Acuity Brands, Inc. (NYSE:AYI) Q2 2020 Earnings Conference Call - Final Transcript

Apr 02, 2020 • 10:00 am ET

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Acuity Brands, Inc. (NYSE:AYI) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Executive
Neil M. Ashe

very weak December, the business picked up in January and February and we began to see real traction, specifically in our independent sales network channel, which represents over two-thirds of our sales and was up over 4% for the quarter, inclusive of TLG.

Some of the business and product highlights included success with our Contractor Select products. Sales grew 30% this quarter. We successfully launched Modulus technology. Modulus is a proprietary and innovative, low-voltage distributed power and control system for LED luminaires, enabling design flexibility, greater connectivity options, and lower installation costs. And the integration of TLG is progressing as expected and is accretive to our performance. Those were balanced by some of the same dynamics that you have heard from Acuity in the past. We continue to face year-over-year revenue declines in retail as a result of our changed home center strategy and in corporate accounts as a result of the timing of relight projects at several large retailers. We expect these dynamics to continue.

We also saw revenue declines in direct sales of industrial and infrastructure accounts, primarily due to large projects in the prior year that did not repeat. Despite that revenue performance, we were able to expand gross margins year-over-year and to generate strong cash flow, both of which demonstrate the adaptability and durability of our core lighting business.

With that, I'll turn it over to Karen for more details on the financials. Karen?

Executive
Karen J. Holcom

Thank you, Neil and good morning, everyone. I know many of you have already seen our results, but I would like to make a few comments on the key highlights for the second quarter of 2020. Net sales for the second quarter were $824 million, a decrease of 3.5% compared with the year ago period. Overall, net sales volume declined approximately 7%, while the price mix of products sold was favorable this quarter by approximately 1%. We estimate price mix was impacted by a favorable shift in channel mix, partially offset by an unfavorable mix of products sold. The positive change in sales channel mix was mostly influenced by the decline in net sales of lower margin products sold primarily through the retail channel, partially offset by product substitutions to lower-priced alternatives, primarily for more basic featured -- lesser-featured LED luminaires sold in certain channels as well as declines in shipments for larger commercial projects; a historical strength of the Company. Acquisitions added about 3% to our growth.

In addition, we believe the demand in the second quarter for private non-residential construction in general and more specifically lighting was down in the low-single digit year-over-year percentage range. We believe these declines were due in part because of the continued concerns over global trade and economic issues. We do not believe that the COVID-19 pandemic had a significant impact on our second quarter results.

From a channel perspective, there were a few key areas of significance. First, net sales through our independent sales network, which makes up approximately 72% of our total net