Acuity Brands (NYSE: AYI) reported Q4 and Full Year 2023 results this week, showing a strong financial performance for the full year with increased adjusted operating profit margin and higher EPS, despite a decline in sales in the lighting business. Full year FY2023 net sales were $3.95B, down -1% from FY2022’s net sales of $4.01B. Adjusted EBITDA for Full Year 2023 was up +1% at $649M vs FY2022’s EBITDA of $642M. Full Year 2023 sales by segment: Acuity Brands Lighting (ABL) had net sales of $3.7B, down -2.3% from FY2023, and Intelligent Spaces Group (ISG) generated net sales of $252.7M, up +16% compared to FY2023.
Net sales for Q4 FY2023 were $1.01B, a decline of -9% compared to the prior year Q4 at $1.11B. Adjusted operating profit margin increased to 16.1%($162.3M) in Q4 FY2023 compared to 15.3%($169.7) in Q4 FY2022. However, the improvement is based on the company taking several charges during Q4 FY2023 including $6M in severance, $16.5M for “impairment of trade names related to prior acquisitions” and $13M for impairment of a receivable from a supplier related to warranty obligation.
Chairman, President and CEO Neil Ashe noted the decline in Q4 sales in the lighting business in his prepared comments on the earnings call, but highlighted Acuity’s “focus on margin and cash generation” and their strong financial overall performance. The company has now realigned its product portfolios, aligning with the three ways Acuity goes to market: Contractor Select, Design Select and Made to Order. CEO Ashe said during the earnings call Q&A that the order backlog has returned to typical levels and that “lead times are in the 20- to 30-day range in our lighting business, which translates to a performance where orders and shipments are consistent…so we have returned to a more normal correlation between order intake and shipment rate.”
Asked during the earnings call Q&A about Acuity’s strong cash position and M&A, CFO Karen Holcom noted that their capital allocation priorities going forward remain the same as in FY2023: “First, to invest in our current businesses for growth; Second, to invest in M&A; Third, to maintain our dividend; and fourth will be share repurchases.”
Looking ahead to FY2024, Acuity is guiding for net sales in the range of $3.7B to $4.0B, with ABL expecting net sales down by low- to mid-single digits, and ISG expecting net sales up in the mid-teen digits.
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