ACUITY INC. (DE) — Call Transcript 2026

Good morning and welcome to the Acuity Fiscal 2026 First Quarter Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, the company will conduct a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Charlotte McLaughlin, Vice President of Investor Relations. Charlotte, please go ahead. Thank you, Operator. Good morning and welcome to the Acuity fiscal 2026 first quarter earnings call. On the call with me this morning are Neil Ashe, our Chairman, President, and Chief Executive Officer, and Karen Holcomb, our Senior Vice President and Chief Financial Officer. Today's call will include updates on our strategic progress and on our fiscal 2026 first quarter performance. There will be an opportunity for Q&A at the end of this call. As a reminder, some of our comments today may be forward-looking statements. We intend these forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as detailed on slide 2 of the accompanying presentation. Reconciliations of certain non-GAAP financial metrics with their corresponding GAAP measures are available in our 2026 first quarter Earnings Release and Supplemental Presentation, both of which are available on our Investor Relations website at www.investors.acuityinc.com.Thank you for your interest in Acuity. I will now turn the call over to Neil Ashe. Thank you, Charlotte, and thank you all for joining us today. We delivered strong performance in our first quarter of fiscal 2026. We grew net sales, we expanded our adjusted operating profit and adjusted operating profit margin, and we increased our adjusted diluted earnings per share. We generated strong cash flow and allocated capital effectively. Acuity Brands Lighting performed well in a tepid lighting market. This is the result of the cumulative effect of our strategy to increase product vitality, elevate service levels, use technology to improve and differentiate both our products and how we operate the business, and to drive productivity. Our product vitality efforts continue to deliver value for our customers and for us. This quarter, we launched our new EAX Area Luminaire product family by Lithonia, an outdoor luminaire that can be used in any environment, from walkways to large parking spaces. EAX is available in our Design Select portfolio and has over 60 configurable options, including an option to embed nLight controls. This makes it easier for our agents to choose the right option for our customers and ensures flexibility for multiple types of projects. ABL is winning in new markets through the combination of our luminaires and electronics. Interestingly, our Nightingale brand won several 2025 Nightingale Awards by Healthcare Design Magazine because of our patient-centric approach to product design. Our Nightingale solutions are engineered with the entire patient journey in mind, creating an environment that supports medical teams while ensuring patient and visitor comfort. For example, the Attend Sconce and the Assure nightlight deliver functional low-level illumination that supports patient sleep while enabling caregivers to perform essential duties. In the Refuel segment, we continue to expand and upgrade our lighting solutions. We initially entered the market with the development of our canopy lighting products. In this quarter, we began delivering a comprehensive offering by incorporating AIS products, including our Atrius software and Distech controls, into the Refuel solution. By addressing the canopy lights outside to refrigeration controls in the back of the convenience store and everything in between, we are creating value throughout the location. The industry continues to recognize the strength of our products. This quarter, several products in our portfolio were awarded GRANDS PRIX DU DESIGN Awards and LIT Lighting Design Awards. Two products recognized by both include the Cyclone Lupa, a contemporary outdoor luminaire that focuses on pedestrian safety and security in public spaces like campuses, parks, and city streets, and the Eureka segment, a slim, minimalist linear LED pendant light designed for a variety of indoor commercial and hospitality environments. Now, switching to Acuity Intelligent Spaces, which continues to deliver strong performance. Through Atrius, Distech, and QSC, we have unique and disruptive technologies that are driving productivity for people experiencing spaces and for the people who are providing those spaces. Spaces that range from amusement parks to theaters, university campuses to healthcare facilities, sports stadiums to your office. Atrius and Distech control the management of the space, and QSC manages the experiences in the space. Over time, we will use data from both to enhance productivity outcomes through data interoperability. Taken together, this is how we can make spaces autonomous. This quarter, we began to change customer outcomes by combining our Distech Resense Move and our Q-SYS platform. Resense Move is a multi-sensor device that uses thermal, light, sound, air quality, temperature, and humidity sensors with AI at the edge to help users understand how their space is being used. The data collected by the Resense Move drives changes in the room, including the ability to adjust the screens, cameras, and microphones from our Q-SYS platform. Q-SYS Reflect is then able to monitor outcomes and performances of the devices within the room. We are then able to further layer lighting controls and shade controls into the solution for an autonomous room experience. We demonstrated this solution to a large multinational technology company in our experience center, and they chose to implement it throughout their headquarters. AIS is also being recognized for the strength of their product portfolios. During the quarter, Atrius Facilities was named a winner in the Smart Buildings category of the 2025 Facilities Net Vision Awards. Our Q-SYS Full Stack AV Platform won the National Systems Contractors Association's Excellence in Product Innovation Award in the category of Best Centralized AV Platform for Command and Control, and our Q-SYS Core 24f processor was recognized with a Pro AV Best in Market 2025 Award. Before I turn the call over to Karen, I want to reiterate that both ABL and AIS are performing well in a challenging market. In Acuity Brands Lighting, we continue to experience a tepid lighting market. The market appears to be waiting for clarity around interest rates, inflation, and policy. In Acuity Intelligent Spaces, Atrius, Distech, and QSC are working well together, both from a customer perspective and an operational perspective. Our AIS business is strategically differentiated and positioned for value creation. We continue to control what we can control, and we are confident in the long-term performance of both the lighting and spaces businesses. Now, I'll turn the call over to Karen, who will update you on our first quarter performance. Thank you, Neil, and good morning, everyone. We had a strong start to fiscal 2026. We grew net sales, improved adjusted operating profit and adjusted operating profit margin, and increased our adjusted diluted earnings per share. For total Acuity, we generated net sales of $1.1 billion, which was $192 million, or 20% above the prior year. This was driven by growth in both business segments and includes three months of QSC sales. During the quarter, our adjusted operating profit was $196 million, up $38 million, or 24% from last year. 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. Adjusted operating profit increased $6 million to $160 million. This improvement was driven by our efforts to lower operating expenses. We delivered adjusted operating profit margin of 17.9%, which was up 60 basis points compared to the prior year. Now, moving to Acuity Intelligent Spaces. Sales for the first quarter were $257 million, an increase of $184 million with the inclusion of three months of QSC. Both Atrius and Distech combined and QSC grew in the mid-teens this quarter. Our AIS business also 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. Adjusted operating profit in Intelligence Spaces was $57 million, with an adjusted operating profit margin of 22%, which was up 100 basis points compared to the prior year. Now, turning to our cash flow performance. In the first three months of fiscal 2026, we generated $141 million of cash flow from operations, which was $9 million higher than the same period in fiscal 2025, primarily due to higher profitability. During the quarter, we allocated $28 million to repurchase over 77,000 shares at an average price of around $357. We additionally repaid another $100 million of our term loan during the quarter and have now repaid $300 million of the $600 million of debt used to finance the QSC acquisition. In summary, we started the year with strong performance. We grew net sales, improved margins, and increased adjusted diluted earnings per share. We generated strong cash flow from operations and allocated capital effectively. Thank you for joining us today. I will now pass you over to the operator to take your questions. Thank you. Our first question comes from Chris Snyder with Morgan Stanley. Your line is now open. Thank you. I wanted to ask on gross margin. Typically, every year, I think gross margin peaks in Q3 and then steps down in Q4 and again sequentially into Q1 on the volume declines. The last couple of those step-downs have been more significant, I guess, on a six-month basis than typical, which I assume is the result of tariffs coming in and pressuring that margin rate. But I guess as we look forward, and it seems like that's now in the base, do you think the business is positioned to kind of deliver typical gross margin seasonality, including the step-up into the back half of the year? Any color on that would be helpful. Thank you. Yeah, good morning, Chris. I'll start, and then Karen, please fill in. So first of all, I think you're really referring to ABL when you talk about that kind of gross margin profile. There is so much noise, I think, in the last, call it, nine months, and that'll work its way through the system over the next several. SoI think a couple of things are going on. First of all, obviously, the tariffs, as you mentioned, those have been inconsistent. I think the headline is they all happened on April 2nd, but that's not really what's happened. So there's been a series of different 232 tariffs, the steel, those sorts of things that have come in and out at different times. We have then reacted to that by driving and accelerating productivity efforts, number one, and then number two, taking price strategically in different parts of the portfolio. That's what you see kind of cascading through the income statement today. As we look forward, and I say this not on a quarter basis, but on a longer-term basis, we're confident in our ability to continue to drive the margins at ABL. So as we've said, we're targeting 50-100 basis points of operating profit margin improvement per year. We're kind of right in that range now. It just so happened this quarter that we benefited more from OpEx than we did from gross profit margin. But we feel really good about where we're going. It doesn't mean that everything's going to go up every quarter, but we feel good about where we are. Thank you. I appreciate that. And then maybe just to follow up on some of the ABL commentary. I think typically we would see a pretty material step-down in ABL SD&A from Q4 to Q1 as the volumes drop. I know the OpEx there did come down, but it was a pretty muted step-down Q4 to Q1. Was that a function of some of these productivity investments you just referenced, or are there other things that are kind of going on on the OpEx line within the SD&A? Thank you. Karen, you want to take that? Yeah. I think, Chris, overall, when we look at OpEx and you see what ABL did in the third quarter of last year, we started to take costs out. So when you look at the fourth quarter and the third quarter, that really is reflective of a lot of those realigning the work and taking some of the costs out of the business. So that's probably why it was a little bit more muted as we had already taken a good chunk of those costs out. But overall, we were focused on driving that operating profit margin improvement year over year, and they improved by 60 basis points despite the decline in gross profit that we talked about. So we feel really good about their performance this quarter. Thank you. I appreciate that. Question comes from Tim Wojs with Baird. Your line is now open. Hey, everybody. Good morning. Maybe just my first question, Neil. You talked about some, if you want to call them cross-sell deployments between ABL and AIS in both the fueling market and in some office markets. As you're kind of going through those types of sales and those types of RFPs and things, are there any sort of gaps in terms of the product portfolio that you're kind of finding that you need, or do you feel like the products that you have in both of those spaces is kind of good for what you're trying to do in those verticals? Yeah. Great question, Tim. And let me start philosophically first, which is that it's our view, it's my view that cross-sell opportunities should be driven by customer. So if the customer realizes the benefit that we're providing across an entire solution, then that will get pulled through the channel as opposed to us trying to push it. So that's our philosophy. So as a