ROK - Earnings call transcript Q2 2018 | Rockwell Automation, Inc.

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Operator

Thank you for holding and welcome to Rockwell Automation's Quarterly Conference Call. I need to remind everyone that today's conference call is being recorded. Later in the call, we will open up the lines for questions. At this time, I would like to turn the call over to Steve Etzel, Vice President of Investor Relations and Treasurer. Mr. ahead. go please Etzel,

Steven W. Etzel

and thank fiscal joining call. XXXX Blake and today and CFO. Automation's With for second is CEO; Chairman our quarter earnings Moret, Goris, you morning our us for Rockwell me Patrick Good release conference

website this released of available our and to to and the Both non-GAAP replay include this reconciliations the be press for measures. Our charts earlier press that next been webcast have call the results will XX at morning were charts A posted website. release for release and days.

need get started, expected remind we company comments statements. Before our of will results statements I and the to to you forward-looking therefore related that are our include future

and may our in a Our described due detailed actual our earnings from materially release differ all filings. results that SEC uncertainties of and our are of projections risks in to wide range

that, So I'll call Blake. the with over hand to

Blake D. Moret

you today. points us quarter. Steve, everyone. joining on and key some for with call Thank the for start morning, good Thanks, the I'll

So was another please for slide deck. quarter X This page us. turn good the in to

gas, by From in organic the automotive average declined X.X%. well led was the above up and a down little comps. perspective, metals mining, Transportation company company Consumer vertical semiconductor. was grew As half we quarter, industries expected, grew the heavy average and tough growth in year, as above Sequentially, up oil automotive and a in was performed growth more global in year-over-year of our on QX business well. QX. in Through X%. automotive. the saw and quarter grew good quarter. Enterprise the first organically. The for new down in gas fairly in once growth Oil in offset represent U.S., Services, heavy softness a the was in based. the largest Connected second X.X% row. again Information about again the partially X% a EMEA the market, U.S. We our double-digits regional associated Solutions From with Revenue Connected from perspective, which industries by and grew broad grew double-digits. was a growth value than

additional China average. China had up about Brazil. was line over Mexico in QX Latin few and grew performance were strength X% America with in a to including Logix X%. strong last a up performance. quarters in was in has by six make up Asia about sales XX% organically comments grown our very orders compared I'll growth CompactLogix, QX. which led in in strong the company double-digits row. year,

was X% Our Process business and delivered quarter good year-over-year. up about another

our was cash basis XX%, half will pleased capital grew are for his remarks. want first points the margins and about quarter. flow free We free with talking cash was flow X.X%, of grew and a is financial up In year-over-year elaborate deployment were up minute first XXX%. very good second operating the segment This EPS I our financial financial organic to priorities. was in performance very our the quarter fiscal the year. on Patrick investment performance conversion performance in EPS XX% and strong. adjusted of Adjusted the sales year, XXX half spend

priority number described increased and invest profitable is January, differentiation. to of In our the ramping long-term growth. organic business we We're first accelerate these growth would Our we in up drive to making investments investments. a be types to of

investments San as training co-located excellence development as with and in California, engagement our electric globally. to new Services based growth software to technology, expand well Solutions of Process development a capabilities, vehicle to our facilities teams and software the fuel benefits Connective commercial to offerings, accelerated resources of center investments example, Jose, our be enhance of one For Information and in and employee

reflects the report sustainable I'm a is XX% our This second announced dividend the increase. increase confidence generation. deployment, capital that in increase in of Enterprise deliver topic the to strategy this and ability This our XX we the pleased cash On to morning Connected months. last

of believe global cycle stages the a now in for our that serve. we fiscal XXXX. and outlook the array are benefit The of positive. the We that to expansion manufacturing of on and are industries we manufacturing environment move early from very Let's balance will macroeconomic remains indicators we broad favorable

Our focused customers simply their our on are mission. in quite is productivity driving operations, which

Turning to guidance.

about driver our first and X% up We for are to followed midpoint into of expect industries fiscal we sales guidance full increasing heavy to guidance range continue year. little be Consistent to a will sales outlook our our guidance our and down EPS the half year Taking earnings more Transportation consumer. for expect and in that fiscal will with adjusted January his $X.XX year by of will the to full at detail provide Patrick year, flat strong to results remainder account be the around largest $X. our guidance, the be expect to growth sales the XXXX $X.X year-over-year remarks. billion. reported we organic be

turn closing Before it let Patrick, me I add few to a over comments.

