Earnings Call Transcript - AYI Q3 2022

Operator, Operator

Good morning, and welcome to the Acuity Brands Third Quarter Earnings Call of Fiscal 2022. At this time, all participants are in a listen-only mode. After the speakers’ presentation, the company will conduct a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Charlotte McLaughlin, Vice President of Investor Relations. Charlotte, please go ahead.

Charlotte McLaughlin, Vice President of Investor Relations

Thank you, Michelle. Good morning, and welcome to the Acuity Brands fiscal 2022 third quarter earnings call. As a reminder, some of our comments today may be forward-looking statements based on management's beliefs and assumptions, and information currently available to our management at this time. These beliefs are subject to known and unknown risks and uncertainties, many of which may be beyond our control, including those detailed in our periodic SEC filings. Please note that our company's actual results may differ materially from those anticipated and we undertake no obligation to update these statements. Reconciliations of certain non-GAAP financial metrics and their corresponding GAAP metrics are available in our 2022 third quarter earnings release, which is available on our Investor Relations website at www.investors.acuitybrands.com. With me this morning is Neil Ashe, our Chairman, President and Chief Executive Officer, who will provide an update on our strategy and highlights from the last quarter; and Karen Holcom, our Senior Vice President and Chief Financial Officer, who will walk us through our third quarter performance. There will be an opportunity for Q&A at the end of the call. For those participating, please limit your remarks to one question and one follow-up if necessary. We are webcasting today's conference call live. Thank you for your interest in Acuity Brands. I will now turn the call over to Neil Ashe.

Neil Ashe, Chairman, President and Chief Executive Officer

Thank you, Charlotte, and thank you to everyone on the call for joining us this morning. Our team delivered a strong quarter of sales and operating profit growth, driven by solid execution across both our Lighting and Spaces businesses. This performance is a direct result of the significant and ongoing improvements that our team has made over the last two years. Third quarter sales continue to trend and marked a bit of a milestone. It was the fifth consecutive quarter of double-digit revenue growth. Sales were over $1 billion this quarter for only the second time in the company's history as we continue to successfully capture price and drive volume through product vitality and service in both the Lighting and Spaces businesses. This quarter we were aggressive with our share repurchases. We repurchased about 5% of our shares outstanding in the third quarter. We are confident in the future of our company, and these repurchases add leverage to our future success and create permanent shareholder value. Moving on to our segments, both our Lighting and Spaces businesses performed well in the third quarter. First, on Acuity Brands Lighting. Our Lighting and Lighting Controls business had another very strong quarter with top line growth driven by our product vitality efforts and our focus on service. Market demand in the third quarter remained strong and we continued to work through our backlog, which continues to be above normal levels. Our strategy of increasing product vitality, increasing service levels, and using technology to differentiate both our products and our service is working. Our product vitality efforts are the combination of new product introductions and improvements to our existing products. Over the last two years, we have dramatically accelerated these efforts. As a result, our products are more valuable to our customers and more profitable for us. One of our key product leaders recently finished a complete refresh of his product families. And he asked me, what do we do now? And my answer was simple. We do it again. With product vitality, I like to tell our team that if you're in front and you run faster than everyone else, no one can catch you. We believe that