result, when we start to talk about these things, it'll be because customers have pulled them through, not because we're aggressively pushing them. So net-net, it might take a little bit longer, but we'll have a much more durable relationship with those customers. We chose to highlight the two that we highlighted. So first, within AIS, the cross-sell opportunity between the Distech portfolio and the QSC portfolio because it really was the first coming together of the basically inside the space and the management of the space so that for the benefit of autonomous room experience. So there are things we can add to that experience for sure, but they're not required to provide the solution that we provided. I think the Refuel is even at least as interesting in that that now spans the entire company. So obviously, the Refuel effort was one that was started in the lighting business, but quickly you realize that the two most important things for the convenience store are to get people into the store and then from a cost management perspective inside the store to manage the refrigeration inside the store. So Distech can provide that. I am super pleased by how our teams have worked together to provide those solutions. So there are other things in that store, for example, that we don't provide, like digital signage, but basically they're coming together. Now, where we go from here, there are continued opportunities to expand those product lines. So maybe not for those specific examples, but for others that provide us both organic and inorganic opportunities to add to the portfolio of AIS over the next two years or so. And we're pretty enthusiastic about what those opportunities are. Okay. Super. Thank you. And then I guess just a modeling question. Karen, I guess in both of the segments you talked about kind of executing on an elevated backlog over the last two quarters. I guess is the insinuation that that is kind of behind you and maybe there's a little bit of slower growth over the next couple of quarters as you kind of the market, the company kind of grows closer to the market versus the market plus backlog? Yeah, Tim, I think that's right. Historical seasonality is going to be a little bit skewed as we look ahead to Q2 based on those accelerated orders and coming into the first quarter with a little bit of a higher backlog. So as we said in the prepared remarks, both ABL and AIS were favorably impacted from that higher backlog. And so the first half, I would say, is going to be more representative of normal seasonality, but Q2 could be down a little bit more than normal. Okay. Sounds good. Thank you, guys. Our next question comes from Christopher Glynn with Oppenheimer. Your line is now open. Thanks. Good morning. Just wanted to talk about some of the divergence with ISN and DSN. They kind of diverge a little more than normal in the quarter. I know you called out the backlog strength really impacting the ISN space, but maybe some other factors beyond that. It was pretty wide divergence. Yeah, Chris, I think that's a good call out, and thanks for the opportunity to talk about them. When I look at the business, I tend to combine them. So if you look at them on a combined basis, that's basically exactly where we expect it to be. Accounts move between the two of them, so that's a little bit of the noise that exists there. But if you take them together, we're kind of exactly where we expect it to be. Okay. I'll think about that and follow up later, but appreciate that. And then a lot of talk about the gas station under canopy convenience store opportunity there today and combining Q-SYS. You also acknowledged some things you don't have, like the signage. And there is a player there that's pretty established with that broad channel strategy. So it was interesting you called out some of the differentiating factors and some of the lack. Where are you in terms of meeting your penetration goals there? Is this a bit of a dogfight, or are you availing some clear runway? I would say that we're really pleased with our entrance into the market, and taking a step back, this is what I wanted our company to demonstrate to itself first and to everyone else second, is that we can identify an organic opportunity that has some size, and we can develop the product portfolio, the go-to-market strategy, and the entrepreneurial spirit to go attack a new vertical like that, so by all metrics, we're succeeding in that effort, so we're not going to be the only player in that market, and that market is a comparatively small part of our company. It's decidedly not our whole company, but this is a muscle that we want to build so that we can apply it here where we're doing really, really well. And in other areas like healthcare, where we're doing well, like sport lighting, where we're starting to come in, and others as we go along. I think the real read here is our ability to attack an area that was not initially in our purview or not historically in our purview and to build both the business model, the product portfolio, the go-to-market that's necessary to be successful there. And that's kind of what's happening. Great color. Thanks, Neil. Thanks, Chris. Our next question comes from Michael Francis with William Blair. Your line is now open. Hey, hi everyone. This is Mike on for Ryan. Wanted to start with just a cleanup. I saw there wasn't the guidance in the PowerPoint. Is there anything that's changed in the outlook? Yeah. And Michael, in the presentation that Charlotte will post after the call, you will see just the same slide with the sales and EPS guidance that we provided in the fourth quarter. So no, nothing changed there. Okay. Understood. And then wanted to talk about gross margins on the AIS side. 60% would be considered a ceiling. Do you think there's more you could do there? I think we're good. Mike, I think we feel good about 60%. So as we continue to grow, we will focus on two things. One is that the level of margin in that business demonstrates the strategic value of the controls that we provide. So that's a recognition, I think, of the strategic importance of the business there. As we add products to that portfolio, we may choose to add some additional business models that maybe are slightly lower margin, which will balance it out a little bit. But net-net, we feel really good about kind of where that is. Okay. And then wanted to hear. It seems like end markets haven't changed at all. Wanted to hear if anything has changed in the quoting environment with that backdrop, and any color from the channel would be helpful. Yeah. First, on the lighting side, I would say that as we've said for, what, the last, Karen, three quarters, it's kind of a tepid lighting environment. We would like the lighting market to be a little bit stronger. All indications we have are that we are at least holding, if not accelerating our position in the market. So it is where it is. And as I'll point out, I like to point out, you can't build a space or touch a space without touching the lighting. So kind of lighting is all spaces at this point, and we are obviously the best-performing player in those spaces. So yeah, would we like the lighting market to be a little bit stronger? We would. And at some point, it will, and we'll benefit from that. On the AIS side, we've got disruptive businesses there that are effectively growing through market environments because of their ability to take share from others. So they continue to perform despite the environments. And that doesn't mean they're going to be up as much as they are this quarter every quarter, but we feel good about kind of the trajectory that we're on in AIS. All right. Thank you. Pass it on. Our next question comes from Jeffrey Sprague with Vertical Research. Your line is now open. Hello. Good morning, everyone. Hope everyone's doing well. I wanted to get your thought on tariffs. We have the Supreme Court ruling coming up on Friday. Who knows what we get? But if tariffs were somehow ruled illegal, do you think you'd have to roll back price as tariffs came back? How do you think the channel would respond to that? Or is there a possibility to sort of pocket some spread there if we have a dramatic change in tariff regime? Yeah. Good question, Jeff. So let's take a step back, and I'll tell you what our working kind of hypothesis is and then what I think the practical implications of that are. Our working hypothesis is that things will stay mostly the same. So however it plays out, I'm not a legal expert, so I can't predict what the ruling will be or how they will rule, but it just feels like if there were a completely adverse ruling, that there would be some counterbalance that would keep things roughly the same. The administration would have an alternative or that would be written in some way that things are mostly the same. But let's go down the path of they're ruled they are disavowed in some way, and then we're there. The question then becomes, okay, so as a practical matter, we sell our product to a distributor. The distributor sells that product to the contractor. The contractor effectively sells that to the owner of the project. That's not the sales process, but that is the flow of revenue. So if we were to somehow kind of realize a benefit from a tariff refund, who would we give it to? So as you push that down the supply chain, then the distributor, we would have to assume that if we did, the distributor would give it to the contractor and that the contractor would give it to the building owner. I just don't think that seems reasonable. So now, if you look forward, then the second half of our expectation is that there would be a new market that everyone was adapting to, and we would need to adapt to that market from that point forward just like everybody else was. We feel good about the dexterity we've demonstrated and our ability to kind of respond to that versus the rest of the industry. Yeah. No, it could be quite interesting if that happens, and then just sort of a quick one back on sort of the backlog normalization. Obviously, not a big backlog business in the grand scheme of things, but are backlogs sort of in a normal spot now relative to what your top line guide is? Are we below normal around this kind of tepid outlook that you're talking about? Yeah. I think we're, Jeff, now, you and I have been having this conversation for now five years, and when I said five years ago, I wasn't what was normal was not normal, and then we've changed through that. I would say that the industry and we got accustomed to higher backlog levels through the post-COVID period, through kind of tariffs, price increases, and whatnot, so we're now at backlog levels, which are more consistent with what they were before all of those things happened, and therefore, our order rate is more consistent with our quarterly performance, and that's what Karen was indicating, so there's still some noise from the price markets in the third quarter and the fourth quarter, which affected this, which is why she said we probably will see more seasonality in the second quarter, especially in the lighting business than we have historically. We're comfortable operating in both environments, but we would like the lighting market to be a little bit stronger. Yeah. Understood. No, thanks for all that color. Thank you, and I'm showing no further questions in queue at this time. I'd like to turn the call back to Neil Ashe for any closing remarks. I think we had a really good first quarter. So both of our businesses continue to perform. ABL is clearly the best-performing lighting business in the world. We've demonstrated through our growth algorithm that we can separate ourselves from the market, and we feel good about kind of the long-term opportunity there to, A, continue to grow, and B, continue to improve margins. With AIS at both Atrius, Distech, and QSC, we have disruptive technologies, which are taking share in their marketplaces. Over the long term, we have great organic and inorganic opportunities there. So we're excited about those. So thank you for spending time with us this morning, and we'll look forward to talking to you again in another quarter. This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker 9: Good morning and welcome to the Acuity Fiscal 2026 First Quarter Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, the company will conduct a question-and-answer session. Please be advised that today's conference is being recorded. Good morning and welcome to the Acuity Fiscal 2026 First Quarter Earnings Call. good morning and welcome to the acuity fiscal 2026 first quarter earnings call At this time, all participants are in a listen-only mode. at this time all participants are in a listen-only mode After the speakers' presentation, the company will conduct a question-and-answer session. after the speakers' presentation the company will conduct a question-and-answer session Please be advised that today's conference is being recorded. please be advised that today's conference is being recorded I would now like to hand the conference over to Charlotte McLaughlin, Vice President of Investor Relations. Charlotte, please go ahead. I would now like to hand the conference over to Charlotte McLaughlin, Vice President of Investor Relations. i would now like to hand the conference over to charlotte mclaughlin vice president of investor relations Charlotte, please go ahead. charlotte please go ahead

