Exhibit 99
1201 S. Second Street
Milwaukee, WI 53204
USA
News Release
| Contact | Ed Moreland Media Relations Rockwell Automation 571.296.0391 | Aijana Zellner Investor Relations Rockwell Automation 414.382.8510 | ||||||||||||
Rockwell Automation Reports First Quarter 2024 Results
•Reported sales up 3.6% year over year; organic sales up 1.0% year over year
•Acquisitions contributed 1.4% to growth
•Total ARR up 20% year over year
•Diluted EPS of $1.86 and adjusted EPS of $2.04; down (44)% and (17)% year over year, respectively
•Reaffirms fiscal 2024 reported sales growth guidance of 0.5% - 6.5%; organic sales growth of (2.0)% - 4.0%
•Updates fiscal 2024 diluted EPS guidance to $11.24 - $12.74
•Reaffirms adjusted EPS guidance of $12.00 - $13.50
MILWAUKEE (January 31, 2024) — Rockwell Automation, Inc. (NYSE: ROK) today reported first quarter fiscal 2024 results.
"Rockwell had an encouraging start to the fiscal year, with both organic and total sales up low single digits year over year. Importantly, we saw an upward inflection in customer order activity, with total orders up double digits sequentially. Q1 orders were up sequentially across all business segments and regions, with particular strength in North America. High levels of channel inventory and some lingering supply chain constraints continue to impact the timing of product shipments, but underlying conditions remain positive. Our Sensia joint venture had a profitable Q1 with over 25% growth in both orders and sales. We also continue to see double-digit growth in our Annual Recurring Revenue, demonstrating the growing value of our recurring software and services," said Blake Moret, Chairman and CEO.
Fiscal Q1 2024 Financial Results
Fiscal 2024 first quarter sales were $2,052 million, up 3.6% from $1,981 million in the first quarter of fiscal 2023. Organic sales increased 1.0%, currency translation increased sales by 1.2%, and acquisitions increased sales by 1.4%.
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Fiscal 2024 first quarter Net income attributable to Rockwell Automation was $215 million or $1.86 per share, compared to $384 million or $3.31 per share in the first quarter of fiscal 2023. The decreases in Net income attributable to Rockwell Automation and diluted EPS were primarily due to lower pre-tax margin. Fiscal 2024 first quarter adjusted EPS was $2.04, down 17.1% compared to $2.46 in the first quarter of fiscal 2023 primarily due to lower segment operating margin.
Pre-tax margin was 12.7% in the first quarter of fiscal 2024 compared to 23.6% in the same period last year. The decrease in pre-tax margin was primarily due to fair value adjustments in the prior year related to our previous investment in PTC and the timing of prior-year investment spend.
Total segment operating earnings were $356 million in the first quarter of fiscal 2024, down 11.3% from $401 million in the same period of fiscal 2023. Total segment operating margin was 17.3% compared to 20.2% a year ago. The decrease in segment operating margin was primarily due to the timing of prior-year investment spend, mix between products and solutions, and lower supply chain utilization.
Cash flow generated by operating activities in the first quarter of fiscal 2024 was $32.6 million, compared to $66.3 million in the first quarter of fiscal 2023. Free cash flow in the first quarter of fiscal 2024 was $(35.3) million, compared to $42.1 million in the same period last year. Decreases in cash flow provided by operating activities and free cash flow include a higher payout of incentive compensation related to fiscal year 2023 performance.
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Fiscal Year 2024 Outlook
The table below provides guidance for sales growth and earnings per share for fiscal 2024. Our guidance reflects first quarter performance and continues to include our assumptions for channel inventory normalization and order growth.
| Updated Guidance | Prior Guidance | ||||||||||
| Reported sales growth | 0.5% - 6.5% | 0.5% - 6.5% | |||||||||
Organic sales growth (1) | (2.0)% - 4.0% | (2.0)% - 4.0% | |||||||||
| Inorganic sales growth | ~1.5% | ~1.0% | |||||||||
| Currency translation | ~1.0% | ~1.5% | |||||||||
Diluted EPS (2) | $11.24 - $12.74 | $11.49 - $12.99 | |||||||||
Adjusted EPS (1) | $12.00 - $13.50 | $12.00 - $13.50 | |||||||||
(1) Organic sales growth and Adjusted EPS are non-GAAP measures. See Adjusted Income, Adjusted EPS, and Adjusted Effective Tax Rate Reconciliation for more information on these non-GAAP measures.
(2) Diluted EPS updated to include the purchase accounting amortization from the Clearpath Robotics and Verve Industrial Protection acquisitions.
"We continue to expect low-single-digit topline growth in FY24, with modest EPS growth weighted to the second half of the year as orders continue to rebound. We are focused on winning share, meeting near-term profitability targets, and investing for the most attractive future opportunities,” Moret continued.
