Q4 2024 Acuity Brands Inc Earnings Call
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Hello, I'm
Speaker Change: Good morning, and welcome to Accuity Brands fiscal 2024 Fourth Quarter earnings call. At this time, I'll participate in a list-only mode. At the spirit of presentation, the company will conduct the question answer session. Please be advised that today's conference is being recorded. I'll now like to hand the conference over to Charlotte McLaughlin, Vice President of Investor Relations. Charlotte, please go ahead.
Charlotte Mclaughlin: Thank you, operator. Good morning and welcome to the AQT brand's fiscal 2024, fourth quarter, and four year earnings call.
Speaker Change: On the call with me this morning, I am Neil Ashe, our chairman, president and chief executive officer, and Karen Holcom, our senior vice president and chief financial officer.
Speaker Change: Today's call will include updates on our strategic progress and on our fiscal 2020-24, fourth quarter and full-year performance.
Speaker Change: There will be enough chinky for Q&A at the end of this call.
Speaker Change: As a reminder, some of our comments today may be forward-lessing statements. We intendly forward-lessing statements to be covered by the safe harbor provisions of the private security's litigation reform Act of 1995. As detailed on slide 2 of the accompanying presentation.
Speaker Change: Reconciliation of certain non-gap financial metrics with their corresponding gap measures are available in our 2024 fourth quarter earnings lease and supplemental presentation.
Speaker Change: Both were to available on our Investor Relations website at www.investors.cootybrands.com
Speaker Change: Thank you for your interest in a cutie brand. I will now turn the call over to Neil Ashe.
Neil Ashe: Thank you, Charlotte, and thank you all for joining us this morning. Our fiscal 2024, fourth quarter performance was strong. We grew net sales in both lighting and spaces, delivered margin expansion, and increased earnings per share.
Neil Ashe: fiscal 2024 was a successful year of improved operating performance that delivered end user satisfaction and improved financial results.
Neil Ashe: In ADL, we grew net sales 11 million dollars, increase our adjusted operating profit by 13 million dollars, and expanded our adjusted operating profit margin to 18%.
Neil Ashe: These results are being driven by 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 to drive productivity.
Neil Ashe: In August, we announced that we combined our lighting and supply chain organizations under one leader to better align the end-to-end connectivity of our ABL processes.
Neil Ashe: I appointed Sachs Techball to lead the combined organization.
Speaker Change: Sachs joined us about three years ago in a growth and transformation role. He's a dynamic leader who has the ability to bring the business together in order to accelerate growth and to drive productivity.
Speaker Change: This quarter, we continue to further our ongoing product vitality.
Speaker Change: One of our recent product launches was Holobay by Holofane, a capable and configurable round high bay for using industrial environments, manufacturing environments, and warehouse spaces.
Speaker Change: Holobay reinforces Holophane's leadership position in the industrial space by leveraging both existing and new technology to deliver game-changing performance.
Speaker Change: It's innovative thermal management can withstand the most demanding environments. It has the broadest lumin output options on the market, it's 5 to 10 pounds lighter than alternatives, has multiple mounting options, and it's configurable with our in-light controls.
Speaker Change: This is the biggest technology improvement in over a decade in industrial highways.
Speaker Change: Our team has continued to be recognized for innovation and for the value that our products bring to our customers.
Speaker Change: In the fourth quarter, many of our lighting solutions were selected for the 2024 illuminating engineering society progress report, which showcases the year's most significant advancements in the art and science of lighting.
Speaker Change: and including Leno by A-Light, the Gotham Ivo-Shalar recessed down light and the Leithonia frame, all of which have been highlighted on earnings calls this year.
Speaker Change: We additionally won for our cyclone crosswalk, a street light that was designed to maximize pedestrian safety through innovative contrast and vertical illumination.
Speaker Change: and for the Hydraaltira, a compact ingrained fixture that is used in outdoor architectural and landscape lighting. It's innovative ceiling capabilities allow for maximum structural integrity that ensures long-term use with minimal maintenance.