Speaker 3: Thank you, Operator. Good morning and welcome to the Acuity fiscal 2026 first quarter earnings call. On the call with me this morning are Neil Ashe, our Chairman, President, and Chief Executive Officer, and Karen Holcomb, our Senior Vice President and Chief Financial Officer. Today's call will include updates on our strategic progress and on our fiscal 2026 first quarter performance. There will be an opportunity for Q&A at the end of this call. As a reminder, some of our comments today may be forward-looking statements. We intend these forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as detailed on slide 2 of the accompanying presentation. Thank you, Operator. thank you operator Good morning and welcome to the Acuity fiscal 2026 first quarter earnings call. good morning and welcome to the acuity fiscal 2026 first quarter earnings call On the call with me this morning are Neil Ashe, our Chairman, President, and Chief Executive Officer, and Karen Holcomb, our Senior Vice President and Chief Financial Officer. on the call with me this morning are neil ashe our chairman president and chief executive officer and karen holcomb our senior vice president and chief financial officer Today's call will include updates on our strategic progress and on our fiscal 2026 first quarter performance. today's call will include updates on our strategic progress and on our fiscal 2026 first quarter performance There will be an opportunity for Q&A at the end of this call. there will be an opportunity for q&a at the end of this call As a reminder, some of our comments today may be forward-looking statements. as a reminder some of our comments today may be forward-looking statements We intend these forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as detailed on slide 2 of the accompanying presentation. we intend these forward-looking statements to be covered by the safe harbor provisions of the private securities litigation reform act of 1995 as detailed on slide 2 of the accompanying presentation Reconciliations of certain non-GAAP financial metrics with their corresponding GAAP measures are available in our 2026 first quarter Earnings Release and Supplemental Presentation, both of which are available on our Investor Relations website at www.investors.acuityinc.com.Thank you for your interest in Acuity. Reconciliations of certain non-GAAP financial metrics with their corresponding GAAP measures are available in our 2026 first quarter Earnings Release and Supplemental Presentation, both of which are available on our Investor Relations website at www.investors.acuityinc.com. reconciliations of certain non-gaap financial metrics with their corresponding gaap measures are available in our 2026 first quarter earnings release and supplemental presentation both of which are available on our investor relations website at www.investors.acuityinc.com Thank you for your interest in Acuity. thank you for your interest in acuity I will now turn the call over to Neil Ashe. I will now turn the call over to Neil Ashe. i will now turn the call over to neil ashe