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Following is a discussion of first quarter results for our business segments.
Intelligent Devices
Intelligent Devices first quarter fiscal 2024 sales were $927 million, a decrease of 1.0% compared to $936 million in the same period last year. Organic sales decreased 4.5%, currency translation increased sales by 1.2%, and acquisitions increased sales by 2.3%. Segment operating earnings were $150 million compared to $209 million in the same period last year. Segment operating margin decreased to 16.2% from 22.4% a year ago. The decrease from prior year was driven by lower sales volume, the timing of prior-year investment spend, and the impact of acquisitions partially offset by positive price/cost.
Software & Control
Software & Control first quarter fiscal 2024 sales were $604 million, an increase of 5.3% compared to $573 million in the same period last year. Organic sales increased 4.0% and currency translation increased sales by 1.3%. Segment operating earnings were $151 million compared to $167 million in the same period last year. Segment operating margin decreased to 25.0% from 29.2% a year ago, driven by the timing of prior-year investment spend and lower supply chain utilization partially offset by positive price/cost.
Lifecycle Services
Lifecycle Services first quarter fiscal 2024 sales were $521 million, an increase of 10.5% compared to $472 million in the same period last year. Organic sales increased 8.1%, currency translation increased sales by 1.0%, and acquisitions increased sales by 1.4%. Segment operating earnings were $54.3 million compared to $24.3 million in the same period last year. Segment operating margin was 10.4% compared to 5.2% a year ago driven by higher sales, lower incentive compensation, and higher margins in Sensia.
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Supplemental Information
ARR - Total ARR grew 20% and Organic ARR grew 18% compared to the end of the first quarter of fiscal 2023.
Corporate and other - Fiscal 2024 first quarter Corporate and other expense was $40.0 million compared to $27.3 million in the first quarter of fiscal 2023. The year-over-year increase includes deal costs associated with the acquisition of Clearpath Robotics.
Purchase accounting depreciation and amortization - Fiscal 2024 first quarter Purchase accounting depreciation and amortization expense was $35.6 million, up $9.6 million from the first quarter of fiscal 2023 primarily related to the acquisitions of Clearpath Robotics and Verve Industrial Protection.
Tax - On a GAAP basis, the effective tax rate in the first quarter of fiscal 2024 was 18.1% compared to 19.1% in the first quarter of fiscal 2023. The adjusted effective tax rate for the first quarter of fiscal 2024 was 17.9% compared to 17.1% in the prior year.
Share repurchases - During the first quarter of fiscal 2024, the Company repurchased approximately 0.4 million shares of its common stock at a cost of $120.3 million. At December 31, 2023, $0.8 billion remained available under our existing share repurchase authorization.
Return on Invested Capital (ROIC) - ROIC was 18.5% for the twelve months ended December 31, 2023, compared to 16.8% for the twelve months ended December 31, 2022. The increase is primarily driven by higher pre-tax income partially offset by a higher effective tax rate.
Definitions
Non-GAAP Measures - Organic sales, total segment operating earnings, total segment operating margin, adjusted income, adjusted EPS, adjusted effective tax rate, free cash flow, free cash flow conversion, and ROIC are non-GAAP measures that are reconciled to GAAP measures in the attachments to this release.
Organic ARR - Annual recurring revenue (ARR) is a key metric that enables measurement of progress in growing our recurring revenue business. It represents the annual contract value of all active recurring revenue contracts at any point in time. Recurring revenue is defined as a revenue stream that is contractual, typically for a period of 12 months or more, and has a high probability of renewal. The probability of renewal is based on historical renewal experience of the individual revenue streams, or management's best estimates if historical renewal experience is not available. Organic ARR growth is calculated as the dollar change in ARR, adjusted to exclude the effects of
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currency translation and acquisitions, divided by ARR as of the prior period. The effects of currency translation are excluded by calculating Organic ARR on a constant currency basis. When we acquire businesses, we exclude the effect of ARR in the current period for which there was no comparable ARR in the prior period. We believe that Organic ARR provides useful information to investors because it reflects our recurring revenue performance period over period without the effect of acquisitions and changes in currency exchange rates. Organic ARR growth is also used as a financial measure of performance for our annual incentive compensation. Our measure of ARR may be different from measures used by other companies. Because ARR is based on annual contract value, it does not represent revenue recognized during a particular reporting period or revenue to be recognized in future reporting periods and is not intended to be a substitute for revenue, contract liabilities, or backlog.
Total ARR - Total ARR growth is calculated as the dollar change in ARR, adjusted to exclude the effects of currency. The effects of currency translation are excluded by calculating Total ARR on a constant currency basis. Total ARR includes acquisitions even if there was no comparable ARR in the prior period. We believe that Total ARR provides useful information to investors because it reflects our recurring revenue performance period over period including the effect of acquisitions.