we have the best engineering and design teams in the industry, and they are delivering. Our service has also been strong. In May, several members of the ABL team and I went to the National Association of Electrical Distributors Annual Conference, where we met with many of our key distributor partners. This was the first time this group had been together since the pandemic and each company we met with had the same feedback for us. Acuity had the right products and was able to deliver throughout the pandemic and the subsequent supply chain shortages when others could not. It was great for the team to receive affirmation from the marketplace on the changes that they've made. It reflects the value of having the right products and being able to deliver them no matter what is going on in the world. Now, moving to our Intelligent Spaces Group. Spaces continue to perform well with strong sequential quarterly sales growth of 17% and 5% year-over-year growth as well as year-over-year margin improvement. The mission of our Spaces group is to make spaces smarter, safer, and greener. Our Distech Controls products, power controls, sensors, and other activities build spaces. And our Atrius cloud-based applications deliver value to owners and end-users in those spaces. I'd like to focus on smarter and greener for a few minutes. A few weeks ago, I was in California at the Distech Connect Conference, where we gathered together key systems integrators who buy and install our Distech products. It was the first time that this group was in-person since 2018, and everyone was excited to be back together. Between 2018 and now, Distech has grown significantly through continued product development and strong partnership with these independent systems integrators. Our open protocol technology and continuing product innovation is proving to be the way to make spaces smarter, faster. And our partnership with independent systems integrators allows us to move quickly and service more and more of the market. Distech powers the facilities and generates data. Atrius is a collection of cloud-based applications that use this data to solve specific problems in spaces. Distech and Atrius can operate independently of one another. But together, we can deliver true edge-to-cloud technology and applications. One of our core offerings under the Atrius brand is Atrius Building Insights, which is targeted to multi-building operators to provide a single source for their energy usage, carbon and cost management through data aggregation. Currently, this platform is used in thousands of buildings across North America. Similar to Distech, our customers include a diverse group of some of the smartest technology companies, commercial customers, and institutions. Our Acuity buildings, of course, use Atrius Building Insights to monitor and reduce our energy usage, our carbon footprint, and our costs and is a key part of our EarthLIGHT initiative. You'll see more about this when we publish our EarthLIGHT report later this year. There's a lot to get excited about in ISG, and I look forward to sharing more developments in the future. Now I want to touch on capital allocation. Our capital allocation priorities remain the same. We will continue to prioritize investments for growth in our current businesses, invest in acquisitions, maintain our dividend, and allocate capital for share repurchases when we perceive there is an opportunity to create permanent value for shareholders. Karen is going to talk about our decision to allocate capital to inventory later in the call and give more color on our additional share repurchases this quarter. But before I pass this to Karen, I want to leave you with a few thoughts. I'm proud of how our team continues to perform. They continue their focus on product vitality and service while managing the ongoing supply constraints. We expect the market conditions in the fourth quarter to remain largely consistent, and I'm confident that our team will continue to deliver. Now I'll turn the call over to Karen, who will take a deeper dive into our third quarter performance. And I'll be back later in the call for Q&A and for some closing remarks.

