Good morning, and welcome to the Acuity Brands 2015 Fourth Quarter Financial Conference Call. After today's presentation, there will be a formal question-and-answer session. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. Now, I would like to introduce Mr. Dan Smith, Senior Vice President, Treasurer and Secretary. Sir, you may begin.

Thank you. Good morning. With me today to discuss our fiscal 2015 fourth quarter and full year results are Vern Nagel, our Chairman, President and Chief Executive Officer, and Ricky Reece, our Executive Vice President and Chief Financial Officer. We are webcasting today's conference call at acuitybrands.com. I would like to remind everyone that during this call, we may make projections or forward-looking statements regarding future events or future financial performance of the Company. Such statements involve risk and uncertainties such that actual results may differ materially. Please refer to our most recent 10-K and 10-Q SEC filings in today's press release, which identify important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements. Now let me turn this call over to Vern Nagel.

Thank you, Dan. Good morning, everyone. Ricky and I would like to make a few comments and then we will answer your questions. First, let me say we are extremely pleased with our performance in 2015. We achieved record results for virtually all financial metrics, including net sales, adjusted operating profit margin, adjusted diluted earnings per share, and cash flow generation for both the fourth quarter and full year. For the full year and the fourth quarter, net sales grew more than 13%, which were both meaningfully higher than the estimated mid-single-digit growth rates of the key markets we served. In fact, this was the tenth quarter in a row where we achieved double-digit volume growth, a meaningful accomplishment in this environment. We believe these results are yet again a strong evidence of our strategies to provide shareholders with superior returns, customers with differentiated value-added solutions, and diversify the end-markets we serve are succeeding allowing us to extend our leadership position in North America. These strategies include the continued aggressive introduction of innovative , energy-efficient lighting solutions, expansion in key channels and geographies, and improvements in customer service and companywide productivity. Our profitability and cash flow for the quarter and full year were records for Acuity even as we continue to invest in areas to support our strong sales growth as well as opportunities with significant future growth potential, including the expansion of our Digital Lighting solutions portfolio which affords us a huge opportunity to be a critical part of the backbone for enabling the Internet-of-Things. I know many of you have already seen our results and Ricky will provide more detail later in the call, but I would like to make a few comments on the key highlights, first for the quarter. Net sales for the fourth quarter were…

Thank you, Vern and good morning everyone. Vern covered the primary drivers for our fourth quarter sales, growth and our profitability, so I will not repeat these items. I will provide a bit more color on our quarter's results and financial position, as well as our acquisition of Distech Controls. I’ll begin my prepared comments by providing a brief update on our streamlining activities. We recorded a 2.6 million pre-tax special charge associated with our streamlining activities related to certain headcount reductions and production transfer costs. This results in a total pre-tax special charge for fiscal year 2015 of $12.4 million. We are reinvesting a portion of the streamlining savings in additional growth initiatives, including adding new talent with different skill sets and expanding and renovating some of our facilities. However, during fiscal 2015, we have realized savings over and above the expense of these reinvestments that are approximately equal to the amount of this year’s total streamlining cost. As Vern mentioned earlier, we had some adjustments to the GAAP results in the fourth quarter of fiscal 2015, which we find useful to add back in order for the quarterly results to be more comparable. In the fourth quarter of fiscal 2015, we added back pre-tax $2.6 million or $0.04 per diluted EPS for special charges related to our streamlining efforts, which I just discussed previously. Pre-tax $1.2 million or $0.03 per diluted EPS for acquisition-related professional fees associated with the Distech Controls acquisition, which is a non-tax deductible expense, and a $13.1 million or $0.18 per diluted EPS net loss associated with financial instruments to hedge the foreign currency exposure related to the acquisition of Distech Controls. In our earnings release, we provide a detailed reconciliation of non-GAAP measures. The effective tax rate for the fourth quarter was 34.9%…