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Conference Call
A conference call to discuss the quarterly results will be held at 8:30 a.m. Eastern Time on January 31, 2024. The call will be an audio webcast and accessible on the Rockwell Automation website (www.rockwellautomation.com/en-us/investors.html). Presentation materials will also be available on the website prior to the call.
Interested parties can access the conference call by using the following numbers: (888) 330-2022 in the U.S. and Canada; (646) 960-0690 for other countries. Use the following passcode: 5499533. Please call in 10 minutes prior to the start of the call.
Both the presentation materials and a replay of the call will be available on the Investor Relations section of the Rockwell Automation website through February 29, 2024.
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This news release contains statements (including certain projections and business trends) that are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Words such as “believe”, “estimate”, “project”, “plan”, “expect”, “anticipate”, “will”, “intend”, and other similar expressions may identify forward-looking statements. Actual results may differ materially from those projected as a result of certain risks and uncertainties, many of which are beyond our control, including but not limited to:
•macroeconomic factors, including inflation, global and regional business conditions (including adverse impacts in certain markets, such as Oil & Gas), commodity prices, currency exchange rates, the cyclical nature of our customers’ capital spending, and sovereign debt concerns;
•the availability and price of components and materials;
•the severity and duration of disruptions to our business due to pandemics, natural disasters (including those as a result of climate change), acts of war, strikes, terrorism, social unrest or other causes, liquidity and financial markets, demand for our hardware and software products, solutions, and services, our supply chain, our work force, our liquidity and the value of the assets we own;
•the availability, effectiveness, and security of our information technology systems;
•our ability to attract, develop, and retain qualified employees;
•our ability to manage and mitigate the risk related to security vulnerabilities and breaches of our hardware and software products, solutions, and services;
•the successful integration and management of strategic transactions and achievement of the expected benefits of these transactions;
•laws, regulations, and governmental policies affecting our activities in the countries where we do business, including those related to tariffs, taxation, trade controls (including sanctions placed on Russia), cybersecurity, and climate change;
•the successful development of advanced technologies and demand for and market acceptance of new and existing hardware and software products;
•our ability to manage and mitigate the risks associated with our solutions and services businesses;
•the successful execution of our cost productivity initiatives;
•competitive hardware and software products, solutions, and services, pricing pressures, and our ability to provide high quality products, solutions, and services;
•the availability and cost of capital;
•disruptions to our distribution channels or the failure of distributors to develop and maintain capabilities to sell our products;
•intellectual property infringement claims by others and the ability to protect our intellectual property;
•the uncertainty of claims by taxing authorities in the various jurisdictions where we do business;
•the uncertainties of litigation, including liabilities related to the safety and security of the hardware and software products, solutions, and services we sell;
•our ability to manage costs related to employee retirement and health care benefits; and
•other risks and uncertainties, including but not limited to those detailed from time to time in our Securities and Exchange Commission (SEC) filings.
Rockwell Automation, Inc. (NYSE: ROK), is a global leader in industrial automation and digital transformation. We connect the imaginations of people with the potential of technology to expand what is humanly possible, making the world more productive and more sustainable. Headquartered in Milwaukee, Wisconsin, Rockwell Automation employs approximately 29,000 problem solvers dedicated to our customers in more than 100 countries. To learn more about how we are bringing The Connected Enterprise(R) to life across industrial enterprises, visit www.rockwellautomation.com.
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ROCKWELL AUTOMATION, INC.
CONDENSED STATEMENT OF OPERATIONS INFORMATION
(in millions, except percentages)
| Three Months Ended December 31, | |||||||||||||||||
| 2023 | 2022 | ||||||||||||||||
| Sales (a) | $ | 2,052.1 | $ | 1,981.0 | |||||||||||||
| Cost of sales | (1,257.5) | (1,167.4) | |||||||||||||||
| Gross profit (b) | 794.6 | 813.6 | |||||||||||||||
| Selling, general and administrative expenses (c) | (513.7) | (469.5) | |||||||||||||||
Change in fair value of investments (1) | 3.1 | 140.6 | |||||||||||||||
| Other income | 8.9 | 17.3 | |||||||||||||||
| Interest expense | (33.3) | (34.1) | |||||||||||||||
| Income before income taxes | 259.6 | 467.9 | |||||||||||||||
| Income tax provision | (46.9) | (89.2) | |||||||||||||||
| Net income | 212.7 | 378.7 | |||||||||||||||
| Net loss attributable to noncontrolling interests | (2.5) | (5.3) | |||||||||||||||
| Net income attributable to Rockwell Automation, Inc. | $ | 215.2 | $ | 384.0 | |||||||||||||
| Gross profit as percent of sales (b/a) | 38.7 | % | 41.1 | % | |||||||||||||
| SG&A as percent of sales (c/a) | 25.0 | % | 23.7 | % | |||||||||||||
(1) Amount in the three months ended December 31, 2022, primarily relates to the change in fair value of our previous investment in PTC.