Karen Holcom, Senior Vice President and Chief Financial Officer

Thank you, Neil. We had a strong third quarter exceeding market expectations across the board. We generated over $1 billion in sales. Our gross margin was 42%, and operating profit increased by $25 million year-over-year. We allocated capital to inventory again this quarter, and we repurchased a significant amount of our outstanding shares. Moving on to our sales performance. Net sales were just over $1 billion, an increase of 18% year-over-year, and as Neil said, this was a significant milestone. It is only the second quarter in the company's history that revenue has exceeded $1 billion. The increase this quarter was driven primarily by ABL and its focus on product vitality and service levels. Demand remains strong, and we continue to benefit from recent price increases and the OSRAM DS business acquisition. Gross profit was $445 million, an increase of $59 million or 15% over the prior year. The increase in gross profit was driven by the impact of price realization and volume while cost was impacted by inflation on components and freight. Gross profit as a percentage of sales was 42%, which was a 100 basis point decrease from the prior year, but a 30 basis point improvement from the prior quarter. Gross profit margin has been impacted by the dilutive mix of the acquisition of the OSRAM DS business throughout the first three quarters of 2022. We also continue to leverage operating expenses and increased operating profit dollars and margin. Our reported operating profit in the third quarter was $143 million, an increase of $25 million or 21% over the prior year. Operating profit margin was 13.5%, an increase of 40 basis points over the prior year. Adjusted operating profit was $163 million, an increase of $26 million or 19% over the prior year. And adjusted operating profit margin was 15.3%, an increase of 10 basis points compared to the prior year. Finally, we continued to grow earnings per share. Our diluted earnings per share of $3.07 was an increase of $0.70 or 30% year-over-year, while our adjusted diluted earnings per share of $3.52 increased $0.75 or 27% over the prior year. Share repurchases favorably impacted adjusted diluted EPS by $0.18 during the third quarter. I now want to expand on our segment performance. Net sales at ABL increased to just over $1 billion, an increase of 19% compared with the prior year and was driven by product vitality and service as well as price increases and the benefit from the acquisition of the OSRAM DS business. Sales in our independent sales network of $726 million grew 16% in the third quarter driven by price realization and volume and continued strong demand across our end markets, particularly in commercial office, education, and industrial facilities. Sales in the direct sales network of $96 million were flat with the prior year. Orders in this channel continued to be strong, but shipments were impacted by component availability. As we discussed previously, corporate account customers continue to move ahead with renovations that were previously deferred due to the pandemic. As a result, sales in the corporate account channel of $59 million increased 34% over the prior year. As we've said before, the corporate account channel is an attractive business. This business is dependent on when customers choose to make renovations to their facilities. And as a result, sales may be inconsistent from quarter to quarter. In the retail channel, we have now worked through the customer inventory transition that we mentioned on prior calls. Third quarter sales in the retail channel of $45 million increased by 24%, which is a higher-than-normal growth rate as a result of the weaker prior year comparison. Finally, sales in the other channel increased due to our OEM business, which includes the impact of the acquisition of the OSRAM DS business. In the third quarter, total sales in this channel were $83 million, an increase of $37 million compared with the prior year. ABL's operating profit for the third quarter of 2022 was $150 million, an increase of $23 million or 18% versus the prior year. Adjusted operating profit of $160 million improved $24 million or 18% versus the prior year. Now moving on to ISG. The Spaces team had another good quarter with sales of $58 million and 5% growth year-over-year. As a reminder, they had a big quarter in the third quarter of fiscal 2021. Sequentially, from the second quarter of fiscal 2022, sales grew 17% in the third quarter. ISG's operating performance also improved while they continue to invest in the business. Operating profit in the third quarter of 2022 increased approximately $2 million to $9 million, while adjusted operating profit of $14 million increased by $3 million versus the prior year. Moving on to cash flow. We generated $166 million of cash flow from operating activities in the first 9 months of fiscal 2022. This was down from the prior year as we allocated capital to inventory in order to support our growth as well as insulate our production facilities from inconsistent supply availability. Cash flow was also impacted by increased tax payments of an additional $22 million. We invested $38 million or 1.3% of net sales in capital expenditures during the first 9 months of fiscal 2022. Finally, as Neil highlighted, we invested $296 million to repurchase 1.7 million shares during the third quarter. Since we began this repurchase effort in May of 2020, through the end of the third quarter of 2022, we have repurchased approximately 17% of our company shares at an average price of approximately $134 per share. We financed the share repurchases this quarter with cash from the balance sheet and with borrowings under our credit facility. Now I want to spend a few minutes to walk you through two strategic topics, our inventory investment and our new credit facility. Our inventory has increased over the prior year in terms of dollars and days. There are four factors affecting inventory: First, increased lead times of Asian finished goods; second, increased inventory from the OSRAM DS acquisition; third, ongoing inflationary cost of materials; and finally, increased levels of components to mitigate the impact of shortages. This investment in inventory is intended to be temporary. Although it is up year-over-year from the end of the second quarter to the end of the third quarter, days has improved by three days. To address the higher levels of inventory, we are doing the following. We've lowered our purchases of Asian finished goods now that we’ve seen an improvement in lead times. We have renegotiated terms with certain finished goods suppliers, and we are controlling purchases of components and manufacturing of products in line with current demand. Now moving on to our new credit facility. This morning, we closed on our new $600 million revolving credit facility which provides us with additional flexibility, if needed, to accomplish our capital allocation priorities. The new 5-year facility incorporates $200 million of additional borrowing capacity, improved pricing, and more favorable covenants. Additional information around the terms of the facility is available in our third quarter 10-Q filing. Just before I turn the call to the operator for questions, I want to leave you with this. These results highlight the effectiveness of the changes implemented over the last two years and our team's ability to drive performance. Our team has delivered meaningful sales growth and leveraged our operating expenses to deliver increases in operating profit and margin, demonstrating that we can deliver in a challenging environment. We've continued to generate cash, and we have effectively deployed capital in a way that generated permanent value. Thank you for joining us today. I will now pass you over to the operator to take your questions.