Thank you, Ricky. As we look forward, we continue to see significant long-term growth opportunities that are ever-changing and evolving, particularly for Acuity. Our expectations for growth of the lighting industry primarily in North America has not changed much over the last few quarters, in spite of some noise to the contrary. We remain very positive. So while we don't give earnings guidance, I would like to provide you with some observations we have for fiscal 2016. First, most economists expect the economy in North America will continue to improve at a modest, but increasing pace. While forecast for industry growth rates vary by independent organizations continue to vary widely, the consensus estimate for the broad lighting market in North America is still expected to grow in the mid to upper single-digit range for our fiscal 2016. The continued favorable trend in our September order rate again seems to support this continuing level of improvement. Further, we continue to see signs that give us optimism regarding the longer term future growth of the markets we serve in our business. Leading indicators for the North American market such as architectural billing index, vacancy rates, office absorption and lending availability and favorable employment trends continue to improve, though never in an absolute straight line, while residential construction continues to grow nicely. Excluding the price of certain LED components which are expected to continue to decline, we do not anticipate significant changes in input costs for our fiscal 2016 as we expect some commodity cost away while other could rise. Further, we expect employee-related cost to continue to increase as we invest in people skills necessary to execute our tiered solutions strategy, wage inflation and the negative impact of rising healthcare cost. To help offset these potential higher costs, we will continue to…

[Operator Instructions] Our first question is from Mr. Mike Ritzenthaler of Piper Jaffray. Sir, you may proceed.

Just wanted to kick it off here by asking about the 17% volume growth, I realized it's kind of difficult to parse into different end-markets, but I am wondering if there is any way to tell what the contribution was from new construction versus retrofitting activities in terms of how you view the end-markets?

Again, a very difficult question for us to answer, we still believe that the mix of our business is roughly 50% new construction, 50% renovation, which contrasted. I've seen some data around Dodge trying to collect information around what's the difference between new versus renovation, and that number is probably more like an 80/20 or 75/25. So, Acuity continues to do an excellent job of diversifying its access to market in the types of projects that it works on, and looking at our overall sales volume growth of 17%, it was very diversified in many-many channels. We continue to experience again solid growth in our Home Improvement business, our International business, our Utility business. The C&I project business was excellent. Again renovation, we continue to see good successes there, so overall I feel that our topline was really quite exceptional in terms of the overall volume growth. Our gas, we don't know because we're a little bit off, we lag a little bit if you will the data that comes out, but my guess is that our fourth quarter the overall growth rate of the lighting market will probably be in that mid to upper single-digit range. So, showing us at 17% again more than two times the overall growth rate of the market is pretty significant.

On the recent collaborations with Sensity, and then I guess just the other day with Silver Spring, will there be anything in the results or any commentary that you will be able to provide in the upcoming kind of 12-month period to be able to tell those partnerships are bearing fruit. I know today you gave a little bit more color on the Tier 3 solutions, is that something that we should be looking for, a little bit more granularity around whether those collaborations are bearing fruit?

Good question. We will be providing more and more information around our tiered solutions approach, and again it's coming off of small base, we know that in the past we've sold individual discrete components, and so that’s easy to measure. But as we continue to offer more and more solutions that are holistic and integrated, particularly when we now bring Distech into the fold, these will be broad-based Acuity solutions and the partnerships that we have or the relationships that we have with others such as Sensity and Silver Spring, those types of things will help to drive both a Tier 3 and Tier 4 revenue solution, and we'll try to provide more cover, but we really have to get our definitions right, we have to get the data collection process right, we need to get people quoting things right so that we're able to provide more precise information there, and we'll do that, but it will take a bit of time before we can really provide you with I think great clarity around that. And it's important that we do that, because we believe very strongly that this tiered solutions approach which we think Acuity is uniquely positioned to provide will add greater margin capability and greater sales growth capability particularly as we drive these technologies and these capabilities to our end-vertical customers.

Our next question is from Mr. Ryan Merkel of William Blair. Sir, your line is open.

