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Item 2. Management’s Discussion and Analysis

2026-01-08 compared with 2025-06-26 · 71 added, 169 removed, 100 unchanged (71% of the section changed)

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The purpose of this discussion and analysis is to enhance the understanding and evaluation of the results of operations, financial position, cash flows, indebtedness, and other key financial information of Acuity Inc.

(referred to herein as “we,” “our,” “us,” the “Company,” or similar references) and its subsidiaries as of May 31, 2025 and for the three and nine months ended May 31, 2025 and May 31, 2024.

(referred to herein as “we,” “our,” “us,” the “Company,” or similar references) and its subsidiaries as of November 30, 2025 and for the three months ended November 30, 2025 and November 30, 2024.

The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included within this report.

Also, please refer to Acuity Inc.'s Annual Report on Form 10-K for the fiscal year ended August 31, 2025, filed with the Securities and Exchange Commission (the “SEC”) on October 27, 2025 (“Form 10-K”).

Effective March 26, 2025, we changed our corporate name from Acuity Brands, Inc.

to Acuity Inc.

We are a market-leading industrial technology company.

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We look to aggressively deploy capital to grow the business and to enter attractive new verticals.

Our business exhibits some seasonality, with net sales being affected by weather and seasonal demand on construction and installation programs, particularly during the winter months, as well as the annual budget cycles of major customers.

Both ABL and AIS exhibit some seasonality, with net sales being affected by business days, weather and seasonal demand on construction and installation programs, particularly during the winter months, and the annual budget cycles of major customers.

Historically, with certain exceptions, we have experienced our highest sales in the last two quarters of each fiscal year due to these factors.

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Our obligations related to these items are described further within Management’s Discussion and Analysis of Financial Condition and Results of Operations within our Annual Report filed on Form 10-K.

Refer to Financing Arrangements below for a discussion of significant changes to our contractual obligations for the first nine months of fiscal 2025.

Refer to Financing Arrangements below for a discussion of significant changes to our contractual obligations for the first three months of fiscal 2026.

We believe that we will be able to meet our liquidity needs over the next 12 months based on our cash on hand, current projections of cash flows from operations, borrowing availability under financing arrangements, and current access to capital markets.

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In the event of a sustained market deterioration, we may need additional capital, which would require us to evaluate available alternatives and take appropriate actions.

Our cash position at May 31, 2025 was $371.8 million, a decrease of $474.0 million from August 31, 2024.

Cash generated from operating activities and cash on hand were used during the current year to partially fund the QSC, LLC (“QSC”) acquisition and our other capital allocation priorities as discussed below.

We generated $398.9 million of cash flows from operating activities during the nine months ended May 31, 2025, compared to $445.1 million in the prior-year period, a decrease of $46.2 million.

Cash flows from operations decreased as increased profitability on higher net sales was offset by payments for nonrecurring items as well as higher interest expense and the timing of collections from customers.

Our cash position at November 30, 2025 was $376.1 million, a decrease of $46.4 million from August 31, 2025.

Cash generated from operating activities and cash on hand were used during the current year to voluntarily repay $100.0 million of borrowings on our Term Loan Facility (as defined below) as well as to fund our capital allocation priorities as discussed below.

We generated $140.8 million of cash flows from operating activities during the three months ended November 30, 2025, compared to $132.2 million in the prior-year period, an increase of $8.6 million.

Cash flows from operations increased due primarily to higher profit, partially offset by the timing of payments for inventory purchases.

Financing Arrangements

See the Debt and Lines of Credit footnote of the Notes to Consolidated Financial Statements for discussion of the terms of our various financing arrangements, including the $500.0 million aggregate principal amount of 2.150% senior unsecured notes due December 15, 2030 (the “Unsecured Notes”), the terms of our $600.0 million five-year unsecured revolving credit facility (“Revolving Credit Facility”), and the terms of our $500.0 million unsecured term loan facility (“Term Loan Facility”) due in two years.

At May 31, 2025, our outstanding debt balance was $1.0 billion, which consisted of our Unsecured Notes and borrowings on our Term Loan Facility, compared to our cash position of $371.8 million.

