Acuity Brands, Inc. (NYSE:AYI) reported fiscal 2022 Q4 and full year results on October 4, 2022, beating market expectations on both revenue (+$30M) and earnings per share (EPS). Q4 FY22 revenue was $1.11B, up 12% over the same Q in FY21, with net sales growth in both of Acuity’s business divisions – Lighting (ABL) and Spaces (ISG). Revenue for the full FY22 was $4.01B, an increase of $545M or 15.7% over FY21.
Operating Profit for Q4 was up 12.7% over the same prior year Q, and for the full year FY22 was up 19.2% versus FY21. The company spent $107M in capital in Q4 FY22 to repurchase shares, which CEO Neil Ashe referred to as again creating “permanent shareholder value.” For the full year FY22, ABL spent $512M in capital for share repurchases. Acuity’s capital allocation strategy was reinforced several times during the Q4 Earnings webcast: continue in FY2023 to generate cash and allocate capital effectively, prioritizing investments for growth in their current businesses, investing in acquisitions, maintaining dividends and allocating capital for share repurchases.
CEO Ashe emphasized during his remarks and in the Q&A with analysts that a focus on improving product vitality and service levels has been foundational to Acuity’s long-term performance, differentiating Acuity from the rest of the lighting industry. He noted that product vitality included a combination of new product introductions and existing portfolio improvements, generally impacting 20% to 30% of the Acuity portfolio per year to drive benefit.
CEO Ashe also underscored Acuity’s significant investment in their supplier relationships, establishing long-term, multi-year relationship with key electronics component suppliers to provide more consistency.
Acuity is also improving planning on the demand and the supply side to smooth out some of the issues with uncertain pacemaker items. He described the current supply chain situation as dynamic, and indicated that these dynamic conditions are expected to continue and be worked through for the first half of 2023. While component, material and transportation costs are down from their highs, CEO Ashe noted they are still higher than they were, and that the inflationary environment continues. Ashe sees Acuity’s combination of product vitality and improved service levels as the key to earning their customers’ business and outperforming competitors.
Acuity runs the business as two segments, with Acuity Brands Lighting (ABL) making up about 95%($3.8B) of Acuity’s overall FY22 revenue($4.01B) and the Intelligent Spaces Group (ISG) making up the remaining 5% of revenue ($216M). The Spaces business is positioned to be a significant long-term accelerator to the overall strategy – the key to making spaces “smarter, safer and greener”. This segment is the home for brands like Atrius and Distech Controls. It’s also the part of the business that is likely to see M&A activity over the coming years, with CEO Ashe indicating that they are seeing interesting “adjacencies” to the Spaces Group.
Looking at the Q4 FY22 results by sales channel underscores the importance of the independent lighting agent network for Acuity, with 70% of the quarterly ABL sales coming from the agent channel. And it would be interesting to know what makes up the “Other” channel, totalling $86M in Q4 (more than either Corporate Accounts or Retail sales, and up by 42% over Q4 FY21.)
| ABL Channel | Q4 FY22 Net Sales | Change over Q4 FY21 |
| Independent Sales Network | $737.1M | +11.2% |
| Direct Sales Network | $114.9M | +12.5% |
| Corporate Accounts | $73M | -3.4% |
| Retail | $44M | -3.7% |
| Other | $86M | +42.4% |
| Total ABL Net Sales | $1.06B | +11.4% |
During the Earnings Webcast Q&A, one analyst asked what percentage of AYI’s luminaires have Acuity’s eldoLED or OSRAM driver installed. CEO Ashe responded that “it’s not yet quite half. So we’re still…both a large consumer of external drivers and obviously a large OEM provider of external drivers now.”
Looking ahead to full-year fiscal 2023, guidance was given by CFO Karen Holcom, indicating the expectation of net sales within the range of $4.1B and $4.3B for total AYI. The assumptions are that ABL will have sales growth in the low- to mid-single digits and that ISG will have sales growth in the low-to mid-teens. Expectation for EPS is that annual adjusted diluted earnings per share will be within the range of $13.00 to $14.50. The “dynamic environment” of supply chain challenges is expect to continue in fiscal 2023. CFO Holcom commented that the company had used a performance framework for fiscal 2022 that centered on net sales and gross margin as Acuity successfully focused on product vitality and managing the price-cost relationship. She noted that for fiscal 2023, AYI’s outlook will use the more traditional metrics of net sales and adjusted diluted EPS. CFO Holcom noted that Acuity will not be providing quarterly guidance.
CEO Neil Ashe closed the Earnings Webcast by reflecting on Acuity’s strong performants in Q4 and throughout fiscal 2022, expressing excitement about how far the company has come, and the prospects for the future – confident in the company’s ability to execute in the ongoing dynamic environment.
Go Deeper:
Acuity Q4 FY2022 & Full-Year Press Release: https://www.investors.acuitybrands.com/news-releases/news-release-details/acuity-brands-reports-fiscal-2022-fourth-quarter-and-full-year
Acuity Q4 FY2022 & Full-Year Presentation: https://www.investors.acuitybrands.com/static-files/fa37f3cf-cce7-408e-9533-9ee3edbe0029
Acuity Q4 FY2022 & Full-Year Infographic: https://www.investors.acuitybrands.com/static-files/29254096-4a9d-4ff6-8fb2-e7de77dd960c