ROK - Earnings call transcript Q2 2022 | 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. [Operator Instructions] At this time, I would like to turn the call over to Jessica Kourakos, Head of Investor Relations. Ms. ahead. go please Kourakos,

Jessica Kourakos

and morning Second you Release Quarter today our With Good CFO. Gangestad, for Conference joining Rockwell me Chairman Moret, Blake Automation's Fiscal is and and Rob. Nick for our thank us Call. CEO; Thanks XXXX Earnings

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

the a prepared of our call. convenience, be remarks your available transcript of website conclusion today's also For at will on our

also news on handles @investorsrok, and about found Relations feed can company our using be Twitter information that's the Investor Rockwell's Additional @investorsrok.

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

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

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

Blake Moret

you and today. Jessica for morning Thanks everyone. good Thank us joining

stand which Before first the half want results, detail comments providing on expectations, business second ,year environment. Through of themes were I on two our below out. quarter to fiscal the provide general our

$X years. we the profitable broad-based double-digit of three in forecasts and growth next is supply will demand industries, detailed and all rates, that and sales couple fiscal business us year revenue first The cancellation in across achieve confidence of reach this give Substantial low billion geographies, offerings. growth segments, backlog component

had seen QX COVID-related guidance. of chain constraints we've The second inflation, shutdowns release push on and China, results for Russia which the electronic Since an associated and put impact Ukraine. outs impact unexpected started and shipments, war component is in de-commits earnings. our on January, have pressure earnings supplier and in our particular persistent last sales cost These theme in supply and

get So, we and detail maximize are and value. our the outlook, let's quarter, Rockwell's into business doing long-term what the performance to on

are the XX% again Total slide quarter reflecting Organic across three. year-over-year very demand summarized ,once momentum and solutions. all sales grew grew on over of our a core versus grew topline in supply challenges. three our by Total quarter. across prior results little six Rockwell's has Through X% was segments. strong worse orders second to the broad-based expectations business Orders year, year-over-year. X% X% than Our digital transformation revenue automation organic months due chain portfolio grown

a significant first Intelligent the quarter, from supply. Technology in solutions by However, digits segment's reversal year, XX% product our declined components double doubled of Devices year multiple growth reflecting than volatile hardware X% and and Independent sharp sales Cart versus Within grew orders more shipments component were the prior this our business sales the motion ago. with from limited shortages. a business, organic segment, content In strong

grew sales also X%, less a organic Control component little shortages. & Software than reflecting

demonstrated in our revenue. prior the beverage, see strong Demand XX% food increased growth and broadly at company grew resilient. year, sales on as relying XX% led by logic Plex XX% In In to strong X.XX wins Sensia. this and in system operations year-over-year, and and state-of-the-art Services, the agile in production platform the demand growth & with organic orders visualization. our keep orders where by in We increasing one with will EV electric their customized continue to and order cybersecurity monitoring, network domain expertise real-time quarter with book-to-bill. smart real-time was manufacturing sciences, strong region, a needed maker end double versus for Solutions as in enable are an to and EMEA Industrial critical Services an Lifecycle of management, business automotive robust markets by plan manufacturing life Lifecycle creating cloud-native technology vehicles. provide mining in and digits increasingly the was other inventory Information headquartered secure both up many led platform customers us the Connected and the Reautomotive, Services technology quality is quarter,

to important realized Microsoft also capability. great on an we're Fiix, You available Last will and ARR through with growing new for deal. this At market in with software we recall XX%. globalizing be became this Plex' month, Europe partnering that access Microsoft's synergy another quarter Plex promote was to Cloud over Azure had

our wins We first including Asia. win continue new in logos to

and on Our for we the partnership identify subscriptions PTC quarter, to new continues booked grow opportunities and act debottlenecking ThingWorx. with management based performance solution digital on in domain prioritize expertise software that for to This proposition quarter, value the in XX%. In very great a combine P&L have We greatest grew our potential create and manufacturing impact the organic technology ARR strong by sites. helps customers.

