EMR - Earnings call transcript Q3 2022

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Operator

Good morning, and welcome to the Emerson Third Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Colleen Mettler. Please, go ahead.

Colleen Mettler

morning. good and you, Thank Thank you conference fiscal earnings third joining Emerson's call. quarter XXXX for am and Chief Today, Lal by joined I President Financial Krishnan. Frank Ram Karsanbhai; Chief Officer, Dellaquila; Officer, and Operating Chief Officer, Executive

note As always, along slide Slide Please which degree presentation, which X. website. business to This available our include me on of with contain risks forward-looking to safe on and and Lal statements, uncertainties. harbor the now remarks. will is join to encourage I everyone take follow Emerson's on opening CEO, presentation over non-GAAP may a the read the pass Please time and Karsanbhai, call I for measures. statement the President

Lal Karsanbhai

XX,XXX effort, Colleen, for morning, Thank and Emerson speak and to passion everyone. around good begin today. the will to results their we like solid world deliver the about the tremendous you, I'd employees commitment nearly by thanking

the And month's our to no to S. our and for I trust forward us. and person. India travel your thank well in teams four be the to customers this and Board like Mexico. Denmark, to I've also in is Ohio there I'm for honest, substitute and looking in teams their support Chicago, to to with being Singapore. opportunity our I'd Directors trips Houston, our Germany, U. of had shareholders Brazil several Pittsburgh visiting for including investors, and Over months, have as past as sites,

aimed an execution. portfolio accelerate culture, progress all value and As on of our to continue to strategic imperatives organization, we significant make creation,

Our earnest. culture evolution in continues

a new on first [Kelly point experience President X, in transformation. and employee efforts and unparalleled a our we hired To cultural at joins this Culture, time crucial with end, tools, launching August modernized We engine. value of who company a proposition and talent listening brings our reinvigorated Clark], our Vice are new

on a to made quarter, AspenTech X. underway. Turning closed higher important cohesive portfolio. And well May the X, progress to Emerson's Slide diversified significant in growth, We the five create XX, portfolio we more Number we took is transformation transaction. steps:

to to X, X, yesterday, exploration to Australian-based the excited agreement offering, fuel say June by Prior into plus feel to sized words in I our incredibly knowledge This X, the projects XXXX. with an minerals date; renewable we positive critical to three-month process were very science system; we AspenTech few positioned sale; into go synergistic an first we optimization to Corporation the EBITDA. plus solid XX, announced structure. Automation execution. sale XX.X for of $X X, a revolution; Number transaction acquire software and we multiple TOD announced the the XX%. to is the XX%, an the at closed from benefit allow fourth a and business, well about are of X, Number Micromine, closed about new won opportunities, quarter, We $XXX to and last, of highly orders the Solutions industry-leading at to driven which DeltaV funnel was million under synergy adjusted as Number and required and me Micromine Fluxa, InSinkErator the Whirlpool life our underlying acquisition trailing or a the are the announced on billion Slide May turning

XX% well quarter improvement basis with Together, XX or the electronics are two XXXX. which by from and exceed XX%. on Operating lockdowns segment Solutions grew Adjusted availability. quarter XX%, contribution Third leverage sales. including was despite performance in in $X.XX EBITDA AspenTech. our underlying continued points plants resulted sales with in in improved $X.XX, was challenges months both for sales occurred impacted X EPS Shanghai, which grew the a X%, the two and Americas, for Adjusted This quarter Automation impact factors driven $XXX to target in six track we the million to points platforms. the

quarter items. driven XXX% by for in Operating was non-operating adjusted was Although investments and and down onetime flow free cash cash working inventory conversion in flow the receivables. capital

turn now X, please. Let's Slide to

zero steps in reach addition our Scope In X has operations the near emissions our emissions a also and our made objective Emerson to reduced portfolio, the by to Recently, reach across our established XXXX. target by In chain we is net value to tangible zero ESG journey. in have gas our XXXX. XX% term, net greenhouse

on by found the detail our Our XXXX target, initiative. science-based which can net on aligned be zero includes is the target emerson.com, which more with ESG report, set standard

many Our particularly excited about we bold, the include goals are that I the expertise our technologies critical incredible we turn solutions, X. serve. of maps credible and have to in Please am road offer industries renewable customers the Slide space. and the and we opportunities

that an economy. such segment technology world's a as enabling the As management investments well broad a includes -- to heat is as sustainability hydro, wind, solar I in as relevant strong electrification billion, This portfolio new energy inclusive and hydrogen. across of and this pumps our sustainability slide. said, Solutions $X.X efforts as broadly few decarbonization, in on share energy funnel has Automation examples I'll of grown efficiency, a emissions

facility. to storable for hub recently first-in-kind hours of XXXx the largest tons This selected XXX green and into were hydrogen on for facility, dispatched to the automate selected producing be hydrogen based per to at Solutions energy of Clean battery converted XXX and United gigawatt and green States. in lithium on convert Advanced Mitsubishi when and storage hydrogen, energy. That's be Emerson storage industry will we'll leading required. world's the portfolio. which capacity can left. was starting renewable day expertise equivalent subsequently a Energy in current the First, The electricity Software storage our production Automation digital Emerson of Power capable is System

