2020 IN REVIEW

Throughout the year we demonstrated the adaptability of our associates, the durability of our business, and our financial strength. We have shown that we can be a strong performer in all markets, including the current one.

• We demonstrated strong cash generation with $450 million in free cash flow. We will use this cash to grow our current businesses and invest in new opportunities while managing our capital structure for value creation.
• We initiated the digital transformation of the business and are in the process of transforming our customer service levels and new product development cycles to be better, smarter, and faster.
• We expanded our intelligent building platform. With Distech and Atrius, we have strategically impactful technology assets that we believe we can build into a very valuable business over time.
• We completed acquisitions of The Luminaires Group (TLG) and LocusLabs, Inc. (LocusLabs). The acquisition of TLG expanded our offering of leading specification-grade luminaires for commercial, institutional, hospitality, and municipal markets. LocusLabs expanded our software offering to support intelligent buildings through its leading indoor mapping and location platform.
• We entered the market for germicidal UV light disinfection products through alliances with Ushio America, Puro Lighting, and Violet Defense.
• We implemented additional programs to support diversity and inclusion. These programs include listening sessions, town hall-style meetings, and resource groups focused on minorities and women and will ultimately lead to building a stronger Acuity Brands.

Financial Highlights

We performed well in fiscal 2020 despite the pandemic and the corresponding impacts on demand for the end-markets we serve. Net sales were $3.3 billion, a decline of 9% as compared with the prior year. Despite the challenging market environment, we were able to increase our gross profit margins by 190 basis points. We achieved an operating profit of $354 million and net income of $248 million. Our diluted earnings per share was $6.27.

We generated record net cash provided by operating activities of $505 million, an increase of $10 million from fiscal 2019. Free cash flow (net cash provided by operating activities, less capital expenditures) was $450 million, an increase of $8 million as compared to the prior year. Our year-end cash balance totaled $561 million, an increase of $100 million since the end of fiscal 2019 after investing $55 million in capital expenditures, paying $21 million of dividends to stockholders, and repurchasing $69 million of the Company’s common stock. We provided a return on stockholders’ equity of 12.2% and an adjusted return on invested capital of 13.6%, both of which are meaningfully above our weighted average cost of capital.

As we look forward to fiscal 2021, we see an opportunity to leverage our expanded product portfolio in lighting, lighting controls, and intelligent building solutions in addition to our investment in our digital transformation, to extend our leading market position and create a new future for our industry.

PERFORMING WELL IN UNCERTAIN TIMES

Fiscal 2020 was a coalescence of challenges, opportunities, and successes. At the onset of the pandemic, we immediately launched several cross-functional workstreams focused on helping us determine the way forward, including how to change our workplace and create ways of working to accommodate the new world brought on by the pandemic. We clearly and unambiguously declared that our priorities were and continue to be: 1) the health and well-being of our associates and their families, and 2) ensuring that we operate effectively and emerge from this pandemic a stronger company. The pandemic has been a real test of who we are, as individuals, as a company, and as a community, and we accomplished some remarkable things.

Our team identified opportunities to make the most impact and we rapidly seized them. We identified temporary alternate care sites as an urgent need that we could help satisfy. In less than 48 hours, our Custom Architectural Lighting Solutions and Applied Technology Solutions teams developed a portable healthcare light stand, designed for lighting patient pods per specifications of the U.S. Army Corps of Engineers. They were deployed to facilities in Michigan, the Javits Center in New York, and McCormick Place in Chicago to support the life-saving treatments for the most critically ill.

Meanwhile, our business continued to march forward. Acuity Brands achieved significant sales wins throughout the pandemic while new products continued to be conceived, developed, and launched on schedule. Our go-to-market, product, and enabling teams transitioned the Company to operate in a virtual work environment almost overnight. Our use of virtual platforms to communicate with our independent sales network and our end users for product information, sales efforts, and training all accelerated. Our supply chain was already unmatched in the industry. Today, it is formidably stronger.