X. to turn Let's slide

shortages remain market orders for this to our they very impacted to have by majority customers. by the slide, left strong. specific component serve the with in auto in In single-digit industry verticals our declined verticals quarter usual Working very sales the to than appendix. two to verticals for is heavily are on resulting within in that e-commerce, quarter, important being shipped shortages into rather were performance these slide decline down sales ship to The which and the demand. the and important e-commerce the is impacted these products contrast, discrete segment. the and verticals auto based segment these products, discrete underlying growth QX of in industry end particular primarily It's Our right ability impacted degree were understand on component we that were

our be in vehicle total full see motion auto of to electric to third with control business our Independent and Technology year. is about continue competitive wins And the expected applications. applications Cart a We battery large for for

an EV flexible this plans companies was Rockwell at had material playing North found It semiconductor at handling this dollar capital for and technology In largest equipment and projects digital can win quarter is chip systems material chosen machinery, be And low-carbon capacity in a clear the win to multibillion first handling metals management twin software. a we semiconductor semiconductor materials to Materials, sustainable the industry's important expansion role in provide leading sector. a for world. offerings also and of continue sustainability provider we plant. with and equipment in expansion. our automotive e-commerce critical making America's Electra Battery are and turnkey to building environmentally in warehouse our integrated solution and sustainable automation, We battery the

digital focus double in and particular up that to continue and trends broad-based are We business in software, see electronic were sales were and services digits less upstream food gas transformation our and led components. sciences in beverage digits Life by projects. demand improving solutions dependent Oil double midstream. sciences as on is two-thirds strong with on up life of sales

industry backlog continuing and capital Sensia the a in double had digital ships support digits Our markets expected high coupled higher order have automation joint funnel grow growth summary, venture with we segment In is strong end strong orders for to to across and serve. intensity transformation many created investments multi-year and in the year. each and strong quarter

this sales by shortages due organic more QX X% prior the the in Slide impacted and to by regional quarter. declined our this America X of performance. heavily sales now about North component higher Devices versus Intelligent to region. was The Turning mix Intelligent Devices organic year segment

gas. We to continue to expect in across more content this growth high grew North sales region. single-digit regions strength the fiscal In higher part the life America be driven sciences, solutions fastest-growing in tire region X% XX%. balanced mass EMEA and full America XXXX. in were growth saw China, the Latin for expect X% Asia in sales oil sales Pacific and and transit, by increased to year due we up and

times set to for turn over be slide growth new stage last of this which second a high the orders to point, a XXXX availability. revenue and is converge, X, near low fiscal backlog, cancellation at rates, quarter. helpful thing. will the and primary The component to begin the and the And growth the which year. good Let's been lead We Slide quarters levels we've In next thought do beyond. shipment strong term, we that few is limiting expect to half over building continued and backlog the stabilize is in would factor

we as go turn overall semiconductor, Slide X, of into and taking bit So actions are the improve to chip deeper our to resiliency. let's availability some a we

in to due We increase coming the expect factors. to several component quarters shipments

the flow fires some several addition first like we key and percentages, next from the are opportunistic factors of suppliers, contributing, improved incremental such these are from buys as couple improved suppliers and existing improved from material over events capacity, discrete The broker recovery flow floods. suppliers of allocation Where of quarters. is seeing

have to supply We reengineered utilize also certain components with products resiliency. better

example, to series PanelView months. last operator quantity interface the has the us For two double enabled of new in the shipment

manufacturing and the benefit second accelerated significantly XXXX. production which have Singapore capacity half our in last fiscal our year investments We and over Twinsburg of facilities the resiliency will in

sources semiconductor QX. for additional to diversify see create we redundant and and benefit in to our vendors, supplier and base new fiscal chip individual qualify to the components continue We expect to

supply Services, inflation. growth in less is Price chains. mitigating which portfolio continued also and & meaningful to to diversifying hardware double-digit in continue Solutions We contributor our invest our and in on resiliency see Connected our Information growth are a dependent our

realization thanks offerings. we increases. several good quicker power so materially increases latter and We even fiscal we as strong have XX%, in portion fiscal and pricing price very realization differentiated taking the XXXX. action In more our year price We're have agreements this highly year, of the to of seeing get annual the renew announced customer future are to market, in totaling benefiting price last

full the widened escalation you range is cannot are be potential the expectations growth the the as we war yet Ukraine. include for risks quantified, in accurately there of reasons, duration that have one risks year. However, These of and for our know which

half the we total less sales. in of small amount suspended business X% have of and do Belarus, We Russia than of

are due costs energy We increases as lanes. cost as constrained higher well air to lengthened freight logistics and seeing

risk businesses source due COVID outbreaks. the is, of of Another widespread infection in to shutdown China

with the the and industries is in products from upstream partially play our such role have suppliers due reopened plants to critical operations area. but risk services Our as the semiconductor, bigger in

in is quarters. next built risk have it in risk We difficult China shutdowns, this for to some quantify the two but