Services partners. significantly As and our Monday in investments by capabilities that Information in enhanced into production I Connected grew double-digits earlier offering This network targeted a of space. mentioned in sizable enhanced On very in is FactoryTalk that platform. analytics of data this that before, is mentioned strong week, QX. of drives software Solutions information This we I turns productivity, actionable we announced this part a are the

is We smart veterans Manufacturing, our which of Advanced manufacturing are for jobs. expanding training Academy

work week graduated to class this at going throughout second graduates manufacturers U.S. the are The and

of Illinois. this received want five example, an we at highlight be will For recognition important startup in also quarter. starting work vehicle to veterans these an I electric

is most our dedication strong Rockwell not Award of have they As as key over it helps a different Patrick? a when turn Ethisphere results world's so the time, and our That's suppliers say for integrity. why stakeholders. of one recognition do I and naming to of pleased our Automation customers It's how the drive was the do, that, XXth that for is what I'll value heard testament employees, makes set of This business our it many times, partners to companies. Patrick. success. culture me the the they you but and we, With to received ethical only

Patrick Goris

Thank Blake, quarter. start for slide on our good you, financial everyone. provides and which information the X, key second I'll morning

or operating fiscal divestiture margin XXXX A compared sales solid currency we million. to the mentioned, was quarter the repurchased we from growth up million, slide. down with sales was the QX a were two-and-a-half and from of had with shown additional Blake Through we shared our share of the At the points good $XXX year XX.X%, at A tailwind growth, target to growth March under XXX remaining shares operating year. last by was $XXX XXst, with basis get you points. $XXX contributed As pace year to organic up line We fiscal billion very adjusted a X.X in X.X%, X.X of ahead the authorization. Segment And year. organic full million last last points a quarter of Free reported expectations reduced sales at X.X%, translation quarter. March $X.X we Average margin and lower million repurchase offset million down had Tax timing higher $XX That's quarter to by little in General strong to $X XXst, spending. partly of corporate finally, $XX.X are compensation to net XXX% our the took expense we in performance incentive fiscal compared XXX.X performance. few costs. first XXXX investment income. was normal million diluted on result EPS strong increase year. of flow EPS million not quarter, an the the and quarter last cost The productivity in million X.X related was is in was Adjusted of to quarter the shares in up of compared GAAP an our the reflect $X.XX mainly tax second year-over-year to of quarter second cash last adjusted corporate of provisional items outstanding cover, $X.XX of XX%. increase year, Act. results variability adjustment million charges our that

to the increased quarter, margin Organic translation Slide for sales charges are Tax up about & on Act sales Architecture X% X.X% currency had overview X.X%. the segment and excluding call year-over-year sales sales were by from performance we segment. mentioned I last EPS. This tax provides As Software and X adjusted related the the growth.

that lap. to segment about had with this organic quarter exceptional tough You a year, XX% will second quarter an certainly last sales recall growth, so

segment and quarter, margin tailwind Margin points expanded the XXX incentive lower offset year-over-year by For productivity partially to XX.X%. spending. good basis higher was sales, higher investment compensation from

for points next segment. services this for in incentive to was sales, similar Solutions, following solutions sales X.X% slide and provides reported of Products QX his X.X% was up growth QX segment. of XXXX were the ago. slide on covered translation basis. Architecture by Blake an slide, to for in Book-to-bill year, Moving in solutions increased primarily performance in quarter performance our and performance X.X%. for in contributed expense; due at segment businesses last services X.XX X.X%. this overview remarks. in exceptionally segment an X.XX segment business compared on sales Organic lower Organic most and sales X, Software good came basis compensation this region. this margin divestiture growth reduced was Currency and sales higher productivity & in a X%. good to product this of by the X, QX our to Control margin our and an in year businesses in segment & XXX growth Growth another Operating this strong The X.X organic segment this the

for about XXXX growth fiscal So for I will just point out and organic saw broad-based X% all emerging was half markets growth QX, the first of we across up regions. that

turn commodities March tariffs, XXX which and the we With quantities to no about a announced still or on reviewing. some of couple make tariffs XXXX, we're buy which do let on business not to impact I to aluminum. including large our comments have guidance, steel of Before steel aluminum regards in enacted of some Section and little of me recently

the tariffs in costs by Similarly, tariffs in April do our we is immaterial of to China seen these of increases products. in on the overall these input of impact our While impact anticipation early results. not the steel and price tariffs, our have implemented aluminum

other has into U.S. that additional as following by the the well goods The as investigation China China. the imported XXX the tariffs imported U.S. certain relate group goods into Section U.S. that China to been on proposed tariffs have of from proposed

enacted to of any be As been these including including potential get you opportunities have implications lot exemptions. tariffs, of not what available of know, uncertainty tariffs yet may mitigate remains the We're particulars enacted. be and business about impacts analyzing they there to the should our these implemented may a that

soon X, the slide fluid to takes it matter, of Given us however, to the guidance. is nature discuss too the specifics. This any

