Yesterday, your humble editor had a video call with Neil Ash CEO of Acuity Brands, Trevor Palmer, President of Lighting and Lighting Controls (ABL) and Peter Han, President of Intelligent Spaces Group (ISG). Acuity announced strong 3Q results and hosted a very successful Investor Day. It was professional, and yet easy for stakeholders to better understand Acuity’s business. Neil explained they had the opportunity to do something different and wanted people to feel the texture of the company, as opposed to the typical quarterly call with investors. In the presentation, Trevor explained the ABL segment which generated sales of $850M in Q3. Peter detailed ISG, bringing in Martin Villeneuve, Distech Controls President into the presentation. ISG generated net sales of $55.4 million.
During my interview, I brought up the following subjects:
Price Increases
Neil talked about recapturing price and that it was different because the cost increases are real. He discussed that commodity prices are swinging wildly, and their price announcements help give some consistency and stability to their customers to manage their business. I pressed a few times on whether we will see more price increase announcements from Acuity during the calendar year and Neil stated, ‘We will continue to effectively manage the business and service our customers.” He used a bullwhip as a metaphor for restarting the economy, saying, “A year ago we were thinking about how to hunker down and now we are in this fast ramp mode.”
Controls
During the Investor Day conference, the team discussed a college campus where a professor, or even a student, may be able to control the lighting. I pursued that specific example in a retrofit job. Would Acuity consider this an ABL job or a ISG job?
Trevor explained, “Think of the two segments as loosely coupled but tightly aligned.” He said there would be projects where system integrators and reps will want to work together, and they support that, explaining “There could be opportunities to apply Atrius and Distech (ISG) technology and lighting and lighting controls (ABL) technology at the same time but they would never force-fit that.” I suggested that the reps will want the entire job and Trevor reiterated that they are free to work together, but Acuity would not force-fit them to work together. Peter added, “Customers don’t think in terms of ABL and ISG, they think in terms of problems they are trying to solve, and Acuity offers a real synergy.” Peter cited an example of a multibillion-dollar national chain retailer with several locations that he visited last week, saying, “We initially engaged them on tech as they wanted do some things with smart shopping, aisle management, and endcap monetization. As the discussion progressed, the retailer mentioned they wanted new lights to make the merchandise pop, so this is where we would pull in Trevor’s team.”
Neil explained that there was much historical confusion and said that Trevor is selling content which can be Atrius-enabled. The physical technology is in the lighting and lighting controls business and the software is Atrius. He explained, “Reps are selling content and they are really darn good at it. We want to speed their ability to do this and nLight is a brand that is thriving in the independent sales network.” He went on to say that Acuity is being more purposeful about Atrius as that is the software piece.
LiFi
I asked Peter about LiFi and he said that the investor call was not intended to make any product roadmap announcements.
Rockpile AI
Neil explained that the purchase of Rockpile makes them different than any other industrial company. The acquisition gives them the ability to hire people that are capable of developing Edge AI capabilities. He said, “We can recruit and develop that talent organically.”
Future Acquisitions
I asked if there were any European lighting companies on the M&A roadmap and Neil explained their strong position in North America and that lighting companies outside of the Americas have very different business models and an acquisition is almost like buying a totally different business. He said they would consider European lighting companies but would not make any predictions.
Channel Conflicts
When I asked about whether reps or distributors should be nervous about direct sales, Trevor reminded me that they have always had a direct market approach with some retail and large national corporate customers, but he emphasized that Acuity engages with the agents and the reps are part of the ecosystem to execute and coordinate those projects. He also cited the work that Holophane has done historically with their direct sales channel with utilities and municipalities. Neil emphasized the importance of the independent sales network and that both he and Trevor are investing in those rep relationships.
The Investor day ended with a question about what each executive is looking forward to. I turned the question around and asked what keeps each executive awake at night.
Peter explained the macro issues cause him concern. He said, “Clearly we are seeing demand grow as customers re-enter hybrid offices.” He said there is a concern about where the world goes from here, post-pandemic.
Trevor had a similar response about the bounce back and the unpredictably that is out of their control. He did put a nice spin on the situation by citing their North America manufacturing and the ability to have the right product in the right place at the right time. Neil interjected, “We have containers on the water, too. We are just managing it effectively.” Trevor said, “I feel good about what the team has achieved in the last 18 months. We came out of the pandemic stronger and we are hyper focused on the culture.”
Neil had a different take as he has trouble sleeping sometimes because he is so excited about all their opportunities, stating, “I woke up at 5 am this morning and could not wait to begin this day.”