Operator, Operator

Thank you. Our first question comes from Chris Snyder with UBS. Your line is open.

Christopher Snyder, Analyst

Thank you. So the Acuity and the broader industry has implemented a number of price increases over the last 18 months. Can you just provide some color on the company's pricing strategy going forward? Should we expect further price increases from here?

Neil Ashe, Chairman, President and Chief Executive Officer

Good morning, Chris. Thank you for your question. We have successfully implemented several price increases recently. In this inflationary market, we are adapting our approach to pricing, making adjustments that are more frequent and often more targeted. As long as the inflationary conditions persist, you can expect us to continue adjusting our prices moving forward.

Christopher Snyder, Analyst

Appreciate that. And presumably, at a point in time, we won't be in such a hyperinflationary environment. So as we get back to a normal environment, wherever that may be, is your expectation that these industry price increases will plateau or potentially decline? And do you believe the company will be able to maintain the 42% gross margin target even in an environment of pricing declines eventually?

Neil Ashe, Chairman, President and Chief Executive Officer

Yes. So I want to kind of emphasize a couple of things, Chris, because I think this is a really good question. So first, our strategy has been to invest in product vitality, invest in service and use technology to differentiate our products. So we’ve better products that are more valuable for our customers and more profitable for us so on a relative basis to the rest of the industry. So as we look forward, we believe those are going to be the hallmarks of who our Acuity Brands Lighting business will be going forward. So we will have the right products in the right place at the right price. Our pricing strategy is really straightforward. We compete effectively where we need to on everyday lighting products, and we are the best solution sold through our independent sales network and direct sales network for broader product business. So I believe that because of our product vitality and because of our service, we are positioned well for whatever market presents itself to us over the next three to five years.

Christopher Snyder, Analyst

Thank you.

Operator, Operator

Our next question comes from John Walsh with Credit Suisse. Your line is open.

John Walsh, Analyst

Hi. Good morning and nice quarter.

Neil Ashe, Chairman, President and Chief Executive Officer

Thanks, John. Good morning.

John Walsh, Analyst

So maybe we could follow-on with that line of questioning, but also bring in the cost piece of that equation, right? Because it's not just price, but it's price cost. So can you talk about, I guess, on the pricing front, what's changed in the organization? I think last Analyst Day, you really highlighted pricing is now more of a corporate function, where I think it was a little bit more down in the brands maybe last time? And then about your ability, if you do see deflation or some type of softness, your kind of variable cost structure around your manufacturing because it is a price cost equation, right?

Neil Ashe, Chairman, President and Chief Executive Officer

Yes, let me explain both of those points, John. First, regarding pricing execution. I've already mentioned our pricing strategy, so now let's focus on execution. In our Lighting business, pricing execution is centralized in a unified function supported by our experienced team and enhanced by technology that provides better data for informed decision-making. This represents a shift from where the company was three years ago, and we will continue to invest in this area as there are still opportunities for improved execution based on the strategy I previously outlined. On the cost side, you pointed out one key aspect, but I want to highlight two. The first is the cost of inputs, and the second is the scalability of our supply chain, which includes manufacturing and distribution. Regarding components, we are operating in an inflationary environment, and we've seen shifts in component prices, freight costs, and more. We have proven to be quite agile in managing these challenges. I've told our team that while I hope the next two years will be easier than the last two, there's no sign that this will be the case, so they are prepared to tackle these obstacles. Secondly, the scalability of our supply chain, manufacturing, and distribution is crucial. If we look back to the pandemic, when no one knew what to expect, we showed our capacity to navigate effectively through a time of revenue decline. Now, I believe we've also demonstrated our ability to perform well during periods of revenue growth. This illustrates two important points: the scalability of our manufacturing and distribution and our team's skill in managing and delivering results in very different circumstances in a short timeframe. This positions us well for the future. While we don't know what the next two years will hold, we understand they may not be straightforward. However, I believe we are well-prepared to handle whatever comes our way.

