Acuity Inc.

Neil Ash.

Thank you, Charlotte, and good morning to all of you joining us. Our fiscal fourth quarter performance demonstrated excellent execution. Our focus on margin and cash generation led to increased adjusted operating profit margin and higher adjusted diluted earnings per share, despite a decline in sales in the lighting business. This quarter concluded a successful year. We delivered strong financial performance, we continued to improve our businesses, and we allocated capital effectively. Throughout fiscal 2023, both our lighting and spaces teams made meaningful progress driving our business forward. In our Acuity brand's lighting and lighting controls business, our strategy is to increase product vitality, improve service level, use technology to improve and differentiate both our products and our services, and to drive productivity. In 2023, we realigned our product portfolio through the introduction of Design Select, we now have three defined ways in which we go to market, contractor select, design select, and made to order. By combining a high product vitality and improved service levels, design select allows us to better serve lighting specifiers, distributors, and electrical contractors. The realignment of our portfolio, together with our ongoing product vitality efforts, has allowed us to strategically manage price in a dynamic environment. while the ongoing productivity improvements in our supply chain continue to improve our processes and manage our costs. We also continuously evaluate our portfolio. This year, that evaluation resulted in the divestiture of our SunOptics daylighting business and the decision to exit Winona Custom Architectural Lighting Solutions. There's a bit of noise in the numbers this quarter, resulting from a series of actions. The first is the result of our ongoing transformation efforts. We have redefined our work, where and how it is done, resulting in organizational changes that will lead to more efficiencies. The second are charges primarily for impairments of trade names related to prior acquisitions. The third charge resulted from the collectability of a supplier warranty obligation owed to us for components we used in products manufactured and sold between 2017 and 2019. Karen will cover each of these in more detail. This year, our teams have refreshed approximately 20% of our product portfolio and have introduced many new product families. I'd like to highlight our American Electric Lighting brand, where we launched AutoConnect, which is a durable, value-driven solution for outdoor infrastructure lighting that includes connected luminaires for roadway, industrial, and commercial applications. The rollout was targeted to coincide with the anticipated increase of infrastructure investment and positions us well for continued success. In August of this year, the City of Philadelphia announced that it has selected our American Electric outdoor lighting product as a major supplier for the Philadelphia Street Light Improvement Project. The citywide project will replace and connect approximately 130,000 street lights into a network of more efficient, longer-lasting, remotely controlled LED lights, which is expected to reduce street lighting energy usage by more than 50%. and is expected to reduce municipal carbon emissions by more than 9%. Our team continue to be recognized for our innovation and the value that our products bring to our customers. In the fourth quarter, six of our lighting solutions were selected for the 2023 Illuminating Engineering Society Progress Report, which showcases the year's most significant advancements in the art and science of lighting, including our warm dim technology from AccuLux, emergency battery backup cylinders from Gotham, and flame lighting technique from Hydrel. Our marketing team was also announced as a winner of the Best of the Best Marketing Award for 2023 by the Electrical Distributor Magazine. Now, moving to Spaces, where we had another great year. The strategy for our Intelligent Spaces business is to make Spaces smarter, safer, and greener by connecting the edge to the cloud. Distech has the best edge control devices on the market, and Atrius will be the best in cloud applications. Our strategic priority for Distech is to expand our addressable market in two ways. The first is geographic, and the second is increasing what we control in a built space. In 2023, we continue to drive this strategy forward by establishing a presence in the UK market and through the acquisition of Key2Therm, which added commercial refrigeration controls to our portfolio. The integration of Key2Therm is progressing well, and we rounded out a successful year with them being awarded a 2023 Dealer Design Award. Earlier this year, we launched Atrius Data Lab, the intersection point between the edge devices in DISTEC and the applications in the cloud. Atrius Data Lab is a foundational to our ability to automate the environment of a built space and help ensure that our partners achieve their specific energy and sustainability goals. During the quarter, Atrius was named as the Sustainability Leadership Award winner in the 2023 Sustainability Awards Program. The program honors people, teams, and organizations who have made sustainability an integral part of their business practice or overall mission. I am pleased with the progress we have made as a team in 2023. We have successfully positioned our company at the intersection of sustainability and technology, setting ourselves up for long-term growth, by taking advantage of two of the most important megatrends, minimizing the impacts of climate change and maximizing the impacts of technology. Our AVL business continued to lead as the largest lighting and lighting controls company in North America. And we have made the business more predictable, repeatable, and scalable by focusing on product vitality, improving service levels, the use of technology throughout the business, and driving productivity. Our spaces business continued to grow as an attractive technology business that connects the edge to the cloud for built spaces. GizTech has a significant technology advantage that we can continue to expand as the mechanical and analog controls of today become digital over time. And Atrius introduced new applications in the cloud that are already making a difference for our customers. We have changed how the company works through our better, smarter, faster operating systems. Better, smarter, faster is the combination of processes, tools, and ways of working that spans from strategy to people to operating rhythms to problem solving. It is unique to our organization and allows us to drive strategic alignment, manage change, and deliver results. Our values are at the core of our culture and help create a shared purpose for achieving our company's strategic goals. We make decisions based on our values, and these values impact how we treat each other and how we serve our customers. The combination of better, smarter, faster, and our values allows us to operate more efficiently with greater distribution of responsibility and accountability throughout the company. It is how we continue to improve our businesses and respond quickly and effectively to changing economic environments. The alignment of everyone in our organization to our value creation model through our total rewards framework compounds that responsibility and accountability. Our associates understand how they contribute to our overall strategy. If you stop people in our company and ask them how we create value, they will answer, we grow net sales, we turn those profits into cash, and we don't grow the balance sheet as fast. This year, we have continued to demonstrate that we are effective capital allocators. We have invested for growth in our current businesses through R&D and capital expenditures. We've enhanced our portfolio through the exit of SunOptics and the acquisition of Key2Therm. We've maintained our dividend, and we've created permanent shareholder value with approximately $1.3 billion in share purchases since the beginning of the fourth quarter of fiscal 2020, which amounts to about 23% of the Venn shares outstanding. As we turn to our fiscal 2024, our strategic priorities remain the same. In our lighting business, we will continue to drive margin and cash flow. We expect roughly the same market conditions in lighting for the remainder of this calendar year, with the potential for some improvement in the next calendar year. We will continue to grow our intelligent spaces group in three ways. Geographically, by adding control planes, and by delivering applications that make a difference in built spaces. We will continue the development of our better, smarter, faster operating system in order to improve our current businesses and those that we acquire in the future. and we will continue to allocate capital consistent with our priorities. Now, I'll turn the call over to Karen, who will update you on our 2023 performance and provide more details about 2024.