Orders turn expect for outlook. the expected times Slide review billion. $XX levels. X, we At products our are more highlights full to to lead point, orders now Let's moderate as year to normal for the for some year return to approach to

the above given However, in of are capital serve. we pre-pandemic orders projects amount expected remain underway levels to well industries

the widened and quarter. and expect reported in total forecast. the We double-digit saw supply our range supply we Acquisitions do expected are well component points tracking we've with but of second well to reduced midpoint that growth, component the to sales in continue of part over are contribute two growth. sales and given the volatility profitable April

Solutions expect Information We core automation double-digit continue & both growth as Connected as Services. to well in

to and organic in investments continue with recurring We pleased up annual over of our year I'm makes lines of expect X% the are of revenue. having which new growth, acquisitions revenue another impact these total business. double-digit of both

over EPS of noted We the year range a for of XX% from Board lower our fiscal Nick benefit billion as have add the slide share to a without and repurchases. financial impact Nick? and on The of rate one-time XXXX. our increase QX our point adjusted prior target will an represents last adjusted legal tax $X expectation midpoint authorized detail one the year's outlook range margin the settlement. And for additional EPS and reduced increase of year. now and the the results

Nick Gangestad

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

key expected we the reported expectations total sales This operating were margins last organic XXX decreased sales I than primarily growth X.X%. quarter X.X year, X.X% to XXX price in growth. comment electronic areas. volume was page. and up by higher and approximately and was higher to sales our XX.X%, Segment lower-than-expected linked basis worse cost translation price negative Versus points our the last were next year. directly X% will Second and on quarter. input cost Currency mostly to points further costs. QX impacted up in and points margin investments sales component below on availability due basis declined over by contributed is acquisitions

prior EPS $X.XX XX% adjusted Our and the in quarter was year. from the down

the discrete half on flow income components. tax more tax $XX adjusted subassemblies as transactions. impacted will income we made the tax higher later XX% year critical in Income line was slide. the prior into and last current a and conversion capital of be we pre-tax results than and for benefits payments. for The bridge year QX in in we as As working compared XXXX payments lower fiscal to fiscal year. year effective heavily by the into the quarter, expectations cost payments tax and in the actions and price price as with said to the quarter expect from Free related year to more down second be receive our Free to due I'll prior and rapid we fiscal pre-tax continue with a higher to quarter million expectations by build prior rate due line finished cash to the most second cash lower income weighted the XXXX. were were negative higher the in lower driven to was EPS cover our year-over-year flow goods US adjusted year-over-year XXXX quarter

Turning new for page XX. and included to projections half this what our both quarter. second for input quarter the added shows This for the This impacts and price and we actual is one two slide quarter we slide in costs. a

recovery benefit our From fiscal than three on to because have the was provide of about First first our half the million XXXX. summer, by pricing. is their expect price see our current customers. not once realized much increase, these we we actions XX% The last pricing with pricing set of Once we ramp cost year increases renew. to price the agreements this a $XXX of Less implemented. occurs, in fully pricing will since customers agreements announce increases achieve impact until of those annual

We offset expected seen. costs XXXX take from elevated did costs in growth worsens actions more for of logistics price on broker realization increase inflationary only are costs by a these not price further and implementing inflation projected anticipate and driven costs here buys. yet higher factors see price higher and increases. in to will is announced actions The than costs. a were We forecast price increases sequential to we year. increasing balance to On the increases future costs, in input these year-over-year If fiscal previously higher for QX. accelerate These increased we of the level input continue

margins Devices driven input Total Intelligent basis year for half. segments. last and Lifecycle expectations constraints. to QX We as to half. and expect due the costs provides first by declined we Intelligent the and and XX.X% by sales XX X% $XXX mid we XXX sales vast operating Compared the to cost primarily of price and & sales up component the to cost more in of first On half expect freight. organic segments. high-single-digits Devices majority margins. higher sales X% performance in costs Devices For impacted and chain over fiscal our segment was net lower in now was spend electronic positive XXXX, to year volumes. our supply be cost to both investment overview Control down up both slightly miss segment in a in higher to increase the million, XX% the price second this in Services negative points in basis, are and accounted negative internal Slide Software full This down were Intelligent margin reported our were three XXXX. price negative fiscal

by implemented price and in sequentially this earlier from XXX the points price second higher to to actions. expect margins higher expand on XXX segment We volumes basis half

and than first organic the acquisition margins point Segment one investment Control year-over-year in price/cost X% this sequentially basis & up less to up were half. mostly declined XXX sales spend, impact due of the year, and and last for integration segment negative points to Software higher were compared costs.

