What Management Said

Read the full Q1 2026 transcript ↗

We grew net sales, we expanded our adjusted operating profit and adjusted operating profit margin, and we increased our adjusted diluted earnings per share. In the Refuel segment, we continue to expand and upgrade our lighting solutions. In this quarter, we began delivering a comprehensive offering by incorporating AIS products, including our Atrius software and Distech controls, into the Refuel solution. We grew net sales, improved adjusted operating profit and adjusted operating profit margin, and increased our adjusted diluted earnings per share.

This was driven by growth in both business segments and includes three months of QSC sales. Adjusted operating profit margin during the quarter expanded to 17.2%, an increase of 50 basis points from the prior year. Our adjusted diluted earnings per share was $4.69, which was an increase of $0.72, or 18% over the prior year. ABL delivered sales of $895 million, an increase of $9 million, or 1% versus the prior year, primarily as a result of growth in the independent sales network.

As we mentioned last quarter, the independent sales network benefited from an elevated backlog that resulted from orders that were accelerated in advance of price increases in the back half of fiscal 2025. The higher backlog favorably impacted the fourth quarter of last year and the first quarter of this year. We delivered adjusted operating profit margin of 17.9%, which was up 60 basis points compared to the prior year. Sales for the first quarter were $257 million, an increase of $184 million with the inclusion of three months of QSC.

What went well
  • Acuity opened fiscal 2026 with total net sales of $1.1 billion, up $192 million or 20% year-over-year, driven by growth in both operating segments plus the inclusion of three months of QSC.
  • Adjusted operating profit rose $38 million, or 24%, to $196 million, adjusted operating profit margin expanded 50 basis points to 17.2%, and adjusted diluted EPS increased $0.72, or 18%, to $4.69.
  • Acuity Brands Lighting performed well in a tepid market, lifting adjusted operating profit margin 60 basis points to 17.9% through disciplined operating-expense reduction while continuing to target 50-100 basis points of annual operating-margin improvement.
  • Acuity Intelligent Spaces delivered strong results with adjusted operating profit margin up 100 basis points to 22%, and both the combined Atrius/Distech business and QSC each grew in the mid-teens.
  • The company generated $141 million of operating cash flow (up $9 million year-over-year), repaid another $100 million of the term loan to reach $300 million of the $600 million QSC financing repaid, and returned $28 million via buybacks of over 77,000 shares.
  • Strategic execution advanced across the portfolio: the new EAX Area Luminaire launched with 60-plus configurable options, the Refuel offering now spans the whole company by adding Distech and Atrius controls, and a combined Distech Resense Move plus Q-SYS autonomous-room solution won a full-headquarters rollout with a large multinational technology company.
What went wrong
  • Management again characterized the lighting market as tepid, with customers waiting for clarity on interest rates, inflation, and policy, and Neil Ashe acknowledged they would like the lighting market to be stronger.
  • ABL net sales grew only 1% ($9 million), and the segment's gross profit margin actually declined in the quarter, with the operating-margin gain coming from operating-expense cuts rather than volume or gross margin.
  • Both segments benefited from an elevated backlog created by orders accelerated ahead of back-half fiscal 2025 price increases, a tailwind that helped Q4 and Q1 but is now normalizing, so the CFO cautioned that Q2 could be down a little more than normal seasonality.
  • The tariff environment remained inconsistent, with a series of Section 232 steel and other tariffs coming in and out at different times pressuring ABL gross margins, and an imminent Supreme Court ruling added uncertainty over pricing and potential refunds.
  • The independent (ISN) and direct (DSN) sales networks diverged more than normal in the quarter, which management attributed largely to backlog strength and accounts moving between the two channels rather than a clean underlying read.
  • Despite the strong start, Acuity did not raise its outlook, simply reaffirming the sales and EPS guidance issued in the fourth quarter.