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ROCKWELL AUTOMATION, INC.
SALES AND EARNINGS INFORMATION
(in millions, except per share amounts and percentages)
| Three Months Ended December 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| Sales | ||||||||||||||
| Intelligent Devices (a) | $ | 927.3 | $ | 936.2 | ||||||||||
| Software & Control (b) | 603.6 | 573.3 | ||||||||||||
| Lifecycle Services (c) | 521.2 | 471.5 | ||||||||||||
| Total sales (d) | $ | 2,052.1 | $ | 1,981.0 | ||||||||||
| Segment operating earnings | ||||||||||||||
| Intelligent Devices (e) | $ | 150.2 | $ | 209.4 | ||||||||||
| Software & Control (f) | 151.0 | 167.3 | ||||||||||||
| Lifecycle Services (g) | 54.3 | 24.3 | ||||||||||||
Total segment operating earnings (1) (h) | 355.5 | 401.0 | ||||||||||||
| Purchase accounting depreciation and amortization | (35.6) | (26.0) | ||||||||||||
| Corporate and other | (40.0) | (27.3) | ||||||||||||
| Non-operating pension and postretirement credit | 4.9 | 12.4 | ||||||||||||
| Change in fair value of investments | 3.1 | 140.6 | ||||||||||||
| Interest expense, net | (28.3) | (32.8) | ||||||||||||
| Income before income taxes (i) | 259.6 | 467.9 | ||||||||||||
| Income tax provision | (46.9) | (89.2) | ||||||||||||
| Net income | 212.7 | 378.7 | ||||||||||||
| Net loss attributable to noncontrolling interests | (2.5) | (5.3) | ||||||||||||
| Net income attributable to Rockwell Automation, Inc. | $ | 215.2 | $ | 384.0 | ||||||||||
| Diluted EPS | $ | 1.86 | $ | 3.31 | ||||||||||
Adjusted EPS (2) | $ | 2.04 | $ | 2.46 | ||||||||||
| Diluted weighted average outstanding shares | 115.2 | 115.5 | ||||||||||||
| Pre-tax margin (i/d) | 12.7 | % | 23.6 | % | ||||||||||
| Intelligent Devices segment operating margin (e/a) | 16.2 | % | 22.4 | % | ||||||||||
| Software & Control segment operating margin (f/b) | 25.0 | % | 29.2 | % | ||||||||||
| Lifecycle Services segment operating margin (g/c) | 10.4 | % | 5.2 | % | ||||||||||
Total segment operating margin (1) (h/d) | 17.3 | % | 20.2 | % | ||||||||||
(1) Total segment operating earnings and total segment operating margin are non-GAAP financial measures. We exclude purchase accounting depreciation and amortization, corporate and other, non-operating pension and postretirement credit, change in fair value of investments, interest expense, net, and income tax provision because we do not consider these items to be directly related to the operating performance of our segments. We believe total segment operating earnings and total segment operating margin are useful to investors as measures of operating performance. We use these measures to monitor and evaluate the profitability of our operating segments. Our measures of total segment operating earnings and total segment operating margin may be different from measures used by other companies.
(2) Adjusted EPS is a non-GAAP earnings measure that excludes purchase accounting depreciation and amortization, non-operating pension and postretirement benefit credit, change in fair value of investments, and net loss attributable to noncontrolling interests, including their respective tax effects. See "Other Supplemental Information - Adjusted Income, Adjusted EPS, and Adjusted Effective Tax Rate" section for more information regarding non-operating pension and postretirement credit (cost) and a reconciliation to GAAP measures.
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ROCKWELL AUTOMATION, INC.
CONDENSED BALANCE SHEET INFORMATION
(in millions)
| December 31, 2023 | September 30, 2023 | |||||||||||||
| Assets | ||||||||||||||
| Cash and cash equivalents | $ | 439.5 | $ | 1,071.8 | ||||||||||
| Receivables | 1,934.9 | 2,167.4 | ||||||||||||
| Inventories | 1,474.0 | 1,404.9 | ||||||||||||
| Property, net | 705.0 | 684.2 | ||||||||||||
| Operating lease right-of-use assets | 350.1 | 349.4 | ||||||||||||
| Goodwill and intangibles | 5,157.1 | 4,381.6 | ||||||||||||
| Other assets | 1,272.7 | 1,244.7 | ||||||||||||
| Total | $ | 11,333.3 | $ | 11,304.0 | ||||||||||
| Liabilities and Shareowners’ Equity | ||||||||||||||
| Short-term debt | $ | 511.3 | $ | 103.3 | ||||||||||
| Accounts payable | 935.0 | 1,150.2 | ||||||||||||
| Long-term debt | 2,863.0 | 2,862.9 | ||||||||||||
| Operating lease liabilities | 277.9 | 285.3 | ||||||||||||
| Other liabilities | 2,959.0 | 3,158.9 | ||||||||||||
| Shareowners' equity attributable to Rockwell Automation, Inc. | 3,607.7 | 3,561.6 | ||||||||||||
| Noncontrolling interests | 179.4 | 181.8 | ||||||||||||
| Total | $ | 11,333.3 | $ | 11,304.0 | ||||||||||
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ROCKWELL AUTOMATION, INC.
