Executive Summary

Q2 FY25 delivered mixed results: net sales rose 11% to $1.006B, adjusted operating margin expanded 70 bps to 16.2%, and adjusted EPS grew 10% to $3.73, while GAAP EPS fell 14% to $2.45 due to acquisition-related and purchase accounting impacts from QSC . Against S&P Global consensus, AYI posted a small EPS beat but missed on revenue and EBITDA (see Estimates Context).
ABL was resilient on margins despite slight sales decline (-0.3% YoY), while AIS surged on the QSC acquisition; AIS included $95.1M from two months of QSC, with adjusted AIS margin at 18.7% (down 230 bps YoY on mix/purchase accounting) .
Guidance unchanged: FY25 net sales $4.3–$4.5B and adjusted EPS $16.50–$18.00 reiterated; management emphasized strategic pricing to offset new tariff costs and near‑term lag effects, and affirmed capital allocation flexibility post‑QSC .
Stock reaction catalysts: durability of ABL margins amid uncertain macro/tariffs, cadence of tariff pass‑through vs. volume, AIS growth and QSC integration, and unchanged FY25 outlook despite acquisition accounting headwinds .

What Went Well and What Went Wrong

What Went Well
- AIS inflection with QSC: AIS sales rose to $171.5M (+152% YoY) with $95.1M from two months of QSC; adjusted AIS operating profit was $32.0M (18.7% margin), evidencing strong platform fit and run‑rate growth .
- ABL margin resilience: Despite -0.3% YoY sales, ABL expanded adjusted operating margin by 60 bps to 16.8% via product vitality, technology and productivity programs .
- Management execution and strategy clarity: “We grew net sales, expanded our adjusted operating profit and adjusted operating profit margin, and… increased our adjusted diluted earnings per share” (Neil Ashe) . Strategic pricing and electronics/controls content highlighted as durable differentiators .
What Went Wrong
- GAAP profitability compression: Operating margin fell 200 bps YoY to 11.0% due to amortization, share‑based expense, acquired profit in inventory, and acquisition-related costs; GAAP EPS declined to $2.45 (-13.7% YoY) .
- AIS profitability mix pressure: AIS GAAP margin declined 760 bps YoY to 5.8% on purchase accounting; adjusted AIS margin -230 bps YoY despite higher scale .
- Top‑line shortfall vs consensus: Revenue missed S&P consensus as ABL retail and corporate accounts softened amid uncertainty; management cited late‑Q2 demand timing and pricing activity effects .

Financial Results

Metric	Q2 FY24	Q1 FY25	Q2 FY25	Q2 FY25 Consensus
Revenue ($B)	$0.906	$0.952	$1.006	$1.0284* (miss)
Diluted EPS (GAAP)	$2.84	$3.35	$2.45	$3.6978* (N/A vs GAAP)
Adjusted Diluted EPS (Non‑GAAP)	$3.38	$3.97	$3.73	—
Gross Margin (GAAP)	45.5%	47.2%	46.5%	—
Adjusted Operating Margin (Non‑GAAP)	15.5%	16.7%	16.2%	—

Non‑GAAP bridge (Q2 FY25): pre‑tax adjustments $52.7M (amortization $16.8M; share‑based $11.4M; acquisition‑related $14.1M; acquired profit in inventory $10.4M); tax effects $(12.1)M .
EBITDA (Q2 FY25): EBITDA $139.7M (13.9%); Adjusted EBITDA $176.6M (17.5%) .

Segment breakdown

Segment	Q2 FY24 Net Sales ($M)	Q2 FY25 Net Sales ($M)	YoY	Q2 FY24 Adj. Op Margin	Q2 FY25 Adj. Op Margin
ABL	843.5	840.6	-0.3%	16.2%	16.8%
AIS	68.1	171.5	+151.8%	21.0%	18.7%

KPIs and cash

KPI	Q2 FY24	Q2 FY25
Adjusted Gross Margin	45.5%	47.5%
Free Cash Flow YTD ($M)	$263.6	$163.0
Cash from Ops YTD ($M)	$292.6	$191.6
Dividend/Share (declared)	$0.15	$0.17 (13% increase)
Share Repurchases YTD	$67.8M (prior year six months)	~$22.6M (68k shares)
AIS: QSC Contribution	—	$95.1M (2 months)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales (Total AYI)	FY25	$4.3B–$4.5B (updated post‑QSC in Q1)	$4.3B–$4.5B	Maintained
Adjusted Diluted EPS	FY25	$16.50–$18.00	$16.50–$18.00	Maintained
Net Interest Expense	FY25	~$20M–$25M	~$20M–$25M (implied unchanged)	Maintained
Dividend	Ongoing	$0.15/qtr (FY24)	$0.17/qtr payable May 1, 2025	Raised (Jan 2025)

Notes: Management explicitly stated “No change” to ranges in Q2 call Q&A .