We were in compliance with all covenants under our financing arrangements as of May 31, 2025.

See the Debt and Lines of Credit footnote of the Notes to Consolidated Financial Statements for discussion of the terms of our various financing arrangements, including the 2.150% senior unsecured notes due December 15, 2030 (the “Unsecured Notes”), the terms of our five-year unsecured revolving credit facility (“Revolving Credit Facility”), and the terms of our unsecured term loan facility (“Term Loan Facility”) due June 30, 2027.

At November 30, 2025, our outstanding debt balance was $797.0 million, which consisted of our Unsecured Notes and borrowings on our Term Loan Facility, compared to our cash position of $376.1 million.

We were in compliance with all covenants under our financing arrangements as of November 30, 2025.

The Unsecured Notes were issued by Acuity Brands Lighting, Inc., a wholly-owned subsidiary of Acuity Inc.

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The following tables present summarized financial information for Acuity Inc., Acuity Brands Lighting, Inc., and ABL IP Holding LLC on a combined basis after the elimination of all intercompany balances and transactions between the combined group as well as any investments in non-guarantors as of the dates and during the period presented (in millions):

Summarized Balance Sheet Information May 31, 2025 August 31, 2024

Summarized Balance Sheet Information November 30, 2025 August 31, 2025

Current assets $ 971.1 $ 1,068.2

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Non-current liabilities 1,041.1 1,138.4

Summarized Income Statement Information Nine Months Ended May 31, 2025

Summarized Income Statement Information Three Months Ended November 30, 2025

Net sales $ 814.2

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Net income 87.5

On November 25, 2024, we entered into an amendment to our credit agreement (the “Credit Agreement”) that, among other things, provided for a delayed draw term under the Term Loan Facility of up to $600.0 million.

In January 2025, we drew the full $600.0 million on the Term Loan Facility to fund the QSC acquisition.

In March 2025, we repaid $100.0 million of the outstanding obligation.

We had $500.0 million in borrowings outstanding under the Term Loan Facility at May 31, 2025.

We were in compliance with all financial covenants under the Credit Agreement as of the periods presented.

At May 31, 2025, we had additional borrowing capacity under the Credit Agreement of $595.8 million under the most restrictive covenant in effect at the time, which represents the full amount of the Revolving Credit Facility less outstanding letters of credit of $4.2 million issued under the Revolving Credit Facility, primarily for securing collateral requirements under our casualty insurance premiums.

As of May 31, 2025, our cash on hand combined with the additional borrowing capacity under the Revolving Credit Facility totaled $967.6 million.

In October 2025, we voluntarily repaid $100.0 million of our outstanding Term Loan Facility obligation.

As of November 30, 2025, we had $300.0 million in borrowings outstanding under the Term Loan Facility.

At November 30, 2025, we had additional borrowing capacity under the Credit Agreement of $593.0 million under the most restrictive covenant in effect at the time, which represents the full amount of the Revolving Credit Facility of $600.0 million less outstanding letters of credit of $7.0 million issued under the Revolving Credit Facility, primarily for securing collateral requirements under our casualty insurance policies.

As of November 30, 2025, our cash on hand combined with the additional borrowing capacity under the Revolving Credit Facility totaled $969.1 million.

Capital Allocation Priorities

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Investments in Current Business for Growth

We invested $43.6 million and $41.0 million in property, plant, and equipment during the nine months ended May 31, 2025 and May 31, 2024, respectively.

We invested primarily in new and enhanced information technology, equipment, tooling, and facility improvements in fiscal 2025 to date.

We invested $26.0 million and $18.9 million in property, plant, and equipment during the three months ended November 30, 2025 and November 30, 2024, respectively.

We invested primarily in new and enhanced equipment, information technology, tooling, and facility improvements in fiscal 2026.

Strategic Acquisitions, Investments, and Divestitures

We seek opportunities to strategically expand and enhance our portfolio of solutions.

On January 1, 2025, we acquired all of the equity interests of QSC, a leader in the design, engineering, and manufacturing of audio, video, and control solutions and services, for $1.2 billion.