tons third to chosen technologies provide were The and annual expected largest capacity biochemical chemicals oil the sustainable emissions. software That biofuel byproduct Solutions, Neste roughly of total facility produce will tall Engineering a advanced of we biorefinery. automation for The pharmaceuticals. process world's the middle, reduction wood to XXX,XXX and in Finland's will refine pulping XXX,XXX-ton emissions. feedstock a to Next, carbon of in the X% for represents along with create and Fintoil biofuels,

existing energy will in Emerson of software In Lastly, controls a and was ton a provider emissions, its to enable power Albioma's selected to help by Albioma, plant coal-fired of Rouge reduction automation utilize convert XXX,XXX energy. part French transition biomass Emerson's XXX% the result doing project this carbon plant Bois renewable energy system in flagship so, the feedstock. coal-fired has will to our and targets in it framework investments our highlight zero exciting a we've turn XXX% And our before reach I renewable by Frank, and the around made in I'd Slide Mike XXXX. few Train operations like to to greening up world. represent plan over projects to that lastly, introduced. by These almost X, green net progress continued on

excellence through regionalization served current us the environment. well Our in pandemic challenging chain operational and strategy supply the and

we will a Greenlee new ribbon years. about on and drive the the honored mainly us I'm next employees, applications Asa three month, It will with XXX, used opened We officially to investment, Ash which Flat, This foot continue is tools left. employment Governor opened double Starting to operational for Arkansas. officially in we the this our Emerson excellence tools four electrical be for XXX square the our facility facility, professional across America. very excited North have Hutchinson, currently our for investments the shown this over and join Earlier were like employs XXX here. cutting.

facility key fluid in Next, help serve Emerson square Asian and This recently a Mexico in new And Mahindra is our for control valve life which introduced we then foot sciences, for customers India using lastly, City and Saltillo, discrete assemblies and process, manufacturing and mining facility pneumatics. India technologies, the industries. metals countries. middle, opened a Chennai, hybrid and facility XXX,XXX and its actuators will specialty other surrounding

designs Emerson include As our these automation Saltillo with factory use technology. will all environmental and capabilities, own facilities, state-of-the-art

are as I and positive where we going. close XXXX, are As out we business extremely where feel a we about

creation go accelerated quarter. our critical financial With over results is are call and third all the we in goal on I that, executing through pass value the detailed to who'll Our Dellaquila, will now dimensions. the Frank

Frank Dellaquila

and you, morning, Lal, good everyone. Thank

If X. Slide to please you turn would

to the reported affected on comment quarter, minute a third results. three that I Before like to I'd take ground the events everyone significant on

a First, on and AspenTech. OSI May its Emerson called moved in XX% AspenTech. transaction Science reported to note GSS, to to for within that OSI We created $X in with SSE were completed addition software platform Subsurface have segment Emerson two cash XX, position the reporting has AspenTech. Engineering a SSE, now Automation Solutions Please our ownership been exchange newly contributed & in businesses, in to billion for been in previously AspenTech new which short. GSS our and or renamed

our the results the entity. purposes, For heritage our our results heritage quarter third accounting Therefore, entire contributed May our our approximately third AspenTech acquiring a XX days contributed quarter quarter and contributed include will businesses closing sum full and XX is of for Stated from simply, quarter AspenTech. businesses the date. of of the businesses

our as contributed which meaningful the team financial includes to of quarter into have and year sales As appendix, encourage Colleen our review are only map AspenTech by the included slides comparisons show result, year-over-year businesses. financials. prior in the results I details the a the not her and the you

balance consolidated fully are Emerson Solutions. our in for no our by non-controlling equity the share interest contributed with metrics earnings earnings reflected in line and usual line results XX% of that per the the used AspenTech's line reminder, finally, a Automation single included businesses subject, calculate deducted are to on As with longer from section in And sheet. a

The Solutions. that the after-tax in the backlog to May our we & $XXX We calculations. exit which to time, underlying item announced in on operationally within is XX and finally, reported guidance divestiture, no business sales Commercial we longer Residential was million a cents call closed At or second transaction previously $X.XX. absorbed gave. the gain included is reported Therm-O-Disc The the decision Russia. several underlying And that on we equivalent May orders, significant

we sales. are charge share TOD a This not $XXX impact reporting and we debooking The orders $XXX that will per be is converted the earnings. from are million and which adjusted million Russia be removed of $X.XX will quarter, to impact, charge the earnings gain related a of

and if background, X, you please quarter. about turn Slide that to would talk with we'll So the

can our we key May. we and we of we expected the said, strong around operations the the be extended we when to are We comments missed components, to we exception Lal sales or quarter. the There and of in million operational that estimate the we told estimate these guided two previous believe we for results was with headwinds Emerson, entirely in May the total what we and in and Demand of in broad-based sales deliver XX%. due by you Together, that continued our continued challenges of which flow. on range guidance sales the we had around in the XXXX some looking equates with are we $XXX to underlying them, quarter, lockdown cash growth to leverage through those for anticipate underlying but could consistent neither performance X building end about and guide, with markets. Shanghai electronic believe not good a which are challenges pleased points very As very reduced about

sales of for plan will year remainder our our detail expectation capability guide about of the in and Our in that component our China balance more a and few subjects our incorporates Ram talk both manufacturing these year, will availability in for the the the support minutes. of