Speaker 8: Thank you, Charlotte, and thank you all for joining us today. We delivered strong performance in our first quarter of fiscal 2026. We grew net sales, we expanded our adjusted operating profit and adjusted operating profit margin, and we increased our adjusted diluted earnings per share. We generated strong cash flow and allocated capital effectively. Acuity Brands Lighting performed well in a tepid lighting market. This is the result of the cumulative effect of our strategy to increase product vitality, elevate service levels, use technology to improve and differentiate both our products and how we operate the business, and to drive productivity. Thank you, Charlotte, and thank you all for joining us today. thank you charlotte and thank you all for joining us today We delivered strong performance in our first quarter of fiscal 2026. we delivered strong performance in our first quarter of fiscal 2026 We grew net sales, we expanded our adjusted operating profit and adjusted operating profit margin, and we increased our adjusted diluted earnings per share. we grew net sales we expanded our adjusted operating profit and adjusted operating profit margin and we increased our adjusted diluted earnings per share We generated strong cash flow and allocated capital effectively. we generated strong cash flow and allocated capital effectively Acuity Brands Lighting performed well in a tepid lighting market. acuity brands lighting performed well in a tepid lighting market This is the result of the cumulative effect of our strategy to increase product vitality, elevate service levels, use technology to improve and differentiate both our products and how we operate the business, and to drive productivity. this is the result of the cumulative effect of our strategy to increase product vitality elevate service levels use technology to improve and differentiate both our products and how we operate the business and to drive productivity Our product vitality efforts continue to deliver value for our customers and for us. This quarter, we launched our new EAX Area Luminaire product family by Lithonia, an outdoor luminaire that can be used in any environment, from walkways to large parking spaces. EAX is available in our Design Select portfolio and has over 60 configurable options, including an option to embed nLight controls. This makes it easier for our agents to choose the right option for our customers and ensures flexibility for multiple types of projects. ABL is winning in new markets through the combination of our luminaires and electronics. Our product vitality efforts continue to deliver value for our customers and for us. our product vitality efforts continue to deliver value for our customers and for us This quarter, we launched our new EAX Area Luminaire product family by Lithonia, an outdoor luminaire that can be used in any environment, from walkways to large parking spaces. this quarter we launched our new eax area luminaire product family by lithonia an outdoor luminaire that can be used in any environment from walkways to large parking spaces EAX is available in our Design Select portfolio and has over 60 configurable options, including an option to embed nLight controls. eax is available in our design select portfolio and has over 60 configurable options including an option to embed nlight controls This makes it easier for our agents to choose the right option for our customers and ensures flexibility for multiple types of projects. this makes it easier for our agents to choose the right option for our customers and ensures flexibility for multiple types of projects ABL is winning in new markets through the combination of our luminaires and electronics. abl is winning in new markets through the combination of our luminaires and electronics Interestingly, our Nightingale brand won several 2025 Nightingale Awards by Healthcare Design Magazine because of our patient-centric approach to product design. Our Nightingale solutions are engineered with the entire patient journey in mind, creating an environment that supports medical teams while ensuring patient and visitor comfort. For example, the Attend Sconce and the Assure nightlight deliver functional low-level illumination that supports patient sleep while enabling caregivers to perform essential duties. In the Refuel segment, we continue to expand and upgrade our lighting solutions. Interestingly, our Nightingale brand won several 2025 Nightingale Awards by Healthcare Design Magazine because of our patient-centric approach to product design. interestingly our nightingale brand won several 2025 nightingale awards by healthcare design magazine because of our patient-centric approach to product design Our Nightingale solutions are engineered with the entire patient journey in mind, creating an environment that supports medical teams while ensuring patient and visitor comfort. our nightingale solutions are engineered with the entire patient journey in mind creating an environment that supports medical teams while ensuring patient and visitor comfort For example, the Attend Sconce and the Assure n ightl ight deliver functional low-level illumination that supports patient sleep while enabling caregivers to perform essential duties. for example the attend sconce and the assure n ightl ight deliver functional low-level illumination that supports patient sleep while enabling caregivers to perform essential duties In the Refuel segment, we continue to expand and upgrade our lighting solutions. in the refuel segment we continue to expand and upgrade our lighting solutions We initially entered the market with the development of our canopy lighting products. In this quarter, we began delivering a comprehensive offering by incorporating AIS products, including our Atrius software and Distech controls, into the Refuel solution. By addressing the canopy lights outside to refrigeration controls in the back of the convenience store and everything in between, we are creating value throughout the location. The industry continues to recognize the strength of our products. This quarter, several products in our portfolio were awarded GRANDS PRIX DU DESIGN Awards and LIT Lighting Design Awards. Two products recognized by both include the Cyclone Lupa, a contemporary outdoor luminaire that focuses on pedestrian safety and security in public spaces like campuses, parks, and city streets, and the Eureka segment, a slim, minimalist linear LED pendant light designed for a variety of indoor commercial and hospitality environments. We initially entered the market with the development of our canopy lighting products. we initially entered the market with the development of our canopy lighting products In this quarter, we began delivering a comprehensive offering by incorporating AIS products, including our Atrius software and Distech controls, into the Refuel solution. in this quarter we began delivering a comprehensive offering by incorporating ais products including our atrius software and distech controls into the refuel solution By addressing the canopy lights outside to refrigeration controls in the back of the convenience store and everything in between, we are creating value throughout the location. by addressing the canopy lights outside to refrigeration controls in the back of the convenience store and everything in between we are creating value throughout the location The industry continues to recognize the strength of our products. the industry continues to recognize the strength of our products This quarter, several products in our portfolio were awarded GRANDS PRIX DU DESIGN Awards and LIT Lighting Design Awards . this quarter several products in our portfolio were awarded grands prix du design awards and lit lighting design awards Two products recognized by both include the Cyclone Lupa , a contemporary outdoor luminaire that focuses on pedestrian safety and security in public spaces like campuses, parks, and city streets, and the Eureka segment, a slim, minimalist linear LED pendant light designed for a variety of indoor commercial and hospitality environments. two products recognized by both include the cyclone lupa a contemporary outdoor luminaire that focuses on pedestrian safety and security in public spaces like campuses parks and city streets and the eureka segment a slim minimalist linear led pendant light designed for a variety of indoor commercial and hospitality environments Now, switching to Acuity Intelligent Spaces, which continues to deliver strong performance. Through Atrius, Distech, and QSC, we have unique and disruptive technologies that are driving productivity for people experiencing spaces and for the people who are providing those spaces. Spaces that range from amusement parks to theaters, university campuses to healthcare facilities, sports stadiums to your office. Atrius and Distech control the management of the space, and QSC manages the experiences in the space. Over time, we will use data from both to enhance productivity outcomes through data interoperability. Taken together, this is how we can make spaces autonomous. Now, switching to Acuity Intelligent Spaces , which continues to deliver strong performance. now switching to acuity intelligent spaces which continues to deliver strong performance Through Atrius, Distech, and QSC, we have unique and disruptive technologies that are driving productivity for people experiencing spaces and for the people who are providing those spaces. through atrius distech and qsc we have unique and disruptive technologies that are driving productivity for people experiencing spaces and for the people who are providing those spaces Spaces that range from amusement parks to theaters, university campuses to healthcare facilities, sports stadiums to your office. spaces that range from amusement parks to theaters university campuses to healthcare facilities sports stadiums to your office Atrius and Distech control the management of the space, and QSC manages the experiences in the space. atrius and distech control the management of the space and qsc manages the experiences in the space Over time, we will use data from both to enhance productivity outcomes through data interoperability. over time we will use data from both to enhance productivity outcomes through data interoperability Taken together, this is how we can make spaces autonomous. taken together this is how we can make spaces autonomous This quarter, we began to change customer outcomes by combining our Distech Resense Move and our Q-SYS platform. Resense Move is a multi-sensor device that uses thermal, light, sound, air quality, temperature, and humidity sensors with AI at the edge to help users understand how their space is being used. The data collected by the Resense Move drives changes in the room, including the ability to adjust the screens, cameras, and microphones from our Q-SYS platform. Q-SYS Reflect is then able to monitor outcomes and performances of the devices within the room. We are then able to further layer lighting controls and shade controls into the solution for an autonomous room experience. This quarter, we began to change customer outcomes by combining our Distech Resense Move and our Q-SYS platform. this quarter we began to change customer outcomes by combining our distech resense move and our q-sys platform Resense Move is a multi-sensor device that uses thermal, light, sound, air quality, temperature, and humidity sensors with AI at the edge to help users understand how their space is being used. resense move is a multi-sensor device that uses thermal light sound air quality temperature and humidity sensors with ai at the edge to help users understand how their space is being used The data collected by the Resense Move drives changes in the room, including the ability to adjust the screens, cameras, and microphones from our Q-SYS platform. the data collected by the resense move drives changes in the room including the ability to adjust the screens cameras and microphones from our q-sys platform Q-SYS Reflect is then able to monitor outcomes and performances of the devices within the room. q-sys reflect is then able to monitor outcomes and performances of the devices within the room We are then able to further layer lighting controls and shade controls into the solution for an autonomous room experience. we are then able to further layer lighting controls and shade controls into the solution for an autonomous room experience We demonstrated this solution to a large multinational technology company in our experience center, and they chose to implement it throughout their headquarters. AIS is also being recognized for the strength of their product portfolios. During the quarter, Atrius Facilities was named a winner in the Smart Buildings category of the 2025 Facilities Net Vision Awards. Our Q-SYS Full Stack AV Platform won the National Systems Contractors Association's Excellence in Product Innovation Award in the category of Best Centralized AV Platform for Command and Control, and our Q-SYS Core 24f processor was recognized with a Pro AV Best in Market 2025 Award. We demonstrated this solution to a large multinational technology company in our experience center, and they chose to implement it throughout their headquarters. we demonstrated this solution to a large multinational technology company in our experience center and they chose to implement it throughout their headquarters AIS is also being recognized for the strength of their product portfolios. ais is also being recognized for the strength of their product portfolios During the quarter, Atrius Facilities was named a winner in the Smart Buildings category of the 2025 Facilities Net Vision Awards. during the quarter atrius facilities was named a winner in the smart buildings category of the 2025 facilities net vision awards Our Q-SYS Full Stack AV Platform won the National Systems Contractors Association's Excellence in Product Innovation Award in the category of Best Centralized AV Platform for Command and Control, and our Q-SYS Core 24f processor was recognized with a Pro AV Best in Market 2025 Award. our q-sys full stack av platform won the national systems contractors association's excellence in product innovation award in the category of best centralized av platform for command and control and our q-sys core 24f processor was recognized with a pro av best in market 2025 award Before I turn the call over to Karen, I want to reiterate that both ABL and AIS are performing well in a challenging market. In Acuity Brands Lighting, we continue to experience a tepid lighting market. The market appears to be waiting for clarity around interest rates, inflation, and policy. In Acuity Intelligent Spaces, Atrius, Distech, and QSC are working well together, both from a customer perspective and an operational perspective. Our AIS business is strategically differentiated and positioned for value creation. We continue to control what we can control, and we are confident in the long-term performance of both the lighting and spaces businesses. Before I turn the call over to Karen, I want to reiterate that both ABL and AIS are performing well in a challenging market. before i turn the call over to karen i want to reiterate that both abl and ais are performing well in a challenging market In Acuity Brands Lighting, we continue to experience a tepid lighting market. in acuity brands lighting we continue to experience a tepid lighting market The market appears to be waiting for clarity around interest rates, inflation, and policy. the market appears to be waiting for clarity around interest rates inflation and policy In Acuity Intelligent Spaces , Atrius, Distech, and QSC are working well together, both from a customer perspective and an operational perspective. in acuity intelligent spaces atrius distech and qsc are working well together both from a customer perspective and an operational perspective Our AIS business is strategically differentiated and positioned for value creation. our ais business is strategically differentiated and positioned for value creation We continue to control what we can control, and we are confident in the long-term performance of both the lighting and spaces businesses. we continue to control what we can control and we are confident in the long-term performance of both the lighting and spaces businesses Now, I'll turn the call over to Karen, who will update you on our first quarter performance. Now, I'll turn the call over to Karen, who will update you on our first quarter performance. now i'll turn the call over to karen who will update you on our first quarter performance

Speaker 2: Thank you, Neil, and good morning, everyone. We had a strong start to fiscal 2026. We grew net sales, improved adjusted operating profit and adjusted operating profit margin, and increased our adjusted diluted earnings per share. For total Acuity, we generated net sales of $1.1 billion, which was $192 million, or 20% above the prior year. This was driven by growth in both business segments and includes three months of QSC sales. During the quarter, our adjusted operating profit was $196 million, up $38 million, or 24% from last year. 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. Thank you, Neil, and good morning, everyone. thank you neil and good morning everyone We had a strong start to fiscal 2026. we had a strong start to fiscal 2026 We grew net sales, improved adjusted operating profit and adjusted operating profit margin, and increased our adjusted diluted earnings per share. we grew net sales improved adjusted operating profit and adjusted operating profit margin and increased our adjusted diluted earnings per share For total Acuity, we generated net sales of $1.1 billion, which was $192 million, or 20% above the prior year. for total acuity we generated net sales of $1.1 billion which was $192 million or 20% above the prior year This was driven by growth in both business segments and includes three months of QSC sales. this was driven by growth in both business segments and includes three months of qsc sales During the quarter, our adjusted operating profit was $196 million, up $38 million, or 24% from last year. during the quarter our adjusted operating profit was $196 million up $38 million or 24% from last year Adjusted operating profit margin during the quarter expanded to 17.2%, an increase of 50 basis points from the prior year. 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. 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. Adjusted operating profit increased $6 million to $160 million. This improvement was driven by our efforts to lower operating expenses. We delivered adjusted operating profit margin of 17.9%, which was up 60 basis points compared to the prior year. Now, moving to Acuity Intelligent Spaces. Sales for the first quarter were $257 million, an increase of $184 million with the inclusion of three months of QSC. 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. 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. 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. the higher backlog favorably impacted the fourth quarter of last year and the first quarter of this year Adjusted operating profit increased $6 million to $160 million. adjusted operating profit increased $6 million to $160 million This improvement was driven by our efforts to lower operating expenses. this improvement was driven by our efforts to lower operating expenses We delivered adjusted operating profit margin of 17.9%, which was up 60 basis points compared to the prior year. we delivered adjusted operating profit margin of 17.9% which was up 60 basis points compared to the prior year Now, moving to Acuity Intelligent Spaces . now moving to acuity intelligent spaces Sales for the first quarter were $257 million, an increase of $184 million with the inclusion of three months of QSC. sales for the first quarter were $257 million an increase of $184 million with the inclusion of three months of qsc Both Atrius and Distech combined and QSC grew in the mid-teens this quarter. Our AIS business also 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. Adjusted operating profit in Intelligence Spaces was $57 million, with an adjusted operating profit margin of 22%, which was up 100 basis points compared to the prior year. Both Atrius and Distech combined and QSC grew in the mid-teens this quarter. both atrius and distech combined and qsc grew in the mid-teens this quarter Our AIS business also benefited from an elevated backlog that resulted from orders that were accelerated in advance of price increases in the back half of fiscal 2025. our ais business also 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. the higher backlog favorably impacted the fourth quarter of last year and the first quarter of this year Adjusted operating profit in Intelligence Spaces was $57 million, with an adjusted operating profit margin of 22%, which was up 100 basis points compared to the prior year. adjusted operating profit in intelligence spaces was $57 million with an adjusted operating profit margin of 22% which was up 100 basis points compared to the prior year Now, turning to our cash flow performance. In the first three months of fiscal 2026, we generated $141 million of cash flow from operations, which was $9 million higher than the same period in fiscal 2025, primarily due to higher profitability. During the quarter, we allocated $28 million to repurchase over 77,000 shares at an average price of around $357. We additionally repaid another $100 million of our term loan during the quarter and have now repaid $300 million of the $600 million of debt used to finance the QSC acquisition. In summary, we started the year with strong performance. We grew net sales, improved margins, and increased adjusted diluted earnings per share. We generated strong cash flow from operations and allocated capital effectively. Thank you for joining us today. Now, turning to our cash flow performance. now turning to our cash flow performance In the first three months of fiscal 2026, we generated $141 million of cash flow from operations, which was $9 million higher than the same period in fiscal 2025, primarily due to higher profitability. in the first three months of fiscal 2026 we generated $141 million of cash flow from operations which was $9 million higher than the same period in fiscal 2025 primarily due to higher profitability During the quarter, we allocated $28 million to repurchase over 77,000 shares at an average price of around $357. during the quarter we allocated $28 million to repurchase over 77,000 shares at an average price of around $357 We additionally repaid another $100 million of our term loan during the quarter and have now repaid $300 million of the $600 million of debt used to finance the QSC acquisition. we additionally repaid another $100 million of our term loan during the quarter and have now repaid $300 million of the $600 million of debt used to finance the qsc acquisition In summary, we started the year with strong performance. in summary we started the year with strong performance We grew net sales, improved margins, and increased adjusted diluted earnings per share. we grew net sales improved margins and increased adjusted diluted earnings per share We generated strong cash flow from operations and allocated capital effectively. we generated strong cash flow from operations and allocated capital effectively Thank you for joining us today. thank you for joining us today I will now pass you over to the operator to take your questions. I will now pass you over to the operator to take your questions. i will now pass you over to the operator to take your questions