So the first question was, one of your larger peers mentioned that lighting trends have slowed a bit in July and that non-res construction might be softening a bit, did you see any of this as you went through the quarter and is there any large project delay to speak of?

We suspected that it would take one or two questions before we got this question. So it's interesting to us, we are a pure play lighting company, but we're broadening very aggressively our capabilities to provide more content, more capability for building owners, smart cities, as well as smart buildings. The Distech acquisition will be very accretive to us offering more solution set. So when we look at the broad industry and we look at that non-residential world, we see both new construction, we see renovation, we see pockets in various channels, various geographies. And I have to tell you that over the last decade and I think I’ve been doing this that long and maybe even a little longer, we’re always experiencing pockets that seem to ebb and flow, but overall the direction that we see and the context that we get back from our channel partners, our customers is still a very favorable picture, and that picture is primarily -- and is driven by both the opportunity for new construction activities, and it depends on the vertical. So if you’re a person that’s in a geography that is robustly connected to schools for example, and you’re probably seeing outsized growth relative to some of maybe in a manufacturing environment where things could potentially have to be a little slower in that geography, due to dollar strength, due to other things. So, we look at the whole picture. In our view, it is still very favorable around the opportunities that are before us in the marketplace. So, I can’t really comment on what others have seen or are seeing, but from our perspective I think our fourth quarter is a good example of the opportunity to grow, outsize the growth rates of the markets we serve, because of the channel diversification and also because of the opportunities that digital lighting energy efficiency brings to the marketplace. You actually can sell paybacks to businesses and to communities that are looking to improve the quality of their life, improve the quality of their energy efficiency, and now with Distech the opportunity really to enhance their physical environment as well. We just see solid growth there.

And then the second question on gross margin. Is it fair to conclude that the reason the gross margin was a little bit lower this quarter versus the prior quarter is because price mix was neutral last quarter that it was down two points this quarter? Is that the conclusion?

For us the gross profit margin was strong this quarter, it was very strong if you will in the third quarter. We continue to do excellent work in expanding in markets that for example the Home Improvement channel and I’ll just use that as an example, that channel which is a fantastic channel for Acuity has showed continued growth. Well, that’s a situation where we’re selling limited SKUs generally high volume, that’s the nature of that business. So, the cost to serve that business is different than the cost to say serve a large project that is a huge building for example. And so, the margin dynamics at gross profit and our SG&A expenses are just different in serving these various channels. And that’s true of all of our channels. Our International business this quarter continued to show a revival that’s vitality, well the margin dynamics are a little bit different. So, I think what you saw in this fourth quarter was very-very outstanding sales volume growth and the mix of that business was a little bit different than say the third quarter, which resulted in just a little bit different what I’ll call the gross profit profile, but I want to bring you all back down to our operating profit. Our operating profit in the quarter was 15.2% which was a record and our variable contribution off of this fourth quarter was almost 28% and that’s well within the range of what we like to talk about. The overall year our variable contribution was 32% and again that’s fantastic, but we continue to invest in our business, our fourth quarter saw a ramp-up in some of our people cost, because we’ve added people to help us drive our tiered solution strategy. So, I think all of that came into play, but very proud with how the organization drove its 15.2% operating profit margin.

The next question is from Mr. Christopher Glynn of Oppenheimer. Sir, your line is open.

So on some of the variation Vern maybe this is just an extension of what you’ve been answering. But the price mix going to minus two from flat and then minus a point in the first half, is this headed anywhere on a normalized trend or still just for the foreseeable couple of years any given quarter could come in anywhere within a range really?

Chris this is again why in our comments we like to look at the full year not any one quarter, we’re always susceptible to sort of quarterly fluctuations. But I think that when we look at not only the fourth quarter but the full year, the trend is very favorable. I mean we improved our gross profit margins for the full year on a robust basis. And if you look at where we’re going with our tiered solution strategy, the ability to now bring Distech, we have optimism that overtime we will continue to improve our gross profit, we’ll continue to leverage our SDA and as a result you’ll continue to see improvement in our overall operating profit margins.