Speaker Change: Now, I'd like to take a step back and recap our achievements this year in the lighting business.
Speaker Change: Overall, our financial performance is strong, and we may progress on our strategy and on our initiatives.
Speaker Change: We evolved our differentiated product portfolios made to order, design, select, and contractor select to create the most effective way for end users and contractors to get what they need when they need it for their specific projects.
Speaker Change: and we invested for future growth, prioritizing new verticals where we have not historically competed or where we are under penetrated.
Speaker Change: Notably in the refueling market where we developed a new line of tailored product solutions and in the horticulture vertical where we built a product portfolio to service the horticulture environment through organic and inorganic product development.
Speaker Change: Now, moving on to an intelligent space's group which delivered impressive growth and margin performance.
Speaker Change: Our mission and our intelligence-based business is to make space a smarter, safer, and greener through a strategy of connecting the edge to the cloud.
Speaker Change: In spaces, we are focused on increasing our addressable market by expanding where we compete and what we can control.
Speaker Change: France was just a regional market outside of North America. We have an impressive market position as a result of having the most adaptable and capable technology on the market, and not surprisingly, our products were used in many of the facilities in Paris this summer.
Speaker Change: In the Aquatic Center, our Clip Solutions Regulated Water and Energy Consumption.
Speaker Change: Our Clips Controller is played a key role in managing temperature, air quality, and acoustics at the Arena of Port D'Aleshapel, which hosts a events like gymnastics and badminton.
Speaker Change: and the Grand Paul A, our controllers enable nighttime window automation to manage temperature and save energy. And in Maxwell Hall, we demonstrated the modularity of our eclipse solutions.
Speaker Change: It served the needs of the athletes when the facility was being used as part of the athlete's village and now it is easily adapted to the requirements of the incoming occupants as the space transforms into offices.
Speaker Change: Our Intelligence Spaces Business had a very good year. We expanded our addressable market, continue to our impressive growth, and increase margins.
Speaker Change: and now, let's look forward.
Speaker Change: In our lighting lighting controls business, we've demonstrated performance that is clearly differentiated from the rest of the market.
Speaker Change: and we're not done.
Speaker Change: We are confident in our ability to grow this business and have a clear growth algorithm to do so.
Speaker Change: First, as the largest company in the North American lighting industry, we will grow with a market.
Speaker Change: Second, we will continue to take share and third, we will invest for growth by entering new verticals where we have either not historically competed or where we are under penetrated.
Speaker Change: Taking together, over a long period of time, we believe that our lighting business will grow mid-singual digits.
Speaker Change: We have also demonstrated that we can improve margins. In fiscal 2020, our adjusted operating profit margin was 15%. And now, in fiscal 2024, it has increased to 18%.
Speaker Change: We are confident that we can continue this trend and believe that we can add around 50 to 100 basis points of adjusted operating profit margin per year in the lighting business.
Speaker Change: We have made AVL more predictable, repeatable and scalable. It is a high quality, strategic asset, and a core pillar of our company.
Speaker Change: In our Intelligence Faces Business, we are delivering meaningful outcomes for end users that are powered by disruptive technologies and that generate strong financial results. We are expanding our addressable market, we are growing sales and we are increasing margins.
Speaker Change: Our open-edge class solutions currently operate buildings to maximize occupant experience and minimize energy and operational costs, and we believe we can do more in the future.
Speaker Change: We see a future where the data generated from managing a built space, from what happens in a built space, and from who is in a built space comes together in new and unique ways.
Speaker Change: Both our organic and inorganic efforts will be focused on continuing to add more disruptive technologies that bring together a new vision of data interoperability to drive end user outcomes.
Speaker Change: We have a strong pipeline of internal development and small and medium sized acquisitions to satisfy this vision.
Speaker Change: In conclusion, we are delivering better outcomes for our stakeholders and compounding well for our shareholders. We are continuing to drive improvements in order to make a community a much larger and more impactful company in fiscal 2025 and beyond.
