The paragraph introduces Rockwell Automation's fourth-quarter fiscal 2024 earnings release conference call. The operator thanks participants for holding and reminds them that the call is being recorded. Aijana Zellner, Head of Investor Relations and Market Strategy, takes over, welcoming attendees and mentioning key figures present, including Chairman and CEO Blake Moret and CFO Christian Rothe. The results, released earlier, are available on the company's website, including non-GAAP measures and their reconciliations. A replay of the webcast and a transcript will be accessible on the website. Aijana notes that the call will contain forward-looking statements, emphasizing the potential risks and uncertainties. Blake Moret then expresses optimism about the future following the recent U.S. Federal Election Day.

The paragraph discusses Rockwell's role in the U.S. manufacturing sector, highlighting its leadership in providing technology to enhance competitiveness. Despite soft order intake in Q4, the company achieved strong execution, restoring pre-pandemic customer service levels and order shipments, while growing its profitable software and digital services. Rockwell saw double-digit growth in annual recurring revenue, now making up 10% of total revenue, up from 4% in 2018. Modest market share gains were observed, primarily in North America, while China contributed less than 5% of revenue. Cost-saving initiatives spearheaded by new CFO Christian Rothe resulted in $110 million in cost reductions by the end of fiscal year 2024, exceeding targets and reducing global headcount by over 12%. These efforts include lowering costs for components and services and boosting manufacturing efficiency.

In the article paragraph, despite facing challenges like lower volume, the company remains confident in achieving $250 million in savings for fiscal year 2025 through various productivity initiatives. Pricing actions have positively impacted their performance. The paragraph discusses the company's Q4 performance, reporting a slight sequential decrease in orders due to excess inventory at distributors and lower end user demand, with North America showing some growth. Sequential order growth was recorded in North America while Asia experienced the largest decline. The company expects flat orders in Q1 and a high single-digit sales decline due to typical seasonality and slower Q4 orders. Q4 organic sales met expectations despite weaker orders, marked by effective conversion of orders to shipments and improved lifecycle services performance. Overall, Q4 sales declined by 21% year-over-year due to tough comparisons, channel destocking, and slower end user demand. Additionally, they achieved a strategic win with NTT, a major data center provider.

Rockwell is optimizing customer space by utilizing CUBIC's modular design capabilities, although its Software & Control segment saw a 30% decline in organic sales due to lower logic shipments. Despite shipment volatility, their PLC market share increased thanks to geographic mix and innovation. Software, led by new offerings like Vision AI Solutions and FactoryTalk Design Studio, showed strong growth. Lifecycle Services saw a 2% organic sales increase despite some project delays and recorded a book-to-bill ratio slightly below average. The company noted progress in energy market projects aiming for autonomous operations, with energy markets comprising over 15% of their business for fiscal 2024. They also strengthened managed services, resulting in a 16% increase in total annual recurring revenue (ARR) and a segment margin exceeding 20%, achieving an adjusted EPS of $2.47.

In the review of Q4 industry segment performance, Rockwell faced challenging year-over-year comparisons due to last year's record shipments. Sales in discrete industries were affected by declines in automotive and semiconductor sectors, despite growth in e-Commerce & Warehouse Automation. The automotive sector experienced delays in EV projects, but Rockwell secured a partnership with Ford for automation in Kentucky and continued to win business in traditional ICE and hybrid programs. Semiconductor sales faced oversupply issues, but Rockwell won a contract to automate R&D facilities. e-Commerce & Warehouse Automation sales grew 25% due to warehouse and data center investments. Hybrid Industry sales declined, with reduced capacity investments in Food & Beverage and Life Sciences, as clients focused on existing facilities.

The paragraph describes Rockwell Automation's recent business activities and performance. They are collaborating with food and beverage producers, specifically highlighting a partnership with Kikkoman to build a modern factory in Wisconsin. In the Life Sciences sector, investments in GLP-1 drugs are increasing as demand grows. Sales growth in Process industries faced tough comparisons from high growth the previous year, while Oil & Gas projects in North America were delayed due to election-related uncertainties. Despite these challenges, Sensia achieved double-digit growth. In Mining, Rockwell was selected to upgrade Syrate's environmental monitoring system in South Africa. Overall, there was a decline in sales year-over-year due to high prior year comparisons and destocking, but orders increased significantly during the same period. The Americas remained the best-performing region with sequential growth in North American orders.