And then Vern you referenced due to symbolically or literally the Home Retail channel can be strong at times. Was there any shelf space still in the quarter, or was the top-line trend kind of a peace with what’s ongoing?

Well, the Home Improvement channel and as you know we are strategic aligned with one particular customer that we have a great partnership and we’re driving growth both for them and for us, and so we see them taking share, we see them continuing to invest aggressively in the lighting solution side of their business, they're putting in products that continue to have both higher average selling prices, as well as ones that continue to be very competitively priced and with the Acuity in this case Lithonia brand behind it, it really provides the opportunity for them to differentiate in both their light construction, as well as remodel and residential side. So, we're seeing good growth. We're also seeing the opportunity to gain share as we provide to them new solution sets where they prefer ours versus others. And so, we're experiencing that growth as well. But the Home Improvement channel, we think represents a great opportunity on a go-forward basis because of the customer base that they touch and the way they touch them. And that model is just a little different than say the C&I model. It’s a little different than utility model, so that's the beauty of what Acuity has done over the last decade or so, we've really worked hard to diversify the sales channels that we sell through, the verticals that we touch and geographies that we're doing, so that we’re less tied to the new construction cycle. And I think that's why you're continuing to see Acuity or a reason why you're continuing to see Acuity outperform the growth rates of the market, the lighting market overall.

And then I’ve been getting asked more about international strategy, what you guys may or may not contemplate. So I was just wondering if you could update kind of when, if, how, why overseas opportunity might be compelling for you?

Sure, we have -- we've touched the globe. We've touched the globe through exports, we have a nice little base in Europe, both in Spain as well in the UK that touches the industrial and the outdoor market. Our approach internationally has been and I believe it will continue to be a vertical approach. And when we say international, I just would like to be clear we say outside of North America, we are extremely excited by the success that our folks are having in Mexico, we have a great team there. We see great growth there. The Canadian folks are doing very well. So, that we call North America and when we say international it's outside of that. We continue to push our vertical approach there, and we continue to follow customers around the globe, take for example large retailers, when you look at Acuity's capabilities from an LED perspective, I'll call it a more holistic digital lighting experience and then you couple that with our ability to have in-store positioning, retailers that are around the globe continue to be prime customers and opportunities for Acuity, that's just an example. And outdoor roadways, smart cities around the globe continue to be an opportunity for Acuity and then we are strong in the industrial space around the globe with our Holophane brand. So, we'll continue to push those on a vertical and geographical and customer strategy.

And I would add, with the Distech acquisition, they have a presence in Lyon, France that we can also leverage along with the other businesses we have in Europe and provide that broad holistic solution outside North America, as well as within North America.

Thank you. The next question is from Mr. Matt McCall of BB&T Capital Markets. Sir, your line is open.

So, Vern you talked a lot about the investment in people and I'm curious, you did a good job on SG&A really this quarter, but the whole year. Has there been, when you are talking about the tiering approach and the tiering strategy, has there been a big salesforce training element to it that maybe the SG&A line could have been even better this year if it weren’t for the investments that you had to make upfront introducing this strategy?

Certainly, training is a critical element in enhancing the selling forces that we have, Acuity is blessed, that it sells through many-many different channels, and in virtually every one of those channels we’re associated with the number selling force, whether it's our rep agency or whether it's the utility side, you pick it, the Holophane sales team they are the best in the business. So, our ability to leverage our access to market is critical. What is going to be important is that we continue to bring solution sets, whether again talking about the tiered solution strategy but these solution sets particularly in Tier 3 and 4 for holistic capabilities. So, that would include Distech, that also includes the Internet-of-Things. So, making sure that those things work are important, but our Tier 1 and Tier 2 strategies are critically important as a foundational element, because that's where a lot of projects will continue to evolve and whether it's new construction or renovation that will want those types of solutions. So, we're investing in people to be able to again it’s software, it’s controls, it’s additional lighting capacity, it's the guts of how fixtures, digital fixtures work. It's app writers, it's all sorts of things that bring value that are different than in the analogue days of say 2008, where it was a fluorescent fixture and it was fairly simple to make and there wasn't a lot of technology change. So, we're investing in people to really get after a number of these solution sets that are just so interesting because of how we're evolving in this digital world.

