We grew net sales, we expanded our adjusted operating profit, and we increased our adjusted diluted earnings per share. Contractor Select drives growth and productivity for electrical distributors and retailers by lowering their cost of doing business and reducing their inventory requirements. The Eureka Segment earned the prestigious Best of the Best recognition, while Tulip, Jerry, and Orelia received multiple product design awards. Now, switching to Acuity Intelligent Spaces, which continue to deliver strong sales and margin performance.
Today, I want to focus on Distech, where we have delivered strong, consistent growth and margin expansion. Through open protocols, open tools, and an independent system integrator network, we have customers full control over how their systems are deployed, serviced, and upgraded over time. Our investments in product innovation, combined with productivity enablers such as AI-enabled programming tools, workflow automation, and the expansion of Distech Academy, are making our partners more efficient and driving growth across the platform. Our third quarter order trends indicate that demand in the lighting market is firming.
We are focused on executing our strategy and advancing our growth algorithm while managing gross profit margin through strategic pricing, product innovation, and productivity improvements, positioning us well for today and for the future. Our focus will continue to be on growth, and we have the opportunity to continue to expand margins over time. We grew net sales, improved adjusted operating profit, and increased our adjusted diluted earnings per share. This was driven by growth in AIS, partially offset by revenue declines at ABL.
| Metric | Period | Current guidance |
|---|---|---|
| ABL sequential sales (Q3 to Q4) | Q4 FY2026 | Expect continued growth from Q3 to Q4 as normal, though the increase may not be as steep as the Q3 sequential step-up; current order rates set up well for Q4 |
| Lighting demand outlook | Next four quarters | Proprietary models point to a firming of demand over the next ~12 months; not a dramatic increase, but a firming as the market finds more normal patterns |
| ABL gross profit margin | Long-term | Expect to continue expanding gross margin via product vitality, service levels, technology, and productivity even in a soft-volume environment; further expansion when volume growth returns |
| SG&A / operating leverage | Next couple of years | Expect significant SG&A operating leverage as lighting outgrows the market and as higher-margin AIS becomes a larger portion of the total company |
| Memory / supply-shock impact | ~Next year | To be managed over the next year or so, primarily an AIS (not ABL) impact; handled like tariffs — secure availability, cover dilution with dollars, then restart productivity |
| Capital allocation framework | Ongoing | Framework unchanged; capacity to do all of the above, with AIS acquisitions (Distech/QSC build-out) the first priority, plus opportunistic, disciplined buybacks and a growing dividend |
| Metric | YoY | Note |
|---|---|---|
| Total net sales | +2% to $1.2B | Growth in AIS partially offset by revenue declines at ABL. |
| Adjusted operating profit | +1% to $224M (margin 18.7%) | Higher AIS profitability partly offset by lower ABL operating profit on softer lighting volumes. |
| Adjusted diluted EPS | +4% to $5.31 | Higher profitability and lower diluted shares outstanding from buybacks. |
| Adjusted gross profit margin | +10 bps to 50.1% | Primarily a higher mix of higher-margin AIS sales. |
| ABL sales | -2% to $905M | Challenging comparison to Q3 2025 when orders were accelerated ahead of price increases; two-year stack +1% and combined independent-plus-direct networks +4%. |
| ABL adjusted operating profit | -$9M to $165M (margin -60 bps to 18.2%) | Lower sales volume, even as adjusted gross margin held strong at 46.1% on pricing and productivity; a $6.4M tariff refund was adjusted out. |
| AIS sales | +15% to $304M | Strong growth in Distech and QSC, driven by share gains, product vitality, and entry into adjacencies. |
| AIS adjusted operating profit | +22.5% to $76M (margin +150 bps to 25.1%) | Operating leverage on strong revenue growth plus a 10 bps gross-margin gain to 60.3%. |
| Operating cash flow (9 months) | +$121M to $520M | Solid earnings and working-capital execution across the first nine months of fiscal 2026. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Distech as a platform company | Positioned as a controls business competing against the traditional big-four incumbents | Now framed as a platform company investing across every layer of the stack — edge control, cloud intelligence (Atrius), and occupant experience — winning share at universities, sports venues, data centers, and enterprise campuses via an open-architecture, edge-with-cloud strategy. | — |
| Data center opportunity | Alluded to over the past several calls but not a vertical historically associated with Acuity | Now a front-footed, responsible entry on both controls (new Eclypse Resilience PLC plus DDC combination positioning Acuity for multiple hyperscalers) and lighting (hyper-growth off a smaller base, selling direct to hyperscaler contractors and prefab operators). | — |
| OEM manufacturer wins | Not previously highlighted as a lane for Distech | A new growth lane: open-protocol Eclypse controllers let OEMs do more than legacy platforms, letting Distech consolidate control opportunities across manufacturers; also the primary route through which Acuity participates in the data center market. | — |
| Order firming / conversion | Elongated quoting and release activity; conversion rates longer than historical norms in the winter (Oct-Jan) | Trends firming with more normal project activity and conversion rates; management sees a combination of backlog normalization and steady demand over the next ~12 months, aided by clearing of tariff- and shutdown-related congestion. | — |
| AI and technology investment | Building AI capability over the past ~two years, embedded in SG&A investment | CEO's top time priority; AI platform maturing and being integrated into operations, supply-chain digitization (Mexican digital focus factories), and product-velocity tools, with the biggest opportunity going to organizations that pair technology change with business change. | — |
| Inflation and supply shocks | Managing tariffs and prior supply shocks | Broad inflation (metals, SG&A, medical +12%) plus a new memory supply shock (mostly AIS); managed via the same playbook of securing availability, covering dilution with dollars, then restarting productivity. | — |
| M&A / capital deployment | Opportunities to further build out the AIS platform | Enthusiastic about multiple identified AIS acquisition targets (expanding Distech and QSC footprints), emphasizing quality over quantity; QSC cited as the model of buying the right asset — with capacity to invest, acquire, grow the dividend, and repurchase stock simultaneously. | — |