Karen Holcom: Now, I'll turn the call over to Karen who will update you on our fourth quarter performance and provide the outlook for fiscal 2025.
Karen Holcom: Thank you, Neil, and good morning to everyone on the call. We delivered strong performance in our fourth quarter.
Karen Holcom: Sales and our lighting business grew, we continued to deliver mid-teen sales growth in our spaces business and both businesses delivered impressive margin improvements. We increased our adjusted-deluded earnings per share and generated significant full-year operating cash flow.
Karen Holcom: For Total AYI, we generated net sales in the fourth quarter of $1 billion, which was $22 million or 2% above the prior year as a result of growth in both the lighting and spaces businesses.
Karen Holcom: We continue to deliver year-over-year margin improvement.
Karen Holcom: During the quarter, our adjusted operating profit was up $16 million from last year, and we expanded our adjusted operating profit margin to 17.3% and increase of 120 basis points from the prior year.
Karen Holcom: This increase was largely a result of the significant year-over-year improvement in our gross profit margin, driven by product vitality, the management of price and cost, and productivity improvements.
Karen Holcom: This quarter, we again generated net interest income as a result of the strong cash position on our balance sheet. And our adjusted deluded earnings per share of $4.30 increase 33 cents or 8% over the prior year.
Karen Holcom: In ABL, net sales were $955 million, and increased of $11 million or around 1%.
Karen Holcom: This increase was driven by improvements in the majority of our channels, but was primarily the result of higher net sales in our corporate accounts channel.
Karen Holcom: Adjusted Operating Profit increased to $172 million, and we delivered adjusted operating profit margin of 18%, a 120 basis point improvement over the prior year.
Karen Holcom: Met sales and intelligent spaces for the fourth quarter were $84 million, an increase of 17% as this tack delivered impressive growth driven in part by large data center projects.
Karen Holcom: Adjusted Operating Profit in Intelligent Spaces, was $22 million, with the adjusted operating profit margin over 25%.
Karen Holcom: Now, turning to our cash flow performance. In fiscal 2024, we generated $619 million of cash flow from operating activities, a $41 million increase over fiscal 2023.
Karen Holcom: We continue to earn attractive returns on the cash that we have on our balance sheet, and end of the year with $846 million of cash.
Karen Holcom: We allocated capital consistent with our priorities, invested $64 million in capital expenditures, and acquired the assets of a rise horticulture lighting.
Karen Holcom: We increased our dividend per share, 15%, and allocated approximately $89 million to repurchase over $454,000 and an average price of $194 per share.
Karen Holcom: Since the beginning of the fourth quarter of fiscal 2020, we have repurchased approximately nine and a half million shares, an average price of about $145 per share, which was funded by organic cash flow.
Karen Holcom: This amounts to about 24% of the then outstanding shares.
Karen Holcom: I now want to spend a few minutes on our outlook for 2025.
Karen Holcom: Consistent with our prior practice, we are going to provide annual guidance, anger to realm net sales, and adjusted-deluted earnings per share. We will also provide you with certain assumptions which you can find in the supplemental presentation, available on our website after the conclusion of this call.
Karen Holcom: For full-year fiscal 2025, our expectation is that net sales will be within the range of $3.9 billion, and $4.1 billion for total AI.
Karen Holcom: This is based on the assumptions the AVL will deliver low to mid-singual digit sales growth, which we anticipate will be more back half weighted in fiscal 2025.
Karen Holcom: and ISG will generate sales growth in the load of mid-teens as we continue to increase our dressable market by expanding where we compete and what we can control.
Karen Holcom: We expect to deliver adjusted-deluded earnings per share within the range of $16 to $17.50.
Karen Holcom: 2 conclude, we delivered impressive performance in fiscal 2024. We improved margins, increased earnings per share, and generated strong cash flow from operations.