Maybe if I take a step further, the contribution margin this year really saw a 40% to 30%, a couple of the quarters on a year-over-year basis looks like it was driven by gross margin, the other couple of quarters it was driven by SG&A leverage, when you look at to next year I am trying to kind of put all these factor product mix, project mix, growth of Tiers 3 and 4, more people cost, productivity when you think about the fact that you are facing a 30% incremental margin comp, how do you want us to think about incremental margin for the full year of ’16?

And so Matt what we had suggested in past calls is that we're comfortable targeting a variable contribution rate of mid to upper 20s. Obviously our objective is to take that variable contribution number as high as we possibly can, but we see investment opportunities right now that are just so important to make today because in making these investments we believe we'll be able to drive even higher variable contribution margins in the future particularly as we leverage our capabilities in Tier 3 and Tier 4 particularly as we create holistic solutions with Distech that are going to be real value-add capabilities to customers that don't exist today. So these investments I believe that the Acuity team feels that our variable contribution margin over a 12 month period is probably in that mid to upper 20% range. But you're going to see quarters where we are north of that number. The full year 2015 was excellent at 32% and our goal is to outperform what we comment on and our hope and our expectation is to execute our strategies and deliver on a favorable number to what we're suggesting here, but we're confident on that kind of mid to upper 20% variable contribution range. And as we see out over the more mid-term future, we see that variable contribution number improving nicely and it will come in both levering or excuse me both in our gross profit margin as we discussed earlier, as well as leveraging our SDA area. I’d like to point out that at 34% cash flow return on investment that's a pretty robust number, so we've done a pretty good job of managing our business, it's kind of interesting. And if you go back 12 months, our salaried headcount relative to where we are today is essentially flat, but yet as you know we took a number of streamlining actions earlier in the year so we've added capability and capacity back into the business but in a very different way. I mean we're truly restructuring the business as we go forward.

Thank you. The next question is from Mr. Rich Kwas of Wells Fargo Securities. Sir, your line is open.

On just a question, first question on variable SD&A, any changes to the run rate here versus the 105 million or so that has been realized over the last couple of quarters?

Well, I believe we prefer to look at our variable contribution rate because our expectation is, is that we will meaningfully outperform the markets, the growth rates of the markets we serve. So we will continue to add capability to help support that, but I think we've done a very good job of driving productivity in our business. We know how to do these kinds of things, so you will continue to see leveraging of our SDA cost but I think you should expect and take it to an illogical strength when we double our business we’re going to be doubling that fixed SDA. The question is at what rate? And Ricky and I and other folks here at Acuity are comfortable with the variable contribution rate kind of in that mid to upper 20s and so then therefore you can see how that is not really fixed and how that portion of the SDA would grow in your business model.

So it's tracked with the fixed piece of tracking a bit more than 115 and 120 is a reasonable way to think about it for a quarter?

Well again, I am not trying to be difficult but I think it depends on what your timeframe is. We will continue to add capability to our organization, human capability where those salaries will come into that bucket that you're talking about. So I would expect that those numbers will continue to improve, but it's improving off of a very large sales growth rate because of the opportunities that we see. Acuity I think has done a good job of making sure that it's driving sales growth so that it can reinvest in its business, as opposed to trying to invest in its business under the hope of having sales. And that's a delicate balance and not one that easily done, but yet we've been able to accomplish that feat. Ricky do you have anything?

The only other comment which is to make sure obviously now Distech will start consolidating them here in the first quarter of ’16 and they have some SG&A cost as well that will come in to that base number in addition to the investments that we will be growing, so you'll need to factor that in, into your thinking as well.