a businesses remains this prior basis sequentially over driven Book-to-bill basis XXX sales second by the compared chain Services X.XX sales a higher Lifecycle by growth declined and caused Starting expect implemented to actions. on provides the volume Sensia. strong to year, slide The Margin increase was performance by with sequentially labor on continue growth lower utilization about and QX this XX% segment next year investments. organic supply constraints, partially strong and higher QX. end more grew offset expand backlog. Core make adjusted was the to for Segment points sales markets. sales XXX XXXX. margin fiscal including is price left. than was sales the balance grow and QX margin EPS incentive XX% half $X.XX expected the by for higher by growth-related Demand segment as higher price points X.X% all walk compensation. organic from we We to up margins from XXXX lower across fiscal the from XX down in of and on through to

We were the lower of labor impacted merit also and utilization. increases timing by

$X.XX discussed impact in a price/cost previously As negative the quarter. had

estimate fiscal On compensation updated EPS lowered our total of to incentive a $X.XX our a Given guidance for about XXXX incentive basis tailwind. This we $X.XX. our brings compensation. year-over-year was year us

fiscal Slide Let's guidance move next on to for the XX, XXXX.

to guidance XXXX, fiscal are XX% for to approximately up billion XX% range our billion $X new to updating We year. the in a sales $X.X of

the expect We range organic growth in sales of XX%. XX% to be to

points We coming points expect growth X.X and acquisitions. translation of be from currency of about to a X.X headwind

COVID-related of see full component guidance uncertainty volatility the impact Our wider supply the sales we of China. shutdowns in range reflects and the in

resiliency are as heavier forecasting the the weighting year increase second the forecasting a the Blake in with of from suppliers. improved driven sales QX, actions line higher balance a by as well the key over timing realization. flow mentioned in material sequential improved calendarization performance we we earlier, an mentioned in Blake half with in price As From from perspective, are

is guide result expect our be with is from our expected to guidance is year operating The reduced prior levels compensation. from XX%. the XXX We January point margin offset full segment and impact about be than of decrease. incentive to reduction a This input including our more since costs higher basis volume spending lower

continue growth prioritize will and resiliency to investments. We our

from second sales levels, improvement XX%, from cost. a We primarily and around volume basis point XXX of first points price from four up expect higher driven percentage margins half half

points from by dilutive points. basis accretive The on first price in cost XXX be the will cost price a of half impact half by basis over margins second and impact the was XXX approximately margin year-over-year and basis

We expect margins points now basis in and to conversion core XX%. earnings second sequentially XXX and improve conversion another XXX with to basis points approximately third the to core full expect XXX the fourth quarter. XXX XX% of quarter of between in year half XX% We

We continue adjusted full tax We fiscal XXXX. do year to anticipate effective around items the be discrete to to tax rate expect any impact not XX%. material in

EPS range this to adjusted range, to our $X.XX to the one At are year. is up We prior the decreasing guidance midpoint the about of compared $X.XX. point

$XXX and average of projected expected $XXX comments increased about Finally, million. our diluted free guide prior decrease is to shares The on of XXXX capital Corporate fiscal assuming A we Net expect free around from income. million support is interest levels to shares. XX% million. guidance. XX% for our few fiscal demand. we full to be conversion XXXX cash about of inventory -- XXX have adjusted higher continue where We're outstanding working year order in expense about we cash of driven expect high flow additional other expense by fiscal is XXXX

focus year deleveraging. including Finally, on deployment allocation for remain this on the same our priorities our capital capital

to share billion to As the Board share committed increased owner deployment drive for are another value capital Board opportunities and Blake using authorized including our long-term repurchases. share $X management mentioned earlier, of framework repurchases.

