Thank you, operator. Good morning, and welcome to the Acuity Fiscal 2026 third quarter earnings call.

On the call with me this morning are Neil Ashe, our Chairman, President, and Chief Executive Officer, and Karen Holcom, our Senior Vice President and Chief Financial Officer. Today's call will include updates on our strategic progress and on our fiscal 2026 third 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 covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Reconciliations of certain non-GAAP financial metrics are available in our 2026 third quarter earnings release and supplemental presentation on our investor relations website at www.investors.acuityinc.com. I will now turn the call over to Neil Ashe.

Thank you, Charlotte, and thank you all for joining us this morning. We demonstrated solid execution in our third quarter of fiscal 2026.

We grew net sales, we expanded our adjusted operating profit, and we increased our adjusted diluted earnings per share. We generated strong cash flow and allocated capital effectively.

In Acuity Brands Lighting, our sequential performance improved while our margins remained strong. Our ability to drive performance in this market is a result of the execution 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 drive productivity.

Over the past several years, we have focused on enhancing our product portfolios — Contractor Select, Design Select, and Made-to-Order. By aligning these portfolios to the specific needs of our customers, we have reduced complexity across the value chain while driving productivity for both our partners and ourselves.

Contractor Select drives growth and productivity for electrical distributors and retailers by lowering their cost of doing business and reducing their inventory requirements. Design Select enhances productivity for architects, specifiers, and contractors by enabling efficient configuration of the right products for each project.

The balance of the portfolio is Made-to-Order, providing customized solutions tailored to specific customer needs. This quarter, we introduced Beyond by Lithonia Lighting into our Design Select portfolio.

Beyond is our next generation linear high bay designed for large-scale industrial applications, with pre-configured trim packages for common use cases such as cold storage, automotive manufacturing, and warehousing. It integrates eldoLED drivers with embedded Sensor Switch and nLight controls, delivering a complete lighting and control solution that simplifies specification, ordering, and installation.

We also introduced CPX3P, our new three-pane panel available in both Contractor Select and Design Select. The CPX3P combines an architectural aesthetic with switchable lumen output and switchable color temperature at an accessible price point.

By enabling configuration at install, we reduce SKU complexity for our distributor partners and simplify specification, inventory management, and installation for our customers. The industry continues to recognize the value our products deliver.

This quarter, we received several Red Dot awards. Our Eureka brand continues to demonstrate design leadership — the Eureka Segment earned the prestigious Best of the Best recognition, while Tulip, Jarry, and Orelia received multiple product design awards.

Over the past 15 years, Eureka has won 27 Red Dot awards, reflecting consistent design strength across the portfolio. Now, switching to Acuity Intelligent Spaces, which continue to deliver strong sales and margin performance.

Atrius and Distech control the management of the space, and QSC manages the experience in the space. Over time, we will use data from both to enhance productivity outcomes through data interoperability.

This is how we can make spaces autonomous. Today I want to focus on Distech, where we have delivered strong, consistent growth and margin expansion.

Our performance reflects the strength of our open architecture strategy. Our edge-with-cloud platform delivers both local resilience and enterprise scale intelligence, eliminating traditional trade-offs.

Through open protocols, open tools, and an independent system integrator network, we give customers full control over how their systems are deployed, serviced, and upgraded over time. This differentiation is translating into share gains across our end markets.

We are winning projects and displacing incumbents at major universities, professional sports venues, data centers, and enterprise campuses. We are winning OEM manufacturers who are selecting our Eclipse portfolio for next-generation applications where our architecture enables capabilities their legacy platforms cannot support.

We recently launched Eclipse Resilience, a programmable logic controller designed for mission-critical cooling applications for use primarily in data centers. We now have a powerful combination of programmable logic controllers and direct digital controllers to solve customer problems.

We also introduced a preloaded Resense MOVE dashboard within Eclipse Facilities, providing immediate visibility into occupancy and space utilization out of the box, accelerating returns for both operators and systems integrators. Our investments in product innovation combined with AI-enabled programming tools, workflow automation, and the expansion of Distech Academy are making our partners more efficient and driving growth across the platform.

Distech is no longer just a controls company — it is a platform company investing across every layer of the stack and uniquely combining edge control, cloud intelligence, and occupant experience. AIS continues to build momentum with strong external recognition.