CONDENSED CASH FLOW INFORMATION
(in millions)
| Three Months Ended December 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| Operating activities: | ||||||||||||||
| Net income | $ | 212.7 | $ | 378.7 | ||||||||||
| Depreciation and amortization | 76.9 | 57.8 | ||||||||||||
Change in fair value of investments (1) | (3.1) | (140.6) | ||||||||||||
| Retirement benefits expense (income) | 4.5 | (1.7) | ||||||||||||
| Pension contributions | (5.9) | (7.0) | ||||||||||||
| Receivables/inventories/payables | 52.4 | (237.7) | ||||||||||||
| Contract liabilities | 13.8 | 52.7 | ||||||||||||
| Compensation and benefits | (243.4) | (40.2) | ||||||||||||
| Income taxes | 1.6 | 73.1 | ||||||||||||
| Other operating activities | (76.9) | (68.8) | ||||||||||||
| Cash provided by operating activities | 32.6 | 66.3 | ||||||||||||
| Investing activities: | ||||||||||||||
| Capital expenditures | (67.9) | (24.2) | ||||||||||||
| Acquisition of businesses, net of cash acquired | (748.7) | (133.8) | ||||||||||||
| Proceeds from sale of investments | — | 144.8 | ||||||||||||
| Other investing activities | (0.8) | (5.1) | ||||||||||||
| Cash used for investing activities | (817.4) | (18.3) | ||||||||||||
| Financing activities: | ||||||||||||||
| Net issuance of short-term debt | 409.0 | 206.9 | ||||||||||||
| Repayment of debt | — | (18.8) | ||||||||||||
| Cash dividends | (144.0) | (135.9) | ||||||||||||
| Purchases of treasury stock | (120.3) | (156.8) | ||||||||||||
| Proceeds from the exercise of stock options | 11.6 | 13.4 | ||||||||||||
| Other financing activities | (22.1) | (14.1) | ||||||||||||
| Cash provided by (used for) financing activities | 134.2 | (105.3) | ||||||||||||
| Effect of exchange rate changes on cash | 9.7 | 18.0 | ||||||||||||
Decrease in cash, cash equivalents, and restricted cash (2) | $ | (640.9) | $ | (39.3) | ||||||||||
(1) Amount in the three months ended December 31, 2022, primarily relates to the change in fair value of our previous investment in PTC.
(2) Cash, cash equivalents, and restricted cash at December 31, 2022, includes restricted cash of $8.6 million recorded in Other assets in the Condensed Balance Sheet.
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ROCKWELL AUTOMATION, INC.
OTHER SUPPLEMENTAL INFORMATION
(in millions, except percentages)
Organic Sales
We translate sales of subsidiaries operating outside of the United States using exchange rates effective during the respective period. Therefore, changes in currency exchange rates affect our reported sales. Sales by acquired businesses also affect our reported sales. We believe that organic sales, defined as sales excluding the effects of acquisitions and changes in currency exchange rates, which is a non-GAAP financial measure, provides useful information to investors because it reflects regional and operating segment performance from the activities of our businesses without the effect of acquisitions and changes in currency exchange rates. We use organic sales as one measure to monitor and evaluate our regional and operating segment performance. When we acquire businesses, we exclude sales in the current period for which there are no comparable sales in the prior period. We determine the effect of changes in currency exchange rates by translating the respective period’s sales using the same currency exchange rates that were in effect during the prior year. When we divest a business, we exclude sales in the prior period for which there are no comparable sales in the current period. Organic sales growth is calculated by comparing organic sales to reported sales in the prior year, excluding divestitures. We attribute sales to the geographic regions based on the country of destination.