John Walsh, Analyst

Great. Thank you for that answer. And then maybe just my second question, just around the outlook. So I think you said Q4 remains largely consistent. I just want to unpack that a little bit, if you could. I mean, typically, you see a seasonal lift Q3 to Q4. Is there anything that you're seeing on why that wouldn't play out?

Neil Ashe, Chairman, President and Chief Executive Officer

Thank you, John. I'll explain that. Regarding the impact of seasonality, we have more shipping days in the fourth quarter compared to the third quarter, which reflects the natural seasonality we experience. In our Q3 performance, we performed strongly across nearly all key distribution channels. For instance, corporate accounts had a particularly strong quarter, although this can vary depending on when customers decide to undertake renovations. Nonetheless, we continue to see backlog levels that are higher than normal. Demand remains strong. Looking ahead, we believe that the performance will generally be similar to what we've observed, although obviously, we aren't expecting to grow at 18% every quarter going forward. The situation will likely remain consistent, though there may be some differences in the fourth quarter.

John Walsh, Analyst

Great. Appreciate you taking the questions. Thank you.

Neil Ashe, Chairman, President and Chief Executive Officer

Thanks, John.

Operator, Operator

Our next question comes from Christopher Glynn with Oppenheimer. Your line is open.

Christopher Glynn, Analyst

Yes, thank you. Good morning. I was wondering if you could explain the volume price split for ABL. Since unit volume is essential for evaluating cyclical strength and is a key input for modeling next year, I would like to understand more about it.

Karen Holcom, Senior Vice President and Chief Financial Officer

Yes. Hi, Chris. This is Karen. Let me give you some color around our price volume. So we are managing, as Neil mentioned, that relationship between price and volume. And if you look at the ABL business and their performance this quarter, it really demonstrates the ability to do both. So we were able to capture and realize price to offset the inflationary cost that we mentioned. We were able to grow our volume this year, year-over-year, and we also benefited from the acquisition of OSRAM, as we mentioned. So I think this quarter is really a good reflection of our ability to manage both of those components.

Christopher Glynn, Analyst

Do you think the organic side of ABL split maybe 50-50 volume price?

Karen Holcom, Senior Vice President and Chief Financial Officer

Without getting into precise numbers, I would say that we had a healthy mix of both this quarter.

Christopher Glynn, Analyst

Okay. That's great. And then a question on ISG. Curious how to think about the fundamental margin and profitability model there. You had almost 100% sequential incrementals and over 80% year-over-year incrementals. I don't think we will see that kind of leverage in perpetuity. But yes, just in terms of informing our view of the kind of run rate, how to think about it in terms of margin index.

Neil Ashe, Chairman, President and Chief Executive Officer

Yes, Chris, I'll address that. As I mentioned in the prepared remarks, ISG comprises both Distech, which operates on-premise, and Atrius, which operates in the cloud. Our strategic direction is to consistently show that we can achieve profitability while also investing in new products, software, and data capabilities. This quarter illustrates our ability to balance both objectives—growing and generating profit. Moving forward, we plan to maintain this approach, demonstrating profitability while pursuing growth. If we had to prioritize, growth would take precedence, but we believe we can effectively manage both.

Operator, Operator

Our next question comes from Ryan Merkel with William Blair. Your line is open.

Ryan Merkel, Analyst

Thanks. Good morning, everyone and nice quarter.