Speaker 9: Thank you. Our first question comes from Chris Snyder with Morgan Stanley. Your line is now open. Thank you. thank you Our first question comes from Chris Snyder with Morgan Stanley. our first question comes from chris snyder with morgan stanley Your line is now open. your line is now open

Speaker 7: Thank you. I wanted to ask on gross margin. Typically, every year, I think gross margin peaks in Q3 and then steps down in Q4 and again sequentially into Q1 on the volume declines. The last couple of those step-downs have been more significant, I guess, on a six-month basis than typical, which I assume is the result of tariffs coming in and pressuring that margin rate. But I guess as we look forward, and it seems like that's now in the base, do you think the business is positioned to kind of deliver typical gross margin seasonality, including the step-up into the back half of the year? Any color on that would be helpful. Thank you. Thank you. thank you I wanted to ask on gross margin. i wanted to ask on gross margin Typically, every year, I think gross margin peaks in Q3 and then steps down in Q4 and again sequentially into Q1 on the volume declines. typically every year i think gross margin peaks in q3 and then steps down in q4 and again sequentially into q1 on the volume declines The last couple of those step-downs have been more significant, I guess, on a six-month basis than typical, which I assume is the result of tariffs coming in and pressuring that margin rate. the last couple of those step-downs have been more significant i guess on a six-month basis than typical which i assume is the result of tariffs coming in and pressuring that margin rate But I guess as we look forward, and it seems like that's now in the base, do you think the business is positioned to kind of deliver typical gross margin seasonality, including the step-up into the back half of the year? but i guess as we look forward and it seems like that's now in the base do you think the business is positioned to kind of deliver typical gross margin seasonality including the step-up into the back half of the year Any color on that would be helpful. any color on that would be helpful Thank you. thank you

Speaker 8: Yeah, good morning, Chris. I'll start, and then Karen, please fill in. So first of all, I think you're really referring to ABL when you talk about that kind of gross margin profile. There is so much noise, I think, in the last, call it, nine months, and that'll work its way through the system over the next several. SoI think a couple of things are going on. First of all, obviously, the tariffs, as you mentioned, those have been inconsistent. I think the headline is they all happened on April 2nd, but that's not really what's happened. So there's been a series of different 232 tariffs, the steel, those sorts of things that have come in and out at different times. Yeah, good morning, Chris. yeah good morning chris I'll start, and then Karen, please fill in. i'll start and then karen please fill in So first of all, I think you're really referring to ABL when you talk about that kind of gross margin profile. so first of all i think you're really referring to abl when you talk about that kind of gross margin profile There is so much noise, I think, in the last, call it, nine months, and that'll work its way through the system over the next several. there is so much noise i think in the last call it nine months and that'll work its way through the system over the next several So I think a couple of things are going on. so i think a couple of things are going on First of all, obviously, the tariffs, as you mentioned, those have been inconsistent. I think the headline is they all happened on April 2nd, but that's not really what's happened. first of all obviously the tariffs as you mentioned those have been inconsistent i think the headline is they all happened on april 2nd but that's not really what's happened So there's been a series of different 232 tariffs, the steel, those sorts of things that have come in and out at different times. so there's been a series of different 232 tariffs the steel those sorts of things that have come in and out at different times We have then reacted to that by driving and accelerating productivity efforts, number one, and then number two, taking price strategically in different parts of the portfolio. That's what you see kind of cascading through the income statement today. As we look forward, and I say this not on a quarter basis, but on a longer-term basis, we're confident in our ability to continue to drive the margins at ABL. So as we've said, we're targeting 50-100 basis points of operating profit margin improvement per year. We're kind of right in that range now. It just so happened this quarter that we benefited more from OpEx than we did from gross profit margin. But we feel really good about where we're going. It doesn't mean that everything's going to go up every quarter, but we feel good about where we are. We have then reacted to that by driving and accelerating productivity efforts, number one, and then number two, taking price strategically in different parts of the portfolio. we have then reacted to that by driving and accelerating productivity efforts number one and then number two taking price strategically in different parts of the portfolio That's what you see kind of cascading through the income statement today. that's what you see kind of cascading through the income statement today As we look forward, and I say this not on a quarter basis, but on a longer-term basis, we're confident in our ability to continue to drive the margins at ABL. as we look forward and i say this not on a quarter basis but on a longer-term basis we're confident in our ability to continue to drive the margins at abl So as we've said, we're targeting 50-100 basis points of operating profit margin improvement per year. so as we've said we're targeting 50-100 basis points of operating profit margin improvement per year We're kind of right in that range now. we're kind of right in that range now It just so happened this quarter that we benefited more from OpEx than we did from gross profit margin. it just so happened this quarter that we benefited more from opex than we did from gross profit margin But we feel really good about where we're going. but we feel really good about where we're going It doesn't mean that everything's going to go up every quarter, but we feel good about where we are. it doesn't mean that everything's going to go up every quarter but we feel good about where we are

Speaker 7: Thank you. I appreciate that. And then maybe just to follow up on some of the ABL commentary. I think typically we would see a pretty material step-down in ABL SD&A from Q4 to Q1 as the volumes drop. I know the OpEx there did come down, but it was a pretty muted step-down Q4 to Q1. Was that a function of some of these productivity investments you just referenced, or are there other things that are kind of going on on the OpEx line within the SD&A? Thank you. Thank you. thank you I appreciate that. i appreciate that And then maybe just to follow up on some of the ABL commentary. and then maybe just to follow up on some of the abl commentary I think typically we would see a pretty material step-down in ABL SD&A from Q4 to Q1 as the volumes drop. i think typically we would see a pretty material step-down in abl sd&a from q4 to q1 as the volumes drop I know the OpEx there did come down, but it was a pretty muted step-down Q4 to Q1. i know the opex there did come down but it was a pretty muted step-down q4 to q1 Was that a function of some of these productivity investments you just referenced, or are there other things that are kind of going on on the OpEx line within the SD&A? was that a function of some of these productivity investments you just referenced or are there other things that are kind of going on on the opex line within the sd&a Thank you. thank you

Speaker 8: Karen, you want to take that? Karen, you want to take that? karen you want to take that

Speaker 2: Yeah. I think, Chris, overall, when we look at OpEx and you see what ABL did in the third quarter of last year, we started to take costs out. So when you look at the fourth quarter and the third quarter, that really is reflective of a lot of those realigning the work and taking some of the costs out of the business. So that's probably why it was a little bit more muted as we had already taken a good chunk of those costs out. But overall, we were focused on driving that operating profit margin improvement year over year, and they improved by 60 basis points despite the decline in gross profit that we talked about. So we feel really good about their performance this quarter. Yeah. yeah I think, Chris, overall, when we look at OpEx and you see what ABL did in the third quarter of last year, we started to take costs out. i think chris overall when we look at opex and you see what abl did in the third quarter of last year we started to take costs out So when you look at the fourth quarter and the third quarter, that really is reflective of a lot of those realigning the work and taking some of the costs out of the business. so when you look at the fourth quarter and the third quarter that really is reflective of a lot of those realigning the work and taking some of the costs out of the business So that's probably why it was a little bit more muted as we had already taken a good chunk of those costs out. so that's probably why it was a little bit more muted as we had already taken a good chunk of those costs out But overall, we were focused on driving that operating profit margin improvement year over year, and they improved by 60 basis points despite the decline in gross profit that we talked about. but overall we were focused on driving that operating profit margin improvement year over year and they improved by 60 basis points despite the decline in gross profit that we talked about So we feel really good about their performance this quarter. so we feel really good about their performance this quarter

Speaker 7: Thank you. I appreciate that. Thank you. thank you I appreciate that. i appreciate that

Speaker 9: Question comes from Tim Wojs with Baird. Your line is now open. Question comes from Tim Wojs with Baird. question comes from tim wojs with baird Your line is now open. your line is now open

