus of approximately XX $XXX We profit operating sales the the basis growth leveraging delayed to Sales points longer the see year, of to in we the with margin or XX% other year, ability due held some an in transit than

for our the Group. to Spaces results on Moving Intelligent

the Atrium. second million Spaces million. approximately growth as $X.X the to operating $XX continued sales to reflecting growth the a prior in of $X million sales investment $X versus year quarter operating profit and increased spaces approximately XX% in the increased in and strong both increased XXXX, in the business. quarter of million $XXX,XXX of profit XXXX approximately of Distech second For Adjusted result

goods to of flow decrease Our was the business first half generating $XX compared due This model of net activities and electronic of our year, increased primarily continues due of on capital of components. related be fiscal up lesser times an the investment fiscal with $XXX in to approximately to million over million increased from the to of half purchases operating increase source a prior end Inventory productive, extent slightly to year, XXXX. working highly the lead increase inventory. days finished in cash to are primarily a

to support well levels managing our insulate are facilities inventory our from inconsistent availability. as as production growth, supply our We

fiscal of expenditures in $XX million months X.X% during also sales invested of the net six We capital first XXXX. or

Finally, shares in we second quarter. the repurchase have to continued

of approximately now price back result, a average As a have our of shares at XXXX of the spend $XXX company few May since bought remainder we XX% like share. focusing per the to year. approximately minutes I an on of would

to continue challenge. and environment remain we a components the the demand As of expect for strong access foreseeable Neil while stated, current will future with cost

on be operating continue Russia have focus either will relation exposure throughout Our direct the to or no expenses. growing instability to In leveraging in we recent and our sales Europe, sales Ukraine. to

does conflict existing pressures. add supply the However, chain the to

in expected price Additionally, experiencing increases increases driving improvements. last driven product oil transportation have in months, we we're prices. XX the introduced increases and to costs fixed productivity in by addition In strategically

I I takeaways. with want the operator, Before you our to leave key hand over you to

continued demonstrate have to sales in cost effective gross We management and strong environment. volatile growth margin a of

We have expenses you to I to for your take continued today. leveraged us the will we operator and Thank pass to now our finally you questions. capital operating have joining effectively. allocate over

Thank you.

Our with first question Glynn comes from Oppenheimer. Christopher

open. is line Your

effect as fuller quarter. you and And on Thank the morning. you. seeing backlog normal. encountering increases versus good levels nice commentary price instances Curious, any take you're know, elasticity, if Hi, of

morning, us. Thanks Chris. with for good Yes, being

we've As price than obviously, strategically accepting year, those been, over this the we to increases commentary, fixed expected, increases. the price able introduce Karen and kind indicated course in of of way relatively we've, reaction of been has kind of and, her more

have in top obviously, as the So success, strong. you've that. a Demand a remained as, of seen performance result you've seen, -- line

committed as as at as are, than is, at orders, the of higher is as point, we, usually demand well components, that this which to. backlogs are etcetera, both which strong significantly of of availability obviously alluded we So Karen look terms in the reflection, a they they

that, And dynamic to be strong, that which the supply So year, we're rest of through is as expect to tight. we, can. as trying we is and through least to continue the calendar at demand effectively we is chain work

in was follow press section in And Outlook removed do Okay, just we thanks. prior default? just by up the the me, disclosure slide quarter’s from guidance the retain the release,

so. Yes,

something introduce really the to hard it's to So world. new

a just what we -- our which engender we to reframe year. to year what not did the so to intended we financial our the do was of the to provide of So at kind had beginning through update framework

mid-single So on. for of what digits margins, that is ABL. that which was, as delivering you And kind expanding operating remember, we're implied

and and during telling doing Our best doing, why going year what we're be how is we're and, we you doing the focus to results on delivering can. we're the that that,

the really of ability access, obviously, strategic our on the these the supplier and And available to cost as price about, talked three so, we over realize there's that we're components, increases, the prioritizing so volume, there's we're some continuous and focused within doing things; to of relationships, reengineering, a product components.

doing. of, we're So that's and the what are we're for results how speaking doing obviously And, kind themselves.