new versus price midpoint lower partially XX. Turning the $X.XX be the now slide on from guidance January of adjusted our midpoint our full year on the sales negative the contribution core the organic to for range to of a due guidance. new lower a guidance now to cost left. performance spend. January EPS our Page range. Currency to to There our Starting Starting expect guidance. the bridges a is lower $X.XX This is expected of impact be offset operating by headwind. negative or to We midpoint

is forecasted range our a Next, new $X.XX. to midpoint decrease given the which $X.XX lower there the performance, of impact projected expense, guidance a about bonus the brings in from

to acquisitions this I'll including Although interest over neutral a this year-over-year for expense Blake $X.XX. Plex With start be incremental about back expect including benefit our not of that, on before continue page, closing we year we or about some Q&A. it to remarks to turn

Blake Moret

impact tough chain but are the working persistent temper Thanks, volatile and aggressively supply Nick. of we shortages. quarter, was This a to

of have are market. detailed view We provided and taking that component solutions availability to guidance we increase the reflects flow actions expected the a to and of product

some semiconductors of in We of the are many see for qualify is beginning to and technology to use, we sources being new use capacity new increases we our in the important continue built we products.

For online example, the will capacity to supplier a XXXX. families a incremental benefit directly our is in major planning bring number fab early product of

chain challenges world. we I coming around thank not While improvement do the the role supply play over US of the recognition anticipate in expect for our we do sequential manufacturing applications gradual to suppliers to the end industrial quarters. and critical we want soon,

are that equipment on growth our revenue Despite internal with and our capacity offense. we processes to 'XX ensure We beyond. these expansion in support on challenges and manufacturing are track year also fiscal

this We opening continue we operator Later January fair. technology at new to and software automation introduce worldwide including FactoryTalk, will of to annual release and year Israeli Operations services our customers. the support new differentiated design our Center interface Cybersecurity

investments that programs but reduced response prioritizing the we higher are that our are we in have strengthen the resiliency. cost years spending new will generate We in plans and revenue increasing coming to

From safe our focus that with and to disciplined working well. dedication internal We value. creating manufacturing supply long-term and our accelerating set investment around chain our the The allocation together professionals continue are needs simultaneous that building world. world productive, protect us capital associates session. and manufacturers to plants on us Jessica now speed cloth as capabilities customers' served move people new our effort teams growth financial investors will remembered on most salespeople our development that people confident focused extra of who and of within begin continue engineers our meet apart. and resiliency Q&A the and has launching a we're balancing to to critical with framework be we focused complement our profitable the is to will through help component demands the on keeping We the the products our

Jessica Kourakos

Q&A. begin Rob. [Operator may you Go Instructions] ahead Operator

Operator

[Operator Research. Scott your And Instructions] first Davis question comes from from of the line Melius

Your line is open.

Scott Davis

Good morning, everybody.

Blake Moret

Good morning.

Scott Davis

not Do this we get the side stop particularly fixate customers of mean if there? how a the it I do the on your restart quarter customers details I'm what about we do different -- on far how because as hit respond think Do you run were or talk Do continue? recession? projects if they much it a so digital then behind act to on they going playbook consumer you your they're as does delayed? Is time recession? if think and do transformation? to do -- about those down guys a how into

Blake Moret

the inflation continuing see of last few these of capacity that the that. investments hundred happen if think multiyear make resilient add With and are weigh what the at big fabs well. Certain at we I'll by semiconductor. are to and announced several an effects we start the different months. with suppliers likely may that I'll expansions these back-end of Nick of comments some billion economy stated dollars investments to through just we in think going here have risk of which conditions be those industries the be in don't are to and the Scott a inflation of track in all economic to industry-by-industry world macroeconomic But and for what's happened some that need seeing. as on look are view are and because more the Yes. as these to there's by going off we that these thrown I such events

moving conditions that the is Life to in of current for every I digital and are other vaccines save food world is in electric as company continued beverage So in people vehicle economic -- regardless vehicles competitive to as medicines. sciences trying cost. think produce and investments looking semiconductor activities the transformation the The more be and for. demand

look driving the capacity the and the there's that. think these enormous certain So the are oil of chip I oil To and And we're to be cycle, secular seeing more be high efficient of impact trends as But capacity in little pressures. along gas, a more who with expansion involved built to have and the need underlying cost you the these others cyclical the finally, customers are huge than typical I we dynamic sure going to across projects different shortages pump and important then multiyear working really are we up that in think create happy position approaches. our with that expansion. most backlog with are inflationary

there's in investment meet continue been announced that are the to portion of going the because seeing on kind they that we're Scott I that the world. of demand to good a So think have have

Scott Davis

question. one Okay. Thank Good color. I'll stick Good to you. luck.