Speaker 6: Hey, everybody. Good morning. Maybe just my first question, Neil. You talked about some, if you want to call them cross-sell deployments between ABL and AIS in both the fueling market and in some office markets. As you're kind of going through those types of sales and those types of RFPs and things, are there any sort of gaps in terms of the product portfolio that you're kind of finding that you need, or do you feel like the products that you have in both of those spaces is kind of good for what you're trying to do in those verticals? Hey, everybody. hey everybody Good morning. good morning Maybe just my first question, Neil. maybe just my first question neil You talked about some, if you want to call them cross-sell deployments between ABL and AIS in both the fueling market and in some office markets. you talked about some if you want to call them cross-sell deployments between abl and ais in both the fueling market and in some office markets As you're kind of going through those types of sales and those types of RFPs and things, are there any sort of gaps in terms of the product portfolio that you're kind of finding that you need, or do you feel like the products that you have in both of those spaces is kind of good for what you're trying to do in those verticals? as you're kind of going through those types of sales and those types of rfps and things are there any sort of gaps in terms of the product portfolio that you're kind of finding that you need or do you feel like the products that you have in both of those spaces is kind of good for what you're trying to do in those verticals

Speaker 8: Yeah. Great question, Tim. And let me start philosophically first, which is that it's our view, it's my view that cross-sell opportunities should be driven by customer. So if the customer realizes the benefit that we're providing across an entire solution, then that will get pulled through the channel as opposed to us trying to push it. So that's our philosophy. So as a result, when we start to talk about these things, it'll be because customers have pulled them through, not because we're aggressively pushing them. So net-net, it might take a little bit longer, but we'll have a much more durable relationship with those customers. Yeah. yeah Great question, Tim. great question tim And let me start philosophically first, which is that it's our view, it's my view that cross-sell opportunities should be driven by customer. and let me start philosophically first which is that it's our view it's my view that cross-sell opportunities should be driven by customer So if the customer realizes the benefit that we're providing across an entire solution, then that will get pulled through the channel as opposed to us trying to push it. so if the customer realizes the benefit that we're providing across an entire solution then that will get pulled through the channel as opposed to us trying to push it So that's our philosophy. so that's our philosophy So as a result, when we start to talk about these things, it'll be because customers have pulled them through, not because we're aggressively pushing them. so as a result when we start to talk about these things it'll be because customers have pulled them through not because we're aggressively pushing them So net-net, it might take a little bit longer, but we'll have a much more durable relationship with those customers. so net-net it might take a little bit longer but we'll have a much more durable relationship with those customers We chose to highlight the two that we highlighted. So first, within AIS, the cross-sell opportunity between the Distech portfolio and the QSC portfolio because it really was the first coming together of the basically inside the space and the management of the space so that for the benefit of autonomous room experience. We chose to highlight the two that we highlighted. we chose to highlight the two that we highlighted So first, within AIS, the cross-sell opportunity between the Distech portfolio and the QSC portfolio because it really was the first coming together of the basically inside the space and the management of the space so that for the benefit of autonomous room experience. so first within ais the cross-sell opportunity between the distech portfolio and the qsc portfolio because it really was the first coming together of the basically inside the space and the management of the space so that for the benefit of autonomous room experience So there are things we can add to that experience for sure, but they're not required to provide the solution that we provided. I think the Refuel is even at least as interesting in that that now spans the entire company. So obviously, the Refuel effort was one that was started in the lighting business, but quickly you realize that the two most important things for the convenience store are to get people into the store and then from a cost management perspective inside the store to manage the refrigeration inside the store. So Distech can provide that. I am super pleased by how our teams have worked together to provide those solutions. So there are other things in that store, for example, that we don't provide, like digital signage, but basically they're coming together. So there are things we can add to that experience for sure, but they're not required to provide the solution that we provided. so there are things we can add to that experience for sure but they're not required to provide the solution that we provided I think the Refuel is even at least as interesting in that that now spans the entire company. i think the refuel is even at least as interesting in that that now spans the entire company So obviously, the Refuel effort was one that was started in the lighting business, but quickly you realize that the two most important things for the convenience store are to get people into the store and then from a cost management perspective inside the store to manage the refrigeration inside the store. so obviously the refuel effort was one that was started in the lighting business but quickly you realize that the two most important things for the convenience store are to get people into the store and then from a cost management perspective inside the store to manage the refrigeration inside the store So Distech can provide that. so distech can provide that I am super pleased by how our teams have worked together to provide those solutions. i am super pleased by how our teams have worked together to provide those solutions So there are other things in that store, for example, that we don't provide, like digital signage, but basically they're coming together. so there are other things in that store for example that we don't provide like digital signage but basically they're coming together Now, where we go from here, there are continued opportunities to expand those product lines. So maybe not for those specific examples, but for others that provide us both organic and inorganic opportunities to add to the portfolio of AIS over the next two years or so. And we're pretty enthusiastic about what those opportunities are. Now, where we go from here, there are continued opportunities to expand those product lines. now where we go from here there are continued opportunities to expand those product lines So maybe not for those specific examples, but for others that provide us both organic and inorganic opportunities to add to the portfolio of AIS over the next two years or so. so maybe not for those specific examples but for others that provide us both organic and inorganic opportunities to add to the portfolio of ais over the next two years or so And we're pretty enthusiastic about what those opportunities are. and we're pretty enthusiastic about what those opportunities are

Speaker 6: Okay. Super. Thank you. And then I guess just a modeling question. Karen, I guess in both of the segments you talked about kind of executing on an elevated backlog over the last two quarters. I guess is the insinuation that that is kind of behind you and maybe there's a little bit of slower growth over the next couple of quarters as you kind of the market, the company kind of grows closer to the market versus the market plus backlog? Okay. Super. okay super Thank you. thank you And then I guess just a modeling question. and then i guess just a modeling question Karen, I guess in both of the segments you talked about kind of executing on an elevated backlog over the last two quarters. karen i guess in both of the segments you talked about kind of executing on an elevated backlog over the last two quarters I guess is the insinuation that that is kind of behind you and maybe there's a little bit of slower growth over the next couple of quarters as you kind of the market, the company kind of grows closer to the market versus the market plus backlog? i guess is the insinuation that that is kind of behind you and maybe there's a little bit of slower growth over the next couple of quarters as you kind of the market the company kind of grows closer to the market versus the market plus backlog

Speaker 2: Yeah, Tim, I think that's right. Historical seasonality is going to be a little bit skewed as we look ahead to Q2 based on those accelerated orders and coming into the first quarter with a little bit of a higher backlog. So as we said in the prepared remarks, both ABL and AIS were favorably impacted from that higher backlog. And so the first half, I would say, is going to be more representative of normal seasonality, but Q2 could be down a little bit more than normal. Yeah, Tim, I think that's right. yeah tim i think that's right Historical seasonality is going to be a little bit skewed as we look ahead to Q2 based on those accelerated orders and coming into the first quarter with a little bit of a higher backlog. historical seasonality is going to be a little bit skewed as we look ahead to q2 based on those accelerated orders and coming into the first quarter with a little bit of a higher backlog So as we said in the prepared remarks, both ABL and AIS were favorably impacted from that higher backlog. so as we said in the prepared remarks both abl and ais were favorably impacted from that higher backlog And so the first half, I would say, is going to be more representative of normal seasonality, but Q2 could be down a little bit more than normal. and so the first half i would say is going to be more representative of normal seasonality but q2 could be down a little bit more than normal

Speaker 6: Okay. Sounds good. Thank you, guys. Okay. okay Sounds good. sounds good Thank you, guys. thank you guys

Speaker 9: Our next question comes from Christopher Glynn with Oppenheimer. Your line is now open. Our next question comes from Christopher Glynn with Oppenheimer. our next question comes from christopher glynn with oppenheimer Your line is now open. your line is now open

Speaker 1: Thanks. Good morning. Just wanted to talk about some of the divergence with ISN and DSN. They kind of diverge a little more than normal in the quarter. I know you called out the backlog strength really impacting the ISN space, but maybe some other factors beyond that. It was pretty wide divergence. Thanks. thanks Good morning. good morning Just wanted to talk about some of the divergence with ISN and DSN. just wanted to talk about some of the divergence with isn and dsn They kind of diverge a little more than normal in the quarter. they kind of diverge a little more than normal in the quarter I know you called out the backlog strength really impacting the ISN space, but maybe some other factors beyond that. i know you called out the backlog strength really impacting the isn space but maybe some other factors beyond that It was pretty wide divergence. it was pretty wide divergence

Speaker 8: Yeah, Chris, I think that's a good call out, and thanks for the opportunity to talk about them. When I look at the business, I tend to combine them. So if you look at them on a combined basis, that's basically exactly where we expect it to be. Accounts move between the two of them, so that's a little bit of the noise that exists there. But if you take them together, we're kind of exactly where we expect it to be. Yeah, Chris, I think that's a good call out, and thanks for the opportunity to talk about them. yeah chris i think that's a good call out and thanks for the opportunity to talk about them When I look at the business, I tend to combine them. when i look at the business i tend to combine them So if you look at them on a combined basis, that's basically exactly where we expect it to be. so if you look at them on a combined basis that's basically exactly where we expect it to be Accounts move between the two of them, so that's a little bit of the noise that exists there. accounts move between the two of them so that's a little bit of the noise that exists there But if you take them together, we're kind of exactly where we expect it to be. but if you take them together we're kind of exactly where we expect it to be

