Earnings call transcript Q2 2023

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Operator

Welcome to the Emerson Second Quarter 2023 Earnings Conference Call. Please note today's event is being recorded. I would now like to turn the conference to your host, Colleen Mettler, Vice President of Investor Relations at Emerson. Please go ahead.

Colleen Mettler

Good morning. joining call. Emerson's for XXXX quarter you conference earnings thank us second for fiscal And joined President Chief I'm Financial Krishnan. Today, by Officer, Karsanbhai; Officer, Frank Chief Lal Dellaquila; and Operating Ram and Officer, Chief Executive joining this as XX. earlier Also was effective financial morning today Baughman, our is who us announced officer chief May Mike

I always, is follow on website. our to available the with As along everyone encourage which slide presentation,

presentation and may degree Please Please include statements, measures. X. join me read a risk on which statement on to of time This business harbor and uncertainties. slide take contain safe the forward-looking the note non-GAAP

will Karsanbhai, over for call to pass Lal remarks. CEO, and I opening now Emerson's the President

Lal Karsanbhai

the Please to that a good you, for I'd of global tremendous And performance, Thank our thanking in and place slide trust Emerson turn the Colleen. shareholders for board team like morning. X. us. directors you by to begin

CEO Emerson. It months busy first a XX as reinvented as has we been

The advanced a second of creation quarter performance which model. three strategic our across our we dimensions value was the in quarter agenda was exceptional. It significantly

distinguished Button we who working the the culture. for chief months, two Kathy important CEOs. officer, Vidya First, while career at company's put two Ramnath and Emerson's was brand replacing the last changes. leadership a named In had Emerson map as marketing announced Bell, on three different

company. a is move and years, East exposure, believe as us play four is highly automation pure Emerson's customer Middle our engineer, company. the a a the deep for business. is and journey to brings technical person differentiating We led as Vidya knowledge accelerate right and this has She Africa last an for

more as the retirement planned Secondly, I'll a this later in Baughman announced this say about Mike morning, Emerson's words we CFO. presentation. and Frank's few

the now score. areas from better stake on our opportunities and and quartile in the engagement XX% Lastly, to engagement ground we employee We experience received and high our the employee global net great gives of a Emerson. us This base first talent heard of survey. perspective strength at digital completed a

portfolio. the Second,

Climate for the the are finalizing experience Shuster, venture be his CEO and transaction business. will has quarter. The what the current to by joint and in leadership excited We brings been named, we Ross the

thank for Jamie the contributions, years he of over I'd work at did like in for business Froedge the his to service Emerson. and XX

excited In a technology addition, most to we people. signed company, agreement the National about the very We're acquire Instruments. importantly, the definitive and,

are This is an moves important The point. now portfolio large complete.

company As of differentiated leading that and have the a you an a investment diversified cash by and set high control in of markets end software, investment and in global devices, clarity serving an automation now made up cohesive investor, of led high intelligent is flow, a an AspenTech. share Emerson stack profitability growth, tech with

this value a quarter, did as on this company. focus we with be basis, creating on go-forward tremendous Our will

the to our in Lastly, and been pillar The a done management our is None the it. testament third business have work we the of of execution. system. phenomenal have would to possible Emerson and – momentum of results the teams we've strength global the quality without

to markets exhibit perspective, area Underlying From order orders also to driven cycle with strong were Americas robust, late led, Hybrid globally. world reshoring up process China remains X% investments as by with continuing returning expected. demand. growth

improving up areas XX% led enabled expectations. quarter still and growth. were steadily confident The supply to environment All feel chain underlying As sales in XX%. growth quarter, strong well of demand in mid-single the year, the Americas double-digits, up we by world continued we above look the the remainder our digit

of the quarter, AspenTech. our strong in operational to This execution the and both excluding Intelligent continued were devices sales and leverage XX% also and software led control double-digits. teams operating up performance

segment drove Adjusted and operational EBITDA a from the sales driven impacts and EPS strong $X.XX, mix midpoint the a QX of performance. in was also is XXXX. again, by adjusted costs to by guidance basis XX.X%. $X.XX, improvement This price Favorable XX% XXX of beating versus point increase

and to XX% which XX% meet up is year-to-date, year Free on expectations. track full cash flow our up was year-over-year