X.X%. sales We continue sales growth with to project of $X.X a billion to organic of range about within X.X%

same. the largely remain currency for assumptions Our

expect to sales. continue translation tailwind of and the business remain sale a about the We the from fiscal about to headwind of will currency in X X% XXXX be to course point

second driven X% half first growth by of fiscal The organic of the the solutions about and in businesses the organic growth higher expected Our QX. that much half and a is of implies half X.X% the increase second to the end year product the about compared organic extent, the be in in backlogs in half to our XXXX midpoint fiscal the X.X% of by of higher first our services will in lesser businesses, organic at rates of growth to of fiscal growth growth compared XXXX. expected guidance

segment margin a below XX.X%. We continue expect to to operating be bit

between we bit a November and second rate full million January earnings increased in guidance. General full X.X consistent point net with was our expected for above to effective believe be We the will than that the This now XX%, margin closer about $XX million adjusted segment investments, to our full January be about implies lower as corporate XX%. tax we $XX to be margin the and year. conversion expense expect is and XX.X%. core guidance. year of half half segment year First

$X.X about about XXXX. fully shares for $XXX.X target fiscal be diluted in fiscal share now and to million continue billion to XXXX expect outstanding We repurchases for

to Q&A. a At had EPS to due primarily This performance. flow the reflects guidance expect about finally, XXXX quarter fiscal sales, and be now We XXXX performance first In the January the be this EPS guidance. tax the guidance. half on good another $X.XX free our cash and our we'll share is adjusted fiscal expect reported $X. operating XXX%. for $X.XX compared midpoint, rate represents to favorable growth higher to to At our year-over-year January we XX% conversion summary, increase solid strong move for are midpoint, X% another Steve. to of us. strong year compared that, performance we With And to and financial we this count range to increasing

Steven W. Etzel

to Q&A, possible. we the start as would want get that to say we as like to I many just you of Before

a you. So please and yourself our question limit take Thank follow-up. to question. quick one Operator, first let's

Operator

first Wells Fargo Your comes Rich Kwas from Securities. question from

Your line is open.

Rich M. Kwas

everyone. Good morning,

Patrick Goris

Good morning.

Rich M. Kwas

It half, on to America, auto, launches in the to at starting a for first North calendar looks XXXX? flat launch What pretty for overall number slightly down goes are visibility up standpoint expect least so for build for flat in Blake, of to flat here in the down based of year, from like the XXXX. you a Detroit manufacturers significantly transportation. bit a kind

that? to of So on just would thoughts revenue see wanted you when to get start benefit your some from the

Blake D. Moret

Yeah.

to for look outlook think XXXX, for as vehicle, the both as well automotive continues positive. traditional I electric

business We some we saw of levels from of to quarter, restored. is a saw traditional the generally positive then those And shaping traditional at in more of commitments we and in So received comments us. QX. the concerns for the be up end spend mentioned in we've had to that QX, the MRO some return XXXX

Rich M. Kwas

And or would auto, how and Okay. both to tire apply that would you...?

Blake D. Moret

activity as as as seen There's commitments the around named America, North we that's some of U.S. vehicles in we've of about well. talk new the for activity and been in China I important would side, particular the in the in good been terms that We've some been say, world. electric XXXX projects tire really in well on has If area

Rich M. Kwas

look and maybe you of face And guess I cadence then tougher kind down help we organic comparisons quarters, with the the of could on so second of for organic timing, here project should cadence how growth Europe, growth? about like think on next Okay. Patrick, regards half, in of anything, to couple some

Patrick Goris

in is Europe just general? or that Rich, to specific

Rich M. Kwas

a on helpful. Well, Europe in and then general comment just would be

Patrick Goris

Europe. with start I'll Yeah.

whole up down projects that second year for growth in Europe. some we last comp see about timing organic point and somewhat the QX, of timing what and Europe With some growth QX. overall overweighed we similar big expect bit I of rates in be differences the think of in about QX the X Europe the So year for in QX, maybe don't the obviously, fourth respect little that of the quarter balance we will in the in QX more was growth was year-over-year maybe tough in a of but quarter, had the is create the to company, little XX% weighted and year, versus noise. a

Blake D. Moret

see through if well. I from did Rich, sequential QX and quarter, automotive see moderate Yes, can to sequential the as we did mentioned, growth shipments the We growth. as add then some QX

Rich M. Kwas

Okay. you. Thank Great.

Blake D. Moret

Thanks, Rich.

Patrick Goris

Thanks.

Operator

from from comes Steve question Tusa Next JPMorgan.

Your line is open.

Stephen Tusa

morning. Hey, guys. Good

Patrick Goris

Morning.

Stephen Tusa

effective; there you guys change ABB any about talk moved where competitive their been you more the globally kind or and were stoked B&R of in becoming – environment the bit. obviously presence. a up discrete Are Can smaller There's are of anything some some there seeing there?