The following is a reconciliation of reported sales to organic sales for the three months ended December 31, 2023, compared to sales for the three months ended December 31, 2022:
| Three Months Ended December 31, | ||||||||||||||||||||||||||||||||
| 2023 | 2022 | |||||||||||||||||||||||||||||||
| Reported Sales | Less: Effect of Acquisitions | Effect of Changes in Currency | Organic Sales | Reported Sales | ||||||||||||||||||||||||||||
| North America | $ | 1,247.1 | $ | 18.8 | $ | (0.2) | $ | 1,228.5 | $ | 1,178.9 | ||||||||||||||||||||||
| EMEA | 388.3 | 6.3 | 17.4 | 364.6 | 372.8 | |||||||||||||||||||||||||||
| Asia Pacific | 275.6 | 2.7 | (1.7) | 274.6 | 296.5 | |||||||||||||||||||||||||||
| Latin America | 141.1 | — | 8.9 | 132.2 | 132.8 | |||||||||||||||||||||||||||
| Total | $ | 2,052.1 | $ | 27.8 | $ | 24.4 | $ | 1,999.9 | $ | 1,981.0 | ||||||||||||||||||||||
The following is a reconciliation of reported sales to organic sales for our operating segments for the three months ended December 31, 2023, compared to sales for the three months ended December 31, 2022:
| Three Months Ended December 31, | ||||||||||||||||||||||||||||||||
| 2023 | 2022 | |||||||||||||||||||||||||||||||
| Reported Sales | Less: Effect of Acquisitions | Effect of Changes in Currency | Organic Sales | Reported Sales | ||||||||||||||||||||||||||||
| Intelligent Devices | $ | 927.3 | $ | 21.1 | $ | 11.9 | $ | 894.3 | $ | 936.2 | ||||||||||||||||||||||
| Software & Control | 603.6 | — | 7.5 | 596.1 | 573.3 | |||||||||||||||||||||||||||
| Lifecycle Services | 521.2 | 6.7 | 5.0 | 509.5 | 471.5 | |||||||||||||||||||||||||||
| Total | $ | 2,052.1 | $ | 27.8 | $ | 24.4 | $ | 1,999.9 | $ | 1,981.0 | ||||||||||||||||||||||
The following is a reconciliation of reported sales growth to organic sales growth for the three months ended December 31, 2023, compared to sales for the three months ended December 31, 2022:
| Three Months Ended December 31, 2023 | ||||||||||||||||||||||||||
| Reported Sales Growth | Less: Effect of Acquisitions | Effect of Changes in Currency | Organic Sales Growth | |||||||||||||||||||||||
| North America | 5.8 | % | 1.6 | % | — | % | 4.2 | % | ||||||||||||||||||
| EMEA | 4.2 | % | 1.7 | % | 4.7 | % | (2.2) | % | ||||||||||||||||||
| Asia Pacific | (7.0) | % | 0.9 | % | (0.5) | % | (7.4) | % | ||||||||||||||||||
| Latin America | 6.2 | % | — | % | 6.7 | % | (0.5) | % | ||||||||||||||||||
| Total | 3.6 | % | 1.4 | % | 1.2 | % | 1.0 | % | ||||||||||||||||||
The following is a reconciliation of reported sales growth to organic sales growth for our operating segments for the three months ended December 31, 2023, compared to sales for the three months ended December 31, 2022:
| Three Months Ended December 31, 2023 | ||||||||||||||||||||||||||
| Reported Sales Growth | Less: Effect of Acquisitions | Effect of Changes in Currency | Organic Sales Growth | |||||||||||||||||||||||
| Intelligent Devices | (1.0) | % | 2.3 | % | 1.2 | % | (4.5) | % | ||||||||||||||||||
| Software & Control | 5.3 | % | — | % | 1.3 | % | 4.0 | % | ||||||||||||||||||
| Lifecycle Services | 10.5 | % | 1.4 | % | 1.0 | % | 8.1 | % | ||||||||||||||||||
| Total | 3.6 | % | 1.4 | % | 1.2 | % | 1.0 | % | ||||||||||||||||||
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ROCKWELL AUTOMATION, INC.
OTHER SUPPLEMENTAL INFORMATION
(in millions, except per share amounts and percentages)
Adjusted Income, Adjusted EPS, and Adjusted Effective Tax Rate
Adjusted income, adjusted EPS, and adjusted effective tax rate are non-GAAP earnings measures that exclude non-operating pension and postretirement benefit credit, purchase accounting depreciation and amortization attributable to Rockwell Automation, change in fair value of investments, and Net loss attributable to noncontrolling interests, including their respective tax effects.
We believe that adjusted income, adjusted EPS, and adjusted effective tax rate provide useful information to our investors about our operating performance and allow management and investors to compare our operating performance period over period. Adjusted EPS is also used as a financial measure of performance for our annual incentive compensation. Our measures of adjusted income, adjusted EPS, and adjusted effective tax rate may be different from measures used by other companies. These non-GAAP measures should not be considered a substitute for Net income attributable to Rockwell Automation, diluted EPS, and effective tax rate.