And then just on Distech, do we think of this over the next year or so as from a go-to-market strategy a separate or are you going to be able to integrate where the channels are going to be able to provide a offer, holistic offering and there is synergies on that front, how long Vern do you think it takes for the growth to be accelerated if you will?

Excellent question. We see these two channels and opportunities to effect channels selling through system integrators primarily us having 14 different channels that the opportunity for these folks to continue to drive their business. But where we see the ability to be collectively accretive is bringing together a holistic combination of a solution set that not only involves lighting but involves security, involves HVAC and access all of this information energy to provide it back to a building owner in a very simple and holistic way, we think that’s a real value proposition. And so what we’ll look to do is to work in those local markets with those local customers and those local reps to bring even more capability. We still have some work to do to figure out exactly how that’s going to work in a local market, but the customer will dictate it for us how they want to be served. And we’re very excited about what that means in terms of how building owners will be able to drive their business and their capabilities. So I think that over this next 12 months or so we’ll figure those types of things out very specifically. We have working hypothesis around these, the teams are working together exceedingly well. We’re getting different types of folks to come together to talk about how not only do we have if you will these two channels or this new channel, but the opportunity to actually creating more capability for the customer. And how we get to that customer with that solution set we’re still working that and there are many other folks out there that are in the channel that Acuity didn’t have access to before and now with Distech as part of the family we have access to those folks to really pitch them on the benefit of the combined Acuity/Distech.

Just as a quick one before I give it off. Commodity benefit, I know you talked about the fiscal ’16 kind of neutral. But I would think that you get some benefit as you look at diesel costs and other metals cost, resin cost et cetera that go into your product. So are you just assuming that there is other overhead costs that offset that or what’s the rationale behind 2016?

So our expectation is, is that those cost I mean they have the potential to continue to decline but they also have the potential to go up so our feeling was is that we sort of see a net neutral to the extent that it turns out to be more favorable fantastic. Most of our business is a bp business sometimes that finds its way sometimes we’re able to bring a portion of that through the bottom-line. But the other thing that I would say is our expectations are that there are other costs that are not directly related to commodity cost such as healthcare cost just to pick one, wage inflation. Forget about just adding new people wage inflation we think is alive and well and so how do you manage those types of things. So, to the extent that we’re able to drive productivity, to the extent that we’re able to take cost out of our business, to the extent that we’re able to get benefits from lower commodity cost our own too sense is that it probably has the potential just to be kind of the net neutral at this point in time, we’ll know more as we get into the year. Ricky do you have any other?

No, I think that’s right I mean the combination of other cost as Vern highlighted that will offset some of that particularly related around compensation and benefit cost given the dynamics there. And then that defines its way in the market, it’s pretty public what steel, aluminum and all is selling at and it does find its way into the market both directions. We try to keep as much we as an industry and we as a company as we can, but the reality is a lot of that does find its way back into the market.

And all of you know this, I mean the regulatory environment continues to grow unabated and so we can see different parts of our business where we enhance, we had to change, alter, invest in compliance to meet some of these new requirements and things. So those are at a cost that come into our business for which no one will face to a price increase on. So that’s why our view is, is that at this point in time the puts and takes are probably pretty even right now.

The next question is from Ms. Kathryn Thompson of Thompson Research Group. Ma’am the line is open.

First question is more focused on the top-line, trends we’re seeing in the later cycle building product categories, including the office future industries increasing orders from small and medium sized businesses, which is largely been absent in the cycle. And this is interesting because generally these small and medium sized businesses typically lead a cycle which hasn’t been the case in current cycle. Are you seeing changes in orders from different size to that small and medium sized businesses in recent months? And is there a margin profile difference for these types of projects? Thank you.