Neil Ashe, Chairman, President and Chief Executive Officer

Thanks, Ryan.

Ryan Merkel, Analyst

So, Neil, I wanted to start with a question on the macro. Are you starting to see any signs of a slowdown either in quoting activity or any feedback from the channel that maybe people are getting a little bit more nervous?

Neil Ashe, Chairman, President and Chief Executive Officer

So, I want to address the macro question. We are all competing in the same economy and looking at the same data you are, positioning ourselves for potential changes because, honestly, none of us can predict what will happen. Currently, our outlook suggests that conditions remain relatively stable. We're observing consistent order and quoting volumes, and we have an above-normal backlog, which supports our position moving forward. However, we do recognize there are discussions regarding possible changes. For now, conditions are more alike than different.

Ryan Merkel, Analyst

Got it. Okay. And then a question on inflation. Are you starting to see peak inflation at this point? Or are costs still rising such that you may need to increase prices again back to the earlier question?

Neil Ashe, Chairman, President and Chief Executive Officer

Yes, I believe we are being quite strategic regarding our pricing approach. We announced a targeted and specific price increase yesterday. I think pricing in our industry should evolve to be a bit more dynamic over time, and we are at the forefront of that change. In terms of costs, we perceive them to be consistent with previous levels. Naturally, we have some costs in our inventory that we will address over the next few quarters. However, we are increasingly comfortable operating in a market where both prices and costs are fluctuating.

Ryan Merkel, Analyst

Very good. Thank you.

Operator, Operator

Our next question comes from Josh Chan with Baird. Your line is open.

Josh Chan, Analyst

Good morning, Neil, Karen, and Charlotte. Congrats on the quarter.

Karen Holcom, Senior Vice President and Chief Financial Officer

Thanks, Josh.

Josh Chan, Analyst

I would like to discuss the outlook. You mentioned that the backlog is above normal. If we look at your project pipeline, assuming all the projects progress as expected, how much visibility do you have right now that makes you feel comfortable? I'm asking this because if demand were to slow, how long would it take for you to notice it based on the strong activity you are currently experiencing?

Neil Ashe, Chairman, President and Chief Executive Officer

We have dedicated significant attention to our growth strategy. In response to an earlier question from Karen, we are experiencing a positive combination of price and volume growth, as well as unit growth, all contributing to our sales. Looking ahead, thanks to our investments in product quality and service, we believe we have a solid foundation to build upon. While the relationship between daily order rates and shipments will still be significant, it may not be as pronounced as it has been in the past. We have room to adapt as we navigate future changes, and our goal is to maintain consistent delivery even during unpredictable economic conditions.

Josh Chan, Analyst

All right. Thanks for that. And I guess my second question on supply constraints. It sounds like the imported products might be getting a little bit better. Could you talk about where the bottlenecks still are in your supply chain? And how you feel like you're stacking against competitors in terms of procurement?

Neil Ashe, Chairman, President and Chief Executive Officer

Sure, I’ll start, Karen, feel free to add anything. The main bottlenecks we're experiencing are related to chips. It all begins with silicon, as you might have heard. We have shown that we can manage this better than others. However, due to a significant backlog, we realize we still need more. This is where we focus a lot of our time and effort. To illustrate the impact, I’ll share that this component is relatively inexpensive but plays a crucial role in the construction of the luminaire. The electronics involved in the driver, which is part of the luminaire, are tied up with many other components that are waiting to be assembled into the final product. This is one reason our inventory levels are higher. We're increasing our raw material inventory to ensure that when we receive those chips, we can respond quickly. I want to commend our sourcing team for their creativity and adaptability in finding these components. I've shared stories before about how we've sourced products for some of our competitors who couldn’t access them. We are doing everything possible to set ourselves apart. As the supply of chips and silicon begins to flow more steadily, which we believe will happen eventually, we can then more consistently manage our inventory and continue to address our backlog.