The following are the components of operating and non-operating pension and postretirement benefit cost (credit):
| Three Months Ended December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Service cost | $ | 9.4 | $ | 10.7 | |||||||
| Operating pension and postretirement benefit cost | 9.4 | 10.7 | |||||||||
| Interest cost | 37.2 | 39.8 | |||||||||
| Expected return on plan assets | (42.2) | (51.3) | |||||||||
| Amortization of net actuarial loss (gain) | 0.1 | (0.9) | |||||||||
| Non-operating pension and postretirement credit | (4.9) | (12.4) | |||||||||
| Net periodic pension and postretirement benefit cost (credit) | $ | 4.5 | $ | (1.7) | |||||||
The components of net periodic pension and postretirement benefit cost (credit) other than the service cost component are included in Other income in the Condensed Statement of Operations.
The following are reconciliations of Net income attributable to Rockwell Automation, diluted EPS, and effective tax rate to adjusted income, adjusted EPS, and adjusted effective tax rate, respectively:
| Three Months Ended December 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| Net income attributable to Rockwell Automation | $ | 215.2 | $ | 384.0 | ||||||||||
| Non-operating pension and postretirement benefit credit | (4.9) | (12.4) | ||||||||||||
| Tax effect of non-operating pension and postretirement benefit credit | 1.0 | 2.8 | ||||||||||||
| Purchase accounting depreciation and amortization attributable to Rockwell Automation | 32.7 | 23.0 | ||||||||||||
| Tax effect of purchase accounting depreciation and amortization attributable to Rockwell Automation | (5.5) | (5.6) | ||||||||||||
Change in fair value of investments (1) | (3.1) | (140.6) | ||||||||||||
Tax effect of change in fair value of investments (1) | 0.6 | 34.1 | ||||||||||||
| Adjusted income | $ | 236.0 | $ | 285.3 | ||||||||||
| Diluted EPS | $ | 1.86 | $ | 3.31 | ||||||||||
| Non-operating pension and postretirement benefit credit | (0.04) | (0.10) | ||||||||||||
| Tax effect of non-operating pension and postretirement benefit credit | 0.01 | 0.02 | ||||||||||||
| Purchase accounting depreciation and amortization attributable to Rockwell Automation | 0.28 | 0.20 | ||||||||||||
| Tax effect of purchase accounting depreciation and amortization attributable to Rockwell Automation | (0.05) | (0.05) | ||||||||||||
Change in fair value of investments (1) | (0.03) | (1.22) | ||||||||||||
Tax effect of change in fair value of investments (1) | 0.01 | 0.30 | ||||||||||||
| Adjusted EPS | $ | 2.04 | $ | 2.46 | ||||||||||
| Effective tax rate | 18.1 | % | 19.1 | % | ||||||||||
| Tax effect of non-operating pension and postretirement benefit credit | (0.1) | % | (0.1) | % | ||||||||||
| Tax effect of purchase accounting depreciation and amortization attributable to Rockwell Automation | (0.1) | % | 0.5 | % | ||||||||||
Tax effect of change in fair value of investments (1) | — | % | (2.4) | % | ||||||||||
| Adjusted effective tax rate | 17.9 | % | 17.1 | % | ||||||||||
(1) Amount in the three months ended December 31, 2022, primarily relates to the change in fair value of our previous investment in PTC.
| Fiscal 2024 Guidance | ||||||||
Diluted EPS (1) | $11.24 - $12.74 | |||||||
| Non-operating pension and postretirement benefit credit | (0.17) | |||||||
| Tax effect of non-operating pension and postretirement benefit credit | 0.04 | |||||||
| Purchase accounting depreciation and amortization attributable to Rockwell Automation | 1.15 | |||||||
| Tax effect of purchase accounting depreciation and amortization attributable to Rockwell Automation | (0.24) | |||||||
Change in fair value of investments (2) | (0.03) | |||||||
Tax effect of change in fair value of investments (2) | 0.01 | |||||||
Adjusted EPS (1) | $12.00 - $13.50 | |||||||
| Effective tax rate | ~ 16.8% | |||||||
| Tax effect of non-operating pension and postretirement benefit credit | ~ —% | |||||||
| Tax effect of purchase accounting depreciation and amortization attributable to Rockwell Automation | ~ 0.2% | |||||||
Tax effect of change in fair value of investments (2) | ~ —% | |||||||
| Adjusted effective tax rate | ~ 17.0% | |||||||
(1) Fiscal 2024 guidance based on adjusted income attributable to Rockwell, which includes an adjustment for SLB's non-controlling interest in Sensia.
(2) The actual year-to-date adjustments are used for guidance, as estimates of these adjustments on a forward-looking basis are not available due to variability, complexity, and limited visibility of these items.
Note: Guidance as of January 31, 2024
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ROCKWELL AUTOMATION, INC.