less capital more flow continued inflation from $X.XX share that I As and cash good working the points. moment. flow measures due supply XXX provide includes XXX the sales have of a as short the Lal expectation will points, and and basis were we There's from a improved XX guidance our but points, in in sheet containment X% of the driven investment conversion impact release basis into versus EBITDA The constraints missed exit modestly would in write-offs. third as pricing our of year, pushed earnings by significantly the versus AspenTech, that more basis Nonetheless, quarter up challenges chain inflationary deleverage midpoint. prior this items with we in the business segment, improved would balance flow our back plan. third reduced and Adjusted improved In news implemented from freight. from underlying continued X $XXX points net cost pressures down Russia falling than material per and added ongoing of X despite release a cash was year, specifically, the this cash fiscal points on million that non-operating capital operational occur which and XX% the excluding guidance the working price the free mentioned, according the them elevated to Free year was addition sales AspenTech XX% gain estimation to XX% price adding overall the TOD during within May, cause XXXX. planned actions Operations our realization Adjusted the and numbers. net details increased realizing these than income, quarter, mainly higher quarters $X.XX, the lot expected. inventory and wages sales to of segment at price prior mainly of versus result, has net earnings was of offset prior by the

Shanghai power business Lal said, for we and renewables and were sustained due supply while double sales mainly instituted $XXX the Americas and sales to up quarter significantly another of segments. Asia X%, the Automation growth Turning all Europe $X.X loss the the to the to due million points year to in sales chain Sales underlying lockdowns the as due disruptions. freight last chemical and more, and China quarter realized earlier the of the by were X%, and driven to discrete our and for to Solutions digits, by down year-over-year. and sales accelerated mainly the hybrid Price backlog up inflation X third results. up, were level Russia up if adjust were elevated into continued and Process in led energy, by was wage of billion. support in This Backlog address to in quarter quarter the increased electronics were in plan increases. XXXX. fourth will programs and

reflect and versus the As controls cost I said year sales million Automation the improved $XXX and favorable in despite to has contributed backlog to the mix e-booking at beginning, points Russia price, revised the volume. of AspenTech. been EBITDA adjusted basis businesses to Solutions removal prior leverage, lower-than-anticipated XX due

China sales to The continues grow & Turning up lockdowns double XX%, increased softening to due XX realization. Solutions. all Commercial COVID-XX except and points to including up areas, Residential business the demand. price Sales Underlying were strongly, of in digits. world

the & commercial offset Home As we strength expected, Climate Technologies of activity remains portion aftermarket the and project Products, Tools business. in moderating non-residential In demand residential strong.

a the a to the for look Emerson's normal full we're of businesses. May the quarter. the The again, contributed heritage a in second we period reflect the business diversification X EBITDA and rules from revenue synergies fourth Disc that, basis weakness to date we AspenTech impact software XX at Tech quarter heritage in points sales seasonality the million margin cost of to combined price in for half expectations represent the forward AspenTech sales. quarter. and $XXX and after and fiscal improvement nearly with AspenTech's and strong XX in sales for at of of the our leverage sequential great on down continues. off quarter sales Together, addition significant Within divested as segments the EBITDA. Therm-O covered Adjusted was realization drove that consistent the reductions of businesses the profit based through for we segment. However, The flat the Once for ongoing these results and adjusted applicable that retail revenue segment was approximately XX% the the Backlog contributed closing recognition AspenTech was the $X.X our business. of in points, identified start platform growth quarter flat removing Climate end billion, envisioned from driving for

EPS If walk. please turn to would, you Page the for XX

versus As that items have mark-to-market We up to two and adjusted XX%. year. balance I Solutions significant prior sheet $X.XX, several leveraged residential said, per to EPS quarter. plants item a at Automation the still contributed adjusted XX% and net and they There non-operating operations Commercial in $X.XX compensation. $X.XX, was on a earnings share that are were stock notably nearly favorable are out

business, by and transaction. contributed interest of quarter $X.XX AspenTech of strong heritage expense fourth net $X.XX driven the attributable the in to the

various for to of returning year. logistics the going the Ram to hand challenges, to affected the off comment with We navigate they supply and continue think these deal on chain, I'm how them can operational to and quarter labor. to issues we balance we as

Ram Krishnan

XX. especially relief Slide previous COVID-XX and lasted of anticipated the we of to electronic turn China are impact positives. Starting the the And going lockdowns, in and Please longer than Frank. into environment for primarily the quarter, to the U.S. Freight decline right mainly commodity quarter. much component all challenging environment. COVID-related third with and is have quarters, you, terms in and the months commodity has the remained the availability challenges prices, the in Consistent Labor, in trending prices us Thank labor provided all and which costs from we and overall operating with as to we direction some plants our resins the copper had steel, which experienced. continued winter improved have an anticipated. Midwestern plastic issue

the shortages. and lockdowns the the extended component items quarter two China the impactful electronic However, in were most

reopening in end the As our discussed the of May with was operation would expectation we May, month. in the middle China begin full near of

not out, the June. May was played of early end until it until delayed As full operation reopening with

represented our plants quarter, employees stays area. the in our in operation required operations, in $XXX roughly Therefore, work factories. the had manufacturing to During to little primarily closed in overnight lost loop reopening six This this our from we during no time, not the Shanghai delay have we extended did in sales expect would in lockdowns. million which

up be of fourth lockdowns further availability quarter. the sales component these made in issues. and to constraints We expect contributed to other supply The China electronic most