Resense MOVE was featured in the AHR product showcase and received a CSE award. Distech Controls earned an EcoVadis medal for sustainability performance, and QSC was recognized with rAVe's Best of ISE 2026 award and named in the AVNation Readers' Choice Awards.

Looking ahead, Acuity Brands Lighting remains the best-performing lighting company in the world. Our third quarter order trends indicate that demand in the lighting market is firming.

Acuity Intelligent Spaces is strategically differentiated with unique and disruptive technologies driving productivity for people experiencing spaces and for the people providing those spaces. We are confident in the long-term performance of both businesses.

I'll turn the call over to Karen.

Thank you, Neil, and good morning, everyone. We delivered solid performance in the third quarter of fiscal 2026.

For total Acuity, we generated net sales of $1.2 billion, which was $19 million, or 2% above the prior year. This was driven by growth in AIS, partially offset by revenue declines at ABL.

Adjusted gross profit margin improved to 50.1%, an increase of 10 basis points above the prior year, due primarily to a higher mix of AIS sales. Adjusted operating profit was $224 million, an increase of $2 million or 1% from last year.

Adjusted operating profit margin during the quarter was 18.7%. Our adjusted diluted earnings per share was $5.31, an increase of $0.19 or 4% compared to the prior year, primarily reflecting higher profitability and lower diluted shares outstanding.

ABL sales of $905 million decreased $18 million or 2% versus the prior year, reflecting a challenging comparison to Q3 2025, when orders were accelerated ahead of price increases. On a two-year stacked basis, total ABL grew 1%, and the independent sales network and direct sales network combined grew 4%.

ABL again delivered strong adjusted gross profit margin of 46.1%, driven largely by strategic pricing, product and productivity improvements. This quarter, we also had a $6.4 million tariff refund in ABL that we have adjusted out of our numbers.

Adjusted operating profit declined $9 million to $165 million, with adjusted operating profit margin of 18.2%, a decline of 60 basis points compared to the prior year, driven largely by lower sales. AIS sales for the third quarter were $304 million, an increase of $39 million or 15%, driven by strong growth in Distech and QSC.

AIS delivered adjusted gross profit margin of 60.3%, an increase of 10 basis points compared to the prior year. Adjusted operating profit was $76 million, an increase of $14 million or 22.5%, with an adjusted operating profit margin of 25.1%, up 150 basis points compared to the prior year.

On cash flow — in the first nine months of fiscal 2026, we generated $520 million of cash flow from operations, which was $121 million higher than the same period in fiscal 2025. During the quarter, we successfully refinanced our existing revolving credit facility with a new five-year, $800 million unsecured revolving credit facility, enhancing our financial flexibility and extending our maturity profile.

Year to date, we have repaid $200 million of our outstanding term loan, increased our quarterly dividend by 18%, and repurchased over 766,000 shares for $230 million. In summary, our execution is solid.

AIS continues to grow and expand margins, while ABL is delivering industry-leading performance. We continue to generate strong cash flow and allocate capital effectively.

I will now pass you over to the operator to take your questions.

I wanted to ask about AIS top-line growth. It doesn't seem like a teens growth category.

Is that all innovation and share gain, or is the company starting to break into higher-growth verticals? I specifically wanted to touch on data centers.

Over the five years I've been here, we've been very purposeful about adding products and innovation to Distech that allows it to compete effectively — first against the traditional big four competitors, and then to enter adjacencies which expand their TAM. You're really seeing all of those things come together in a very constructive way.

First, in our core Eclipse controllers business, we are out-innovating the competition and taking share. For example, at the Hartsfield-Jackson Atlanta International Airport, for the first time in over 20 years, Distech was selected as a new operating platform in Concourse D — an example of displacing incumbents.

Second, we announced the introduction of the PLC controller, giving us a unique combination of digital and PLC controllers, which positions us well for several of the hyperscalers. Third, we've entered adjacencies like refrigeration through the KE2 Therm acquisition a couple of years ago, and added more OEM exposure to other manufacturers.

Taken together, we've taken the growth rate of the industry and expanded dramatically beyond that through share gain, innovation, and adjacent market opportunities. That gives us the opportunity to continue to grow at these rates as we look forward over the next several years.

On capital deployment — you have over $400 million of cash on the balance sheet and more free cash generation to come. Can you talk about how you think about capital deployment and further building out the AIS platform?