Blake Moret

Thanks.

Operator

of Obin comes the question from Bank Andrew line next of Your America. from

open. is line Your

Andrew Obin

morning. Hey, good

Blake Moret

morning. Good Andrew. Hi,

Andrew Obin

you supply your component what talk of question. your controllers egg provide to a can with this lot. controllers? guys chain I into of progressed And a quarter? thing have that's them Thanks getting availability how chicken how visibility because add we're my can't you their your capacity wonder ability you sort on can If did have the of if ship throughout of just So Could it to in right? customers you sort Hi. terms add about capacity they kind and

Blake Moret

fab some The we're providing to to of Andrew. and directly extent capital our circularity of of interesting an I to what in availability some it is equipment dated semiconductor the is Sure, owners by dynamic. equipment. mean the suppliers big

general seeing the I done think start of we're new the operations. and it's whole we a benefits and efforts So lot critical through our PanelView And we already month online that redundant of some see that I we the example have the in coming to in significantly are month with series of reengineering the that bills mentioned a now flow. we the from material early although because will PanelView old changed products. suppliers I reengineering we absolutely that between give we as don't other us availability these know QX. have quarter see and how increased of went QX good did existing the

chips a into We products. have of that detailed product-by-product analysis all various the done those go

us basic breadth reflect online. it their there's going script. a which the are the can incremental a we in forward, we you my I the of flow increasing of Nick? for diverse for that our the in mentioned now guidance But more suppliers with do to then, this and with base brand-new that As and capacity imagine SKUs highly gives expansions. flow offer come increased Obviously, between supplier confidence to capacity greenfield seeing reasons while the takes

Nick Gangestad

availability specifically of head we’ll month on out Hey, Andrew, during the shipments the some to first on of to quarter largest we your question, the quarter. our quarter part noticeably do. the were in as month-to-month We able improvements of saw March went being with

Andrew Obin

Thanks so much. Good luck.

Nick Gangestad

you. Thank

Operator

comes from line Sprague Jeff the Your of next question Research. from Vertical

open. is line Your

Jeff Sprague

Good Thank you. morning.

Blake Moret

Jeff. morning, Good

Jeff Sprague

morning. good Hey,

on price price Just and cost.

suggesting that? incremental is cost the I an Maybe sequential be just you back between was and million between year. price have clarify the clarify XX% price/cost the is just And kind also you been significant said leakage you But Are announcements realized? price, headline going only normal you X%. year-over-year. for of that talking expect whole that for million additional can $XXX you're of going of equation and So Nick you or kind to is and number. some Maybe $XXX the the obviously But increase. thought year? is might price kind what about forth

Nick Gangestad

Great. on we we that into those pricing are to price three Yes. those and put contract price increases Services on place From don't those Lifecycle products. basis. our are the parts a Jeff. impact There increases of the done -- project-by-project such Thanks and that that have as our apply general and business

-- that XXXX implemented of And million applies we selling. So that's our that that increase. increases $XXX the the to and million through late annualized progress XXXX. price and XX% to will $XXX of XXXX when ultimate XXXX fiscal that the year at on expect year products price fiscal we're be fully the And yield that million at through $XXX that by that our

the as As far impact. cost

full saying year that's to $XXX the fiscal year is we a what increase. million input year-over-year that had in costs we're going versus fiscal XXXX be XXXX For the

expect had that XXXX why XXXX. we Now That's increases cost increases from of we those of that costs in we've into go increase the little to there. we've second of further now in that up amount If XXXX in put out inflation act in anticipation to a cushion have needed. that the to some we to half price bit continue up. to continue cost it we're projections go with and input another we of if our underestimated prepared price the cushion turns input But right believe

Jeff Sprague

Okay. Great. Thank you.

Operator

Your next from question of the comes Josh Pokrzywinski Stanley. from line Morgan

Your line is open.

