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Acuity Brands (AYI) looks to shine today after exceeding Q1 (Nov) earnings estimates. The lighting and light control product supplier also boosted its adjusted operating margins in the quarter, benefiting from product vitality, price management, and productivity improvements. Additionally, AYI bumped its FY25 (Aug) guidance higher after incorporating its recently closed acquisition of QSC last week. However, a slight miss on its top line in the quarter may be keeping a lid on the stock today. It is important to note that shares gained roughly +50% in 2024, opening the door to modest profit-taking.

• Headline numbers were still solid in Q1. AYI expanded its bottom line by 7% yr/yr to $3.97, supported by a 20 bp bump in adjusted operating margins to 16.7%. Revenue inched 1.8% higher yr/yr to $951.6 mln, relatively consistent with AYI's +2.2% growth delivered last quarter. It also marked back-to-back quarters of positive growth following five straight periods of declining sales.
• Both AYI's segments experienced growth, with Lighting climbing by 1.1% to $886.0 mln while Intelligent Spaces swelled by $14.5% to 73.5 mln.
  • In Lighting, AYI has stepped up its efforts to deliver a more consistent and predictable performance each quarter by leveraging technology that offers multiple functionalities. This allows distributors to carry fewer SKUs while providing more options for consumers.
  • In Intelligent Spaces, AYI is capitalizing on customers opting for smarter working and living spaces. The company is also penetrating additional markets, adding capacity in the U.K., Asia, and Australia.
• In October, AYI purchased QSC, a cloud-manageable audio and video control platform, for $1.215 bln, representing around 14x QSC's estimated trailing twelve-month EBITDA. AYI anticipated the acquisition to be accretive to its FY25 adjusted EPS. With the purchase closing last week, AYI updated its FY25 forecast to include QSC, targeting revs of $4.3-4.5 bln, up from $3.9-4.1 bln and adjusted EPS of $16.50-18.00, up from $16.00-17.50.

AYI's Q1 report may not be shining all that brightly today. However, the company registered sound results that may be enough to keep its stock trending positively over the near term. The inclusion of QSC fortifies AYI's Intelligent Spaces segment, allowing the firm to now possess the opportunity to control the building and what happens in the space, bringing a unique combination of data collection and the ability to control that data. While Lighting revenue growth may remain sluggish over the next few quarters as the retail side drags its feet, management was optimistic about 2025 being a better year for the business than 2024, potentially supporting a string of positive yr/yr sales growth in the coming quarters.