Guidance Changes

MetricPeriodCurrent guidance
Net sales (FY2026)FY2026Reaffirmed unchanged; the same sales guidance slide from the fourth quarter will be re-posted, with nothing changed
Adjusted diluted EPS (FY2026)FY2026Reaffirmed unchanged; same EPS guidance as provided in the fourth quarter
ABL adjusted operating profit marginLong-term / annualOn track and running within the 50-100 bps annual improvement range (up 60 bps to 17.9% this quarter); confident in continuing to drive ABL margins over the long term
AIS gross marginOngoingComfortable holding around 60%; may add some slightly lower-margin business models as products are added, balancing the mix
Q2 seasonalityQ2 FY2026Expected to be down a little more than normal seasonality (especially in lighting) as the elevated backlog normalizes; first half broadly representative of normal seasonality

Performance Breakdown

MetricYoYNote
Total net sales +20% (+$192M) to $1.1B Growth in both business segments plus the inclusion of three months of QSC.
Adjusted operating profit +24% (+$38M) to $196M Higher sales and margin expansion across both segments; adjusted operating profit margin up 50 bps to 17.2%.
Adjusted diluted EPS +18% (+$0.72) to $4.69 Growth in net sales, improved margins, and effective capital allocation.
ABL net sales +1% (+$9M) to $895M Growth in the independent sales network, which benefited from an elevated backlog of orders accelerated ahead of back-half fiscal 2025 price increases.
ABL adjusted operating profit margin +60 bps to 17.9% Operating-expense reduction and prior-year cost actions more than offset a decline in gross profit margin (adjusted operating profit up $6M to $160M).
AIS net sales +$184M to $257M Inclusion of three months of QSC, with combined Atrius/Distech and QSC each growing in the mid-teens, aided by the same elevated backlog dynamic.
AIS adjusted operating profit margin +100 bps to 22% Strong performance and the strategic value of the controls portfolio; adjusted operating profit of $57M.
Operating cash flow +$9M to $141M Primarily higher profitability in the first three months of fiscal 2026.

Earnings Call Themes & Trends

TopicPrevious mentionCurrent periodTrend
Cross-sell and autonomous spaces (Distech + QSC)Atrius, Distech, and QSC positioned to work together over timeFirst real coming-together delivered: Distech Resense Move multi-sensor plus Q-SYS creates an autonomous room (adjusting screens, cameras, microphones, lighting, shades), demonstrated in the experience center and chosen for a full-HQ rollout by a large multinational technology company; management stresses cross-sell should be customer-pulled, not pushed.—
New-vertical expansion (Refuel / convenience stores)Entered the market via canopy lighting productsRefuel now spans the whole company, adding Atrius software and Distech controls to manage everything from canopy lighting outside to back-of-store refrigeration; management frames it as proving a repeatable 'muscle' to attack new verticals (also healthcare, sport lighting), while acknowledging gaps such as digital signage and existing competitors.—
Tariffs and pricingReacting to tariff-driven cost pressureSection 232 steel and other tariffs have come in and out inconsistently; Acuity responded with accelerated productivity and strategic pricing; ahead of a Supreme Court ruling, management's working hypothesis is that things stay mostly the same and that any tariff refund would flow down the distributor-contractor-owner chain rather than be pocketed.—
Backlog normalizationElevated backlog levels post-COVID and through the price-increase periodBacklog is now more consistent with pre-COVID/pre-tariff levels, so order rate more closely tracks quarterly performance; the elevated backlog that boosted Q4 and Q1 is largely worked through, with Q2 expected to show more seasonality, especially in lighting.—
Lighting market conditionsTepid lighting market for roughly three quartersStill tepid, with the market waiting on interest rates, inflation, and policy; Acuity believes it is at least holding, if not accelerating, its share position and remains the best-performing lighting business, expecting to benefit when the market strengthens.—
AIS margin profile and capital deploymentAIS as strategically differentiated, high-margin controls businessAIS operating margin reached 22% and gross margin comfortable near 60%; management sees continued organic and inorganic opportunities to add to the AIS portfolio over the next two years, potentially including some lower-margin business models.—
Capital allocation and deleveragingFinancing the QSC acquisition with $600M of debtRepaid another $100M of the term loan (now $300M of $600M repaid), repurchased over 77,000 shares for $28M at roughly $357, and generated strong operating cash flow of $141M.—