Josh Pokrzywinski

Hi, Good guys. morning,

Blake Moret

morning, Josh. Good

Josh Pokrzywinski

of year on surprised a that this your implies pricing Blake, the or order long. I backlog of on starts little comment too expect mix environment that? this that of and is talked but some on the the and kind with power And you the just you before what's the And cost we've what's about guess, sense in to about wondering think I you'll guess, little stuff the and that $X confidence the on still out I'm level quarter last converge decent pricing on or quarter. sort context on sort got price/cost maybe is this for come sort be bit so talked pretty of So margin price next pleased I the margins your that a table earlier over billion revenue to that?

see trying today. is repriceable how backlog that to So just

Blake Moret

as the of the to in higher-margin product is backlog opposed majority solutions. The Yes.

with we're So quality have Nick, increases good. renewal see both prepared backlog, And of for respect the of already the that to benefit necessary. have general price and said, the more we as do the due talked margin as come over those is quarters if about the coming from implemented steadily benefits of we'll mounting to increasing customer kind agreements, of price a us increases.

that the margins remain to see see the committed actual of so impact we as on expands And and the in there. margin think long-term good. is absorption that talked We I So that there's we terms an framework growth, we've also good said, the of demonstrate we're as commitment in of for that. and years of half terms we business will to conversion last continue about for show revenue think the And to that the few conversion. Nick incremental the second sizing year

Josh Pokrzywinski

Great. Thanks.

Blake Moret

Josh. Thanks,

Operator

Your next line the Julian question of comes from Mitchell Barclays. from

Your line is open.

Julian Mitchell

new back year. think headwind And pre-tax around clear Any exactly investment investment profit two those to to get of that factors to incentive the I Hi, on that kind boost in of walk cost. comp was spend incentive good Maybe compensation the what very those that margin other profits? pieces to increases new how the bridge, on and please? before and those just in million also it what is? is the walk trying in the sort second go to I wanted number? spend. half understand back much and to headwind guidance $XXX sort circle help a half. That's color two of us items price big of tailwind then dollars, the then, the What's that guided for Just -- morning.

Nick Gangestad

in that often $XXX would with of We what we a our are million. started that highlighted comp incentive bonus. year Julian, be that plan, I the terms our call

second full our Given between year, our million $XXX is half balanced reduced first plan, to down that $XX original from and guidance half. the million. reduced expectation That we've from $XX million reduction for evenly

investment that spend million, of half only year. expect terms part saying, now We be of approximately $XXX we spending second go the increase In started down increasing up the million scale to correct. the of in and investment you're $XXX that of we instead expect to benefit to – will approximately in that million we $XXX that margin now year expect the we spend,

Julian Mitchell

Very helpful. Thank you.

Operator

Your next question comes Luecke from of AllianceBernstein. from the line Brendan

is line Your open.

Brendan Luecke

taking Good question. Thanks morning, the all. for

Blake Moret

Good morning.

Brendan Luecke

at comment perhaps thinking North other share you specifically regions? in where a here for you're your look you last a submarket more have quarters, the America, or how where competitors concerned? quarter about of you're taking if bit or share you you position and in are the As believe segments couple last areas Are there

Blake Moret

looking in multiple over of Brendan we're as a time as quarters volatile period a we're – suggest. this you as

for that first strong the And the share customers There's new of it's that that be lot from something shipments in good different we're pretty around growth every and continued our have seeing spots we new of low year X% anecdotes more over fastest-growing that we too areas. won to and rates feels we is world proud but full of importantly region. but new think expect we'd half orders so business America, America the movement it's gain North the orders in even I as see kind North early cancellation some in where those and region. And a major of to those we're talked call about don't

very as that held transformation I'm across pleased world from our in the we're orders we best take well new our competitively with only So it core of with order as do continuing solutions then Europe to new we're flow in America out in we'll at Asia, bring terms the look a both digital in North in business offerings the are. winning the But where accounts. the not and but of shipping automation

Brendan Luecke

Thank you.