Karen Holcom: We've allocated capital effectively, investing for future growth in our existing businesses, and we've finished the year with a very strong balance sheet. We are positioned well to continue to deliver sales and earnings growth in fiscal 2025.
Speaker Change: Thank you for joining us today. I will now pass you over to the operator to take your questions.
Speaker Change: Thank you. To ask the question, please press star one one of your telephone and wait for your name to be announced. To withdraw your question, please press star one one again.
Speaker Change: Our first question comes from Tim Wozge with Beard, your line is open.
Tim Wozge: What's this thing?
Tim Wozge: Yeah, hey guys, good morning, thanks for the time. Good morning. Maybe I could just start with one question, Neil, just, you know, as you kind of look at the current more conditions obviously.
Speaker Change: There's a lot of choppy data points out there and it's kind of curious if you can give us an update. Just kind of what you're seeing around quoting, you know, kind of ordering and release activity in the AVL business.
Neil Ashe: Yeah, thanks Tim. So first of all, we feel good about where we're going for fiscal 25. So we're building off of strength. The ABL business returned to growth in the fourth quarter. Our operating performance was very strong.
Neil Ashe: As we look forward, we're reasonably confident about fiscal year 25. I think our view is consistent with most of the data that we've seen, which is that calendar year 25 is expected to be pretty strong.
Neil Ashe: So, the conditions now are, I would say, relatively normal, neither extraordinarily good nor, or, nor bad.
Neil Ashe: on the ABL side. So we're focused there on the growth outer of them and we feel good about kind of the full, full of the full 25 albeit more as Karen said back and loaded.
Speaker Change: Okay, okay, that's so full and then maybe just...
Speaker Change: You guys have built quite a cash pile on the balance sheet at this point, which is a good situation to have.
Speaker Change: You know, any kind of update, I could just kind of how you're thinking about the priorities to have capital allocation, I know that she didn't really find much stock, you know, this quarter, you know, from a root purchase standpoint. So any kind of just update, I'm kind of how you're thinking about capital allocation and if any significant changes there.
Karen Holcom: Karen, you want to start and then I'll follow up. Yep sounds good. So Tim, you know, we're really pleased with our cash flow generation this year. We had $555 million a free cash flow, which was $44 million higher than last year.
Karen Holcom: You know, we've demonstrated that we're capable with our cash flow to satisfy all of our priorities. We've invested in our current businesses for growth. We've got a healthy M&A pipeline. We increased the dividend and we did repurchase $89 million of shares outstanding.
Tim Wozge: So, on the share repurchases, you know, at the beginning of the year, we did provide you with expectations that we would repurchase about 40 to 60 million shares this year.
Neil Ashe: So at the midpoint, we bought back about 80% more than we expected to, and we did it at an average price of around $194 a share. So we feel good about all of the repurchases this year and how we executed there. And so then I'll let Neil talk more about the M&A pipeline.
Neil Ashe: Yeah, and before I do that, I'll just build on Karen's point. I think the takeaway of our cash generation and balance sheet is that we have the capacity to do it all. We have the capacity to invest for growth in our current businesses, which we've demonstrated through the refueling and the horticulture vertical and the...
Neil Ashe: and the continued expansion in ISG. We have increased our dividend. We've repurchased shares as Karen pointed out.
Neil Ashe: and then as we look forward we believe we have a strong pipeline of opportunity of small and medium sized acquisitions to grow both of our businesses.
Neil Ashe: Our priority is around ISG and we believe that both our organic and inorganic efforts will continue to be directed towards...
Speaker Change: Developing and acquiring disruptive technologies that have the opportunity to bring data together in new and interesting ways that deliver end-user outcomes. But I think the core takeaway is that we believe with our performance and our balance sheet that we can do it all from a cash perspective.
Speaker Change: Okay, sounds good, good luck on the year. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Christopher Glenn with Oppenheimer and Company, your line is open.
Christopher Glenn: Hey, thanks, congratulations on strong results.