Thank you, Neil, and good morning to everyone on the call. We executed well throughout fiscal 2023. In a challenging sales environment in the lighting business, we improved our adjusted operating profit by $9 million year over year, and generated cash flow from operations of $578 million. We continued to improve our businesses and allocated capital effectively. For total AYI, we generated net sales in the fourth quarter of approximately $1 billion, which was $100 million, or 9% lower than the prior year, as a result of the decline in net sales in our ABL business. This is partially offset by continued growth in the ISG business of 17% in the quarter. We continued to deliver year-over-year margin improvements. During the quarter, our adjusted operating profit was down year-over-year on lower sales, while we expanded adjusted operating profit margin to 16.1%, an increase of approximately 80 basis points from the prior year. The increase was driven largely by the significant improvement in our gross profit margin as we continue to strategically manage price and cost. During the quarter, our adjusted diluted earnings per share of $3.97 increased two cents or 1% over the prior year. In ABL, net sales were $944 million in the quarter, a decrease of 11% compared with the prior year, driven by declines across most of our channels offset slightly by continued strong performance in our retail channel. ABL's adjusted operating profit decreased 2% to $159 million on lower net sales, and we delivered adjusted operating profit margin of 16.8%, a 150 basis point improvement over the prior year, as we strategically managed price and input costs improved, particularly steel and inbound freight. As Neil mentioned at the beginning of the call, we also took several charges during the quarter that primarily related to ABL. Taken together, these amounted to $35.5 million in non-recurring pre-tax charges or 87 cents in diluted earnings per share. The first is a result of our ongoing transformation efforts and includes a charge of $6 million in severance as we realigned how we work. The second is a $16.5 million non-cash impairment charge for a small investment and for certain trade names related to prior acquisitions. In addition, we transitioned several of those trade names from indefinite to definite lives to more accurately reflect their value. The third is a $13 million pre-tax non-cash charge for the impairment of a receivable based on its collectability. The receivable is from a supplier who owes us a warranty obligation related to the recovery of quality costs we have incurred for certain ABL outdoor lighting products manufactured and sold between 2017 and 2019. We are pursuing recovery from the supplier. ISG's net sales for the fourth quarter were $72 million, an increase of 17% as DISTEC continued to win business across new and existing customers. This quarter, we also had a modest benefit from the acquisition of Key2Therm. ISG's adjusted operating profit was $14 million, which was a decline of approximately 3% over the prior year as we continued to invest in the business for long-term growth. Now, turning to our cash flow performance. We generated $578 million of cash flow from operating activities for the full year of fiscal 2023. an increase of $262 million over the prior year, driven largely by improvements in working capital. We've improved both days of inventory and accounts receivable compared to the end of fiscal 2022. In fiscal 2023, we invested $67 million in capital expenditures and allocated $269 million to repurchase approximately 1.6 million shares. Since the beginning of the fourth quarter of fiscal 2020, we have repurchased over 9 million shares at an average price of approximately $143 per share, which was funded by organic cash flow. I now want to spend a few minutes expanding on our outlook for 2024. Consistent with our 2023 guidance, we are going to provide annual guidance anchored around net sales and adjusted diluted EPS. We will also provide you with certain assumptions which you can find in the supplemental presentation available on our website after the conclusion of this call. For full year fiscal 2024, our expectation is that net sales will be within the range of $3.7 billion and $4 billion for total AYI. This is based on the assumptions that ABL will deliver sales down low to mid single digits as a result of conditions in the lighting macro environment. And ISG will continue to generate sales growth in the mid-teens as we continue to take share and expand geographically and into new control planes. We expect to deliver adjusted diluted earnings per share within the range of $13 to $14.50 for total AYI. Our capital allocation priorities in 2024 are unchanged and we will continue to focus on delivering margins and cash flow. In conclusion, we strategically managed price and cost and delivered margin growth at ABL. We continued to grow the Intelligent Spaces Group. We generated strong cash flow from operations and allocated capital effectively. We continued to improve the business through product and productivity improvements, and we continue to take the steps necessary to drive our transformation forward. Thank you for joining us today. I will now pass you over to the operator to take your questions.