This acquisition is intended to expand AIS into a cloud-manageable audio, video, and control platform that includes controls, sensors, and software with broad applications across multiple end-markets including education, commercial, hospitality, government, healthcare, and transportation.

We funded the transaction using cash on hand and proceeds from our Term Loan Facility.

On January 1, 2025, we acquired all of the equity interests of QSC, LLC (“QSC”), a leader in the design, engineering, and manufacturing of audio, video, and control solutions and services, for $1.2 billion.

This acquisition expanded AIS into a cloud-manageable audio, video, and control platform that includes controls, sensors, and software with broad applications across multiple end-markets including education, commercial, hospitality, government, healthcare, and transportation.

We funded the transaction using cash on hand and proceeds from our

Term Loan Facility.

The operating results, assets, liabilities, and cash flows of QSC have been included in our consolidated financial statements since the date of acquisition.

M3 Innovation

On May 1, 2025, we acquired certain assets of M3 Innovation, a sports lighting startup that uses innovative technology to lower the overall cost of the installation and operation of sports lighting solutions.

The assets have been included in ABL's financial results since the date of acquisition and did not have a material impact to our consolidated financial condition, results of operations, or cash flows.

Please refer to the Acquisitions footnote of the Notes to Consolidated Financial Statements for more information.

We paid dividends on our common stock of $15.3 million ($0.49 per share) and $13.4 million ($0.43 per share) during the nine months ended May 31, 2025 and May 31, 2024, respectively.

We paid dividends on our common stock of $5.3 million ($0.17 per share) and $4.5 million ($0.15 per share) during the three months ended November 30, 2025 and November 30, 2024, respectively.

All decisions regarding the declaration and payment of dividends are at the discretion of the Board of Directors (the “Board”) and are evaluated regularly in light of our financial condition, earnings, growth prospects, funding requirements, applicable law, and any other factors the Board deems relevant.

Share Repurchases

During the first nine months of fiscal 2025 and 2024, we repurchased approximately 0.3 million shares and 0.5 million shares of our outstanding common stock for $90.0 million and $88.3 million, respectively.

Total cash outflows for share repurchases during the nine months ended May 31, 2025 and May 31, 2024 were $91.3 million and $88.7 million, respectively.

During the first three months of fiscal 2026 and 2025, we repurchased approximately 0.1 million shares and less than 0.1 million shares of our outstanding common stock for $27.6 million and $5.4 million, respectively.

Total cash outflows for share repurchases during the three months ended November 30, 2025 and November 30, 2024 were $27.1 million and $6.7 million, respectively.

We expect to repurchase shares on an opportunistic basis subject to various factors including stock price, Company performance, market conditions, and other possible uses of cash.

On January 25, 2024, the Board approved an increase of three million shares to the maximum number of shares that may yet be repurchased under the share repurchase program.

As of May 31, 2025, 3.4 million shares remained available within the program to repurchase.

Recent Developments

In recent months, the U.S.

government has imposed, and is considering imposing, additional tariffs and trade restrictions on certain goods produced outside of the United States, including steel and aluminum.

In response to these actions, certain jurisdictions, including China, Mexico, Canada, and the European Union, have imposed, or are considering imposing, tariffs and restrictions on certain goods produced in the United States.

The situation concerning the imposition of additional tariffs and trade restrictions by the U.S.

and other jurisdictions and the status of certain trade agreements, including the United States, Mexico, Canada Free Trade Agreement, continues to evolve, and we cannot be certain of the outcome which could adversely impact demand for our products, costs, inflation, customers, suppliers, and the U.S.

Although we have taken actions to mitigate the impacts of tariffs and trade restrictions, including pricing actions and efforts to diversify our supply chain, competitive pricing or market pressures may not allow us to pass on the additional cost of these tariffs and may adversely affect our profit margins, results of operations, and/or cash flows.

Recent increased geopolitical instability has created additional uncertainty in the marketplace.