Christopher Glenn: Oh, all year, and I was curious for an update on...
Christopher Glenn: Design, select how the reception's going there and the independent agency adoption to any variation of trends across their early adopters or laggards.
Speaker Change: Yes, thanks Chris. So, big picture. We're really pleased with the way the portfolio segmentation is going. So, the contractor's select portfolio has to form exceptionally well. We obviously have the made-to-order portfolio, and now as we kind of dig in on design select.
Speaker Change: Sachin, I'm around the road over the course of the last couple weeks we met with distributors and agents
Speaker Change: and the reaction is universally positive. There are hope for us is that we bring more and more of our product families into the portfolio. So, big picture, it's a lot more effective for each of them to ensure that they're ordering the right things for the projects that they are, for performance and service levels is makes everything better for them. Makes them more profitable, makes distributors more profitable, and allows them to choose us. On the agent side, the reaction has been incredibly positive. Distributors want more of it faster and...
Speaker Change: and we're going to continue to methodically turn it out as we meet our internal targets for product vitality and service performance.
Speaker Change: That's certainly sounds good. And just you mentioned DC Project Data Center for the ISG segment.
Speaker Change: I don't recall you calling that out in the past, so just curious, you know, how much of a driver that vertical is in fiscal 25, anything on wind rates, pipeline and how that is, that selection process for disc tech is rolling around, rolling ahead.
Speaker Change: Yeah, so we obviously had an exceptional quarter on that front last quarter. We take two steps back on data center control. There's digital control, and then there's pneumatic control. We are basically the leader in digital control, so four of the...
Speaker Change: for the the scalars who use digital control, we are the we are the choice. And so that's what's the driver behind that. So it's been a part of our business for for the last several years. We just had a really we had a really good quarter this year. That obviously that portion of the business will continue to grow both both in the US and in some of the markets outside the US.
Speaker Change: Thanks, and I'll wrap up with a housekeeping question, 8 million miscellaneous expense, just context and timing of that.
Speaker Change: So the miscellaneous expense, there's a couple things that fall in there. One is our tension expense which is pretty consistent quarter over quarter
Speaker Change: The big mover this quarter was really around foreign currency movements.
Speaker Change: and that's primarily due to two areas. One is the cash that detect generates, which is a significant and so we had some foreign currency movements on the Canadian dollar and then the other would be around our lease liabilities in Mexico and we had some unfavorable movements there.
Speaker Change: and that's what you saw. So when you look ahead, it really depends on what the FX rates are doing and then we're working to manage our cash effectively.
Speaker Change: Great, thank you.
Speaker Change: Good. Thank you. Our next question comes from the line of Joe Ode with Wolf Fargo. Your line is not open.
Joe Ode: Hi, good morning everyone. Thanks for taking my questions.
Joe Ode: You know, I wanted to start just in terms of any additional color tied to your commentary around County here 2025 is expected to be pretty strong any of the contributors there with respect to.
Speaker Change: Interest rates, or what's been a kind of prolonged period of time, you know, with maybe more muted activity and starting to see that shift, but any of the drivers and confidence behind that.
Speaker Change: and then related to that, when you talk about the growth algorithm within.
Speaker Change: Lighting and kind of looking at something in the, you know, if it's mid-single digits through a cycle, just how you break that down in terms of market growth, outgrowth, price, for some perspective there.
Speaker Change: Yes sure
Speaker Change: So first on the economy CEOs are notably terrible economists, so this commentary is worth what you're paying for it.
Speaker Change: I would say we do a fair amount, however, of data analysis and our data analysis, trying to analysis is, continues to be consistent, which is...
Speaker Change: which is that there will be, you know, there is a fair amount of activity on the horizon generally.
Speaker Change: I mentioned that I were traveling with agents and distributors and what they would say is that they are very busy, but projects aren't releasing as consistently or as they will.