Q&A Summary

Chris Snyder (Morgan Stanley) asked whether ABL is positioned to deliver typical gross-margin seasonality (including the usual back-half step-up) now that tariff pressure appears to be in the base.
Neil Ashe said the last nine months carried a lot of noise from inconsistent Section 232 and other tariffs coming in and out, which Acuity offset with accelerated productivity and strategic pricing that is still cascading through the P&L; he was confident in continuing to drive ABL margins on a longer-term basis, targeting 50-100 basis points of operating-margin improvement per year, noting this quarter simply benefited more from OpEx than from gross profit margin.
Chris Snyder (Morgan Stanley) followed up on why the ABL SD&A step-down from Q4 to Q1 was more muted than the usual volume-driven decline.
Karen Holcom explained ABL had already begun taking costs out and realigning work back in the third and fourth quarters of last year, so a good chunk of the reduction was already done, making the sequential step-down more muted; the focus was on year-over-year operating-margin improvement, which came in up 60 basis points despite the gross-profit decline.
Timothy Wojs (Baird) asked whether the ABL/AIS cross-sell efforts in fueling and office markets are revealing any product-portfolio gaps Acuity needs to fill.
Ashe said cross-sell should be customer-pulled rather than pushed, which builds more durable relationships; the highlighted examples (Distech plus QSC for autonomous rooms, and Refuel spanning canopy lighting through back-of-store refrigeration controls) do not require additional products to deliver, though gaps like digital signage exist, and he sees organic and inorganic opportunities to expand the AIS portfolio over the next two years or so.
Timothy Wojs (Baird) asked, on modeling, whether the elevated-backlog execution is now behind the company and growth could slow closer to the market over the next couple of quarters.
Holcom agreed, saying historical seasonality will be skewed as both ABL and AIS were favorably impacted by the higher backlog; the first half is more representative of normal seasonality, but Q2 could be down a little more than normal.
Christopher Glynn (Oppenheimer) asked about the wider-than-normal divergence between the independent (ISN) and direct (DSN) sales networks beyond the backlog strength called out.
Ashe said he tends to combine the two networks, and on a combined basis they landed exactly where expected; accounts move between ISN and DSN, which creates some of the noise, but together there was no concern.
Christopher Glynn (Oppenheimer) followed up on the convenience-store/under-canopy opportunity combined with Q-SYS, given an established competitor and the acknowledged signage gap, asking about penetration progress.
Ashe said Acuity is very pleased with its market entrance; the real point is proving the company can identify a sizable organic opportunity and build the product portfolio, go-to-market, and entrepreneurial spirit to attack a new vertical, a 'muscle' applicable to healthcare, sport lighting, and beyond; the convenience-store market is a comparatively small part of the company, and Acuity does not expect to be the only player.
Michael Francis (William Blair, on for Ryan) asked, as a cleanup, whether anything had changed in the outlook since the guidance slide was absent from the deck.
Holcom said nothing changed; the presentation Charlotte will post after the call includes the same sales and EPS guidance slide provided in the fourth quarter.
Michael Francis (William Blair) asked about AIS gross margins, noting ~60% is often seen as a ceiling and whether there is more room.
Ashe said the company feels good about ~60%, which demonstrates the strategic value of Acuity's controls; as it adds products to the portfolio it may introduce some slightly lower-margin business models that balance the mix, but net-net he was comfortable with where AIS margins are.
Michael Francis (William Blair) asked whether anything had changed in the quoting environment given unchanged end markets.
Ashe reiterated a tepid lighting environment for about three quarters, with all indications that Acuity is at least holding and possibly accelerating its share position; on the AIS side, the disruptive Atrius, Distech, and QSC businesses are effectively growing through the market environment by taking share, though not necessarily up as much every quarter.
Jeffrey Sprague (Vertical Research) asked how Acuity would respond if the upcoming Supreme Court ruling made tariffs illegal, including whether it would roll back price or could pocket some spread.
Ashe's working hypothesis is that things stay mostly the same, with some counterbalance likely even under an adverse ruling; practically, since Acuity sells to distributors who sell to contractors who sell to building owners, any tariff refund would have to flow down that chain rather than be retained, which he does not see as reasonable, and the company would then adapt to whatever new market emerged, confident in the dexterity it has shown versus the industry.
Jeffrey Sprague (Vertical Research) followed up on whether backlogs are now in a normal spot relative to the top-line guide or below normal given the tepid outlook.
Ashe said the industry and Acuity had grown accustomed to higher backlog levels through the post-COVID and price-increase period, and backlog is now more consistent with pre-those-events levels, so the order rate more closely matches quarterly performance; residual price-market noise from Q3 and Q4 is why more seasonality is expected in Q2, especially in lighting, though the company is comfortable operating in either environment.

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Q1 2026 call
Reported 2026-01-08 · figures from the Acuity Inc. (De) Q1 2026 earnings call.

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