While we do not have significant operations in directly affected areas, we are unable to predict the impact of geopolitical factors on the global economy or on our financial condition, results of operations, and cash flows as of the date of these financial statements.

As of November 30, 2025, 3.3 million shares remained available within the program to repurchase.

Results of Operations

Third Quarter of Fiscal 2025 Compared with Third Quarter of Fiscal 2024

The following table sets forth information comparing the components of net income for the three months ended May 31, 2025 and May 31, 2024 (in millions except per-share data):

First Quarter of Fiscal 2026 Compared with First Quarter of Fiscal 2025

The following table sets forth information comparing the components of net income for the three months ended November 30, 2025 and November 30, 2024 (in millions except per-share data):

Three Months Ended

May 31, 2025 May 31, 2024 Increase (Decrease) Percent Change

November 30, 2025 November 30, 2024 Increase (Decrease) Percent Change

Net sales $ 1,143.7 $ 951.6 $ 192.1 20.2 %

Cost of products sold 589.9 502.3 87.6 17.4 %

608.4 515.9 92.5 17.9 %

Gross profit 553.8 449.3 104.5 23.3 %

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393.4 316.0 77.4 24.5 %

Special charges 29.7 — 29.7 NM

Operating profit 160.4 133.3 27.1 20.3 %

Percent of net sales 14.0 % 14.0 % — bps

Other expense:

Other expense (income):

Interest expense (income), net 8.4 (4.0) 12.4 NM

Miscellaneous expense (income), net 2.3 (0.5) 2.8 NM

Miscellaneous (income) expense, net (0.6) 2.5 (3.1) NM

Total other expense (income) 7.8 (1.5) 9.3 NM

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(1) Fiscal 2025 includes $19.2 million in preliminary acquisition date fair value adjustments to inventory for the QSC acquisition.

(2) Fiscal 2025 includes $2.5 million in acquisition-related costs and $11.6 million in preliminary amortization of intangible assets for the QSC acquisition.

Net sales for the third quarter of fiscal 2025 increased $210.5 million, or 21.7%, to $1.2 billion, compared with $968.1 million in the prior-year period due primarily to an increase in sales in our Acuity Intelligent Spaces segment driven by the acquisition of QSC, which contributed $172.8 million in sales, as well as higher sales of Atrius and Distech products.

Additionally, net sales increased in our Acuity Brands Lighting segment due primarily to higher net sales within the independent sales network, partially offset by lower net sales within the corporate accounts channel.

Gross profit for the third quarter of fiscal 2025 increased $118.0 million, or 26.1%, to $570.2 million, compared with $452.2 million in the prior-year period, and gross profit margin increased 170 basis points to 48.4%, compared with 46.7% in prior-year period.

Our gross profit increased compared with the prior period due primarily to the fall through of higher net sales, including contributions from the QSC acquisition, as well as favorable materials cost.

These increases were partially offset by increased production costs, acquisition date fair value adjustments to QSC's inventory, higher costs for Asian-sourced finished goods (including freight, duties, and tariffs), and additional non-Asian tariff costs.

(1) Fiscal 2025 includes $4.6 million in acquisition-related costs.

Net sales for the first quarter of fiscal 2026 increased $192.1 million, or 20.2%, to $1.1 billion, compared with $951.6 million in the prior-year period due primarily to an increase in sales in our AIS segment, driven by the acquisition of QSC, as well as an increase in net sales in our ABL segment.

Gross profit for the first quarter of fiscal 2026 increased $104.5 million, or 23.3%, to $553.8 million, compared with $449.3 million in the prior-year period, and gross profit margin increased 120 basis points to 48.4%, compared with 47.2% in prior-year period.

Our gross profit increased compared with the prior period due primarily to contributions from the QSC acquisition.

The improvement at AIS was partially offset by lower gross profit at ABL due primarily to higher production costs, partially offset by the fall through of higher sales and lower materials costs.

Operating Profit

Selling, distribution, and administrative expenses (“SD&A”) expenses for the third quarter of fiscal 2025 were $400.7 million, compared with $306.9 million in the prior-year period, an increase of $93.8 million, or 30.6%.