X. slide to Turning

innovation Our are growth priorities growth meaningful creation platforms in conference our outlined results. value and at initiatives we November and around secular investor XXXX that yielding

Emerson companies. recognized Fortune by First, one innovative of most was magazine America's as

to software our from and The leading for recognition and our our dedication is a customers. technology to create testament history employees innovation

award this accelerate We are growth. innovation extremely our to for recognized to continuously be future excited engine and working for are

clean The In awarded by XXXX. and coal-fired a to continues Intermountain metals second power Emerson energy software first, a like Agency's was running power and Power quarter, XXX% mix automation as software. plant the Emerson differentiate plant for renewed of retiring and hydrogen, Utah in plant. mining, gas the leader to energy a XX% will At hydrogen. project before natural transition, hydrogen use into Similarly, on growth XX% a markets, transitioning plant the transforms contract

Advanced will power, supplied Power Energy hub, Western net a zero towards states will awarded another step Mitsubishi a Emerson six project complete, When critical supply carbon Clean storage Intermountain be hydrogen the and with the project The XXXX. greenfield by world. was that production in free

With power proven Emerson because hydrogen complex in our projects. integrated of chosen renewables and our and experience generation industry platform, was end-to-end and expertise

is Gulf jointly Golden we that billion the Chevron and Texas selected highlighted in first AspenTech Triangle Coast. Secondly, Laffan quarter $X.X facility sister and to the were automate Polymers project facility to optimize the project a Phillips The on QatarEnergy Ras Emerson and

XX% great operate the example than emissions This of the control and devices, will is a system of with This facility in Emerson and Canada. its DeltaV Emerson software. strength approximately will provide AspenTech differentiating its projects the and US gas similar will leading greenhouse simulation provide and leading to lower AspenTech. intelligent technology allow

National into our remain test by recently National business and Turning industry to automation X, Instruments important will diversification into markets. discrete measurement of space attractive we slide expand Instruments. energized excited our announced leading the acquisition and and provide

end software the transaction financial to communicated. by technology expect million we accretive of vehicles, positioned be secular and transaction the and of portfolio have are on electric within year capitalize our Inclusive long-term leading and five, $XXX of criteria the that to semiconductor of meets we to underlying growth. well NI's synergies trends

will closing close complete conditions to customary of XXXX. to half and and Emerson's expect fiscal the in We work regulatory the first

combined the in meeting, opportunity employees extended team the town while to do had visiting opportunities more even NI confident came the We to of week and meet last that away with management a Austin. global From potential our company. hall we

the is and the and way, we differentiated we all team reception talent a technology to an energized by employees room In and well. simply to importantly, was leadership met. from am well, proud now I warm it's ample the The I most – exceptional. the But NI-er has be expand received as

months cohesive fast automation a have It Emerson. paced Please slide and opportunity $XX now to hard We create journey this shareholders. from an for leader. $XX a business we for to to past exciting took X. have lot an value billion transform turn platform XX a billion moved to and work been The outstanding of two business,

XX% to portfolio trends to exposed we'll a and is It growth to expected that committed target. growth remain come is underlying drive growth through-the-cycle our to that years for secular are

XX% and portfolio new gross is margin segment profit higher Our margin. EBITDA adjusted XX% approximately at

market. years discrete on with Our and diversified ago, two than automation industry our the now mix is markets customer second focused more end largest

out focus we executing to pursue AspenTech investor will continue delivering the acquisitions, to laid conference our now the committed to and we're turning we at we for bolt-on NI. have strategy While in synergies

two to announcing we slide committed board new Please had of our of to board to our turn and refreshments, X. the and directors. board privilege yesterday, Emerson are ongoing board members

for ADM, the Leticia of Gonçalves company's Foods is and Global a of Council. the Executive President member

ADM, longtime and development, and advocate As part commercial inclusion. and Bayer is a Leticia and in has solutions, held driver of of digital international operations, and Monsanto, management, technology roles diversity