While critical to to had lead suppliers elevated in than at price we component more sales Six variances components experienced quarter, to purchase remain stable and million primarily Automation led times the more account in to sales, for of challenges quarter, procure suppliers challenges in drove decommits an were the our XX% in levels, us to the the $XX we This to the go critical capacity at forced elevated we anticipated. miss market open our Solutions. in converting shortages backlog about leading quarter. and for

chain structured fourth approach into the and participating stabilized critical programs expedite, what a of to supply supply executive the the quarter supplies teams purposeful end situation Our up with shoring necessary for using driving growing the have these in assurance engagement year. is

supply execute teams Finally, and our turn to the 'XX successfully call now the I to outstanding to landscape, us outlook. to the customers. chain our an through back over allowing do operations continue will us effectively managing global job, ever-changing take for Frank

Frank Dellaquila

Ram. Okay. Thank you,

to turn please would, Slide XX. you If

the to XX% decarbonization across Sustainability, in As we orders continues year. strength the Automation year, double towards June industries. automation, factory the continue trailing broad for Emerson into with orders investment decisions trends digits up to key three-month be business. up look trailing year of reshoring Solutions prior continued rest versus demand strong drive prior were underlying versus of indicative XXXX, modernizations and three-month secular and

June well up mining sciences will end all is remain Residential like expect the We continues. globally improvement power propelled end business in food, seen is and pump as were Commercial, was to as home well as home the and three-month X%, communicated, sales our as warm up the business markets in of non-residential project market demand In as the growth some energy, Climate signs markets tools and This soften of by Technologies, renewables activity Climate temperatures strong to process unusually which retail as and chemicals record Solutions, life due showing and and Residential strong weather expected in European weakens remained and efficiency and Aftermarket while heat led industrial, be conditions other markets, in support by we've first orders residential Europe. markets. data, XXXX. trailing also we continues moderation during and Commercial and May in & call. mentioned favorable housing-related imperatives retail X%. to energy products the can which expect growth high inflation into metals the continue key

to update. Slide talk You would guidance the XX. turn please We'll about

guidance range, reduced the and of sales quarter with Disc that balances the it revised the moved the to guidance remove transaction as the the the underlying Emerson's Therm-O updated impact businesses contributed third So the to AspenTech remove and considers underlying we robust we that of end low experienced. continued to to headwinds has part demand been principally of contribute quarter electronics. chain well now of as is the Ram remove to mentioned. between X%. We the expected modestly Solutions again supply of growth to be recognize that to constraints underlying as in and ongoing X% the continued and chain XXXX the supply Automation third impact to range AspenTech challenges constraints, sales businesses the

underlying both year. continued actions And solid record Solutions China. material Automation for realization guide electronics adequate net believe offset the our Ram other production pricing the secured than more of outlook by of Solutions the guide Commercial to are both across the on sales Inflationary for we electronics the for strong Solutions, of COVID-XX-related our beyond As the of pressures Residential inflation. should impact Residential going based confidence is the further said, but into price end we year. have lockdowns the of Recalibration fiscal supply with our to The demand strong the strong XXXX. expected with and backdrop, reflect expected sales projected the Commercial expected orders in the the recovered, of the Ram to is balance platforms, guidance we convert is as to backlog. deliver year. ability be end on & along fourth & bottom be The raised to described, remain, challenges assumes but In reflects quarter the The to in and China supportive guide no platform. have supported will and outlook which the demand be the miss extend sales

expect guide, included quarter fiscal its of AspenTech's is the Regarding the on recognition and timing our impact AspenTech the quarter to fiscal active fourth bit the synergy our Therefore, the earnings quarter companies. we QX. which continues rules and business lower revenue and be project to renewals in plan, third to AspenTech's apply. due is heritage was engagement joint between contract in seasonally there that drive the revenue a The contribution to strongest two

simultaneously AspenTech their which sustainability meet priorities solutions help both and excellence investment customers customers are for top operational targets, and Emerson's traditional customers.

as Our the is to for to is hybrid well combined now for updated and the process to X headwind in We've assumptions fiscal portfolio InSinkErator we point close sales no dividend year, product is net change positioned well users. expected tax X and will a X to be end on the the the to digital no the after gave XXXX has Therm-O-Disc by guide. FX transaction and the incremental account that as Share impact, transaction partner which $XXX divestiture. repurchase X the to guidance points AspenTech May the it rate million. impact The There's guide. be

flow TOD will of cash operating we flow the for $XXX We we gain XXX%. updated the has quarter, impact year in the million. be that sales further have the of $X.XX said gain to for was third have free billion $X.XX $X.XX walk. been Slide XX to the guide guide. said previous and be $X.XX left, be and year, TOD XX% to to balance GAAP the $X.XX. former Solutions in of leverage look that are be expected EPS cash to $X.XX. billion for on for Automation to nearly to EPS cash removing Starting reduced divestiture EPS into May revised to due our the flow to on $X.XX the the calls. expect May in Russia we’re gain end significant had on as guide the we're operational comparable the million still divestiture the non-operating the and is expected first we After the guide $X.XX Russia turn lowering total upper the $X.XX. is reflecting the the conversion the the segment exited have to a all range, The as between items, is Please the and top incorporated We charge and quarter in $X the three revised reduced significant EPS seeing. CapEx Free guide sheet the EPS is accordingly. divestiture issues after-tax to adjusted now $XXX approximately $X.X impact by and basis has operating now to The