The increase in SD&A expenses was due primarily to higher employee-related costs, including amounts from the QSC acquisition, higher selling costs associated with higher sales, higher amortization, and acquisition-related costs.

Acquisition-related costs were recorded within unallocated corporate amounts.

We recorded special charges totaling $29.7 million during the third quarter of fiscal 2025, which consisted primarily of impairments of long-lived assets as well as employee severance costs related to productivity initiatives.

Operating profit for the third quarter of fiscal 2025 was $139.8 million (11.9% of net sales), compared with $145.3 million (15.0% of net sales) for the prior-year period, a decrease of $5.5 million, or 3.8%.

The decrease in operating profit was due to the recognition of special charges in the current period and higher SD&A expenses, partially offset by higher gross profit.

Selling, distribution, and administrative expenses (“SD&A”) expenses for the first quarter of fiscal 2026 were $393.4 million, compared with $316.0 million in the prior-year period, an increase of $77.4 million, or 24.5%.

The increase in SD&A expenses was due primarily to amounts related to the QSC acquisition, including higher employee-related costs and higher amortization from acquired intangibles.

Operating profit for the first quarter of fiscal 2026 was $160.4 million (14.0% of net sales), compared with $133.3 million (14.0% of net sales) for the prior-year period, an increase of $27.1 million, or 20.3%.

The increase in operating profit was due to higher gross profit, partially offset by higher SD&A expenses.

Interest Expense (Income), net

We reported net interest expense of $12.1 million and net interest income of $1.8 million for the third quarter of fiscal 2025 and 2024, respectively.

The increase in net interest expense was due primarily to interest incurred on our outstanding Term Loan Facility and lower interest-bearing cash and cash equivalent balances held during the period as a result of our purchase of QSC.

Miscellaneous Expense (Income), net

Miscellaneous expense (income), net consists of non-service components of net periodic pension cost, gains and losses associated with foreign currency-related transactions, and non-operating gains and losses.

We reported net miscellaneous expense of $2.3 million and net miscellaneous income of $0.5 million for the third quarter of fiscal 2025 and 2024, respectively.

We reported net interest expense of $8.4 million and net interest income of $4.0 million for the first quarter of fiscal 2026 and 2025, respectively.

Miscellaneous (Income) Expense, net

Miscellaneous (income) expense, net consists of non-service components of net periodic pension cost, gains and losses associated with foreign currency-related transactions, and non-operating gains and losses.

We reported net miscellaneous income of $0.6 million and net miscellaneous expense of $2.5 million for the first quarter of fiscal 2026 and 2025, respectively.

Income Taxes and Net Income

Our effective income tax rate was 21.5% and 22.8% for the third quarter of fiscal 2025 and 2024, respectively.

This decline was due primarily to an increase in favorable discrete items recognized in the quarter.

Net income for the third quarter of fiscal 2025 decreased $15.5 million, or 13.6%, to $98.4 million, from $113.9 million reported for the prior-year period.

This decrease was due primarily to the recognition of nonrecurring special charges, higher SD&A expenses, and higher net interest expense, partially offset by higher gross profit and lower income tax expense.

Diluted earnings per share for the third quarter of fiscal 2025 decreased $0.50, or 13.8%, to $3.12 compared with diluted earnings per share of $3.62 for the prior-year period.

This decrease reflects lower net income as well as higher outstanding diluted shares.

Our effective income tax rate was 21.0% and 20.8% for the first quarter of fiscal 2026 and 2025, respectively.

Net income for the first quarter of fiscal 2026 increased $13.8 million, or 12.9%, to $120.5 million, from $106.7 million reported for the prior-year period.

This increase was due primarily to higher operating profit, partially offset by higher net interest expense and income tax expense.

Diluted earnings per share for the first quarter of fiscal 2026 increased $0.47, or 14.0%, to $3.82 compared with diluted earnings per share of $3.35 for the prior-year period.

This increase reflects higher net income, as well as lower outstanding diluted shares.