Blake D. Moret

when to but as about were was any be terms change seeing competitor talked will strong be the we're based before, I combination. competitor of on independent. mean continue a Not with the ABB good not they B&R competitive in B&R, really. a we've environment wholesale

Stephen Tusa

half. of you the obviously in How or there any taking start your that? on then better And what business. seems end year, margins the moves kind high like of of and that's the start to I given guess about even is you're because the Okay. I little to in should like of seems to end significant it second the that EPS – It with mean pretty range pickup get of just a to high to need was we off seeing I the the range sales thought bit tax. year the though up the mean

end still getting of a shot high range? at there's You think to the that

Blake D. Moret

fashion. a for book-to-bill mix exposure couple the some are good large the biasing any we projects of last in industries come greater to us, projects is has that seen quarters. heavy If more those time. towards in industries, As could lumpy heavy see to come and going over We've

revenue we impact come end projects to when could a the those when and the those of so projects, significant start And year. on have recognize from

we why range. of high-end have that that's So the into that baked

Stephen Tusa

one. auto for growth, auto global? organic, last is for One What Okay. on year guidance the your

Patrick Goris

to Flat slightly Steve. down,

Stephen Tusa

lot Thanks Great. a the Okay. for detail.

Patrick Goris

Thank you.

Operator

from Next Research. from Jeffrey Vertical question Sprague comes

is Your line open.

Jeffrey Todd Sprague

Good you. Thank morning, everyone.

Patrick Goris

Good morning.

Jeffrey Todd Sprague

today, and growth of are kind know you back Just too a I leaving different the our kind things something and the you your your of bit, to you're you'd to couple you're need address re-evaluating kind Blake, to process, how need of a of this say, an little I'm is Do landscape, evolution friends of in wake competitive is a upside Obviously, the maybe Connected in doing if evolutionary we partners? take and are, a up environment the thinking Enterprise, – how you gears, approach market? competitively friends question. don't your on invested shift of us on you there, sure what amount you in wonder or much the any and fair but you've to mentioned but just doing? tweak morning yeah,

Blake D. Moret

can is of to part are need do, core partnering it's I it think a to way we a more versus we solution the the I provide pace what is question of at good in us as constantly given a that. acquisitions and obviously our technology by what to changes, that to evaluating robust look the what think and evolution We're Jeff, well. customers

capabilities as core expertise. technology things be forward to at that of as terms or thought what part best in as well ago our going looking be So partners something things might need we more left to that be we maybe XX would of years a

is to that at going is every think we're anybody closed that we don't that. top And constantly bit need to mean approach expertise a and single because to have think application to customers doesn't bottom we need best-in-brand so having every What monolithic looking there. might our that we of have

So we framework they are need to constantly that like combination to accommodate existing have small and our provide to we companies ideas can fit still customers for provide be partners part our well-known installed future smaller as what nimble good a as able can fit to open partner to be market need going of a solution, advantage can framework, best take strategy of that take advantage the that's that well evaluating able again of our an what to be versus big that in might good of ideas much but to have our the what own into need those with base as access. to very we're well system Microsoft to and our names into companies as

Jeffrey Todd Sprague

Will vertical MAVERICK follow though, increasing? need of want that your from right that even it of you size think that small gives chemical, you do the have bolt-on that to is to would the the game you or do what category, do M&A I'd or that is plan a increase size you put in still

Blake D. Moret

say the particular about of as you acquisitions well larger it's if both range have some as number I'd before and areas. thought terms focus look in might at we larger, in our including our funnel, increased the than

we're the We're fit about priorities Solutions, financial area in our we're then looking impact we of that increasing looking the the So the active and very in some at emerging Connected markets. acquisition, strategic at of Services, for talked first and company. Information access the

Jeffrey Todd Sprague

you very Thank Great. much.

Blake D. Moret

Thanks, Jeff.

Operator

from from comes Melius open. Davis Scott Line Research. is question Next

Scott Davis

morning, guys. Good Hi.

Patrick Goris

morning. Good

Scott Davis

hit we're this bit I manufacturing at little out? comment, And in out hurt as a prepared year you seem weird to experience an really your is traditional you X.X%, half little cycle, based need XXX the growth in Blake, stages a meaning the numbers. to the way. that playing know growth doesn't will pick even your bit How but think said on so, that for mean, you of your made points back I a or probably slow Tusa in the basis remarks up noted, time cycle. of least, or I in things auto a the Steve feel up in you if back like early cycle just this maybe

my books see it do So cycle are or real your order is your this a in macro up more question in really way, your indeed comments customer data? based that in an commentary you on is,

Blake D. Moret

Yeah.

that of at a we there's think arrive I that factors to triangulate combination outlook.