Earnings Call Themes & Trends

Topic	Q4 FY24 (Q-2)	Q1 FY25 (Q-1)	Q2 FY25 (Current)	Trend
Tariffs/Macro	Normal conditions; FY25 back‑half weighted; outlined price/margin discipline	“Talk, not action” yet; prepared to react if tariffs occur	Treat tariffs as supply shock; cover dollar cost first; pricing lag of ~30–90 days; confident vs Asia‑heavy peers given Mexico/US footprint	Elevated focus; proactive pricing and supply chain dexterity
ABL product vitality/ electronics	Emphasis on product vitality, service, technology; margin expansion target 50–100 bps/yr	Portfolio segmentation traction; new launches, controls integration	Electronics, drivers, nLight platform; Design Select expansions (GOTHAM IVO)	Consistent execution; deepening electronics/controls moat
AIS growth & data interoperability	ISG growth mid‑teens; data center successes	Mission: smarter, safer, greener; adding SI capacity	QSC integration off to strong start; enabling edge‑to‑cloud AV+BMS outcomes	Step‑function scale with QSC; integration progressing
Pricing strategy	Strategic pricing to capture value	Continued strategic pricing; margins powered by mix/productivity	Strategic pricing by portfolio (Contractor/Design Select/MTO); immediate actions post‑tariff	Offensive, segmented pricing; managing lag impacts
Guidance/tone	FY25 guide: sales $3.9–$4.1B; adj EPS $16–$17.5	Guide lifted for QSC to $4.3–$4.5B; $16.5–$18 EPS	Guidance maintained; confident, “no change”	Stable outlook despite uncertainty
Capital allocation	Strong FCF; capacity “to do it all”	QSC financed with $600M debt; repurchases resumed	Post‑quarter $100M debt repaid; buybacks/dividend ongoing; M&A pipeline active	Balance sheet flexibility preserved

Management Commentary

“We delivered steady performance in the second quarter of fiscal 2025. We grew net sales, expanded our adjusted operating profit and adjusted operating profit margin, and… increased our adjusted diluted earnings per share.” — Neil Ashe (CEO) .
“We approach tariffs as the equivalent of a supply shock… manage the dollar impact first and then the margin impact… pricing actions will take a little bit of time to be fully implemented.” — Neil Ashe .
“AIS… welcomed QSC… building the industry's most innovative full stack AV platform… we’re off to a great start.” — Neil Ashe .
“Adjusted operating profit was $163M… margin 16.2%, up 70 bps… ABL adjusted operating profit margin 16.8% (+60 bps)… AIS adjusted operating margin 18.7%.” — Karen Holcom (CFO) .

Q&A Highlights

Tariffs and pricing cadence: Immediate tariff costs with ~30–90 day lag to price realization; management to prioritize recovering dollar cost, accepting temporary percentage margin dilution; confident supply chain (US/Mexico/Asia ~18%) provides relative advantage .
Demand timing/ABL seasonality: Late‑Q2 uncertainty caused timing shifts; initial post‑price increase pull‑forward in orders; too early to call sustained demand impact .
Guidance: Ranges unchanged from Q1 update; “No change” reiterated .
QSC integration and margins: Directionally mid‑teens adjusted margins, similar growth profile to legacy AIS; enablement integration largely complete; opportunity to expand margins over time while prioritizing growth .
Capital allocation/M&A: Highly cash generative; capacity to pay down debt, repurchase shares, and pursue additional M&A; healthy pipeline (no near‑term QSC‑scale deal expected) .

Estimates Context

How Q2 FY25 results compared to S&P Global consensus (at announcement):

Revenue: $1.0063B vs $1.0284B consensus — miss* .
Primary EPS: $3.73 vs $3.6978 consensus — slight beat* .
EBITDA: $153.9M vs $178.8M consensus — miss* .

Quarterly compare (consensus vs actuals)

Metric	Q1 FY25 Consensus	Q1 FY25 Actual	Q2 FY25 Consensus	Q2 FY25 Actual
Revenue ($M)	955.6*	951.6	1,028.4*	1,006.3
Primary EPS	3.8956*	3.97	3.6978*	3.73
EBITDA ($M)	170.8*	158.5 (approx adj EBITDA 171.6)	178.8*	153.9

Values marked with * are retrieved from S&P Global (Capital IQ). Actuals per company filings.

Implications: modest EPS beat on lower revenue; EBITDA miss driven by acquisition‑related items (amortization, purchase accounting, acquisition costs) and higher SD&A, partially offset by mix/margin improvements; full‑year ranges maintained, suggesting management confidence in offsetting tariff and integration headwinds .

Key Takeaways for Investors

AIS is now a scaled growth engine; QSC adds ~$95M in two months and strengthens the edge‑to‑cloud AV+BMS strategy with margin expansion potential as integration progresses .
ABL margins continue to outperform peers via product vitality, electronics/controls content, and strategic pricing; adjusted margin rose to 16.8% despite soft retail/corporate channels .
Near‑term tariff pass‑through lag may pressure percentage margins and cash flow timing, but management intends to cover dollar costs and sees relative supply chain advantage (US/Mexico footprint) .
FY25 guidance was reaffirmed; watch 2H cadence for revenue normalization (post pricing actions) and AIS margin trajectory as purchase accounting fades .
Capital allocation remains a catalyst: dividend raised 13% to $0.17, buybacks resumed, $100M post‑quarter debt repayment, with capacity for further M&A and repurchases .
Trading lens: Narrative likely driven by ABL margin durability vs tariff/demand uncertainty, AIS growth sustainability, and evidence of QSC synergies; small Q2 EPS beat vs revenue/EBITDA miss may temper immediate enthusiasm but support medium‑term thesis on mix and margin .

Additional detail (source extracts)

Q2 headline results: revenue $1.006B (+11.1% YoY), operating profit $110.2M (‑6.7% YoY), adjusted operating profit $162.9M (+16.3% YoY), GAAP EPS $2.45 (‑13.7% YoY), adjusted EPS $3.73 (+10.4% YoY) .
Channel mix (Q2): ABL ISN +0.5%, Direct +4.7%, Retail ‑11.6%, Corporate accounts ‑6.6% .
Cash flow YTD: CFO $191.6M; FCF $163.0M; repurchases ~$22.6M (68k shares); increased dividend .
Name change and segment renaming (Acuity Inc.; AIS): underscores broader technology identity ; acknowledged in call .

ACUITY BRANDS INC (AYI)·Q2 2025 Earnings Summary