Segment Results

The following table sets forth information comparing the operating results of our segments, Acuity Brands Lighting and Acuity Intelligent Spaces, for the three months ended May 31, 2025 and May 31, 2024 (in millions):

The following table sets forth information comparing the operating results of our segments, ABL and AIS, for the three months ended November 30, 2025 and November 30, 2024 (in millions):

Three Months Ended

May 31, 2025 May 31, 2024 Increase (Decrease) Percent Change

Acuity Brands Lighting:

Net sales $ 923.2 $ 898.5 $ 24.7 2.7 %

Operating profit 134.0 151.5 (17.5) (11.6) %

Operating profit margin 14.5 % 16.9 % (240) bps

Acuity Intelligent Spaces:

Net sales $ 264.1 $ 75.7 $ 188.4 248.9 %

Operating profit 27.4 12.5 14.9 119.2 %

Operating profit margin 10.4 % 16.5 % (610) bps

Acuity Brands Lighting net sales for the third quarter of fiscal 2025 increased $24.7 million, or 2.7%, to $923.2 million, compared with $898.5 million in the prior-year period.

This increase was due

primarily to higher net sales within the independent sales network, partially offset by a decline in the corporate accounts channel.

The decline in our corporate accounts channel was due primarily to the timing of renovation activities for a large retail customer.

Operating profit for Acuity Brands Lighting was $134.0 million (14.5% of Acuity Brands Lighting net sales) for the third quarter of fiscal 2025, compared with $151.5 million (16.9% of Acuity Brands Lighting net sales) in the prior-year period, a decrease of $17.5 million.

The decrease in operating profit was due primarily to the recognition of special charges.

Additionally, the fall through of higher net sales and favorable materials cost was partially offset by higher production costs, higher costs for Asian-sourced finished goods (including freight, duties, and tariffs), and additional non-Asian tariff costs.

Acuity Intelligent Spaces net sales for the third quarter of fiscal 2025 increased $188.4 million, or 248.9%, to $264.1 million, compared with $75.7 million in the prior-year period.

The increase in sales within the Acuity Intelligent Spaces segment is attributed primarily to the acquisition of QSC, which contributed $172.8 million in sales.

Additionally, sales of Atrius and Distech products increased during the current quarter.

Operating profit for Acuity Intelligent Spaces was $27.4 million for the third quarter of fiscal 2025, compared with $12.5 million in the prior-year period, an increase of $14.9 million.

This increase was due primarily to contributions from higher net sales, partially offset by additional costs related to the acquisition of QSC, including preliminary pre-tax nonrecurring acquisition date fair value adjustments to inventory and preliminary amortization of intangible assets.

First Nine Months of Fiscal 2025 Compared with First Nine Months of Fiscal 2024

The following table sets forth information comparing the components of net income for the nine months ended May 31, 2025 and May 31, 2024 (in millions except per share data):

Nine Months Ended

May 31, 2025 May 31, 2024 Increase (Decrease) Percent Change

November 30, 2025 November 30, 2024 Increase (Decrease) Percent Change

Net sales $ 895.1 $ 886.0 $ 9.1 1.0 %

Cost of products sold (1)

1,649.0 1,515.7 133.3 8.8 %

Gross profit 400.6 406.4 (5.8) (1.4) %

Percent of net sales 47.4 % 46.0 % 140 bps

Selling, distribution, and administrative expenses (2)

1,074.5 896.7 177.8 19.8 %

Special charges 29.7 — 29.7 NM

Operating profit 149.0 143.3 5.7 4.0 %

Percent of net sales 12.2 % 14.1 % (190) bps

Other expense:

Interest expense (income), net 15.0 (1.0) 16.0 NM

Miscellaneous expense, net 5.8 1.2 4.6 NM

Total other expense 20.8 0.2 20.6 NM

Income before income taxes 362.5 396.1 (33.6) (8.5) %

Percent of net sales 11.6 % 14.1 % (250) bps

Income tax expense 79.9 92.4 (12.5) (13.5) %

Effective tax rate 22.0 % 23.3 %

Net income $ 282.6 $ 303.7 $ (21.1) (6.9) %

Diluted earnings per share $ 8.92 $ 9.67 $ (0.75) (7.8) %

NM - not meaningful

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(1) Fiscal 2025 includes $29.6 million in preliminary pre-tax nonrecurring acquisition date fair value adjustments to inventory related to the acquisition of QSC.