industrial our in all, First rate industrial that but ever production I've get IP where long multiple actual of time change will business, you the the actuals, you to the if our growth that. at pretty that since the a over it's at is production. to over well correlated our decades, business, been of particularly obviously correlated of is in been growth is in period when to forecasts it's highest a look U.S. IP, years. And

base saw the from certainly Now, but positive again has to starting by that industry going weighted be transforms be going as a more growth is from question and no commits, program is mature vertical year, run so to And then auto the that's volatile. business. what in There's changing. moderated meaningful less than last small a to we quarter-to-quarter mix one a rates EV, growth it's seeing we're to rates everybody

we from macro signs. standpoint, a So positive see

a QX. that quarter. our our very We but changing. our had projects, We're we backlog, good of capabilities, book in good Patrick we historically had terms mentioned before, think fits book-to-bill mix that chasing order in for reasonable, high is this are In are and book-to-bill the

consumer, produce, the industries heavy as obviously out and of the we're see a other the playing is before that side, semiconductor standpoint, emerging high-single-digits, industry at on the about things for and that, helping consumer And regional that I've are more going talked we so that growth good class still heavy to there's of and you're see automotive From fundamentals then strengthening. then creates middle piece manufacturers amidst markets, transportation. demand

our our fundamental of to time. this. historic sidelines that with we the think variety projects we some I still help a from remained customers where of have has the capital with the to directions, in you that save I us them able agree our in money that able they capital in Scott And them large So confidence increase productivity whether stages, be wheelhouse compared the minds gives of but on to we're be not, ratios. weirdness still helping of mean to are and their about early mission or

Scott Davis

sense. And as Makes mean, then perspective. vehicles they Yeah. the long to just doesn't given and that different historically. in not sell, follow-up train a from electric need what you're be from I but that Rockwell follow-up, you huge drive particularly a it be don't seem to a

market that or approach you way little upstarts to bit et you think requires you showcase to action, or this need for will. way what the closer is form, some and do just your a of or yourself in startups, you kind of in do different capabilities really out excellence maybe shape of a of the if some So, cetera? And to differently plop a center think you kind in is a middle it of you separate the to

Blake D. Moret

lot manufacturing assembly, traditional automotive Scott, different. processes of the it's and the those very paint, know, fabrication, EV, chassis, you it's Whether mean I similar. You or winding obviously are are that's a battery, the trim have the same.

of know excellence. have only create lot in ideas while what companies. poached These prompts this to their nature the of a be the and they of ourselves away that technology, these in us not is smaller companies companies. what them of And center manufacturers, in of traditional startup think business that a they've And from flow to differentiate to embed prompted I have is able models. a of our center us but excellence open to to their veterans are big are they that part

Scott Davis

you. Thank Okay. Very luck, fair. guys. Good

Patrick Goris

Thanks, Scott.

Operator

Winoker UBS. Your Steven next question comes with from

open. is line Your

Steven Winoker

margin Thanks, just versus morning et – into given and talking impact just on that the good the the vertical can growth you're the I you as all. you're looking of Hey, on margin, half again Process heavy growth? mix cetera, maybe just quantify auto, industry impact second and wanted once other the follow-up about to of and growth the relative

Patrick Goris

second your to first the Steve, or compared half half? second half

Steven Winoker

Yeah.

weighs there continues words, that industry, other solutions more picking know and profit areas I up. and to outgrow that got bit in heavy my Process in So other just the understanding little is as services a you've

for of rates impact So growth the all up. rolled of various just mix of margin the the looking within segment, kind sort

Patrick Goris

a perspective. the For think, of company half be negative might from of few it you point can overall back tenths the a the year,

Steven Winoker

Okay.

Blake D. Moret

out has we've sure additional rich. to it going As less longer-term which the margin content to a growth in little process modeled it be labor be is

it to hardware other integration the On hand, into integration then are doing VARs they're customers the those doing the a complete or are the when of buying processors. and solutions, tends use lot large

And when products margin it's contribution is so good. sold as of the that pretty actually

to we said, completely mix were some So the dilution there's over, and see, Patrick as if change but some puts takes there.

Patrick Goris

segment much industries the better of which did better across Yeah. And the the in X.X% much because quarter, was actually within that. including It industries. a was & Software up it's exposure than up Steve that has Architecture X%, it one Blake's point, to heavy reasons about Logix

Steven Winoker

That's helpful. Great. second Okay. a topic follow-up. the on then And as

talked with kind number the and make if but long-term Jeff assumption, some about I capital obviously still M&A you approach. in of a the last capital that – cash, mentioned would increase deployment, even increasing to but getting overseas, but overall tax of still months, kind changes, XX I Just dividend not it's second of the still deals, the your of to would Rockwell on you back size lot kind deployment extent, sitting it's outside

stages or to the if you an maybe expansion? early up can need you capital not a maybe like at of what to, we're feel industrial So take but do feel deployment especially, if

Patrick Goris

Yeah.