Speaker 1: Okay. I'll think about that and follow up later, but appreciate that. And then a lot of talk about the gas station under canopy convenience store opportunity there today and combining Q-SYS. You also acknowledged some things you don't have, like the signage. And there is a player there that's pretty established with that broad channel strategy. So it was interesting you called out some of the differentiating factors and some of the lack. Where are you in terms of meeting your penetration goals there? Is this a bit of a dogfight, or are you availing some clear runway? Okay. okay I'll think about that and follow up later, but appreciate that. i'll think about that and follow up later but appreciate that And then a lot of talk about the gas station under canopy convenience store opportunity there today and combining Q-SYS. and then a lot of talk about the gas station under canopy convenience store opportunity there today and combining q-sys You also acknowledged some things you don't have, like the signage. you also acknowledged some things you don't have like the signage And there is a player there that's pretty established with that broad channel strategy. and there is a player there that's pretty established with that broad channel strategy So it was interesting you called out some of the differentiating factors and some of the lack. so it was interesting you called out some of the differentiating factors and some of the lack Where are you in terms of meeting your penetration goals there? where are you in terms of meeting your penetration goals there Is this a bit of a dogfight, or are you availing some clear runway? is this a bit of a dogfight or are you availing some clear runway

Speaker 8: I would say that we're really pleased with our entrance into the market, and taking a step back, this is what I wanted our company to demonstrate to itself first and to everyone else second, is that we can identify an organic opportunity that has some size, and we can develop the product portfolio, the go-to-market strategy, and the entrepreneurial spirit to go attack a new vertical like that, so by all metrics, we're succeeding in that effort, so we're not going to be the only player in that market, and that market is a comparatively small part of our company. It's decidedly not our whole company, but this is a muscle that we want to build so that we can apply it here where we're doing really, really well. I would say that we're really pleased with our entrance into the market, and taking a step back, this is what I wanted our company to demonstrate to itself first and to everyone else second, is that we can identify an organic opportunity that has some size, and we can develop the product portfolio, the go-to-market strategy, and the entrepreneurial spirit to go attack a new vertical like that, so by all metrics, we're succeeding in that effort, so we're not going to be the only player in that market, and that market is a comparatively small part of our company. i would say that we're really pleased with our entrance into the market and taking a step back this is what i wanted our company to demonstrate to itself first and to everyone else second is that we can identify an organic opportunity that has some size and we can develop the product portfolio the go-to-market strategy and the entrepreneurial spirit to go attack a new vertical like that so by all metrics we're succeeding in that effort so we're not going to be the only player in that market and that market is a comparatively small part of our company It's decidedly not our whole company, but this is a muscle that we want to build so that we can apply it here where we're doing really, really well. it's decidedly not our whole company but this is a muscle that we want to build so that we can apply it here where we're doing really really well And in other areas like healthcare, where we're doing well, like sport lighting, where we're starting to come in, and others as we go along. I think the real read here is our ability to attack an area that was not initially in our purview or not historically in our purview and to build both the business model, the product portfolio, the go-to-market that's necessary to be successful there. And that's kind of what's happening. And in other areas like healthcare, where we're doing well, like sport lighting, where we're starting to come in, and others as we go along. I think the real read here is our ability to attack an area that was not initially in our purview or not historically in our purview and to build both the business model, the product portfolio, the go-to-market that's necessary to be successful there. and in other areas like healthcare where we're doing well like sport lighting where we're starting to come in and others as we go along i think the real read here is our ability to attack an area that was not initially in our purview or not historically in our purview and to build both the business model the product portfolio the go-to-market that's necessary to be successful there And that's kind of what's happening. and that's kind of what's happening

Speaker 1: Great color. Thanks, Neil. Great color. great color Thanks, Neil. thanks neil

Speaker 8: Thanks, Chris. Thanks, Chris. thanks chris

Speaker 9: Our next question comes from Michael Francis with William Blair. Your line is now open. Our next question comes from Michael Francis with William Blair. our next question comes from michael francis with william blair Your line is now open. your line is now open

Speaker 5: Hey, hi everyone. This is Mike on for Ryan. Wanted to start with just a cleanup. I saw there wasn't the guidance in the PowerPoint. Is there anything that's changed in the outlook? Hey, hi everyone. hey hi everyone This is Mike on for Ryan. this is mike on for ryan Wanted to start with just a cleanup. wanted to start with just a cleanup I saw there wasn't the guidance in the PowerPoint. i saw there wasn't the guidance in the powerpoint Is there anything that's changed in the outlook? is there anything that's changed in the outlook

Speaker 2: Yeah. And Michael, in the presentation that Charlotte will post after the call, you will see just the same slide with the sales and EPS guidance that we provided in the fourth quarter. So no, nothing changed there. Yeah. yeah And Michael, in the presentation that Charlotte will post after the call, you will see just the same slide with the sales and EPS guidance that we provided in the fourth quarter. and michael in the presentation that charlotte will post after the call you will see just the same slide with the sales and eps guidance that we provided in the fourth quarter So no, nothing changed there. so no nothing changed there

Speaker 5: Okay. Understood. And then wanted to talk about gross margins on the AIS side. 60% would be considered a ceiling. Do you think there's more you could do there? Okay. okay Understood. understood And then wanted to talk about gross margins on the AIS side. 60% would be considered a ceiling. and then wanted to talk about gross margins on the ais side 60% would be considered a ceiling Do you think there's more you could do there? do you think there's more you could do there

Speaker 8: I think we're good. Mike, I think we feel good about 60%. So as we continue to grow, we will focus on two things. One is that the level of margin in that business demonstrates the strategic value of the controls that we provide. So that's a recognition, I think, of the strategic importance of the business there. As we add products to that portfolio, we may choose to add some additional business models that maybe are slightly lower margin, which will balance it out a little bit. But net-net, we feel really good about kind of where that is. I think we're good. i think we're good Mike, I think we feel good about 60%. mike i think we feel good about 60% So as we continue to grow, we will focus on two things. so as we continue to grow we will focus on two things One is that the level of margin in that business demonstrates the strategic value of the controls that we provide. one is that the level of margin in that business demonstrates the strategic value of the controls that we provide So that's a recognition, I think, of the strategic importance of the business there. so that's a recognition i think of the strategic importance of the business there As we add products to that portfolio, we may choose to add some additional business models that maybe are slightly lower margin, which will balance it out a little bit. as we add products to that portfolio we may choose to add some additional business models that maybe are slightly lower margin which will balance it out a little bit But net-net, we feel really good about kind of where that is. but net-net we feel really good about kind of where that is

Speaker 5: Okay. And then wanted to hear. It seems like end markets haven't changed at all. Wanted to hear if anything has changed in the quoting environment with that backdrop, and any color from the channel would be helpful. Okay. okay And then wanted to hear. and then wanted to hear It seems like end markets haven't changed at all. it seems like end markets haven't changed at all Wanted to hear if anything has changed in the quoting environment with that backdrop, and any color from the channel would be helpful. wanted to hear if anything has changed in the quoting environment with that backdrop and any color from the channel would be helpful

Speaker 8: Yeah. First, on the lighting side, I would say that as we've said for, what, the last, Karen, three quarters, it's kind of a tepid lighting environment. We would like the lighting market to be a little bit stronger. All indications we have are that we are at least holding, if not accelerating our position in the market. So it is where it is. And as I'll point out, I like to point out, you can't build a space or touch a space without touching the lighting. So kind of lighting is all spaces at this point, and we are obviously the best-performing player in those spaces. So yeah, would we like the lighting market to be a little bit stronger? We would. And at some point, it will, and we'll benefit from that. Yeah. yeah First, on the lighting side, I would say that as we've said for, what, the last, Karen, three quarters, it's kind of a tepid lighting environment. first on the lighting side i would say that as we've said for what the last karen three quarters it's kind of a tepid lighting environment We would like the lighting market to be a little bit stronger. we would like the lighting market to be a little bit stronger All indications we have are that we are at least holding, if not accelerating our position in the market. all indications we have are that we are at least holding if not accelerating our position in the market So it is where it is. so it is where it is And as I'll point out, I like to point out, you can't build a space or touch a space without touching the lighting. and as i'll point out i like to point out you can't build a space or touch a space without touching the lighting So kind of lighting is all spaces at this point, and we are obviously the best-performing player in those spaces. so kind of lighting is all spaces at this point and we are obviously the best-performing player in those spaces So yeah, would we like the lighting market to be a little bit stronger? so yeah would we like the lighting market to be a little bit stronger We would. we would And at some point, it will, and we'll benefit from that. and at some point it will and we'll benefit from that On the AIS side, we've got disruptive businesses there that are effectively growing through market environments because of their ability to take share from others. So they continue to perform despite the environments. And that doesn't mean they're going to be up as much as they are this quarter every quarter, but we feel good about kind of the trajectory that we're on in AIS. On the AIS side, we've got disruptive businesses there that are effectively growing through market environments because of their ability to take share from others. on the ais side we've got disruptive businesses there that are effectively growing through market environments because of their ability to take share from others So they continue to perform despite the environments. so they continue to perform despite the environments And that doesn't mean they're going to be up as much as they are this quarter every quarter, but we feel good about kind of the trajectory that we're on in AIS. and that doesn't mean they're going to be up as much as they are this quarter every quarter but we feel good about kind of the trajectory that we're on in ais

Speaker 5: All right. Thank you. Pass it on. All right. all right Thank you. thank you Pass it on. pass it on

Speaker 9: Our next question comes from Jeffrey Sprague with Vertical Research. Your line is now open. Our next question comes from Jeffrey Sprague with Vertical Research. our next question comes from jeffrey sprague with vertical research Your line is now open. your line is now open