OTHER SUPPLEMENTAL INFORMATION
(in millions, except percentages)
Free Cash Flow
Our definition of free cash flow, which is a non-GAAP financial measure, takes into consideration capital investments required to maintain the operations of our businesses and execute our strategy. In our opinion, free cash flow provides useful information to investors regarding our ability to generate cash from business operations that is available for acquisitions and other investments, service of debt principal, dividends, and share repurchases. We use free cash flow, as defined, as one measure to monitor and evaluate our performance, including as a financial measure for our annual incentive compensation. Our definition of free cash flow may be different from definitions used by other companies.
The following table summarizes free cash flow by quarter:
| Mar. 31, 2022 | Jun. 30, 2022 | Sep. 30, 2022 | Dec. 31, 2022 | Mar. 31, 2023 | Jun. 30, 2023 | Sep. 30, 2023 | Dec. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||
| Cash provided by (used for) operating activities | $ | 90.8 | $ | 344.9 | $ | 399.4 | $ | 66.3 | $ | 187.1 | $ | 281.7 | $ | 839.5 | $ | 32.6 | |||||||||||||||||||||||||||||||
| Capital expenditures | (44.9) | (18.3) | (40.8) | (24.2) | (31.5) | (41.6) | (63.2) | (67.9) | |||||||||||||||||||||||||||||||||||||||
| Free cash flow | $ | 45.9 | $ | 326.6 | $ | 358.6 | $ | 42.1 | $ | 155.6 | $ | 240.1 | $ | 776.3 | $ | (35.3) | |||||||||||||||||||||||||||||||
Free cash flow conversion (free cash flow as a percentage of adjusted income) is a non-GAAP financial measure, which reflects our ability to generate cash from the operations of our business while considering the capital investments required to maintain operations and execute our strategy as a ratio of our operating performance. We believe free cash flow conversion provides useful information to investors about our ability to convert operating performance into cash generation. Our measure of free cash flow conversion may be different from measures used by other companies.
The table below provides free cash flow conversion for the three months ended December 31, 2023 and 2022:
| Quarter Ended | |||||||||||
| Dec. 31, 2023 | Dec. 31, 2022 | ||||||||||
| Free cash flow (a) | $ | (35.3) | $ | 42.1 | |||||||
| Adjusted income (b) | 236.0 | 285.3 | |||||||||
| Free cash flow conversion (a/b) | (15) | % | 15 | % | |||||||
Return On Invested Capital
Our press release contains information regarding ROIC, which is a non-GAAP financial measure. We believe that ROIC is useful to investors as a measure of performance and of the effectiveness of the use of capital in our operations. We use ROIC as one measure to monitor and evaluate our performance. Our measure of ROIC may be different from that used by other companies. We define ROIC as the percentage resulting from the following calculation:
(a) Net income, before Interest expense, Income tax provision, and purchase accounting depreciation and amortization, divided by;
(b) average invested capital for the year, calculated as a five quarter rolling average using the sum of Short-term debt, Long-term debt, Shareowners’ equity, and accumulated amortization of goodwill and other intangible assets, minus Cash and cash equivalents, short-term investments, and long-term investments (fixed income securities), multiplied by;
(c) one minus the effective tax rate for the period.
ROIC is calculated as follows (in millions, except percentages):
| Twelve Months Ended | ||||||||||||||
| December 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| (a) Return | ||||||||||||||
| Net income | $ | 1,112.0 | $ | 1,058.9 | ||||||||||
| Interest expense | 134.6 | 127.8 | ||||||||||||
| Income tax provision | 288.2 | 200.1 | ||||||||||||
| Purchase accounting depreciation and amortization | 274.0 | 103.8 | ||||||||||||
| Return | $ | 1,808.8 | $ | 1,490.6 | ||||||||||
| (b) Average invested capital | ||||||||||||||
| Short-term debt | $ | 754.2 | $ | 794.7 | ||||||||||
| Long-term debt | 2,865.6 | 3,226.7 | ||||||||||||
| Shareowners’ equity | 3,557.8 | 2,925.4 | ||||||||||||
| Accumulated amortization of goodwill and intangibles | 1,168.2 | 1,017.4 | ||||||||||||
| Cash and cash equivalents | (574.2) | (483.3) | ||||||||||||
| Short-term and long-term investments | (3.0) | (7.6) | ||||||||||||
| Average invested capital | $ | 7,768.6 | $ | 7,473.3 | ||||||||||
| (c) Effective tax rate | ||||||||||||||
| Income tax provision | 288.2 | 200.1 | ||||||||||||
| Income before income taxes | $ | 1,400.2 | $ | 1,259.0 | ||||||||||
| Effective tax rate | 20.6 | % | 15.9 | % | ||||||||||
| (a) / (b) * (1-c) Return On Invested Capital | 18.5 | % | 16.8 | % | ||||||||||
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