Kathy it’s interesting for us we're not economist, we look at the right data, it's interesting to hear some of the pundits who are smart in the space, Barry Sternlicht was on our show the other day. He was talking about hotels how lodging rates are improving and apartment buildings, monthly rental rates are improving. In office buildings you're seeing rising rents around the country, and you're seeing the whole notion of vacancy rates declining, office demand improving. All of these things I believe are driving not just later stage, but the opportunity for Acuity in our industry to continue show growth. The employment figure, which employment is modestly improving, and that unemployment is down. All of those bode really well for our business. Nothing goes up in a straight line, you all know that. And so overall, we think the trends are favorable and yes I would say that our business has been built more around at least in the trailing 12 months, around more small medium kinds of things, renovation as well than big large massive project, we've done those as well and they are out there. But what is interesting to us as we travel around and visit with customers and visit with our own associates, this trend is everywhere and it's impressive to see and that is a normal part of the cycle when -- this isn't like you're going to decide to go buy a pair of tennis shoes one day because you got a race, when you're building these huge buildings and you're doing different things and you're making these long-term investments, they take time. So, we believe that we're still in the early part of this uptick in the cycle. And then you add on top of that the whole notion of I mean to use the word renovation, but it's more than that, selling value propositions to that in the past all was that all my life fixtures are perfectly fine. Now you're selling energy, now you're selling the connected world, now you're selling Distech environmental if you will energy control solutions, you're selling Internet-of-Things. So, your value proposition has changed dramatically and a lot of the big players that would move on that, they're evaluating these types of things. So, we believe we're in the really early stages of this rather large move. And from a profit profile, it really depends, every job is different, depends on who and why and what value add you've had in there. I don't think that it's precise to say that because it's a large project, you make more money, because it's a small project you make less money from the margin perspective. It just really depends and fortunately for Acuity we're good at all sized projects and that's been our strength for a long time.

Vern having just moved into a new office and having the new lighting solutions including some of your own again a great bet and as we look at our window we have about five cranes, so they are certainly seeing that at Acuity headquarters. A follow-up question on margins and this is really just a little bit longer term focus as you focus on more technology focused acquisitions and partnerships as you grow your tiered solutions, how does this change your margin profile over the next two to four years? Theoretically it should see at least on the gross margin side a bump up , but may be help us think about more mid to long-term, what tiered solutions do to your margin profile? Thank you.

It’s a great question. Our expectation is, is that as we are able to bring again more holistic integrated solutions and this includes Distech into a building. And think about how someone who is managing your building, their opportunity to make their lives smart in technology that's simple to use. We believe there is a unique capability that Acuity and Distech will have. And so as a consequence of change in that type of we’ll call it Tier 3 integrated holistic solution, where it's more elegant, it's more efficient, it's more simple even though it's very-very sophisticated. We think that will resonate with folks and so therefore we would expect a higher margin profile. When we think about Tier 4, what's Tier 4 for us, our alternate revenue streams, the notion of how providing users whoever it doesn't matter who that user is, but users with the ability to have data because between Distech and its capabilities and where digital lighting is in Acuity and our capabilities, we think we’ll have the ability to cash up probably 85% of the data that is being generated in a building. And you can also take this to smart cities and outdoors as well. Well, the opportunity to do that we think is a unique revenue stream and we can take all the verticals we can see that there are value propositions there are -- and so Acuity 12 months ago if someone said do you have app writers on-board, we would have said no, today we have 12. The opportunity to create these solution sets because of what our transformation has done and where we are in our Tier 3 solution, these app writers are creating solution sets that will allow us to generate revenues that should have very nice margins in that section. So, we over a longer term period we would expect to see our gross profit margin profile improve, we would expect us to leverage our SDA and we would expect that our offering profit margins would reflect that as well. At some point in time here we're going to come back and say, no we don't think that our variable contribution margin of the high 20s is the right number anymore. We think it should be in the high 30s, but we're not there today. That's the kind of the transformation that we expect to see over the next handful of years.

And now I’d like to turn the call back over to Mr. Vern Nagel for closing remarks.