January 7, 2022
Acuity Reports Strong Quarter: Here are the Takeaways
Company is optimistic about 2022 and is confident it can effectively navigate the supply chain challenges
Today, Acuity Brands reported its Fiscal Year 2022 first quarter performance for the period ended November 30, 2021. For the third straight quarter, the company has reported double-digit percentage revenue growth compared to prior year – with the latest quarter’s sales coming in at +17% growth for a total of $926.1 million.
By channel vs. Q1 2021:
- Independent Sales Network (sales agents): Net sales grew 14% to $636.8 million
- Direct Sales Network: $90.0 million, up 12.4% over the prior year
- “Other” is the third largest of Acuity Brands Lighting’s five channels and grew 108% to $73 million.
- An Acuity Brands spokesperson informed us that the “Other” category primarily includes "OEM Channel, International Sales, Daylighting business and our catalog business." Based on that answer, the growth in “Other” may be mostly due to OSRAM DS sales being part of the 2022 number and not part of the 2021 comparison.
Gross profit of $385.8 million for the first quarter of fiscal 2022 increased $53.4 million, or 16.1 percent, over the prior year.
Stock buyback: During the quarter, Acuity Brands repurchased approximately 300,000 shares at an average price of $176 per share. Shares of Acuity Brands opened the day trading at $212.97.
Intelligent Spaces Group (Atrius and Distech Controls): Sales increased 14% to $46 million. In the earnings call, Ashe stated “our ISG group had an eventful quarter.”
Cost of goods sold rose 17.6% to outpace sales growth.
PRODUCT MENTIONS DURING EARNINGS CALL
- STACK PACK™ from Lithonia Lighting
- STACK Switch™ from Lithonia Lighting
- Multiple mentions of Distech controllers
- Compact Pro High Bay by Lithonia Lighting: During the earnings call, Acuity Brands CEO, Neil Ashe, described the Compact Pro High bay as "game changer from a value and impact perspective…”
- "In controls, we introduced the Clarity Link," part of nLight lighting controls platform.
- Holophane: “Good quarter, but candidly not a great quarter.”
Germicidal UV (GUV) products: When asked about UV-C product sales performance, Ashe explained that a robust GUV product line was built “on the expectation that people will buy it consistently” and went on to state “we don't view this as a game changer for us” and that “the market isn't as large as I think some had hoped it would be."
OSRAM Digital Systems (acquired by Acuity Brands six months ago): Karen Holcom, Senior Vice President and Chief Financial Officer, stated that the company has made “significant progress in our integration of OSRAM” and later added that the “acquisition is going really well.”
- The company is seeing improvement in many areas related to retrofit and renovation
- Industrial continues to be a strong market
- Slight improvements in office space
- Education is strong depending on the time of the year
- Large retailers are “coming back”
- Hospitality is still lagging
The “engineering team at Distech spent over half their time focused on redesigning Distech products for available components.”
Overall, Acuity Brands explains that it is addressing the supply chain challenges by:
- Sourcing from multiple places
- Reinventing how they source products
- Reinventing how they schedule production
- Reinventing the flows through the company’s factories and distribution system
Ashe explained, “We are currently and expect to continue to be operating in unpredictable times. Input prices and availability can sometimes feel like a game of Whac-A-Mole and we are dealing with Omicron which materialized only a few months ago.”
The company remains “optimistic about 2022 and our ability to effectively manage in this environment.”
Holcom explained that the revenue increase was driven by high service levels, continued recovery in end markets and “the benefits of recent price increases.”
During the earnings call Q&A, analysts asked numerous questions about price increases and how the company is realizing those increases.
Both Holcom and Ashe explained that there is “lag between when we have the price increase and when we see that in the results.” The cost increases come in a lot faster than the price realization does.
As of this week, the company has now announced “five price increases” and the benefits of the price increases will be realized throughout the course of the year. In this unscripted answer, Holcom did not cite the time span in which the five price increases took place, but we believe that the span is the last six quarters including the current quarter.
NUANCED LANGUAGE: “GUIDANCE” vs. “FRAMEWORK”
During earnings calls, it is common for CEOs and CFOs to give future guidance of financial performance for upcoming quarters and/or the remainder of the fiscal year.
During this earnings call, Ashe explained that Acuity Brands will be providing a more general future “framework” and explained how it differs from the Wall Street mindset of “guidance.”
Ashe maintained his professionalism and composure, but we imagine that he didn’t enjoy multiple analyst questions about the terminology. He started his response to the final question about “guidance” with the phrase “let me reiterate what I’ve said multiple times so far on this call…” and that was the end of that topic, until the April earnings call, perhaps.
This new use of nuanced language comes after Acuity Brands has recently reached a class action settlement in principle that may soon cause Acuity Brands to write a $15.75 million check to address claims that past Acuity Brands executives miscommunicated business performance and market expectations during earnings calls.
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