Our people make all the difference. Throughout Acuity Brands our associates continued to identify ways to make a positive impact on the communities where we operate and live in addition to the substantial day-to-day efforts required to balance work life and family priorities. We will not be what we were before the impact of the pandemic. We will emerge stronger and more agile with new ways of working. We are well prepared to invent the future of Acuity Brands.

TRANSFORMING ACUITY BRANDS

We are transforming the way we do things and leveraging the Company’s strong foundation and sound balance sheet as we continue our journey to be an industrial technology leader. In fiscal 2020, we embarked on a digital transformation of the business. We are in the process of making our business better, smarter, and faster while we transform the service levels to our customers and improve our product development cycles.

The digital transformation we have embarked upon is not merely about technology. It begins with a transformative customer experience that delivers on increased expectations. We also want to operate like a digital company, adopting the methods and strategies that allow us to execute our processes effectively and efficiently using technology. It is about both what we do and how we do it. We have outstanding opportunities in our product and technology portfolio –in our lighting, lighting controls, and building management systems – as well as dynamic opportunities in location-aware applications. The digital transformation of the Company will make the core business stronger and set the stage for what we believe will be solid growth in revenue and profitability over the long term.

Our strategy is to drive our transformation and expand the capabilities of our intelligent building platform, while we continue to use the cash flow that we generate to grow our current businesses, add new ones, and generate value for shareholders.

STRONGER TOGETHER

Acuity Brands is many things. We are a company with a strong strategic, operating, and financial foundation. We are a team of curious individuals seeking innovative solutions to problems before our customers ask for them. We are lighting solutions experts who are opportunistic on our customers’ behalf, optimizing their energy efficiency and enhancing the occupant experience while reducing operating costs. We create intelligent building solutions that enable our customers to convert their buildings into strategic assets. We are a talented group of transformative thinkers and together we are creating a future of what can be.

During fiscal 2020, we expanded our management team to increase our capabilities for the opportunities and challenges ahead. Dianne Mills was added as our Chief Human Resources Officer and will build on our strong culture to ensure we continue to attract, develop, and retain exceptional talent aligned with our business strategy. Vijay Raghavendra joined Acuity Brands in the newly created position of Chief Technology Officer to align our product and technology architecture with our customers’ needs. They bring a wealth of experience and passion for growing our Company and will be key contributors to our transformation.

I believe in our people. Our associates are the ones who best understand the decisions that need to be made for their markets, their customers, and their operations. We empower them by giving them the authority and responsibility for making these decisions and holding them accountable for the results. We employ, empower, and embrace a diverse group of people at Acuity Brands and increasingly work to build an organization that reflects society.

Our EarthLIGHT program will continue to enhance our ability to become better stewards of the environment and the communities where we do business. It will also help us to focus on better maintaining a diverse board and workforce and to improve our governance procedures. We continue to provide our associates with ongoing training programs, health and wellness programs, and career advancement opportunities.

I am proud of the collaborative culture we have at Acuity Brands. We want to be the place where the best people want to work because they believe they can do their best work here.

BUILDING FOR OUR FUTURE

We are not experiencing a new normal, but a new and different reality. We are executing well and will come out of this challenging market environment a stronger company and a better business than we went into it. We have learned new ways to work and plan to build on this momentum of productivity, collaboration, and innovation. We will continue to light the way for each other, our customers, and all our stakeholders during and far beyond this uncertain time.

I cannot imagine a year that would have revealed better evidence of our Company’s durability and sustainability in unfavorable environments than fiscal 2020. Unusually challenging times demand incredible things from extraordinary people, and those are the elements that came together this year at Acuity Brands. The commitment and selflessness of our associates is truly inspiring.

We are building for tomorrow, inventing the way that we will be working in the future. We want to master the art of the possible. At the same time, we will continue to leverage our market-leading position to extend that prominence, as we develop solutions to questions the industry has not yet asked.

I could not be more excited about the years ahead. We value the trust you have placed in us and will continue to work to safeguard it. Acuity Brands is on the way to some new and exciting places, and I appreciate that you are with us for the journey ahead.

NEIL M. ASHE President and Chief Executive Officer