Speaker Change: In other words, there's stuff building up in the pipeline. We're obviously going to work through, you know, we were things like, we were in, I'll take one market, for example, we're in Chicago and there's been obviously a significant decrease in, on the one hand, office space that's been put back, on the other hand, to slow down in warehouse.
Speaker Change: The consumption focusing on warehouse for a section for a second has to turn because they're going to reach a low point capacity.
Speaker Change: These things will work themselves out, and so, you know, over the longer term, we feel really good about that. So, then transitioning to the growth algorithm, and I'll answer each of your questions. So, the first is...
Speaker Change: The...
Speaker Change: We're the largest in North America, so obviously we're going to in some manner be tied to the performance of the industry, so that's kind of step one.
Speaker Change: The second is our performance is clearly differentiated from any other lighting companies that we can identify in North America and frankly anywhere else. So we will continue to take care.
Speaker Change: and third is, despite the fact that we are the largest and we are taking share. There are other verticals within the North American lighting industry, where we have been either chosen not to be.
Speaker Change: are under penetrated. So we spend a minute on refueling for example and I will focus on that.
Speaker Change: We literally had no business zero in refueling as of 12 months ago.
Speaker Change: We created a new canopy product portfolio that meets the needs of gas stations and convenience stores and QSR restaurants.
Speaker Change: We signed up the largest agent, independent agent in the network and we are going to prosecute that opportunity.
Speaker Change: Opportunities like that can be chunky as they add to the portfolio. So we feel good about the mix of those three things. So we're confident that whatever the lighting industry growth is, we will help grow it.
Speaker Change: and then finally on the strategy on price. So we believe that we, through our product vitality efforts and through our service, we are delivering more valuable products and services to the industry.
Speaker Change: and we will get paid for that. So we have a strategic pricing strategy which allows us to focus on continuing to one deliver that value to the lighting industry.
Speaker Change: they will continue to reap the benefits of that. At the same time, we can continue to earn higher margin. So we feel really good about kind of where ABL is positioned now as we look forward to the next, you know, kind of at three to five years.
Speaker Change: I appreciate the color and then I also just wanted to ask on the East Coast port situation, just any
Speaker Change: Any color on your exposure there, you know, your approach to kind of managing the situation, not sure if there's any sort of buffer inventory that you're looking at and how you think about sort of timeline before it could convert to any challenges for your operating model.
Speaker Change: On the West Coast Sports, most of our products come into the West Coast Sports.
Speaker Change: So, we do ship a few specific products from the East Coast, but you know, depending on how long it lasts, we feel pretty good about where we are from an inventory position on those specific products.
Speaker Change: So that customers won't be impacted. There could be some secondary impact as volumes move to the west coast, but we don't believe we should be materially impacted at this time and are just continuing to monitor the situation.
Speaker Change: Y'all, thank you.
Speaker Change: Thank you, as a reminder, it's half a question at this time, please press star 1-1 on your touched on telephone. Our next question comes from Brian Lee with Goldman Sachs and Company. You're letting us know of it.
Brian Lee: Hey guys, good morning. Thanks for taking the questions. I guess first one, just as I think about, um...
Brian Lee: The different segments and channels, the independent sales network, obviously a big one for you guys, you know, back to growth first time in over a year plus. Are you seeing a true inflection in trends? There may be kind of speak to the outlook for that business, and if you can help bracket what you think growth scenarios look like for that specifically in 25 is that is that flat up low single mid-singwood is trying to get a sense specifically on that part of the business.
Speaker Change: Yeah Brian, thanks for joining. I would just build on my answer to Joe there. So from a trans perspective, as Karen said, we expect the lighting business generally to be in the load of mid-Single digits growth this year, which is more skewed towards counter year 25.
Speaker Change: I will take a minute to outline and emphasize the power of our independent sales network. So I haven't talked about that in a while, but it's worth taking a step back and...
Speaker Change: and reflecting on that.
Speaker Change: You know, it's round number 60% of our lighting business. We have about 80 agents in North America, they have about on average 50 FTE. So we have 4,000 sales and support professionals.