Thanks Neil.

Just point order. small of a

You digits. high said standing I think metric you're ABL, for mid-single single digits is just

Yes, high digits. single

the Chris. give Sorry, for you mean accidentally me, wrong didn't correcting numbers. give, I thank to

I didn't. know you

Blair. Our next Ryan at question from William comes Merkel

is line Your open.

everyone. Hey, quarter. Nice morning. Good

Ryan. Thanks,

pretty that mentioned it the and you like good realization price Neil, So backdrop. fixed increases, is sounds given

give see full you to do can seeing of given once fixed? you the start like, Just a impact? what contribute those us the just of expect then, full there And you of backlog could the range price a curious, when impact sense

Yes, so.

of one we of So as last kind those, quarter have the we backlog. not talk we was the repriced as highlighted things in we intentionally through that our

project a just when for, all on So are started, quotes those -- committed Project to consider The and for make price a not forward. we who for accepted, those know, we project honor whether started. may a we get for that C&I start it's second. get going that quotes that focused order

are So that price effectively point all from that forward. from increases

price the of are effectively those and forward. matching obviously, independently the the to, increases to those cumulative of other. as managing each it moving starts cost challenge roll or you those to, in as it up with are backlog see The is starts price effect So

the buying have So, goods. from manufacture so obviously, that we out will we rest the significant impact are, and Independent rolls price, year. to that, the components continue realized we as through those separately to a amount of of necessary kind more we're realize of the of cumulative

margins we like And other when fiscal the it the the up The we the, us for And And as it nice each ability as way can how whether components pay its etcetera, performance in we've on though last the and, which of we them they of are cost. done the get high materials and done of feel even them. same aren't moving continued sum given key our for, is other. were where, for manner get which a, to So, volatility like obviously the need and those. cost like we've remainder side, managing manage that's independently when really aluminum, we of feel year. job by the year, to and we've sets the steel, price to those what done a

Got it.

you the outs? Okay, next, sequentially thanks on based my the and And Did grow for the about you supply on pretty it from good do push to for any backlog? challenges months what and Or just can three then follow up, six that. given or customers? feel hearing cancellations comment you're just chain seeing

Yes, as we've that's, strong continued. that's seen indicated, I so Karen said, demand,

So, ticked slightly is backlog up sequentially.

So hard business there. there's working we're to there's, it. plenty just of It's, out satisfy

Thanks. it. Got

Snyder next Our at from comes UBS. Chris question

line is Your open.

you. Thank

to strategy, current fixed the And a margin size be company. or margin, understand absorption inventory and period? in quarter if inventory from higher coming lower? Or during at certainly normalized that? this August headwinds and wording could be Any has on level whether right I potential building the levels of this this the costs it of may result any but last, the major the you also speak impact drivers So

Karen, to start? you want

Chris. yes, Sure,

reasons. One It seeing used two about lead get As that it's the us, purchase was and now take we've we're really mentioned, taking to XX. our days to on closer to we inventory to goods. increased XX the have times to finished related longer intentionally

So build been that because happened that those has lead times. of has some longer

been second of The has our reason components. availability electronic

And to just So light would demand secure we we those. that so we're typically of that do in seeing. shortages, tried the have can service we more of the

kind headwinds, from been has rolls you're that going know, call. as from So see the we've Neil any as of not increasing about, talking on and described that you any, than through, that cost the to described you other other

build there adding remember pushing we've that. you in, the at I M&A. you. past, then around commentary the up; also its was vertical, if has spaces correctly, And assets the touch some day the tech tangential strategy could some to a In on investor color group. follow believe provide remains what to M&A seen But in I Thank I want historically? maybe the even company maybe Appreciate spoken on to than interest higher company's industrial into cast some ballots the as just out

take Chris. I'll that Yes, one,

So what was strategy acquisition I here. got speak I for can't before the

our So add company straightforward. capital current we'll spaces, investor is which of priorities time. what One, already acquisition, via focus on we to the want lighting said allocation investments as businesses, the that, to we both and additional well we in grow the businesses, as are two, on want kind day, we our expand pretty have businesses over