Speaker 4: Hello. Good morning, everyone. Hope everyone's doing well. I wanted to get your thought on tariffs. We have the Supreme Court ruling coming up on Friday. Who knows what we get? But if tariffs were somehow ruled illegal, do you think you'd have to roll back price as tariffs came back? How do you think the channel would respond to that? Or is there a possibility to sort of pocket some spread there if we have a dramatic change in tariff regime? Hello. hello Good morning, everyone. good morning everyone Hope everyone's doing well. hope everyone's doing well I wanted to get your thought on tariffs. i wanted to get your thought on tariffs We have the Supreme Court ruling coming up on Friday. we have the supreme court ruling coming up on friday Who knows what we get? who knows what we get But if tariffs were somehow ruled illegal, do you think you'd have to roll back price as tariffs came back? but if tariffs were somehow ruled illegal do you think you'd have to roll back price as tariffs came back How do you think the channel would respond to that? how do you think the channel would respond to that Or is there a possibility to sort of pocket some spread there if we have a dramatic change in tariff regime? or is there a possibility to sort of pocket some spread there if we have a dramatic change in tariff regime

Speaker 8: Yeah. Good question, Jeff. So let's take a step back, and I'll tell you what our working kind of hypothesis is and then what I think the practical implications of that are. Our working hypothesis is that things will stay mostly the same. So however it plays out, I'm not a legal expert, so I can't predict what the ruling will be or how they will rule, but it just feels like if there were a completely adverse ruling, that there would be some counterbalance that would keep things roughly the same. The administration would have an alternative or that would be written in some way that things are mostly the same. But let's go down the path of they're ruled they are disavowed in some way, and then we're there. The question then becomes, okay, so as a practical matter, we sell our product to a distributor. Yeah. yeah Good question, Jeff. good question jeff So let's take a step back, and I'll tell you what our working kind of hypothesis is and then what I think the practical implications of that are. so let's take a step back and i'll tell you what our working kind of hypothesis is and then what i think the practical implications of that are Our working hypothesis is that things will stay mostly the same. our working hypothesis is that things will stay mostly the same So however it plays out, I'm not a legal expert, so I can't predict what the ruling will be or how they will rule, but it just feels like if there were a completely adverse ruling, that there would be some counterbalance that would keep things roughly the same. so however it plays out i'm not a legal expert so i can't predict what the ruling will be or how they will rule but it just feels like if there were a completely adverse ruling that there would be some counterbalance that would keep things roughly the same The administration would have an alternative or that would be written in some way that things are mostly the same. the administration would have an alternative or that would be written in some way that things are mostly the same But let's go down the path of they're ruled they are disavowed in some way, and then we're there. but let's go down the path of they're ruled they are disavowed in some way and then we're there The question then becomes, okay, so as a practical matter, we sell our product to a distributor. the question then becomes okay so as a practical matter we sell our product to a distributor The distributor sells that product to the contractor. The contractor effectively sells that to the owner of the project. That's not the sales process, but that is the flow of revenue. So if we were to somehow kind of realize a benefit from a tariff refund, who would we give it to? So as you push that down the supply chain, then the distributor, we would have to assume that if we did, the distributor would give it to the contractor and that the contractor would give it to the building owner. I just don't think that seems reasonable. So now, if you look forward, then the second half of our expectation is that there would be a new market that everyone was adapting to, and we would need to adapt to that market from that point forward just like everybody else was. The distributor sells that product to the contractor. the distributor sells that product to the contractor The contractor effectively sells that to the owner of the project. the contractor effectively sells that to the owner of the project That's not the sales process, but that is the flow of revenue. that's not the sales process but that is the flow of revenue So if we were to somehow kind of realize a benefit from a tariff refund, who would we give it to? so if we were to somehow kind of realize a benefit from a tariff refund who would we give it to So as you push that down the supply chain, then the distributor, we would have to assume that if we did, the distributor would give it to the contractor and that the contractor would give it to the building owner. so as you push that down the supply chain then the distributor we would have to assume that if we did the distributor would give it to the contractor and that the contractor would give it to the building owner I just don't think that seems reasonable. i just don't think that seems reasonable So now, if you look forward, then the second half of our expectation is that there would be a new market that everyone was adapting to, and we would need to adapt to that market from that point forward just like everybody else was. so now if you look forward then the second half of our expectation is that there would be a new market that everyone was adapting to and we would need to adapt to that market from that point forward just like everybody else was We feel good about the dexterity we've demonstrated and our ability to kind of respond to that versus the rest of the industry. We feel good about the dexterity we've demonstrated and our ability to kind of respond to that versus the rest of the industry. we feel good about the dexterity we've demonstrated and our ability to kind of respond to that versus the rest of the industry

Speaker 4: Yeah. No, it could be quite interesting if that happens, and then just sort of a quick one back on sort of the backlog normalization. Obviously, not a big backlog business in the grand scheme of things, but are backlogs sort of in a normal spot now relative to what your top line guide is? Are we below normal around this kind of tepid outlook that you're talking about? Yeah. yeah No, it could be quite interesting if that happens, and then just sort of a quick one back on sort of the backlog normalization. no it could be quite interesting if that happens and then just sort of a quick one back on sort of the backlog normalization Obviously, not a big backlog business in the grand scheme of things, but are backlogs sort of in a normal spot now relative to what your top line guide is? obviously not a big backlog business in the grand scheme of things but are backlogs sort of in a normal spot now relative to what your top line guide is Are we below normal around this kind of tepid outlook that you're talking about? are we below normal around this kind of tepid outlook that you're talking about

Speaker 8: Yeah. I think we're, Jeff, now, you and I have been having this conversation for now five years, and when I said five years ago, I wasn't what was normal was not normal, and then we've changed through that. I would say that the industry and we got accustomed to higher backlog levels through the post-COVID period, through kind of tariffs, price increases, and whatnot, so we're now at backlog levels, which are more consistent with what they were before all of those things happened, and therefore, our order rate is more consistent with our quarterly performance, and that's what Karen was indicating, so there's still some noise from the price markets in the third quarter and the fourth quarter, which affected this, which is why she said we probably will see more seasonality in the second quarter, especially in the lighting business than we have historically. Yeah. yeah I think we're, Jeff, now, you and I have been having this conversation for now five years, and when I said five years ago, I wasn't what was normal was not normal, and then we've changed through that. i think we're jeff now you and i have been having this conversation for now five years and when i said five years ago i wasn't what was normal was not normal and then we've changed through that I would say that the industry and we got accustomed to higher backlog levels through the post-COVID period, through kind of tariffs, price increases, and whatnot, so we're now at backlog levels, which are more consistent with what they were before all of those things happened, and therefore, our order rate is more consistent with our quarterly performance, and that's what Karen was indicating, so there's still some noise from the price markets in the third quarter and the fourth quarter, which affected this, which is why she said we probably will see more seasonality in the second quarter, especially in the lighting business than we have historically. i would say that the industry and we got accustomed to higher backlog levels through the post-covid period through kind of tariffs price increases and whatnot so we're now at backlog levels which are more consistent with what they were before all of those things happened and therefore our order rate is more consistent with our quarterly performance and that's what karen was indicating so there's still some noise from the price markets in the third quarter and the fourth quarter which affected this which is why she said we probably will see more seasonality in the second quarter especially in the lighting business than we have historically We're comfortable operating in both environments, but we would like the lighting market to be a little bit stronger. We're comfortable operating in both environments, but we would like the lighting market to be a little bit stronger. we're comfortable operating in both environments but we would like the lighting market to be a little bit stronger

Speaker 4: Yeah. Understood. No, thanks for all that color. Yeah. yeah Understood. understood No, thanks for all that color. no thanks for all that color

Speaker 9: Thank you, and I'm showing no further questions in queue at this time. I'd like to turn the call back to Neil Ashe for any closing remarks. Thank you, and I'm showing no further questions in queue at this time. thank you and i'm showing no further questions in queue at this time I'd like to turn the call back to Neil Ashe for any closing remarks. i'd like to turn the call back to neil ashe for any closing remarks

Speaker 8: I think we had a really good first quarter. So both of our businesses continue to perform. ABL is clearly the best-performing lighting business in the world. We've demonstrated through our growth algorithm that we can separate ourselves from the market, and we feel good about kind of the long-term opportunity there to, A, continue to grow, and B, continue to improve margins. With AIS at both Atrius, Distech, and QSC, we have disruptive technologies, which are taking share in their marketplaces. Over the long term, we have great organic and inorganic opportunities there. So we're excited about those. I think we had a really good first quarter. i think we had a really good first quarter So both of our businesses continue to perform. so both of our businesses continue to perform ABL is clearly the best-performing lighting business in the world. abl is clearly the best-performing lighting business in the world We've demonstrated through our growth algorithm that we can separate ourselves from the market, and we feel good about kind of the long-term opportunity there to, A, continue to grow, and B, continue to improve margins. we've demonstrated through our growth algorithm that we can separate ourselves from the market and we feel good about kind of the long-term opportunity there to a continue to grow and b continue to improve margins With AIS at both Atrius, Distech, and QSC, we have disruptive technologies, which are taking share in their marketplaces. with ais at both atrius distech and qsc we have disruptive technologies which are taking share in their marketplaces Over the long term, we have great organic and inorganic opportunities there. over the long term we have great organic and inorganic opportunities there So we're excited about those. so we're excited about those So thank you for spending time with us this morning, and we'll look forward to talking to you again in another quarter. So thank you for spending time with us this morning, and we'll look forward to talking to you again in another quarter. so thank you for spending time with us this morning and we'll look forward to talking to you again in another quarter

Speaker 9: This concludes today's conference call. Thank you for participating. You may now disconnect. This concludes today's conference call. this concludes today's conference call Thank you for participating. thank you for participating You may now disconnect. you may now disconnect