Speaker Change: throughout North America selling our products. We are generally number one in each market in which we compete. They are generally number one in each market. They compete.
Speaker Change: and the symbiotic relationship between them and us is really strong. So going all the way back to when I first got here and we immediately kind of went into the...
Speaker Change: the pandemic and all of the misogash of the global supply chain stuff that followed that. Our agent performance of the independent sales network has been very consistent.
Speaker Change: So they're continuing to perform for us and our important part of our growth.
Speaker Change: And as I mentioned, when we've been out on the road talking to them, they are working very hard, they have a lot of activity right now, projects are a little slow to release, but they will over time.
Speaker Change: So taking together that kind of they are a contributor but not the only contributor to our expected continued kind of mid-single digit sales growth over a long period of time on the lighting business.
Speaker Change: Okay, super helpful and then maybe just question on the gross margins. If I look at the fiscal, you know, 25 guidance here, kind of implies if our numbers are right, you know, gross margin, essentially flat on a percentage basis with fiscal 24 where, you know, you obviously had very good performance on that metric. So is it fair to assume the additional margin leverage in fiscal 25 is coming more at the about that, just maybe contextualized, you know, the long-term target for 50 to 100 basis points. And you'll be, is that going to be a split between ongoing gross margin leverage and, and at the Outback Finer, is it more going to be shifting?
Speaker Change: Ward, kind of leverage on the up-back line, like it seems like it could be for 25. Thanks, guys.
Speaker Change: Yes, thanks for the question. Let me kind of highlight a couple things on that. First is, um...
Speaker Change: It's fair to say that our gross margin performance has been incredibly strong over the last several years and we don't think that that's going to a bait.
Speaker Change: The second on the op-ex line is that we have some geographic changes, so for example, as we invest in technology to help power the gross margin improvement, that technology investment shows up in SDNA.
Speaker Change: As we now focus on operating profit margin and the combination of those two.
Speaker Change: We think that 50 to 100 basis points annual target can continue for the foreseeable future.
Speaker Change: It will be a mix of those two, so it won't be perfectly linear in any specific period, but we believe that we have opportunities in both areas. We have the opportunity to continue on Gross Margin expansion, to varying degrees in different years.
Speaker Change: and we believe that we have the opportunity to leverage OPEX as we continue while we still continue to invest to drive the higher margin. So, you know, taking together, I really want to use this opportunity to highlight how powerful our lighting business is.
Speaker Change: It is clearly a top performer in its industry. We have demonstrated that both we can outgrow the industry and we can continue to expand margin. So, it's a strategically valuable industry-leading asset for us for the long term.
Speaker Change: Alright, thanks a lot, I'll pass it on.
Speaker Change: Thanks.
Speaker Change: Thank you. And I'm showing no further questions than to queue at this time. I like to turn the call back to Neil Ashe for any closing remarks.
Neil Ashe: Great, thank you all for joining us today work.
Neil Ashe: We're very pleased with the performance in our fiscal 2024. It was incredibly strong. As we look forward to FY25, our lighting business will continue to be the industry leader. We will, that business will grow. We have a clear algorithm to do that. We will continue to expand margins there for the foreseeable future.
Neil Ashe: and we're excited about the opportunities in our spaces group as we continue to deliver disruptive technologies that stitch data together in a new and interesting way to drive end user outcomes. We feel like we can continue to expand what we can control and where we can compete and we're excited about the possibility.
Neil Ashe: and finally all of that delivers incredibly strong cash generation for us to use capital allocation to drive value for stakeholders and compound wealth for our shareholders. So we're looking forward to the year ahead and the year after that and the year after that. So thank you for being with us this morning and we'll talk to you again in another quarter.
Speaker Change: This concludes today's conference call. Thank you for your participation. You may now disconnect.
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Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Sure.
Speaker Change: Sure.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Right.
Speaker Change: Okay.
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.
Yes.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Okay.