Operator

the Andy Your next Kaplowitz Citigroup. from comes question line of from

open is line Your

Andy Kaplowitz

more seems to and into lot good concentrated but gas. are downstream general? could at much – Process that and back do oil like issues investment? movement this How which projects and X.XX in in Lifecycle in Blake, mentioned it is what Solutions holding in in segments? it you midstream or in have Are an those is in seeing you component uptick color you're point leverage mining, you just really little think upstream of book-to-bill a a give the Services you growth segment is you the us I seeing in the

Blake Moret

Sure.

and our talking in our of activity a there's solutions and say had Sensia but fair people would certainly I we especially throughout joint there. midstream. some in of on is terminals. offering LNG there focus power are oil bit And our in So upstream offering, venture good lot a at particularly gas about our

on previous So good our funnel. new offerings top we're the what midstream some places with and this we comment back my – good of to and we're automation. Brendan, core seeing And activity goes where of some are adding seeing

So these on adding services as about adding adding the even Sensia, through solutions operations. again autonomous all there the software, of some closed-loop higher control of level automation, but they're well, in

plant as wins some see increased us, well. our downstream the we So you lot some asked it's upstream the And some refinery application is did and but In for with mining seeing seeing Latin base about and in well seeing think midstream the nice our the not offering doing as we're safety we're strongest to control come the safety in that activity of as of target quarter really the we of a a work systems. and mining, installed we're and well. I particularly life about of where there, some are as America, balance

Andy Kaplowitz

Blake. Thanks

Blake Moret

Yes, thank you.

Operator

comes Research. question from Wolfe Nigel next line Your Coe from the of

open. Your line is

Nigel Coe

morning. Good Thanks.

that so you through goes to America gave up take Number second elements Just why get sales channel? long understand things. of us one North distribution, pricing some Nick. couple given Kind a through to does the half Just get of in the ramp it so want bulk of we the of your that.

XX% of I your channels. in through sales go XX% North think America

like XQ XXX through? up that implied to helpful. coming just would it that's you I Can XXX, seems you understand at dynamic. the confirm ramp you midpoint. want Thanks. So, just see That be Then how is the

Nick Gangestad

of that the Nigel, I'll first we're take type what part in QX to. calculated in for you've of thinking zone that's the of what the earnings

correctly. You've interpreted that

are In margin terms things. of year in the second the there's elements driving our several expansion the of that half

on versus the year flip is the the and volume is -- third half piece. last second of piece, our the biggest. spend the and costs price biggest The to of first and we the the that's is see year the positive is lowering moving the First versus then

takes about timing many next it the Now, until going see not to really on that of customers function about And that be if do in our agreement we for particular, price annual the us price a your price -- my and getting see distribution, question we in their it's have talked -- they opening a I agreements. increase about what remarks of that's do annual increase, price even announce renews. it's when through they not increase price

from that distribution through primary lag. the is noticeable for That we caused until create that can that things actually we're the So, realizing announce that lags time increase. even thing Nigel

Blake Moret

in but done that if lag that in of I make the changes. going are wish, number until period, talked year to of that going actions about full And to as the place have customers. And agreements it's Yes. Nick that ago, for we I We've certain we those at add both not increasing price. agreements speed to that realization we places. could annual to a renew us had wait and I will benefit forward

Nigel Coe

Thank you. Great.

Operator

Company. line And Noah question from the of from comes Oppenheimer & Kaye your final

open. line is Your

Noah Kaye

Thanks some for you taking the past question. provided around maybe advanced In the ordering. metrics some

be how approaching talking for billion part you pulled do really the orders the the higher didn't guess, of shortages still year have would You’re year? forward? you if much the is $XX I these second how revenue component is much think about frankly And of this it for

Blake Moret

orders for of Yeah. The are vast customers. for majority that are we the current needs receiving

We have line of sight.

been the the dozen with with about and talked to trying projects what they're on several to expand call as we line that. are distributors ship. and their on needs customers and machines impact to have of their the plans I've the Our sight us

significant cancellation I about component talking that up backlog as is with So very there. think forward. be the low that demand we that, shortages been rates continues the go A as backed underlying by we've continuing would further amount shipping. that vast no majority And of

– order – lead still putting we that orders the greater. customers be demand. of also in. But our it it orders increasing automatically impacts the the as would systems they're MRP long underlying the amount But So on shipment much of do see times levels represents the are

Operator

for your over you closing call thank back now questions. the will turn I for Kourakos some remarks. Ms. And to

Jessica Kourakos

Thanks Rob. concludes call. That today's

us. joining for all you thank So

Operator

for today's participation. concludes your you Thank call. conference This

disconnect. now may You

Rockwell Automation (ROK) 3 May 222022 Q2 Earnings call transcript