(2) Fiscal 2025 includes $21.2 million in acquisition-related costs and $19.4 million in preliminary amortization of intangible assets related to the acquisition of QSC.

Net sales for the nine months ended May 31, 2025 increased $327.8 million, or 11.7%, to $3.14 billion compared with $2.81 billion in the prior-year due to increases in sales in both our Acuity Intelligent Spaces and Acuity Brands Lighting segments.

The increase in our Acuity Intelligent Spaces segment was driven by the acquisition of QSC, which contributed $267.9 million in sales, as well higher net sales of our Atrius and Distech products.

Additionally, net sales increased in our Acuity Brands Lighting segment due primarily to higher net sales within the independent sales and direct sales networks, partially offset by lower net sales within the corporate accounts and retail channels.

Gross profit for the nine months ended May 31, 2025 increased $194.5 million, or 15.0%, to $1.49 billion compared with $1.29 billion in the prior-year period.

Gross profit margin increased 140 basis points to 47.4% for the nine months ended May 31, 2025 compared with 46.0% in the prior-year period.

Our gross profit increased compared with the prior period due primarily to the fall through of higher net sales, including contributions from the QSC acquisition, as well as favorable materials cost.

Operating Profit

SD&A expenses for the nine months ended May 31, 2025 were $1.07 billion compared with $896.7 million in the prior-year period, an increase of $177.8 million, or 19.8%.

Acquisition-related costs were recorded within unallocated corporate amounts.

We recorded special charges totaling $29.7 million during the nine months ended May 31, 2025, which consisted primarily of impairments of long-lived assets as well as employee severance costs related to productivity initiatives.

Operating profit for the nine months ended May 31, 2025 was $383.3 million (12.2% of net sales) compared with $396.3 million (14.1% of net sales) for the prior-year period, a decrease of $13.0 million, or 3.3%.

The decrease in operating profit was due to the recognition of special charges in the current period and higher SD&A expenses, partially offset by higher gross profit.

Interest Expense (Income), net

We reported net interest expense of $15.0 million and net interest income of $1.0 million for the nine months ended May 31, 2025 and May 31, 2024, respectively.

The increase in net interest expense was due primarily to interest incurred on our outstanding Term Loan Facility and lower interest-bearing cash and cash equivalent balances as a result of our purchase of QSC.

Miscellaneous Expense, net

Miscellaneous expense, net consists of non-service components of net periodic pension cost, gains and losses associated with foreign currency-related transactions, and non-operating gains and losses.

We reported net miscellaneous expense of $5.8 million for the nine months ended May 31, 2025 and $1.2 million for the nine months ended May 31, 2024.

This year-over-year change is due primarily to a non-cash loss in the first quarter of fiscal 2025 on an investment in a privately-held entity over which we do not exercise significant influence or control.

Income Taxes and Net Income

Our effective income tax rate was 22.0% and 23.3% for the nine months ended May 31, 2025 and May 31, 2024, respectively.

This decline was due primarily to an increase in favorable discrete items recognized during the period.

We recognized excess tax benefits of $4.8 million and $1.8 million related to share-based payment awards during the nine months ended May 31, 2025 and May 31, 2024, respectively.

Net income for the first nine months of fiscal 2025 decreased $21.1 million, or 6.9%, to $282.6 million from $303.7 million reported for the prior-year period.

This decrease was due primarily to the recognition of nonrecurring special charges, higher SD&A expenses, and higher net interest expense, partially offset by

higher gross profit and lower income tax expense.

Diluted earnings per share for the nine months ended May 31, 2025 decreased $0.75 to $8.92 compared with diluted earnings per share of $9.67 for the prior-year period.

This decrease reflects lower net income as well as higher outstanding diluted shares.