AspenTech partially transaction. on the from of offset results amortization by intangibles operationally, that net $X.XX accounting adds $X.XX the purchase

guide So the resulting the revised The guide for the current GAAP the $X.XX $X.XX was EPS walks May of guide The right chart to EPS $X.XX. side is to guide. to $X.XX. adjusted

the transaction. interest debt that is We have to expense in the same $X.XX of $X.XX operational-related reduction, AspenTech operations at attributable $X.XX, this by case, offset on

the to $X.XX. is $X.XX new guide So

I there slide, EPS bridge customary three are is a next items on that for the I've through fiscal along but the reference, from your discussed. GAAP adjustment won't For adjusted go the year. there it, with items unique The to

review I the to for transaction. AspenTech you that for it open your included appendix encourage the of turning of the some we to we've explain slides that Q&A. would that, the again, before attention, details in With So the thank Q&A, and up you accounting will

Operator

[Operator Bank comes question of Andrew with America. from Obin Instructions] The first

Andrew Obin

good morning you. all Colleen, Frank, Ram, to of Lal,

be question I Just guess to about my going is Aspen. first

had interaction about of any has the Aspen's talk of have customers the Emerson some if engaging Can talk One their of sort could on that the things system of early you incredible any some just rolodex success with side? hardware you about clients. in and of this is of you Aspen terms if side? on customers And

Lal Karsanbhai

and you. and the world to we on million $XXX today, $X million AspenTech Sure. ways: by Emerson with that’s very over Lal. thank sized is date project and AspenTech by channel. very funnel area synergy to active have into We've conjunction and customers, begin organization of and Andrew, This by at it's balanced we Emerson with, projects, customers. a technology. selling the Look, into traditional industry It's in closely worked AspenTech in Yes. won slightly three world area, traditional

And suggest growing. so things it's So fiscal this there's I for depending would sight how year, line on $XX another, million or of the over next quarter. move

that been as that addition. have million AspenTech but a not a large and full booked We automation with projects in $XX awarded well size suite very

So of commercial activity. a lot there's

Emerson and have individuals responsible a and We both of at the engagement. synergy for delivering AspenTech value are lot that

customer loyal the a very is opportunities week, organization last to anecdote, a digitize one of time their quartile to lay have AspenTech and they we that Chemical, top simply not customer out with who McDivid CEO spent move an Andrew, performance. Just Ascend to again, last just the but and as strong met as Phil very DeltaV I with a plants

So of levels activity the and many a excited synergies. organization. working lot the very about across different at great

Andrew Obin

follow-up question. And a just

this do terms feel that moved this as you confident to brokers, coming, capacity of about has right? past out chips I on delays particularly to visibility over industrial to in early quarter? maybe come this think I before very, talking there talking you sort calendar are sort talked of North that in coming the capacity chip [indiscernible], visibility about the know late very year? still year, this I'm worldwide online well. think, capacity America, in some started potential evolved but how on? because Or of we Has Are this next still specifically short semiconductors

Ram Krishnan

Andrew, Ram here. Yes,

I and really come 'XX suppliers, very relates of into good late worked to as will capacity think point, this that it is in online come buy we capacity one this Richardson, the that will Emerson, six we've plan. pretty with online into capacity we capacity online an two understanding 'XX online, At to frankly, of come we is a XX that next bring is example, and facilities, of somewhere online to 'XX. point, expected suppliers But most Lehi, months. components this TI track. as this coming capacity have top on lot least and expansion the in need of this which 'XX, good how feel our terms in will getting equipment at from they at capacity the In X is that Utah specific was and a other to challenge are our particular But the where delayed. to Texas, our late seeing

Operator

comes Suisse. The with next from Credit question Walsh John

John Walsh

Just I here the you talked year, Sol's leverage the guess, wanted I of Auto of fourth that the much about up XX% running on mean, about follow to should quarter. I know think half of first kind higher. incremental kind in the But we how target.

in the this you any fiscal You more you the of in kind give quarter? Those us business obviously how to granularity China on fourth had there that expect reverse leverage can quarter. disruptions

Lal Karsanbhai

in whole. think, if it Emerson believe, I Embedded of I as guide -- good XX%, a in you assumption Look, XX% question. our an approximately is QX, just leverage to in for XX% That's higher QX little QX, John, for operating a about back up into in perhaps.

the quarter. as feel go we should we conversion. off attractive the good businesses structure automation, ahead, very executing which us how working we're So really through Go benefit Obviously, the about a are Frank. and cost in

Frank Dellaquila

but add to would normalize We in was as will, more John, little that. first of it leverage you Automation is second we off said, very said kind is the the the year, just what level then to very of strong. half it the which actions strong year Solution, Solutions for the as The said. price be half, in yes, the the bit fourth in in it a And just full kick in, and a Commercial quarter. Residential will leverage normalized accelerating

standpoint, a margin from and be exactly would what a that's half both seeing. Second stronger and we're sequentially, leverage

Lal Karsanbhai

year just correct, stand the XX% XX% calculation, be And full QX. would approximately in the to leverage

Sorry, John.