in that we have larger One, of I things. the a we Blake mentioned type done think Steve, what deals have couple in than past. the pipeline,

have this in in for did – $X.X billion capital just increasing deployments increase the we year as January to repurchases terms and target of from today, announced per we million share $XXX dividend. We we're substantially the

have think And there that fair And to cash, I be doing attractive And us access months deploying. a reform, months. that we're over already over because of the all redeploy that careful flexibility say think repurchase period to non-U.S. capital flexibility. it's the already keep a want of that doing we significantly that process we increased I if is so. the an We've the if we've we're we so, see period excess we of to XX then said to the want to XX would in time and deploy amount share provides to of capital, we tax opportunity

Blake D. Moret

We from of think primarily remain an that Connected be of brings company which still We all as and really going use position strengths our strengths financial growth parts as well. strong as story. we're is that to going to of remains vibrant some organic together Yeah. but all ever, proposition value the the our Enterprise

Steven Winoker

right. all just it surprised a numbers wouldn't like of you be sounds net that? debt those based that here from you know of But kind certainly normal in be within now to year All on given position from well a

Patrick Goris

I think over not months to a is unreasonable. period of say months XX XX that

Steven Winoker

Okay. it Great I'll hand off. thanks.

Patrick Goris

Steve. Thank you,

Operator

question with Barclays. Julian Next Mitchell comes from

open. is line Your

Julian Mitchell

in you're I QX. SG&A guess morning. Thank year-on-year circle I to wanted up that this just back sort of the ramping to and good you notion is because down investments

and half I down slowing. even in CapEx think a with is year-on-year QX margins up moved Your the top-line bunch in high-teens the your first incremental

spend lot of going R&D a what it all, there's in buckets, realize dollars or is investment much I kind let's quantify in higher could So but parts each to? those up maybe you're moving you referring how say of of

Patrick Goris

Yeah.

you go talk a lot investments, and development. SG&A. When our research towards of Julian we investments So mentioned

the profit see gross of SG&A. of sit actually spend margin look there change there's overall up an have a Our R&D R&D our the if profit that you been gross gone of overhead a of that expenses in is big in spending. part billion-ish about profit. They And you talk you at From not at and heard are is, area. may one gross our spending us that the our reasons has $X point past in view, not base in performance,

happen the third year-over-year. a in year included For that our increase other is million, seen full year. the million. guidance the X.X% $XX increase, year, the half first the we've about so We've $XX a targeting and million which of of that's seen two-thirds back about in we're will the Of in about projected $XX we half a

Julian Mitchell

seeing numbers I think, had you. follow-up, my discrete peers, China. high quarter. Thank the automation there you're in of around guess, in March Understood. really be what A And bunch growth your I would then

easier You slowed I despite an down, all think, have comp.

some So maybe on in coming what Is is where bit just market. that half that your orders. may Maybe and just that hit you talk also revenues about a saw little large there projects in, then those in P&L the of you some color it think second China? in

Blake D. Moret

Sure.

of projects in in big Some fact those China. are

we saw chemical, by So, the industries driven included was range in QX semiconductor, metals. that consumer, water treatment, growth a diverse of that

new important is would order spectrum. very and operations, that our China the say A facility Chinese as the most orders; that gave flow maybe talk a So pair there development strong one multimillion across MES the was included manufacturer examples in dollar for it us their projects with I particular about story one as business. electric for vehicle the software. was in we can U.S. couple well of a of

that of real-time variety industries new link services outlook software fits so, productivity. differentiates even them hardware I that have helps some and information and as the in that discrete from the squarely and that this a Enterprise we're along control our China Connected greater value maintenance get again the and that China obviously with us positive and of that of the in the would people software across industries. projects chasing really in we other from There's quite heavy suppliers some it's characterize those in in support that with orders and industry other So our associated can

Julian Mitchell

Thanks.

think China, the you what's And year this average should grow you company in above then? slightly so

Patrick Goris

for XX% full below little A Yes. the year.

Julian Mitchell

Great. Thank you.

Patrick Goris

Thank you, Julian.

Operator

Our question from comes Citigroup. next with Andrew Kaplowitz

Your is line open.

Andrew Kaplowitz

good Hey, guys. morning,

Patrick Goris

Hey, good morning.