The company is expanding its presence in Europe and has secured a significant project with Gaia in India, a major system supplier. Despite a 9% decline in reported sales for the year, growth was aided by acquisitions and strong recurring software and services performance, which now make up over 10% of the business. Cost reduction efforts have improved margins, and the free cash flow conversion met forecasts. Looking ahead to fiscal 2025, the company anticipates sales growth between 2% and a decline of 4% due to economic uncertainty and project delays, with gradual improvement expected after Q1.

In the paragraph, Christian Rothe provides key financial information for the fourth quarter. Reported sales were down 21% compared to the previous year, with organic growth mostly driven by price. Segment operating margin fell from 22.3% to 20.1% due to lower sales volume and unfavorable mix, partially offset by cost reductions. Adjusted EPS was $2.47, exceeding expectations due to pricing and one-time items, including a $22 million benefit from an earn-out adjustment. The adjusted effective tax rate was 14.9%, lower than last year and expectations. Free cash flow was $367 million, down $409 million year-over-year because of reduced pretax income. Additionally, the company repurchased 450,000 shares for $118 million and has $1.3 billion left in its repurchase authorizations as of September 30th.

The paragraph summarizes the sales and margin performance for three operating segments: Intelligent Devices, Software & Control, and Lifecycle Services. Intelligent Devices saw a margin decrease to 20.6%, mainly due to lower sales volume and unfavorable mix, with adjustments showing a segment margin of 18.3%. Despite lower-than-expected operational performance, the segment managed a 20% sales decline with effective cost management. Software & Control experienced a significant margin drop to 22.3% due to reduced sales volume, particularly in hardware, although software sales remained stable. Cost reduction measures partially mitigated high decrementals. Lifecycle Services improved margin to 17.4%, attributed to strong project execution and Sensia performance, slightly exceeding expectations. The paragraph sets up for more detailed analysis in the following slide regarding adjusted EPS changes from Q4 fiscal 2023 to Q4 fiscal 2024.

The paragraph discusses the financial performance and challenges faced by Rockwell in a recent quarter and the full fiscal year 2024. Core performance saw a decline with a significant decrease in organic sales and an unfavorable product mix impacting results. Cost reduction actions provided significant financial benefits, exceeding expectations. There were notable year-over-year changes in incentive compensation and other elements such as currency and tax effects. Sequentially, from Q3 to Q4, negative mix largely contributed to decreased performance, with declines in certain product sales, though some areas like Lifecycle Services saw growth. Full fiscal year 2024 reported sales declined by 9%, with organic sales down by 10%, and a decrease in the segment margin compared to last year.

The paragraph discusses financial performance and guidance for the company. It notes a decrease in adjusted EPS by 20%, primarily due to lower sales and an unfavorable product mix, but partially offset by cost reduction actions and other factors. Free cash flow decreased by $575 million from the previous year, driven by lower pretax income. However, inventory and receivables helped by being a cash source. Return on invested capital was down from the prior year due to lower income. The company invested $1.2 billion in dividends and share repurchases, and $750 million in acquisitions. Looking ahead to fiscal 2025, sales are expected to range from a decline of 4% to an increase of 2%, with Intelligent Devices and Software & Control expected to decrease slightly, while Lifecycle Services may increase slightly. A point of growth from pricing is anticipated, and the segment margin is projected to decline slightly. The company expects a $250 million benefit from productivity and margin improvement projects.

The company is preparing for its upcoming Investor Day, where it plans to discuss its productivity and operational strategies. For fiscal year 2025, they anticipate an adjusted effective tax rate of around 17%, which is 2 percentage points higher than 2024 due to non-recurring events. They project adjusted EPS between $8.60 and $9.80, with a free cash flow conversion rate of 100% of adjusted income. First quarter sales are expected to decrease by high single digits sequentially, with margins projected in the low to mid-teens. Intelligent Devices sales are anticipated to decline by low teens due to weak demand and seasonal lows, impacting margins. Software & Control is expected to maintain flat sales growth with margins in the low 20s. Lifecycle Services sales may drop slightly with margins in the low teens due to compensation pressures. Gradual sales and margin improvements are expected throughout the year. The adjusted EPS is anticipated to be negatively impacted by $0.20 due to a 1% sales decline.

In this paragraph, the company outlines its financial expectations and strategies for fiscal 2025. Key points include targeting R&D spending at 6% of sales to drive future growth and structural investments to expand their capabilities, such as enhancing data center infrastructure and IT systems. Despite these investments causing a $0.25 EPS headwind, the company anticipates a $1.85 EPS increase from productivity actions aimed at achieving $250 million in cost savings. However, compensation and inflation are expected to reduce EPS by $1.40. Other factors like tax, earn-out adjustments, and interest expenses are projected to slightly impact EPS negatively. Segment margins are expected to remain flat, and the company plans to repurchase $300 million in shares, with average diluted shares estimated at 113.1 million and corporate expenses projected at $130 million.

In the paragraph, Blake Moret discusses the company's achievements and outlook despite project delays due to policy uncertainty and the U.S. election. They have secured new capacity projects in the U.S. across various sectors, including renewable energy, tire, oil and gas, EV, and semiconductor, with a notable increase in project wins in Q4. The company anticipates further growth in fiscal year 2025, driven by new product introductions and the contribution of past acquisitions to organic growth. They have no plans for major new acquisitions, focusing instead on integrating existing assets to drive customer simplification and expand margins. Moret also emphasizes the importance of their workforce in achieving success. Finally, Aijana Zellner begins the Q&A session, with Scott Davis from Melius Research asking the first question.

In the conversation between Blake Moret and Scott Davis, Blake Moret indicates that there isn't an expectation for a rapid restocking of inventory in the first quarter, as the excess stock at distributors and machine builders is mostly depleted. Regarding the impact of tariffs, Blake notes that customer behavior didn't notably change last time, and the company managed to adapt by adjusting pricing to maintain a positive price-cost relationship. He expresses confidence in the company's ability to handle future tariffs similarly. Investments in U.S. technology are expected to continue, aligning well with the company's focus. Scott Davis concludes by wishing the team good luck.

In the paragraph, Blake Moret discusses the outlook for various markets in 2025 during a conversation with Andy Kaplowitz. In the hybrid market, particularly in Food & Beverage, there's limited greenfield investment but ongoing business through digital services for existing facilities. In Life Sciences, there's cautious optimism about growth, especially in GLP-1 capacity. For discrete markets, automotive remains the largest component, with continued investments but not enough to declare a full recovery. The expected increase in U.S. EV sales is slower than initially anticipated. Additionally, the e-Commerce and Warehouse Automation sector, including data center activities, showed positive growth and is expected to continue being a strong area.

The paragraph discusses the outlook for orders and growth in the context of a business update. Blake Moret mentions expecting gradual, sequential growth in orders after Q1, based on an analysis of various industries and lifecycle stages, despite current destocking challenges. The focus is on gaining growth through backlog contributions and the significant impact on Software & Control and Intelligent Devices throughout the year. The conversation shifts to Andrew Obin from Bank of America, who inquires about understanding how the funnel of potential orders will convert into actual shipments, considering the budgeting at year-end.

The paragraph discusses the process and timeline for converting orders into shipments within a business context, specifically focusing on projects involving Maintenance, Repair, and Operations (MRO) and large-scale greenfield projects like electric vehicle (EV) initiatives. The speaker, Blake Moret, explains that projects can be tracked over a year or more before orders are finalized. Once ordered, the timeline for shipping can vary widely, from a matter of days for products from distributors to several months or even over a year for complex projects requiring significant engineering. The business tracks these projects carefully and anticipates increased activity and opportunities in the coming year, with a strong funnel of potential projects supporting their business goals.

The paragraph discusses the current status and expectations around lead times for different product types, noting that standard products ship within weeks and configure-to-order products take longer, with Lifecycle Services averaging a lead time of five to six months. It acknowledges the delays faced by machine builders in Europe, which a competitor suggested could extend for three to six months, but notes increased engagement with European machine builders at events like the Automation Fair and PACK EXPO. Many European machine builders are aiming to collaborate more with U.S. companies, presenting growth opportunities, as their end users are investing in the U.S. This is seen as encouraging for expanding business relationships.

In fiscal year 2025, the Americas are expected to be the best performing region globally, followed by Europe and then Asia, as European machine builders recover from overstock issues. Nigel Coe from Wolfe Research discusses 1Q guidance with Christian Rothe. Rothe explains that compared to Q4, Q1 will face headwinds such as the non-recurrence of an earn-out adjustment, compensation inflation, and reduced volume, leading to significant EPS decrementals below $2.

The paragraph involves a discussion led by Blake Moret about projected growth and order trends for the year. Moret explains that achieving a 2% growth would require either a pronounced ramp-up or an earlier recovery in end markets, particularly for intelligent devices and Software & Control products. He mentions that lifecycle services may not see drastic changes due to process market exposure and backlog. Nigel Coe acknowledges this explanation. Subsequently, Chris Snyder from Morgan Stanley inquires about trends in the American market, noting low single-digit sequential growth. He seeks clarification on expectations for Q1, the competitive environment, and the company's performance regarding new wins and awards.

In the paragraph, Blake Moret discusses the performance and expectations for the Americas region, stating it was the best performing region in 2024 and is expected to continue as such in 2025. The company's strong market presence in the Americas is supported by a large installed base, robust channel partnerships, and deep relationships. Despite competitors' interest in expanding in the U.S., the company is aggressively pursuing new opportunities, including working closely with machine builders and engineering firms globally, while providing unmatched support and launching new products. Moret notes a sequential improvement in orders in North America during Q4, with anticipation of increased orders from mega projects in 2025 as overstock issues are resolved. Chris Snyder inquires about shifts in American manufacturing capital expenditures (CapEx) towards electronic components and larger electrical equipment, questioning the implications for the automation industry's product content.

In the paragraph, Blake Moret discusses Rockwell's strategic positioning across various vertical industries. He acknowledges that while Rockwell might have lower penetration in newer verticals in the U.S., such as semiconductors, it has a strong presence in traditional sectors like Food & Beverage, Automotive, and Life Sciences. The company is tracking thousands of projects, focusing on those with the clearest potential. These projects, split between less-penetrated and well-established industries, represent significant capital expenditure opportunities. Moret notes they are still in the early stages of these opportunities being awarded, with substantial potential over the coming years. Chris Snyder thanks Blake Moret, and then Julian Mitchell from Barclays is introduced for the next question.

The paragraph discusses the company's approach to returning to mid-to-high single-digit organic sales growth, following a period of negative growth and restructuring. Blake Moret emphasizes the importance of preserving investment in customer-facing resources and R&D, specifically in Software & Control, Intelligent Devices, and New Digital Services, despite short-term spending cuts due to current business conditions. He mentions past significant growth and remains confident in achieving targeted growth and margin expectations after the current reset period, highlighting structural capacity investments for long-term alignment. More details are anticipated to be shared at an upcoming event, Automation Fair.

The discussion focuses on the projected segment margin for 2025, specifically targeting a 19% margin for the year. Julian Mitchell inquires whether a low to mid-teens margin in Q1 can increase by 200 to 300 basis points each quarter to achieve this goal. Christian Rothe confirms the expectation of sequential improvement in segment margins throughout the year to reach the 19% target, although he refrains from providing detailed first-half or second-half earnings breakdowns. The conversation then shifts to the next question from Joseph O'Dea about the outlook for intelligent devices in the first quarter.

The paragraph discusses trends in revenue and inventory management for 2024. Christian Rothe explains that a significant revenue decline from the fourth quarter to the first quarter is due to shipments surpassing incoming orders and seasonal lows. Joseph O'Dea inquires about the influences of end markets versus channel effects on inventory management. Blake Moret responds that it's difficult to quantify their relative contributions because they're interconnected, with destocking influenced by end-user demand. He notes that in early 2024, overstock effects were more noticeable despite positive end-user demand.

The paragraph discusses the impact of end-user demand on various industries, highlighting the linkage between stock in the distribution channel and end-user demand. The product-centric verticals, such as Automotive and Food & Beverage, are expected to be most affected by changes in end-user demand due to their reliance on products distributed through channels. In contrast, industries like Oil & Gas and Life Sciences have a greater emphasis on Digital Services and Engineered Solutions, mitigating the impact of demand fluctuations in products. Noah Kaye from Oppenheimer seeks clarification on the nature of certain investments described as operational expenses (OpEx) rather than capital expenditures (CapEx), questioning why facility expansions fall into the former category. Blake Moret clarifies that the investments consist of a mix of OpEx and CapEx, with some expenditures directed towards managing growth in the data center business.

The paragraph discusses the new facility in India, which enhances the company's resilience in Asia. It highlights investments in digital infrastructure to boost both internal and external productivity through world-class business systems and digital services. These investments involve both operational expenditures (OpEx) and some capital expenditures (CapEx). The conversation ends with expressions of gratitude and a note that the conference call is concluded.

This summary was generated with AI and may contain some inaccuracies.