ACUITY INC. (DE) (AYI)

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

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, 2026 and for the three and nine months ended May 31, 2026 and May 31, 2025. 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”).

Overview

Company

We are a market-leading industrial technology company. We use technology to solve problems in spaces, light, and more things to come. Through our two business segments, Acuity Brands Lighting (“ABL”) and Acuity Intelligent Spaces (“AIS”), we design, manufacture, and bring to market products and services that make a valuable difference in people’s lives. We achieve growth through the development of innovative new products and services, including lighting, lighting controls, building management solutions, and an audio, video, and control platform. We focus on customer outcomes and drive growth and productivity to increase market share and deliver superior returns. We look to aggressively deploy capital to grow the business and to enter attractive new verticals.

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.

Financial Condition, Capital Resources, and Liquidity

We have numerous sources of capital, including cash on hand and cash flows generated from operations, as well as various sources of financing. Our ability to generate sufficient cash flows from operations or to access certain capital markets, including banks, is necessary to meet our capital allocation priorities, which are to invest in our current business for growth, to invest in mergers and acquisitions, to pay a dividend, and to make share repurchases. Sufficient cash flow generation is also critical to fund our operations in the short and long term and to maintain compliance with covenants contained in our financing agreements.

Our significant contractual cash requirements primarily include principal and interest on outstanding debt, accounts payable, accrued employee compensation, operating lease liabilities, and certain purchase obligations incurred in the ordinary course of business that are enforceable and legally binding. 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 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. Additionally, we believe that our cash flows from operations and sources of funding, including, but not limited to, future borrowings and borrowing capacity, will sufficiently support our long-term liquidity needs. 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.

Cash

Our cash position at May 31, 2026 was $411.9 million, a decrease of $10.6 million from August 31, 2025. Cash generated from operating activities and cash on hand were used during the current fiscal year to voluntarily repay borrowings as well as to fund our capital allocation priorities as discussed below.

We generated $520.2 million of cash flows from operating activities during the nine months ended May 31, 2026, compared to $398.9 million in the prior-year period, an increase of $121.3 million. Cash flows from operations increased due primarily to higher profit and lower income tax payments.

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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 2.150% senior unsecured notes due December 15, 2030 (the “Unsecured Notes”), and the terms of our five-year credit agreement (“Credit Agreement”) entered into during the period set to expire May 8, 2031.

At May 31, 2026, our outstanding debt balance was $697.3 million, which consisted of our Unsecured Notes and borrowings on our revolving credit facility under the Credit Agreement, compared to our cash position of $411.9 million. We were in compliance with all covenants under our financing arrangements as of May 31, 2026.

The Unsecured Notes were issued by Acuity Brands Lighting, Inc., a wholly-owned subsidiary of Acuity Inc. The Unsecured Notes are fully and unconditionally guaranteed on a senior unsecured basis by Acuity Inc. and ABL IP Holding LLC, a wholly-owned subsidiary of Acuity Inc. 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):

During the first nine months of fiscal 2026, we voluntarily repaid $200.0 million of our outstanding obligation on our term loan facility (“Term Loan Facility”). Additionally, we repaid the remaining $200.0 million obligation on the Term Loan Facility with borrowings under the revolving credit facility under the Credit Agreement entered into on May 8, 2026. As of May 31, 2026, we had $200.0 million in remaining borrowings outstanding under revolving credit facility under the Credit Agreement.

At May 31, 2026, we had additional borrowing capacity under the Credit Agreement of $592.8 million under the most restrictive covenant in effect at the time, which represents the full amount of borrowing capacity under the Credit Agreement of $800.0 million less outstanding borrowings of $200.0 million and letters of credit of $7.2 million, primarily for securing collateral requirements under our casualty insurance policies. As of May 31, 2026, our cash on hand combined with the additional borrowing capacity under the new Credit Agreement totaled $1.0 billion.

Capital Allocation Priorities

Our capital allocation priorities are to invest in our current business for growth, to invest in mergers and acquisitions, to pay a dividend, and to make share repurchases.

Investments in Current Business for Growth

We invested $58.5 million and $43.6 million in property, plant, and equipment during the nine months ended May 31, 2026 and May 31, 2025, respectively. We invested primarily in new and enhanced information technology, equipment, tooling, and facility improvements in fiscal 2026.

Strategic Acquisitions, Investments, and Divestitures

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

QSC, LLC

On January 1, 2025, we acquired all of the equity interests of QSC, LLC (“QSC”), a leader in the design,

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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.

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

Dividends

We paid dividends on our common stock of $17.7 million ($0.57 per share) and $15.3 million ($0.49 per share) during the nine months ended May 31, 2026 and May 31, 2025, 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 2026 and 2025, we repurchased approximately 0.7 million shares and 0.3 million shares of our outstanding common stock for $232.7 million and $90.0 million, respectively.

Total cash outflows for share repurchases during the nine months ended May 31, 2026 and May 31, 2025 were $229.9 million and $91.3 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. As of May 31, 2026, 2.6 million shares remained available within the program to repurchase.

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Results of Operations

Third Quarter of Fiscal 2026 Compared with Third Quarter of Fiscal 2025

The following table sets forth information comparing the components of net income for the three months ended May 31, 2026 and May 31, 2025 (in millions except per-share data):

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Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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 for the fiscal years ended August 31, 2025 and 2024. The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included within this report.

A discussion of the year ended August 31, 2024 compared to the year ended August 31, 2023 can be found within Part II, Item 7. Management's Discussion and Analysis within our fiscal 2024 Annual Report on Form 10-K filed with the Securities and Exchange Commission on October 28, 2024.