Andrew Kaplowitz

Good morning.

broad-based markets it's give if any and gas, markets little as and whether speak? we heavy in on within second as markets picking different lot you of oil up, about? Maybe of seeing say confidence bit talked heavy know in the growth pickup those semicon, within what So industries. are industries, industries, growth you heavy you're more Would mining? a gives industries organic a you color us you heavy actually could you Is end that that different half in

Patrick Goris

particularly half the comments, businesses. and to I referred of I our in versus first Andy, Yes. rates solutions referred year. the services higher the half in growth my second growth higher And to

of backlog we in a that that that level our March. reasons One comfort why already good is a the of end of of have sits with lot at the

back As more businesses our those year. for and at you so backlog a the half about know six tend of visibility we have solutions in the bit months and little services run businesses a to

Andrew Kaplowitz

growth down. And some short That's cycle regarding helpful. there obviously slowing then, concern is momentum

distributors you. doing So, growth. telling see what destocking, be would steady seen provide cadence sort generally tell slowdown maybe of with you color you are your could orders Patrick, any Blake the Did the month they any can they Are Have any you within quarter. in the helpful. of or us

Blake D. Moret

in from results distributors think I we're seeing general the sequential quarter. feedback the our through the what matching improvement is

Patrick Goris

another for looking And year. good

Andrew Kaplowitz

Thank guys. you. enough Easy

Patrick Goris

Thank you.

Operator

question from Kaye from Noah Next comes Oppenheimer.

your line Your is Kaye, open. line Noah is open.

comes Noah from question Next Kaye with Oppenheimer.

open. line Your is

Noah Kaye

much. Thanks Thanks pretty the the much. performance a operating contributor revenue. a nice line. as on Yeah. to And had we time, significant morning. very FX very same Good At

So impact to that? I margins how dilutive, FX. Was what wondering accretive, the it about was was to think from

Patrick Goris

EPS the it It benefit, segment no year. It impact versus Noah. in no had margins, had segment an on had quarter impact on but prior margin

Noah Kaye

Okay.

would pipeline. guess about a full healthy pure a bit of is I we and to a sort So like different you a expanding that's for amount. little expectation I like What start spending year, very ways, understand. you to to And pipeline improvement. then year the of operational know commented but acquisition reasonable but Great. M&A the Obviously, been you've think couple asked just

Blake D. Moret

growth, X targeted look impact. acquisitions. then the and at a revenue I we'd We predicated going the of financial overall it's as be point year to our fit, or obviously, Yeah. mentioned, from more in strategic And sources first on then

period So more time, or growth. point over of of X a

than that less years You'll see might some that. be

will about and pipeline. talked out. active but also I've You'll forward, it's an as more getting diversity a There's little close pipeline. what's in of terms in further see bit we that what's other move considerably years be that the diversity what's of

what now maturing to that we want a steady of So that's there's opportunities that want. and out, forward. stream charge planning We near you going have so that and pipe are far

Noah Kaye

Okay. Perfect. Thanks so much.

Patrick Goris

Thank you.

Operator

with Ritchie Next question Goldman comes Joseph Sachs. from

Your line open. is

Joe Ritchie

Hey good morning, guys.

Patrick Goris

Morning, Joe.

Joe Ritchie

electronics, you're flagged it's question. that as a first I'd market market I other any for you know commentary on an have intra-quarter not huge but being It's some seeing pretty what that you, end my been trends. be So, folks end just on have choppy. curious to hear

commentary your hear to curious I'm there. So

Blake D. Moret

with expect in for the headline; growth Well, investing starting semiconductor we double-digit lot. a They're year. Sure. the

good the building impact time of supervisory you the as control, at have We look the long big a that's a applications. solution and facilities software, when there, we type semiconductor China of It's been were beyond in in saw in for management associated the well. Asia for particularly some used quarter, is being orders last but with overall Asia the

differentiated somewhat have about so when sciences. Europe, as I for on instance, we that semicon growth have impact business, growth And similar there. seeing they it an having to results and rates, from large contribution X% some as life at rates, those you those look we're our overall well. have highly solutions our can It's And but of at

Joe Ritchie

for Blake. Sure. Maybe on, one following That makes sense, Patrick.

Patrick number repatriation on we on helpful. what timing, roughly come abroad cash an the that seeing repatriate Any be maybe you're in would about a thinking can there be back about able $X U.S.? the that's to you the Just update to thinking color billion being give ultimately should will us and

Patrick Goris

Yes.

of the far our redeployed or cash year is this That's of us, you we've fiscal short-term about little see billion a back By we repatriated we end zero. year it $X.X The debt million excess the through a debt all take at of or share that some course home. repurchases. to expect year, no, be January, – said in short-term and this non-U.S. $XXX our why to a So cash. reduction we year end have fiscal bring than in of over bit of of this going close what to later

some months do period it provides XX to of earlier the so flexibility us of is to take our And call, lot will months into said on early it it period because over I as a XXXX. XX it redeploy an And over us expectation time. the to of

Joe Ritchie

Got guys. you. Thanks,

Patrick Goris

Thank you.