Karen Holcom, Senior Vice President and Chief Financial Officer

Yes. Josh, I would just add that we have seen some improvement in the flow of purchased finished goods at the port. We are now able to receive those products for shipping, which will help us manage our inventory as we observe this improvement.

Josh Chan, Analyst

Thank you both for the color and good luck finishing off this fiscal year.

Neil Ashe, Chairman, President and Chief Executive Officer

Thanks.

Karen Holcom, Senior Vice President and Chief Financial Officer

Thank you.

Operator, Operator

Our next question comes from Jeff Osborne with Cowen & Company. Your line is open.

Jeffrey Osborne, Analyst

Yes. Good morning. I might have missed this, but I was just wondering if you could give us a sense of perspective, Karen, on the OSRAM contribution in the quarter for both revenue and gross margins?

Karen Holcom, Senior Vice President and Chief Financial Officer

Sure. From a top line perspective, OSRAM contributed about 300 basis points of the growth that you see year-over-year. As we mentioned, in the near term, it is dilutive to gross profit margins where we’ve had them almost a full year now, I think, July 1 will be a full year since we purchased that business. And so we have been working to improve the profitability of the business and still have some work to do, but it was a bit dilutive to the gross profit margin.

Jeffrey Osborne, Analyst

Got it. And then on the share repurchase, great to see in the quarter. Can you remind me, I think it's 3.5 million or so outstanding? Is that something you're active with now? And can you remind me when that expires or if that would be something you need to reinstate?

Karen Holcom, Senior Vice President and Chief Financial Officer

Yes. Last quarter, we received additional authorization from the Board, providing us with ample opportunity for share repurchases. Since initiating this effort in May 2020, we have repurchased approximately 17% of our outstanding shares. We still have plenty of capacity should we choose to proceed with more repurchases.

Jeffrey Osborne, Analyst

Got it. Thank you. That’s all I had.

Karen Holcom, Senior Vice President and Chief Financial Officer

Thank you.

Operator, Operator

Our next question comes from Brian Lee with Goldman Sachs. Your line is open.

Miguel De Jesus, Analyst

Hi, everyone. This is Miguel on for Brian. Just a quick question on the ABL. With the $1 billion you reported this quarter, it seems like you're now tracking well above the high single-digit growth target for the year, assuming if the fourth quarter is flat or even slightly declining quarter-on-quarter. Is that right? And how do we think about that target for the year or the cadence through the rest of the year for ABL? Thanks.

Neil Ashe, Chairman, President and Chief Executive Officer

Miguel, great job with your calculations. That’s our approach for the remainder of the year. Clearly, we won’t sustain an 18% growth rate as I mentioned earlier. However, the calculations indicate that we will exceed single-digit growth for the full year.

Miguel De Jesus, Analyst

Okay, great. Great. Yes. I just had one quick follow-up there. On the general just the demand backdrop as it relates to pricing, are you seeing anything on the customer appetite changing due to price increases or seeing any stress on demand or worried about pricing getting a bit too intense for customers?

Neil Ashe, Chairman, President and Chief Executive Officer

Yes. As we mentioned in our outlook, I think things are largely consistent at this point. We continue to see strong performance across all of our channels, as Karen highlighted in our detailed revenue breakdown. So overall, things remain relatively unchanged.

Miguel De Jesus, Analyst

Okay. Thanks. That’s all I had. I will pass it on.

Operator, Operator

Thank you. I'm showing no further questions in the queue at this time. I will turn the call back to Neil Ashe for any closing remarks.

Neil Ashe, Chairman, President and Chief Executive Officer

Thank you all for joining us this morning. We appreciate your interest in Acuity. I just want to reiterate that I'm really proud of how our team is performing through downtimes and now uptimes. They are continuing their focus on product vitality and service while they manage through the ongoing supply constraints. And so I want to take my hat off to our team for their performance, and we look forward to continuing that. And we look forward to talking to you again soon. Have a good rest of your day.

Operator, Operator

This concludes the program. You may now disconnect.