Our capital allocation framework has not changed. We continue to invest in the business for growth, increase our dividend, evaluate acquisition opportunities, and repurchase shares.

On repurchases, we've demonstrated we're super disciplined and opportunistic — this quarter specifically we purchased nearly 500,000 shares at an average price of $281 a share. We feel really good about our program and it's working to create permanent value for our shareholders.

Our compounding generation of cash empowers us to do all of the above — invest in current businesses, make acquisitions, increase our dividend, and repurchase shares. On the acquisition front, we are enthusiastic about the opportunities ahead of us in AIS.

There are multiple areas we've identified for expanding Distech and QSC's footprint. Our view on acquisitions is quality over quantity — we want to buy the right assets.

The QSC acquisition is a great example: we waited and did our work so we knew we'd be buying the right asset, and you can see the results. In summary, we have the ability to do all of the above, and additional acquisitions to build out AIS remain our first priority.

On order trends — are you hearing from your agents that the gap between quoting and release activity is closing? Is there a particular catalyst?

Order rate was softest in the winter months, October through January. Conversion rates were longer during those periods than they had been historically, and we believed it to be an anomaly.

We're starting to see that firm up. We're seeing more normal project activity and more normal conversion rates on the lighting side.

I also believe we're performing better than the competition. Remember, last year at this time was the April tariff situation, which kicked up a lot of activity that we saw the impact of all the way through.

We also think the government shutdown clogged up the works during that period. We're starting to see some clearing of that activity as well.

Any areas of inflation you're particularly focused on, and can we start seeing more SG&A leverage on an annualized basis?

On general inflation — yes, we're seeing it across the complex. There's some materials inflation, metals for example.

We're seeing inflation in SG&A lines. Medical costs are up 12% going forward for us.

On supply shocks like memory — we treat that as we have tariffs and other supply shocks. We focus first on ensuring access and availability, second on covering any margin dilution with dollars, then third on restarting architectural and productivity improvements to continue our margin expansion.

Memory is largely an AIS impact as opposed to an ABL impact. On SG&A — the vast majority of the increase in our SG&A expenses has been investments in technology.

That includes AI in our operations, digitizing our supply chain, digital focus factories. These are largely investments helping to drive the margin expansion we see in the gross margin.

Our lighting business will continue to outgrow the market, and that does create significant operating leverage on the SG&A line. AIS is also leveraging its own operating expenses as it continues to grow at a higher rate.

As AIS becomes a larger portion of the total, we will see leverage as a result.

Should we think about ABL for Q4 showing normal seasonality or above normal? Any color on end markets where order trends are firming?

Q3 was a little bit of an outperformance on our sequential trends. We will see an increase from Q3 to Q4 as we normally do — it may not be as steep as the Q3 increase, but we should see continued growth.

Based on current order rates, things are firming and that should set us up well for Q4.

On end markets — I look at the independent sales network and direct sales network combined on a two-year basis, which is up 4%. That normalizes for tariffs and for accounts moving between the two channels.

It highlights that over that two-year period there was some weakness in corporate accounts, retail, and OEM. Corporate accounts is performing pretty well this year — that's a very good piece of business where we are the clear leaders.

On data centers, we have strong lighting performance there as well, just a smaller vertical as a percentage of dollar content. The other one I'd call out is our entry into refuel — we've won many of the largest accounts, and their performance with us will only increase over time.

We have great relationships there and we'll continue to grind forward. On the Acuity Lighting side broadly, we have the ability to flex into where the opportunities are because we have generally good market coverage.

Net-net, firming is the right determination, and it will demonstrate how much we outperform the rest of the lighting industry.

On gross margins longer term — can you continue to expand ABL gross margins if volumes stay soft?

The short answer is yes. The strategy at ABL is a virtuous cycle of product vitality, increasing service levels, using technology to differentiate our products and how we operate the business, and driving productivity.

Each one of those is contributing to the margin performance we've delivered and the opportunity that remains in front of us. We have moved the lighting business to a more productive product vitality cadence than it's been.

On service levels, we are increasing our ability to tie together an order and deliver higher outcomes for both distributors and projects through higher performance and reliability. Technology in our supply chain is starting to impact our productivity even more than it has in the past.