Overview

Company

Acuity Inc. (referred to herein as “we,” “our,” “us,” the “Company,” or similar references) is a market-leading industrial technology company. Effective March 26, 2025, we changed our corporate name from Acuity Brands, Inc. to Acuity Inc. We use technology to solve problems in spaces, light, and more things to come. Through our two business segments, Acuity Brands Lighting (“ABL”) and Acuity Intelligent Spaces (“AIS”), we design, manufacture, and bring to market products and services that make a valuable difference in people’s lives. We achieve growth through the development of innovative new products and services, including lighting, lighting controls, building management solutions, and an audio, video, and control platform. We focus on customer outcomes and drive growth and productivity to increase market share and deliver superior returns. We look to aggressively deploy capital to grow the business and to enter attractive new verticals.

Financial Condition, Capital Resources, and Liquidity

We have numerous sources of capital, including cash on hand and cash flows generated from operations, as well as various sources of financing. Our ability to generate sufficient cash flows from operations or to access certain capital markets, including banks, is necessary to meet our capital allocation priorities, which are to invest in our current business for growth, to invest in mergers and acquisitions, to pay a dividend, and to make share repurchases. Sufficient cash flow generation is also critical to fund our operations in the short and long term and to maintain compliance with covenants contained in our financing agreements.

Our significant contractual cash requirements as of August 31, 2025 primarily include principal and interest on outstanding debt, accounts payable, accrued employee compensation, operating lease liabilities, and certain purchase obligations incurred in the ordinary course of business that are enforceable and legally binding. Further details on our borrowings and operating lease liabilities are outlined in the Debt and Lines of Credit, Leases, and Subsequent Event footnotes of the Notes to Consolidated Financial Statements within this Annual Report on Form 10-K.

Contractual purchase obligations subsequent to August 31, 2025 include $323.3 million in fiscal 2026. Contractual purchase obligations beyond fiscal 2026 are not significant.

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. Additionally, we believe that our cash flows from operations and sources of funding, including, but not limited to, future borrowings and borrowing capacity, will sufficiently support our long-term liquidity needs. 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.

Cash

Our cash position at August 31, 2025 was $422.5 million, a decrease of $423.3 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 $601.4 million of cash flows from operating activities during fiscal 2025 compared with $619.2 million in the prior-year period, a decrease of $17.8 million. Cash flows from operations decreased as payments for acquisition-related costs, higher interest, and increased purchases of inventory were partially offset by the timing of collections from customers.

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Financing Arrangements

See the Debt and Lines of Credit footnote of the Notes to Consolidated Financial Statements within this Annual Report on Form 10-K 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 27, 2027.

At August 31, 2025, our outstanding debt balance was $896.8 million, which consisted of our Unsecured Notes and borrowings on our Term Loan Facility, compared to our cash position of $422.5 million. We were in compliance with all covenants under our financing arrangements as of August 31, 2025.

The Unsecured Notes were issued by Acuity Brands Lighting, Inc., a wholly-owned subsidiary of Acuity Inc. The Unsecured Notes are fully and unconditionally guaranteed on a senior unsecured basis by Acuity Inc. and ABL IP Holding LLC, a wholly-owned subsidiary of Acuity Inc. 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):

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. During fiscal 2025, we voluntarily repaid $200.0 million of the outstanding obligation. We had $400.0 million in borrowings outstanding under the Term Loan Facility at August 31, 2025.

At August 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 August 31, 2025, our cash on hand combined with the additional borrowing capacity under the Revolving Credit Facility totaled $1.0 billion.

Capital Allocation Priorities

Our capital allocation priorities are to invest in our current business for growth, to invest in mergers and acquisitions, to pay a dividend, and to make share repurchases.

Investments in Current Business for Growth

We invested $68.4 million and $64.0 million in property, plant, and equipment in fiscal 2025 and 2024, respectively. We invested primarily in new and enhanced information technology, equipment, tooling, and facility improvements in fiscal 2025.

Strategic Acquisitions, Investments, and Divestitures

We seek opportunities to strategically expand and enhance our portfolio of solutions. Refer to the Acquisitions and Divestitures footnote of the Notes to Consolidated Financial Statements for more information.

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QSC, LLC

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 expands 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, LLC

On May 1, 2025, we acquired certain assets of M3 Innovation, LLC, 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 financial condition, results of operations, or cash flows.

Dividends

We paid dividends on our common stock of $20.6 million ($0.66 per share) in fiscal 2025 and $18.2 million ($0.58 per share) in fiscal 2024. All decisions regarding the declaration and payment of dividends are at the discretion of the Board of Directors (the “Board”) and are evaluated regularly with consideration of our financial condition, earnings, growth prospects, funding requirements, applicable law, and any other factors the Board deems relevant.

Share Repurchases

During fiscal 2025, we repurchased approximately 0.4 million shares of our outstanding common stock for $117.1 million. Total cash outflows for share repurchases during fiscal 2025 were $118.5 million. During fiscal 2024, we repurchased 0.5 million shares of our outstanding common stock for $87.8 million. Total cash outflows for share repurchases during fiscal 2024 were $88.7 million. 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 August 31, 2025, the maximum number of shares that may yet be repurchased under the share repurchase program authorized by the Board equaled 3.3 million shares.

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Results of Operations

The following is a discussion of our results of operations in fiscal 2025 compared to fiscal 2024. A discussion of our fiscal 2024 results of operations compared to fiscal 2023 can be found within Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations within our fiscal 2024 Annual Report on Form 10-K filed with the Securities and Exchange Commission on October 28, 2024.

The following table sets forth information comparing the components of net income for the year ended August 31, 2025 with the year ended August 31, 2024 (in millions except per share data):

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