John Walsh

it calendar on based the when ops that year whirlpool just super or get then set? congrats get on of on more just the taken it things able if go sold? obviously, can might granularity more color business us timing on if you And give transaction be curious InSinkErator Just the helpful. disc around will just then to it's done business some will either that's any any And if announcing this No, out Great. by once

Frank Dellaquila

Yes. John, this Frank. is

soon of subject the but close regulatory timing, can, we as terms will we and possibly it's In hope Whirlpool, the as it to approvals. both normal

I we know be this in would at but will point. expect time just So XXXX, early some don't it

we're we that that, the disc ops, not disc point at may In terms ops. looking bar at the for clear of

us, to significant big very not to disc business Although treatment. it's may enough ops a be for qualify

not, at to this we're but would going point, revisit that. expect I So

Operator

comes with question next Our Kaplowitz Andy Citigroup. from

Andy Kaplowitz

you so big Well, what in on end China seeing much focus, the then a European business? you you could QX? baking thinking thinking see resiliency towards growth are related or How the Did on quarter. relatively update your if you're saw just any, peers are several in ground now your of with lockdown-related that? you of back how step China? of the And anything us like into And the regional the headwind, about electronic in

Lal Karsanbhai

challenging Good quarter obviously, execution. us. The Sure. significant both that lockdown China and in a And demand was the in results had for sales that question. reflected impact was the in Yes, you. this economic we in through shared activity, terms of that well. continued we in quarter part as aggressively June the with and very has Having rebounded of of month said that, early

including, investments of in the Russian and that country the into had oil So for Automation are renewables which significant being project and a we of is actually There term, largest the cheap particularly very funnel as a coming availability into driven QX. optimistic continues is attractive run in on that, lack very go of think, in driven, gas I sustainability in also a relatively the that been about by electrolyzer through I and [John], China. am China China, better projects world segment,

Union of quarter resilient through quarter. But continues relatively that the European Western the the in In climate growth obviously our had and the We during war. growth it Europe, as into quite of the former terms Soviet QX. with performance offset we actually to was were impacted, obviously, go Western look, be European -- and Russia parts expect by positive was

Andy Kaplowitz

And assume easier. but Lal, can continue & about get comps which actually you forward? to June, how improved comps, easier I order bit in give Residential Solutions know growth a color is thinking going do I you're us more into Commercial

pun, to And on even a then cautious be Frank in that see little or than continue you know I your business? continue residential for expectations? steady I you've market been better could market has but So growing some HVAC. improving think order that the mentioned continued given to growth And relatively in the

Lal Karsanbhai

There better is been market expectations, no the doubt has that than John.

back the of went at think to expected. I the moderate expected to hasn't pace beginning the we orders you we year, first significantly. to when we that if that occurred talked In that climate,

pleasant investments well. are with a that space as There's that's regulations surprise. lot of in now in upcoming a driving So changes this resiliency

the feel segments year, there's I of residential business, all the at demand carefully. the beginning I there a proven better resiliency watching of very, than So and did of the across course, very

Operator

Steve JPMorgan. Our next question with Tusa comes from

Steve Tusa

your update year, Can give plays in you you that price/cost? an on us on then just the guide? through stand how just And for where updated

Frank Dellaquila

Yes. is Steve, Frank. this

quarter said that in So the talked include wage third. in we about covered enough that We we And then -- implement net price on broadening wage the we basically last some call, would freight. the of material seeing, we and to everything and addition the to third did. and definition to I'm we're and sorry, cover it inflation include material to price/cost in

levels, pricing as being fourth this. as favorable the and So NMI, accelerate. the work quarter off through not actions we're it's be net wage to some we as we continuing in expect turned more planned, are inflation, the inflation material The well and of well and that at seeing a favorable we delivered returned in to leveling moderation freight the in kind as but as somewhat elevated

is freight So equation wage, year. go as inflation we price, the overall through material, in the the improving less

Steve Tusa

Great. year? nitpicky guidance comp lower something is And to I Or it's were think corporate it's guess kind with reporting. some we don't I in on there's there there of X stuff. corporate lot carryover one for than just Aspen, was on any the expecting. maybe have. on the that Is regards you What's influence then stock stock Aspen going there the comp into next the there year? a

Frank Dellaquila

move -- stock still No, year, it's LTI have that mean comp are it's it's last the were mark-to-market. some of X outstanding there not. the one-timers mean but significant X I the programs I quarter. in the in We essentially there to

that. that down there went was So significant when price on stock mark-to-market the temporarily, a

volatility in on corporate unusual there's So by introduced nothing other the that than going mark-to-market. gets no, that

Operator

with Josh Pokrzywinski Our next question Morgan Stanley. comes from

Josh Pokrzywinski

past, to would and you just on takes the from of off, as maybe the know last of activity you're while So foremost. to while over maybe process obviously, things but first you lot especially of size about and start the a stuff over call have Obviously funnel talked Europe mind world on that, broadly to to well. book funnel, the a the totality it, Any us six the sort of build comes that changed some out. that I more dimensioning use where kind of months? seeing six lowest of three kind maybe months.

