What Acuity (AYI) Said on Its Q4 Earnings Call

Key Points

• Q4 fiscal 2026 results improved: Sales rose 3% to $1.2 billion, adjusted operating profit increased 3% to $233 million, and adjusted EPS climbed 11% to $5.77. Strong growth in Acuity Intelligent Spaces offset a slight decline in the lighting business.
• AIS delivered strong growth, with sales up 17% and adjusted operating margin expanding to 24.9%, while ABL sales declined slightly and its operating margin compressed due partly to technology investments. Rising memory costs are expected to pressure AIS gross margins in fiscal 2027.
• Fiscal 2027 guidance calls for $4.7 billion to $4.9 billion in sales and adjusted EPS of $20.50 to $22. Acuity also highlighted strong cash generation, debt repayment, an 18% dividend increase and continued share repurchases.

Acuity NYSE: AYI reported higher fourth-quarter sales, adjusted profit and adjusted earnings per share for fiscal 2026, as growth in its Acuity Intelligent Spaces segment offset a modest decline in its lighting business.

For the fiscal fourth quarter, total net sales rose 3% year over year to $1.2 billion. Adjusted operating profit increased 3% to $233 million, while adjusted operating margin expanded 10 basis points to 18.7%. Adjusted diluted earnings per share rose 11% to $5.77, driven primarily by higher profitability and fewer diluted shares outstanding.

“We demonstrated solid execution in the fourth quarter of Fiscal 2026,” Chairman, President and Chief Executive Officer Neil Ashe said. He said the company increased sales, expanded adjusted operating profit and margin, generated strong cash flow and allocated capital effectively during the period.

AIS Growth Offsets Lighting Sales Decline

Acuity Brands Lighting, or ABL, generated fourth-quarter sales of $959 million, down less than 1% from a year earlier. Chief Financial Officer Karen Holcom said the comparison reflected elevated backlog in the prior-year period, when customers accelerated orders ahead of price increases during the second half of fiscal 2025.

On a two-year stacked basis, ABL sales were flat, while the company’s independent sales network and direct sales network combined grew 3%. ABL recorded an adjusted gross margin of 46.2%, which Holcom said was driven largely by product and productivity improvements. However, adjusted operating profit fell $14 million to $180 million and adjusted operating margin declined 130 basis points to 18.8%, as the business invested in technology.

The segment received $32 million in tariff refunds during the quarter and recorded a $15 million special charge tied to productivity actions involving its product portfolio, supply chain and operating footprint. Both items were excluded from adjusted results.

Ashe said Acuity expects continued structural improvements at ABL, including manufacturing-network changes, facility consolidation and rationalization of smaller brands and product lines. He said the company plans to target approximately 50 to 100 basis points of adjusted operating margin expansion annually over time.

Acuity Intelligent Spaces, or AIS, posted fourth-quarter sales of $298 million, up 17% year over year, supported by growth across its building operations and experiences portfolios. Its adjusted gross margin increased 200 basis points to 61.2%, while adjusted operating profit rose 36% to $74 million. Adjusted operating margin expanded 350 basis points to 24.9%.

AIS also received $13 million in tariff refunds and recorded a $3 million special charge related to a facility impairment, with both items excluded from adjusted results.

Memory Costs Expected to Pressure AIS Margins

Management said rising memory costs did not affect fourth-quarter performance but are expected to weigh on AIS margins during fiscal 2027. Holcom said the gross impact could be approximately a couple hundred basis points at the gross-margin level over the year.

The company expects the effect to begin late in the fiscal first quarter and extend into the second quarter, depending on when inventory moves through sales. Acuity said its first priority will be securing inventory for customers, followed by recovering higher costs in dollar terms and accelerating product and productivity initiatives to restore margins over time.

Ashe said AIS operating margins should be “flat to slightly” higher in fiscal 2027 despite the memory-cost pressure, as sales growth provides operating leverage. He emphasized that dollar margins are expected to increase as the segment grows.

Product Launches and Leadership Changes

During the quarter, Acuity appointed Ruth Gratzke as president of ABL. Ashe said Gratzke brings experience in industrial technology across go-to-market activities, product and engineering, and operations. She joined Acuity from Siemens.

ABL also introduced and expanded several products, including a Lithonia Lighting BLT luminaire designed for data centers, Holocore Element from Luminis, and the Ridge outdoor linear floodlight range from Hydrel. The company also highlighted its nLight controls platform, SensorSwitch offerings and eldoLED’s Accella 85-watt driver, which uses eldoLED studio and NFC technology.

Within AIS, the company pointed to QSC’s Network Video Management offering, which is designed to distribute and manage low-latency video across hundreds of endpoints, as well as RoomSuite, the Collaboration Bar and the Scheduling Panel for smaller and medium-sized spaces.

Ashe said Acuity is embedding artificial intelligence in internal processes and products, citing Q-SYS Reflect and Atrius DataLab as examples of offerings designed to help customers manage and optimize spaces using data and analytics.

Cash Flow, Debt Reduction and Fiscal 2027 Outlook

For fiscal 2026, Acuity generated $826 million in operating cash flow, up $225 million from fiscal 2025. The increase reflected operating performance, tariff refunds and lower tax payments, according to Holcom.

The company spent $78 million on capital expenditures, repaid $200 million in debt during fiscal 2026 and repaid an additional $200 million after year-end. Holcom said Acuity has now fully repaid the borrowings used to finance its QSC acquisition.

Acuity increased its dividend by 18% and used $287 million to repurchase more than 940,000 shares during the year. Since the beginning of the fourth quarter of fiscal 2020, the company has repurchased nearly 11 million shares at an average price of about $164 per share, representing nearly 28% of shares outstanding at that time, Holcom said.

For fiscal 2027, Acuity forecast total net sales of $4.7 billion to $4.9 billion and adjusted diluted earnings per share of $20.50 to $22. The outlook assumes flat to low-single-digit sales growth at ABL and low- to mid-teen sales growth at AIS.

Management said it expects the broader ABL market to be flat to down low single digits in fiscal 2027, with the company targeting growth through market-share gains, increased penetration in new verticals and corporate-account performance. Ashe also said Acuity continues to see data-center opportunities in both its lighting and intelligent-spaces businesses.

About Acuity (NYSE:AYI)

Acuity NYSE: AYI is a technology company that provides lighting, lighting controls and building-management solutions for commercial, institutional, industrial and residential environments. Its products are designed to improve illumination, energy efficiency, automation and the overall performance of indoor and outdoor spaces.

The company offers a broad portfolio of lighting fixtures, controls, sensors and connected-building technologies. Its brands and product lines have included Lithonia Lighting, Holophane, Peerless, SensorSwitch, Distech Controls and Atrius.

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