We're doing all of this in a soft volume environment. When there is volume growth — and there will be, because there is literally nothing in the world that doesn't have lights in it — we will continue to expand those margins.

Wanted to double-click on one of the Distech comments about winning with OEM manufacturers. I hadn't heard that before — it sounds like a new lane for the business.

In summary, the industry recognizes that we have the best technology. Because we're open protocol, our partners have the ability to do more things with our controllers than they've been able to do in the past.

What I predict going forward is that we will be able to consolidate more of the control opportunities among more manufacturers, because they have the best of both worlds with Distech controllers — the best technology, open protocol, and over time access to the Atrius DataLab, which gives them the opportunity to do all the things they want to do with data and digital control. At the same time, they can remain expert in the things they're expert in, which are valves and other components.

That's also how we participate in the data center market — largely as an OEM provider.

What have you been spending most of your focused time and energy on around the organization this quarter?

Four things have taken up most of my time. First, I'm pleased with the development of our AI platform inside the company.

My view is that the organizations that understand how to integrate the change in technology with a change in the business will have the greatest opportunity. That's the biggest opportunity for us and where I've spent most of my time.

Second, I've spent a lot of time with each of our teams around product and product velocity and how to use our better, smarter, faster operating system to drive product velocity — a differentiator and a long-term opportunity for us. Third, I've spent a lot of time in our facilities.

We hosted our board of directors this week in our Mexican production facilities, and every time I go there I'm proud of what they are capable of doing — a high productivity, incredibly engaged population completely aligned with our strategy. Fourth, we mentioned acquisitions earlier — there are opportunities for us to expand AIS, and we're out meeting with potential partners and companies on that front.

Can you help clarify the firming you're seeing — is this more backlog normalization and delayed conversion coming through, or is there a clear uptick in demand in the end markets themselves?

I'd say it's a combination of both, with primary emphasis on normalization of the backlog. A lot of these are long-tenured projects that are starting to move through the pipeline.

We've said in the past that with any normalization or clarity around policy, inflation, and tariffs, the market will react positively. People can't wait forever on these projects, so they're starting to move through.

As we look forward in our proprietary models, we see a firming of demand for the next four quarters or so. We don't see a dramatic increase in demand, but we definitely see a firming.

It's a combination of the market trying to find some normal patterns.

Have you gotten your head around why ABI continues to be weak while Dodge momentum looks better? We had another bad ABI print this morning.

We're aware of the ABI print. ABI measures month-over-month change, and it has been down for three years.

If you stack that, you'd be in a really negative place, which is not where the world is. There's something going on in that data that we have not figured out yet.

You seem more front-footed on the data center opportunity. Can you talk about the increasing product set for that end market, and frame the opportunity in terms of numbers and competitive landscape compared to other end markets?

At Distech, we previously competed principally with digital direct controllers and have participated with at least one hyperscaler using DDC controllers. We've now added PLC controllers to meet the requirements of those hyperscalers that favor PLCs.

We're also seeing more hyperscalers realizing the benefits of DDCs. Taken together, this gives us the opportunity to be a reliable supplier for multiple hyperscalers.

In terms of magnitude, I think this can be an interesting portion of Distech's business, which is itself an interesting portion of AIS going forward, without putting specific dollars around it yet. On the lighting side, we've had hypergrowth on a percentage basis in data center lighting, but they're smaller dollar numbers.

We're dealing directly now with contractors building for hyperscalers, and we sell directly into them as well as to prefab operators so that we can be the lighting system of choice going forward. To summarize — we have a responsible entry into the data center market on both the control side and the lighting side, and it should be a predictable portion of our growth going forward.

Now that you have a foot in the door with key customers, are you seeing more organic growth opportunities, or will you need inorganic growth to expand the footprint?

At this point, I would emphasize it's all organic. This is all product development on our side, which is the most valuable path for us to grow.

I won't rule out that there might be opportunities to tack on things in the future, but I am pleased with our team's ability to enter this dynamic market organically.

Thanks. Thank you all for joining us this morning.

As we said in our prepared remarks, we feel like we've delivered solid execution in this quarter. The lighting demand market is firming.

We will continue to differentiate ourselves from the competitive set in lighting. It's hard not to be impressed with what AIS is doing, both on the Distech side, which we highlighted this quarter, and on the QSC side.

We're pleased with where we are, excited about where we're going, and we look forward to talking to you again next quarter.