Lal Karsanbhai

Yes. No, to. happy I'll be

consists total XXXX. the project at That is now of funnel So about between and at sized projects $X.X billion. XXX end of the

that's the that today. So kind we have of visibility

And projects. then, a Baltic within funnel, which a quarter, were funnel were almost including with in Baltic XX projects that Russia projects projects of from were as added. in LNG about funnel. went value impacted Chemical that a booked, Complex there of we were the right, The majority lot through that project the we $X.X and removed absolutely you're the of was that the movement As billion

big renewables basically X.X of was the removals. from the to essentially but are size, did value the relatively today. project funnel those So of approximately what which it get larger funnel, in the X But flat, terms within grew

our encouraging to significantly it's activity in very So see segment. continues increase that to and

Josh Pokrzywinski

Got impacted capital kind of early around working yourself decent sort flow I on peers is the cash and a for for That's your then just And up it. understand following on sized of free situation. helpful. CapEx, especially all percentage basis, pretty

talk much how the plan of protecting Just been versus more trying the around constructive. the is growth has just to cash sort slowdown. gauge of CapEx lot of of cut A a pretty

two those phenomenon? So just to trying marry

Frank Dellaquila

done. of assure done key the the we're of slowdown our But CapEx. cost to cash is improve CapEx. always And growth There's squeezed investments you, room on everything making any get to no and getting given Josh, challenges down that kind Yes, in both position. the we've needs operating flow line, that sustained sustaining I for can

Operator

Davis Scott from comes question Melis with Research. next Our

Scott Davis

side, this scope little on to that Slide the things talked sense of materiality. of Mitsubishi it the that. control just like like Or flowmeters can perhaps mean won And win these We in I address of guess contract say types include stuff you a it's I'm automation an get kind -- a you when does bit about contract, X. trying you you things of winning and that?

Lal Karsanbhai

Scott, discuss would It's traditional projects. relative too similar good Lal scope not Absolutely. we to morning. to automation Yes. that a here. an carbon-based

for the on here opportunity core, would But that it our include and analytics of very elements. control the our the are we which funnel have relevant includes elements, at now sensor optimization. AspenTech So course, control, and

flowmeters, level. transmitters, So pressure

to it as the be it's that opportunity. as bring project this like $XX of A we scope full we over that has can it So execute but type potentially sizable bear. million, automation as an high as

Scott Davis

we impacts just the competitors That's still And guys in just as conversation obviously an on bit et is changes big are competitive advantage, of the But currency last translation some as no FX, mean, and mostly just you Okay. here then And using of a I few are helpful. dynamics real global. months. far here talking cetera?

Frank Dellaquila

correct. Yes, Scott. Yes,

where profit. on it the defensively a to do impact our typically and of around flows competitive growth around don't that. cash have currency, sense translated about businesses lot issues currency themselves conservatively We talking really very position sales then and are We makes they hedge

businesses being not to cost somebody being currency. the a in at else's disadvantage about relative no, competitive we're base from hearing weaker So anything a

Operator

comes Jeff question next Our from Research. Vertical Sprague with

Jeffrey Sprague

should you've in are And assets, been businesses of along start expecting not disconnected more far taking action process and you take? illuminated the name a where if you've about how process in Well, here to little longer started just transformation? assets? give this that bit items us by name. now a what segments X or thinking just we you in could But at disconnected the to process pretty those busy thought I of specifically, as call. maybe wonder we're how on much And called with

Lal Karsanbhai

to good question. you. good from I think hear Jeff, a it's No,

significant of them, progress, across I strategic three and imperatives along journey the I of We and three a that. And we've are made I described. on all recognizing think that all you appreciate

on meantime, execute to we to the be journey. what few of envision end not free at about look we the the by dimensions, investor commitment terms I'm the this business our continue and will been to future and the will along to we latest portray XX has portfolio, conference, of my speak opportunities state our November In the state In that at really moment. of at a which the shareholders

Jeffrey Sprague

a think question additional I I maybe X, and the really in pretty that And ability business. you the is Solutions? price the more Automation question or actively. coming some on is the particular, into us give momentum back just But X price, there context more said I just was But you revenues. relative Could thinking then and price in XX price comment to I that automation, certainly Maybe on it isn't is and X. X% about there? where system it through gotten understand in there price in price heads CRS with you've CRS, you positive and to get orders most some it's where just need if it

Lal Karsanbhai

a products well. within and color some now inflationary significant very realization have Having we had has give positive in an price from and The solutions about segment you continue elasticity price add I'll The ability replacement to to and you said this decade billion that installed as we've to business is relevant in feel be pricing really, a Solutions. in -- that, customer over base know, obviously, $XXX been it market really some at environment. I Jeff, positive forward. I'll the is ask drives Yes. Ram incredible highly Automation And our almost as that that take perspective. price. differentiated

out have improved we're to But the continue We about there. we color? I price capture our drive to can improvements Ram, environment so to in ability drive we But from that families. that's the feel will product value the realize across where activity. good can and customers value also operational