Segment Results

The following table sets forth information comparing the operating results of our segments, Acuity Brands Lighting and Acuity Intelligent Spaces, for the nine months ended May 31, 2025 and May 31, 2024 (in millions):

Nine Months Ended

May 31, 2025 May 31, 2024 Increase (Decrease) Percent Change

Acuity Brands Lighting:

Net sales $ 2,649.8 $ 2,618.4 $ 31.4 1.2 %

Operating profit 407.6 421.3 (13.7) (3.3) %

Gross profit margin 44.8 % 45.9 % (110) bps

Operating profit margin 16.6 % 16.2 % 40 bps

Acuity Intelligent Spaces:

Net sales $ 257.4 $ 73.5 $ 183.9 250.2 %

Gross profit 153.2 42.9 110.3 257.1 %

Operating profit 37.0 10.8 $ 26.2 242.6 %

Gross profit margin 59.5 % 58.4 % 110 bps

Operating profit margin 14.4 % 14.7 % (30) bps

Acuity Brands Lighting net sales for the nine months ended May 31, 2025 increased 1.2% compared with the prior-year period due primarily to higher net sales in our independent and direct sales networks, partially offset by a decline in corporate accounts due primarily to the timing of renovation activities for a large retail customer and a decline in the retail sales channel.

Operating profit for Acuity Brands Lighting was $407.6 million (15.4% of ABL net sales) for the nine months ended May 31, 2025 compared to $421.3 million (16.1% of ABL net sales) in the prior-year period, a decrease of $13.7 million.

The decrease in operating profit was due primarily to the recognition of special charges.

Acuity Intelligent Spaces net sales for the nine months ended May 31, 2025 increased 144.8% compared with the prior-year period.

The increase in sales is attributed primarily to the acquisition of QSC, which contributed $267.9 million in sales, as well as higher net sales of Atrius and Distech products.

Acuity Intelligent Spaces operating profit was $48.1 million for the nine months ended May 31, 2025 compared with $26.9 million in the prior-year period, an increase of $21.2 million.

ABL net sales for the first quarter of fiscal 2026 increased 1.0% compared with the prior-year period.

This increase was due primarily to higher net sales within the independent sales network and corporate accounts channels, partially offset by lower net sales within the direct sales network.

ABL gross profit was $400.6 million (44.8% of ABL net sales) for the first quarter of fiscal 2026, compared with $406.4 million (45.9% of ABL net sales) in the prior-year period, a decrease of $5.8 million.

The decrease in gross profit was due primarily to higher production costs, partially offset by the fall through of higher net sales and favorable materials cost.

ABL operating profit was $149.0 million (16.6% of ABL net sales) for the first quarter of fiscal 2026, compared with $143.3 million (16.2% of ABL net sales) in the prior-year period, an increase of $5.7 million.

The increase in operating profit was due primarily to lower selling and employee costs, which more than offset the decline in gross profit.

AIS net sales for the first quarter of fiscal 2026 increased 250.2% compared with the prior-year period.

The increase was due primarily to the acquisition of QSC.

Additionally, sales of Distech products increased during the first quarter of fiscal 2026.

AIS gross profit was $153.2 million (59.5% of AIS net sales) for the first quarter of fiscal 2026, compared with $42.9 million (58.4% of AIS net sales) in the prior-year period, an increase of $110.3 million.

The increase in gross profit was due primarily to the acquisition of QSC as well as the fall through of higher Distech net sales.

AIS operating profit was $37.0 million (14.4% of AIS net sales) for the first quarter of fiscal 2026, compared with $10.8 million (14.7% of AIS net sales) in the prior-year period, an increase of $26.2 million.

This increase primarily reflects higher operating profit from the QSC acquisition.

AIS's operating results also include higher amortization from acquired intangibles from the QSC acquisition.

Critical Accounting Estimates

5 unchanged sentences

inventory valuation;

goodwill and indefinite-lived intangible assets;

and product warranty costs.

business combinations;

and goodwill and indefinite-lived intangible assets.

We base our estimates and judgments on our substantial historical experience and other relevant factors, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

17 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis