• Reported sales down 6.6% year over year; organic sales down 8.1% year over year
• Acquisitions contributed 1.4% to growth
• Total ARR up 20% year over year
• Diluted EPS of $2.31 and adjusted EPS of $2.50; down (11)% and (17)% year over year, respectively
• Updates fiscal 2024 reported sales growth guidance to (6.0)% - (4.0)%; organic sales growth to (8.0)% - (6.0)%
• Updates fiscal 2024 diluted EPS guidance to $8.80 - $9.80; adjusted EPS guidance to $10.00 - $11.00
• Announces upcoming retirement of Nicholas Gangestad, Senior Vice President and Chief Financial Officer

Rockwell Automation, Inc. (NYSE: ROK) today reported second quarter fiscal 2024 results.

"Execution in the second quarter was solid, and we continue to see sequential order improvement. However, there is more excess inventory at our customers, particularly machine builders, than we originally expected. As a result, we are not yet seeing the accelerated order ramp this fiscal year and are reducing our full-year guidance. Despite the lower FY24 outlook, we are gaining share across many of our most important product lines and in North America, our largest market," said Blake Moret, Chairman and CEO.

Fiscal Q2 2024 Financial Results

Fiscal 2024 second quarter sales were $2,126 million, down 6.6% from $2,275 million in the second quarter of fiscal 2023. Organic sales decreased 8.1%, currency translation increased sales by 0.1%, and acquisitions increased sales by 1.4%.

Fiscal 2024 second quarter Net income attributable to Rockwell Automation was $266 million or $2.31 per share, compared to $300 million or $2.59 per share in the second 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 second quarter adjusted EPS was $2.50, down 16.9% compared to $3.01 in the second quarter of fiscal 2023 primarily due to lower segment operating margin.

Pre-tax margin was 14.6% in the second quarter of fiscal 2024 compared to 15.4% in the same period last year. The decrease in pre-tax margin was primarily due to lower sales volume, partially offset by lower non-operating pension expense.

Total segment operating earnings were $404 million in the second quarter of fiscal 2024, down 16.5% from $484 million in the same period of fiscal 2023. Total segment operating margin was 19.0% compared to 21.3% a year ago. The decrease in segment operating margin was primarily due to lower sales volume, partially offset by lower incentive compensation.

Cash flow generated by operating activities in the second quarter of fiscal 2024 was $120 million, compared to $187 million in the second quarter of fiscal 2023. Free cash flow in the second quarter of fiscal 2024 was $68.6 million, compared to $156 million in the same period last year. Decreases in cash flow provided by operating activities and free cash flow were primarily due to lower pre-tax income and higher tax payments, partially offset by decreases in working capital.

Fiscal Year 2024 Outlook

The table below provides updated guidance for sales growth and earnings per share for fiscal 2024.

"The reduced guide for the fiscal year only strengthens our commitment to building a strong foundation for future growth and profitability. We have built an unmatched portfolio with both our traditional offerings and new sources of value. As we couple this with our focus on margin expansion through cost discipline, operational excellence, and organic growth, we will achieve the longer-range targets introduced in November and create significant shareowner value,” Moret continued.

Following is a discussion of second quarter results for our business segments.

Intelligent Devices

Intelligent Devices second quarter fiscal 2024 sales were $974 million, a decrease of 4.9% compared to $1,023 million in the same period last year. Organic sales decreased 7.4%, currency translation increased sales by 0.2%, and acquisitions increased sales by 2.3%. Segment operating earnings were $161 million compared to $207 million in the same period last year. Segment operating margin decreased to 16.5% from 20.2% a year ago. The decrease from prior year was driven by lower sales volume and unfavorable mix, partially offset by lower incentive compensation.

Software & Control

Software & Control second quarter fiscal 2024 sales were $570 million, a decrease of 23.1% compared to $741 million in the same period last year. Organic sales decreased 23.2% and currency translation increased sales by 0.1%. Segment operating earnings were $146 million compared to $249 million in the same period last year. Segment operating margin decreased to 25.7% from 33.6% a year ago, driven by lower sales volume partially offset by lower incentive compensation, positive price/cost, and favorable mix.

Lifecycle Services

Lifecycle Services second quarter fiscal 2024 sales were $583 million, an increase of 14.0% compared to $511 million in the same period last year. Organic sales increased 12.4% and acquisitions increased sales by 1.6%. Segment operating earnings were $96.9 million compared to $27.9 million in the same period last year. Segment operating margin was 16.6% compared to 5.5% a year ago driven by lower incentive compensation, higher sales volume, and higher margins in Sensia.

CFO Transition

Rockwell Automation also announced today that Nicholas Gangestad, Senior Vice President and Chief Financial Officer, will retire from the Company. A search for his successor has been underway, and Mr. Gangestad will continue to serve in his role until the new CFO is appointed. Mr. Gangestad will work with the Board and management team to help ensure a smooth transition.

Supplemental Information

ARR - Total ARR grew 20% and Organic ARR grew 17% compared to the end of the second quarter of fiscal 2023.

Corporate and other - Fiscal 2024 second quarter Corporate and other expense was $28.2 million compared to $29.2 million in the second quarter of fiscal 2023.

Purchase accounting depreciation and amortization - Fiscal 2024 second quarter Purchase accounting depreciation and amortization expense was $37.1 million, up $10.5 million from the second 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 second quarter of fiscal 2024 was 14.5% compared to 16.1% in the second quarter of fiscal 2023. The adjusted effective tax rate for the second quarter of fiscal 2024 was 14.8% compared to 17.4% in the prior year. These decreases were related to the impact of discrete items recognized in the current quarter.

Share repurchases - During the second quarter of fiscal 2024, the Company repurchased approximately 0.7 million shares of its common stock at a cost of $194.7 million. At March 31, 2024, $0.6 billion remained available under our existing share repurchase authorization.

Return on Invested Capital (ROIC) - ROIC was 18.0% for the twelve months ended March 31, 2024, compared to 19.7% for the twelve months ended March 31, 2023. The decrease is primarily driven by a higher trailing twelve month effective tax rate and higher invested capital.

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.

Total 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. Total ARR growth is calculated as the dollar change in ARR, adjusted to exclude the effects of currency, divided by ARR as of the prior period. 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. 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.

Organic ARR - Organic ARR growth is calculated as the dollar change in ARR, adjusted to exclude the effects of 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.

Conference Call

A conference call to discuss the quarterly results will be held at 8:30 a.m. Eastern Time on May 7, 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 June 7, 2024.

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 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 and price of components and materials;
• 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, 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.

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):

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