Ram Krishnan

get freight terms has in X% remained I and we would in Yes. add to price which that magnitude wage of green And price/cost, the X% the always includes range. of that inflation, and business that

obviously That well increases a and and realize QX continue the material positive higher. XXXX the lot into inflation percent Our and ahead wage net into will we list price freight. go a market certainly list the as in of as and execute. well as We remain are of to

Operator

Our question comes from next Julian Barclays. Mitchell with

Julian Mitchell

the the Maybe cash free first just question around flow.

us inventory back And Maybe income think to headwind of work can with the sort help here understand conversion you fiscal around often adjusted P&L. in in of carry XXX% I as margin this So some 'XX. net the quickly sort they how that to XX% down get your guidance year.

kind cash wondered any of what of in that the around flow to current year. in thoughts contribution dynamic the Aspen is free just also So the and flow

Frank Dellaquila

-- I a quarter the having believe normalize. those and be The hope issues, good books. have the 'XX, sheet a the expect better mean, to would in I all conversion Frank. of Okay. it fourth would do the would in shape. I operational mean would manageable. simply given sales inventory what I Julian, by absorption we concerns 'XX, the we no I expect quarter. expect the some growth but first growth headwinds point consider think it middle on we in I those, in take fiscal half of to fiscal start we challenges. this in balance The 'XX. of we aspect I is the businesses have It's big actually the XXXX. pretty had Margin terms is on matter have of about shape to for just are expectations when robust about we talk good is I a

year, we the well So terms balance even that, the we adjustment something -- inside go the it's of that. but have this more guide for have balance It's it's of of as just that through sheet. the in manage within the some guide to we considered on there's

with and year, and the had quarter XXXX year a on is of third significant basically fiscal their lowest it was part which contribution the much to basically fourth incentive quarter specific the some as they cash there a of items do X quarter, and fiscal of to transaction, their it this the quarter, of short cash return that they their will -- cash in is comp having transaction, function in the flow which flow, for period well the their as final accelerated a cash be the they fourth the AspenTech be payments, normal tax in that payment, first some free basically to their for appears negated flow. have had and is quarter free flow the and absorbs would that also score, -- timing minimal

from on So AspenTech free flow. is inside number impact our of minimal cash

Julian Mitchell

That's following specifically. Aspen, And up very maybe then helpful. just on

point, So earnings these aside of of like, your not quarter in itself it and because I SSE the really leave is Aspen some when to fourth OSI one-timers accretive looks think earnings. we

case, that's wondered So confirm how the the... if just you you about do that could yes? think

Frank Dellaquila

year, guide the accretive, it in the into quarter. Julian, at for sorry, No, implies it accretive $X.XX interrupt. which it's quarter. We've I $X.XX accretive the fact I'm to $X.XX in fourth in built obviously No, mean the is was least earnings third

year. will, -- on accretive. We've I'd the AspenTech So got yes, you for in will to it operations fact, be XX. be it $X.XX point contributing Slide

the we expense and then in the we the the… we -- to get had year, So interest $X.XX debt, attributable contribution and to of $X.XX deduct net for which

Julian Mitchell

the jumping helpful. QX, for about sort that think we point, that sort a sort do about on about of interest, think QX. as maybe, that number off we're think of non-controlling And point for the big to just That's that just trying in How was of Frank, when next year?

Colleen Mettler

with up follow we'll you. Julian,

Frank Dellaquila

that okay. on up follow us with let Julian, one Yes,

Operator

Nicole question next Our Deutsche comes with next DeBlase Bank. question from

Nicole DeBlase

on and you the had what China Or just had $X.XX a reduction core First Can much million, couple versus is I in quarter was any Therm-O guidance? core Disc you versus completely incremental operations of year, XQ? how impact Disc, of that full start impact? $XXX operations? expected for expected the in clarification Therm-O items plus of the And for with then guys the of the

Frank Dellaquila

in or operational we lost expected is third -- the the is in lockdown, issues are entirely that the $X.XX around that we Those it a Disc sales that. to function Therm-O quarter have $X.XX -- mainly incremental. as $X.XX we extended the around of chain. and when yes, supply of May, guided maybe the So was

Nicole DeBlase

the seeing oil it. all price versus can That's we've to in KOB guys bit just gas the and seen what X And then talk oil respect with movement Got you clear. project a Okay. what are we little activity was about given customers, recently? the

Lal Karsanbhai

Yes. Sure, Nicole.

set X, KOB of quarter So XX% automation. the at

XX% been range. relatively in it's that So consistent

very expect to robust go We that through XX% to it The range in the project year. be we is continues as be. right and activity

We demand. and those a U.S. as capture for shale capacity the But Bechtel, phase one engagements the just EPCs, Louisiana, Mexico by and and as active environment well. efficiency. for both a of gas phase again, in in are that's across and in who's improving, right well North America number the sustainability efforts particularly chemicals energy have and And last And along is taken new that's jobs very and the Texas emissions, now. significant carbon LNG investment driven It's then in with it is engineering combined significant positive. is design

Operator

attending you and presentation. session concludes Thank for This today's our question-and-answer conference.

now disconnect. may You

Emerson Electric (EMR) 9 Aug 222022 Q3 Earnings call transcript