Operator

Next Giordano comes from Joe Cowen. from question

line open. Your is

Tristan Margot

that if Joe. live Hey, personally in This the morning. through Tristan difficult believe identify guys. you is changes it's for Thanks to Good question. them. I taking for historic

know when that. is know take evolution on So with your in that X.X do Would how be Industrie in mind, will complete? you we – how interested

Blake D. Moret

Manufacturing control principle never say that. is Connected integrating maturity. these on a different would XXXX, customer's for customer done I or terms X.X Yeah. China of They stages mind to that Important to journey in with for embark journey that Enterprise, different on Industrie information. all a is at all their keep

we're when have XX%, by journey much some to tools technology. we their that There's place have put start, providing mean to others additional low-hanging downtime update control instance in needed for to enterprise, see as looking Others wherever can they're productivity that reduce as they more that I be So modest they doesn't old but automation in unplanned still end. customers goals. integrate sure. fruit real-time on basic decades for information blocks and monitoring building remote or fundamental

never more you're rapid be but startup So around on, so they and might done.

Now, about impacts in and concepts, talked we looking that it before go are we terms the results our enterprise at as maturity those more of how to engagement. from the we customer seeing move pilots

confidence pilots. have larger some people They've So concepts money let's and these save say, out they're deployments. they of can to tried, gotten moving that with it

we're increasing. the rollouts services at And looking are and multi-site of customers seeing that these technologies so number of

Tristan Margot

The can is your do to if what I manufacturers in Hive, And think barrier Thanks. on follow-up this adopting AI? you the then biggest and investment

Blake D. Moret

with luxury starting of think because in taking manufacturing So manufacturers have the sheet largely of a terms advantage is base, I well of paper. few of very installed AI, clean

technology techniques. that's new, upgrade, new and older facilities opportunities implement to as their running with they dealing they're So they have

the another a is artificial that multiple organizational intelligence that company. silos within way think I the of effective spans challenge use

to world the the and and operations the other. to then advantage you have it of that IT those that One understands the you converge knows run, productivity take the technology to IT traditional is how And the should knows biggest well is really as have of So that these the as expertise OT the both world tools. for plant sources effective on able these downtime operation opportunity being companies new bridge without lost not in floor the expertise. and

Tristan Margot

Thanks.

Steven W. Etzel

Operator, we'll one take more question.

Operator

from comes question Next McCarthy Stifel. with Robert

is line open. Your

Robert Paul McCarthy

Good morning, everyone.

Patrick Goris

Rob. morning, Good

Robert Paul McCarthy

questions. two So,

about can was gain First maybe mean your you with share versus areas And base. But, it Logix a just strong rate? and where a challenge? talk getting about I a you LATAM obviously the little you sales. some bit the maybe in overlay can probably off comment like regional at growth about share growth could organic talk reasonable some you're

Blake D. Moret

Yeah.

PowerFlex terms drives, the tick industry in our reporting those a report, we general we of products have about network products in see upward steady core and share Kinetix triangulate a the what competitors pretty us. shares what what Control Stratix and switches, companies in been tell on gains continued report, our Motion we to Logix talked path and So we've our View, like

quarterly on respect. that watch a share lagging It's indicator. volatile we While basis, fairly obviously fluctuations that in a also is

we're share the continuing of in Latin a up the kinds we real-time, we're seeing places see but in is think information When us share that don't taking notch the there's get U.S. that improving. we our you no America, Indicators the like in we good that question growth share. real So to we're think tell

selling that is comfortable feel we the market we differentiated. access what and So are

Robert Paul McCarthy

of follow-up. here. a to turn capital And just got in there's mean a XX% your want I kind market break allocation significant up kind excellent to I Okay. of the you've pretty stock. questions

from a down material another turned higher bid, You've company. pretty

consider to company? peak you prices XX% market XX% view accelerated break, of given your maybe stock be capital your wouldn't buy You worth more aggressive Why on to back that the higher. of have and it the what could a XX% an and deployment be these of could being basis at is earnings what

Blake D. Moret

Yeah.

stock see of going few some we're today, later. remain back comments a over fall to fluctuations go near-term in Rob, I'll months but last So that true the the price, from

growth The all, from to strategy for that. customers Enterprise we're bringing seeing our them is bringing of life and Connected working. that First is strategy and value

of as said, as to a use to point sheet for Second, that. additional balance create you our that out, we shareholders, have and ways Patrick do there's can we strength the do variety value

priority first of the growth. is and the to organic improving differentiation long-term company around the Our support

our do increased in acquisition so repurchase. active use expect respect. we We is pipeline Thanks do strategy to than that, and in just the creation an of to increased measures. already by not superior a we of the the do and out And to past share today we've that borne a then dividend have more capital the have looking We the we variety new lot. and that's going working into lurk strategy And but we're we're past value that we've long-term we because bringing provided value. think intend a over

Robert Paul McCarthy

Thanks for Thank your time. you. All right.

Steven W. Etzel

Thank joining us. all Okay. for today's That call. concludes you

Operator

time conference you. call. you this That concludes today's Thank may disconnect. At

Rockwell Automation (ROK) 25 Apr 182018 Q2 Earnings call transcript