Acuity Beats Earnings Estimates as it Manages Supply Chain Issues

Editor’s Note:  Below is the press release we received this morning from Acuity, but one of the most important statements is: “Cost of goods sold rose 17.6% to outpace sales growth, with gross profit as a percentage of sales falling to 41.7% from 42.0%.”    It is a significant number and it tells us that Acuity is willing to pay higher prices to obtain components.  Nearly 18% is a huge increase in costs, and some companies would also cheerfully pay that premium if they had the opportunity, but many components simply aren’t available at any premium to some companies.  It looks like Acuity is managing their supply chain quite well. Because their Gross profit of $385M increased by 16%, it tells me they are successful with their timely price increases.

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  • Net Sales Increased 17% Over the Prior Year
  • Operating Profit Increased 34% Over the Prior Year
  • Diluted EPS Increased 57% Over the Prior Year

ATLANTA, Jan. 07, 2022 (GLOBE NEWSWIRE) — Acuity Brands, Inc. (NYSE: AYI) (the “Company”) a market-leading industrial technology company announced net sales of $926.1 million for the first quarter of fiscal 2022 ended November 30, 2021, an increase of $134.1 million or 16.9 percent, compared to the same period in fiscal 2021. Diluted earnings per share “EPS” was $2.46, an increase of 56.7 percent over the prior year.

“I am proud of our performance in the first quarter of fiscal 2022. Our team delivered sales growth of 17%, expanded our operating profit margin by 160 basis points and increased diluted EPS by 57% despite global supply chain challenges and unpredictable market conditions,” stated Neil Ashe, Chairman, President and Chief Executive Officer of Acuity Brands, Inc. “Our performance demonstrates that by prioritizing customers we are driving sales growth and turning that into operating income while continuing to invest in the long-term growth and transformation of the Company.”

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, driven by revenue growth as well as our ability to largely offset the significant increase in material and freight costs through price increases and product and productivity improvements. Gross profit as a percent of sales was 41.7 percent for the first quarter of fiscal 2022, a decrease of 30 basis points from 42.0 percent over the prior year.

Operating profit of $115.1 million for the first quarter of fiscal 2022 increased $29.4 million, or 34.3 percent over the prior year. Operating profit was 12.4 percent of net sales for the first quarter of fiscal 2022, an increase of 160 basis points from 10.8 percent over the prior year. The improvement in operating profit margin was due primarily to improved leveraging of our operating costs.

Adjusted operating profit of $133.0 million for the first quarter of fiscal 2022 increased $28.8 million, or 27.6 percent over the prior year. Adjusted operating profit was 14.4 percent of net sales for the first quarter of fiscal 2022, an increase of 120 basis points from 13.2 percent in the prior year.

Net income of $87.6 million for the first quarter of fiscal 2022 increased $28.0 million, or 47.0 percent, over the prior year. Diluted earnings per share of $2.46 for the first quarter of fiscal 2022 increased $0.89, or 56.7 percent, from $1.57 in the prior year.

Adjusted net income of $101.3 million increased $24.4 million, or 31.7 percent, over the prior year. Adjusted diluted earnings per share of $2.85 increased $0.82, or 40.4 percent, from $2.03 in the prior year.

Segment Performance

Acuity Brands Lighting and Lighting Controls (“ABL”)

ABL generated net sales of $883.6 million for the first quarter of fiscal 2022, an increase of $130.0 million or 17.3 percent, over the prior year with acquisitions contributing less than 4% to current year sales growth.

  • Net sales of $636.8 million in the Independent Sales Network and $90.0 million in the Direct Sales Network increased 13.8 percent and12.4 percent, respectively, over the prior year.
  • Sales in the Corporate Accounts channel of $37.0 million increased 61.6 percent over the prior year as large accounts continuing to carry out previously deferred maintenance and renovations.
  • Retail sales of $46.9 million declined 16.3 percent over the prior year.

Operating profit was $128.1 million for the first quarter of fiscal 2022, an increase of $29.7 million or 30.2 percent over the prior year. Adjusted operating profit was $138.2 million for the first quarter of fiscal 2022, an increase of $29.9 million or 27.6 percent, over the prior year.

Intelligent Spaces Group (“ISG”)

ISG generated net sales of $46.4 million for the first quarter of fiscal 2022, an increase of $5.6 million or 13.7 percent over the prior year.

Operating profit was $2.0 million for the first quarter of fiscal 2022, an increase of $2.1 million over the prior year. Adjusted operating profit was $6.1 million for the first quarter of fiscal 2022, an increase of $2.4 million or 64.9 percent over the prior year.

Cash Flow and Capital Allocation

Net cash from operating activities of $83.7 million decreased $40.2 million, or 32.4 percent for the first three months of fiscal 2022 compared to the same period in the prior year. This decline primarily reflects the increased working capital to support the growth of the business, timing of income tax payments, and the prior year deferral of withholding taxes under the CARES Act.

During the first three months of 2022, the Company repurchased 0.3 million shares of common stock for a total of $52.8 million at an average price of $175.75 per share. The Company had approximately 3.5 million shares remaining under its most recent share purchase authorization at the end of the first fiscal quarter of 2022. Since May of 2020, the Company has reduced the outstanding share count by approximately 12 percent.

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