been The through repurchase. to we been is aggressive. an see third permanent and And maintain really it's share value really that dividend. We've done our create to then when the fourth attractive, we've when is opportunity

the to we So absolutely going of forward want business. the want we forward a how as grow we to strategy, want we deploy look to capital where acquisition part and that the to to is

though, of our significant opportunity existing fact, seen As a generate value to we've point businesses. through

to example our a where for important strategic adding a great an business asset us. we efforts. of is focused the Obviously, that's acquisition OSRAM So

that to that reminder, have the was luminaires. we one technology we threefold; we control as the in our a did So reason have, was

that engines. car our was, the, analogy So, were the a drove with team I now we And didn't the do. we manufacture company

was to accretive fulsomely and sales integrate so more, opportunities was channel we're, third chain second then expand to participate the, gross perspective, actively the, a we businesses The well. broader financial effectively. primarily could our as Distech other on the investing that add to, as we to organic supply accelerate diluted We're to Atrius to group towards we, scale working; indicated and, expand that dollar, as as That demonstrate And first but in margin at percentage, working dollar obviously are products it. couple to we OEM a could market. that quarter, finally, then to more to is, spaces is acquisition was and we with we're From the related to last in in our from looking and performing it's the so that further over time And the we're more the exceptionally years more of over integrate the expect expand then the then, it's, mildly aggressively us step gives in portfolio. that opportunity businesses growth them. the we next

we're both So Sach. an perspective, from a addition we're talent well obviously, from as positioning evidence, well perspective as And the the of positioning are, company perspective. ability we financial

where will over that improve with have. So can where we've next narrative over businesses we'll returns businesses our environments can ABL while for we in we continue the we what and shareholders. add and drive and done other spaces the to be we demonstrate high And, will time, the already

the you that, Appreciate for time. thank

at Our next Josh comes question from Baird. Chan

Your open. line is

quarter. morning, on Neil, good Charlotte a congrats Hi, Karen, good

you Thank Josh.

or And, I trend Could If at how data is guess. to kind supply chain, the months all, expect guess? better that do how on question of on you I anything changed in us it you update getting first the sequentially? My has worse? coming

say It whack better say can't I different analogy than would morning. think a supply I'll a mean, good Josh, something I kind I mole. of pick just to that the chain, Karen, one. different be a for pretty you each that more seems -- trends picture pick There the than of, it's are I The would other picture, is obvious. your there big flowing see commodity, components. a, time, supply so through and your believe kind pick that in is I the demand and that's chips. global of big

been the get transportation challenge any excuse the problem strike get through of commodity our the those, product that and working they're our in get of a kind better changed. trying then to to Beach a unfair hopefully So bit little has And moving foreseeable planning future absence, kind me, demand Coast. have Long allocations is issues, should West in share of prices the the through through

well You can see as those we as can.

situation, That's it's so, we're prices, why I about, of we'd we're we is with hang a of whether feel if margins I Ukraine delivering mole, in margin be with and Karen state we're, this. trying change I'm pricing them. pleased manage for even or and how obviously through higher think the so like aluminium levels we're at these whack a these kind and level why with So steel, talked But steady through we're playing can the while, delivering, the walk environment, kind gross be we've pleased with a the to which we And the costing. they the around and confident margins.

transactional you're there. the terms of you color is like what are share, winning market It on secured kind of in how nature period? certainly share. the market some working second to given of seems And projects, over this you question time retain the my that of like can do? Appreciate gains Or then guess you've I more these

impact and our sales, now would differentiate ability vitality. for to product grow direct Yes, our portfolio. our service to us having our focus be sales an independent be continues really And able our and I to that's on say you're sales service where and network is with in the network, right seeing really Josh, product

focus continue just as going we we So that as move to we're forward.

portfolio, time. to success of that The Josh thing is is only right select had add a product, we've right which contractor with the I'd place, right lot

most describe lighting your important as products. So everyday we it

product, long that's, forward. interesting portfolio as vitality, so we important that And that's so, an a a high the as is, and going of that's part maintain

That's great. time. Thank your you both for

Thanks.

Jeff Our & next Company. question Cowen at comes Osborne from

line open. Your is

that mentioned questions morning. year, be the throughout think low last margins thought case? had quarter, I you my gross point the XQ is would of on end. A good that the Hey, the couple on for still you Karen,

mentioning recall not that for do the would gross be I it margins. point low

top I seasonally think about that is what quarters we line. second lowest are sequentially talked our

And from were so I you the million seasonal first some decrease, we of to that think quarter. about which expect is could $XX see down

you fixed about profit of And, So your some and the do a we manage to speed we over to gross be from we'll servicing as prioritize and our that And challenge, customers from of before, will continue an components those cost look aggressively. perspective. costs as cost a get leveraging of just we costs. and little impact availability bit ahead, talked continue

the then I Got two then And curious help that? And quicker rates it. rising you with from larger any what are ones, other the of your in on impact projects? just quick to backlog through initiatives interest some to work backlog to do the was increase the inventory try

I yet. rates. the on think seen first, so we've don't Yes, that

have to our Big obvious the value of So we're will of that change. I obviously point paying it's pretty project, not projects rates. will be by a close impacted attention to that. And projects were discount projects, some there's, don't part know, the think I at projects,

significant over costs. over we and have, to the I redesigning of speed are, we we managing supplier the terms and a through ones kind products managing relationships or cost and to the key highlighted number backlog, In of initiated of activities. strategic about access have

factories were halls, you strategy to go-to-market were Mexico elimination If in hear our you you focus sourcing to talk our is way if backlog, the from spans that our which all product, and our and a our through teams. the walk would activity about and us best

good as you We've, a components, now. see they really look things spot harder challenge easier we've to are we've you worked we've can And are. managed than a as can't gotten well, capacity. so has than aggressively in some we're see, they been are labor over ramping time This one

starting backlog. crank remain to that through The through we're to strong. is to, to, good So news we're that orders crank starting that

our though the increase So keep we even orders in. productivity, production, our continue to coming

it. Neil, Thanks appreciate the detail, for

next comes our at Lee Sachs. And from Goldman question Brian

open. is line Your

Hey, on Miguel Neil. Hey, Karen. This is for Brian.

Just just quick talk about inventories question again. a had to a quick

you about down? shift Would just about revenues, Is increasing you hold happening be to inventories with managing continue think higher lead then would challenges increasing is inventories of times NAV forward, lead So talked on? percent going expect also you the there revenue come the going the just chain impacts may as to the purchases? of potentially you a at there increased and supply times the all as as you you're as two given how a

Yes.

Miguel. thank So you,

are I goods the the and mentioned, two reasons finished components. the on source right then you're As electronic lead times extended and also the

ahead. how looking So is we're we're those managing

rear ahead, we really where the So we're the demand carefully look that have meet on and where not really meet need we need that. to understand have trying but we view to the demand, the look in that to to focusing or mirror products understand inventory we manage inventories,

So to be our would we the high. that to and we expect We by seeing aggressively we're windshield. are managing do very don't to believe now, challenges right but this that in given it's the components access necessary and days continue inventory, that days and

Okay, very much. me. I'll thank you That's for it it pass on.

Miguel. Thanks,

the no closing in I'd Thank turn I'm you. at back any And like to queue Neil to Ashe remarks. questions call the this time. further showing for

challenging a believe say interest for appreciate really that in you in all joining Thank quarter a would our We summary delivered I really really your us really my perspective Acuity team good is, a from I this Brands. morning. environment.

tight continue we the the forward, that seen results remains remains hard you've we'll demand going deliver on look As chain work to supply And strong; forward. challenging. and

and us you work team hard results. for our to network thank our for independent interest their you in delivering these thank and your sales So

the concludes program. This

disconnect. now have a Everyone may great You day.