Her these to excellent change areas her make experience and in board. an addition our accelerating

has chemical a Brazil. from innovation. passion originally tremendous a is She's for Leticia and engineer,

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we, They excited Jim and Leticia of we join directors. so are are and to our are have both board and energized

like I call and over the without your congratulate not XX honor over to be turn Frank would accomplished past And colleague. I been Frank, of a you confidence Emerson. has at support. the that to and as We it we career have years legacy Before XX the over to could a ago, able Frank, for XX here you did to you. distinguished Emerson I an past XX CFO. please and to would I met Please company without have this slide years know been lead not at months what created X. wisdom, turn your years

You made us better.

me better. you of made impression you and left you us. the on You Thank the lasting all on impact made me for

the Mike congratulations. I'm course, also years of please And Emerson, what PwC. to Emerson, Baughman me over welcoming role. Baxter, as and XX. across join to has operations excited about CFO in May I'm Mike, announce effective XX brings of experience Mike Mike finance, him. in excited of

Michael Baughman

to And you role. thanks chief to get next Lal. giving Emerson's excited financial for opportunity officer. very board as the Thanks, serve the me the to and I'm into

analysts, the you and meet colleagues future. of several looking to had for Good morning, opportunity Emerson my working and I'm in, I've And forward to you everyone. fantastic thank you and a more investors quarter. of with our in the meeting to listening

respect automation result talked set to a achieve do. through track just cycle, The billion the with about, As to portfolio a X% peer-leading company cohesive and to more margins is what and Lal exposure. more end been our market a on with impressive XX expected diversified productive $XX out grow reshaping months it's we're X% we to to

growth, hallmark a And the as flows growing increased to to of great portfolio result new supply Execution accelerating of areas think on this integrating value. that normalizes. environment. as now has cash the always shareholder I execution our building operate chain in focus a certainly get in successful And transformation these and we in NI, I we're been Emerson. profitable start. to on expect

time, five I'm bittersweet future, come and professional, While Frank a more that was I a is for a reason we'll know I'm smooth I've months. as ago. over person. to over me confident a major little And a excited have CFO importantly, personally. Frank a coming about to Emerson joined our transition during finance great wonderful the role the little years transitioning

Lal Karsanbhai

now, call And over Mike. Frank. Thanks, I'll to turn the

Frank Dellaquila

words. thank Mike, much for the so kind you

the have When have things the with. have, imagined I – to didn't all, I to expect above XX years here privilege do, never what up I get I the would I and the I and people would know that would really showed ago, work could never opportunities to

The the thank last world who of been XX class finance And trust respect, years privilege, them a truly implicitly, bottom organization, me my from I heart. never leading let a I have I down.

with working for extended years be a that. just two been this Lal And and a grateful wonderful truly last team Thank run. opportunity. transformation heck always It's to career. the Ram our and The you, portfolio on I the capstone of that and my Lal. will I'm people and grateful special, have a room been for in truly

very, person, have confident time well part a over provide is again. as the he's going This happy we future. of bright, over challenges five leader the come a am well for and as to been it. very to leadership is I've the I'm Mike know a have for to Emerson who is turn small to I perfect years. The so a future right to the last it positioned respect

two way our with I've so for years that. grateful all and on enjoyed I investors, the our think to with just the go and and analysts phone am I'm of a I better couldn't out last you working of and very thankful over

everybody. there crying calls. earnings no And on is Thanks

Lal Karsanbhai

Thanks, Frank. X. chart you And to on

Frank Dellaquila

Okay.

Here we X. go. to morning turn Please Good everyone. slide again,

results Our I'll color. summarized results bit provide were markets so the reflecting more our execution. operating second a quarter outstanding, you, and Lal for financial strong end

presentation. in the release Additional in to press the this the and appendix details in and slides are

our Underlying at in in and world groups business both were areas growth exceeded double geographic All sales reflecting the end them up our presence. our our markets, digits, positioning XX%. strength expectations in

the broad the digits up moderate was teens high-single several up after cycle strong also has growth, in quarters later up still to in demand of with sales digits. process were Discrete strong and but markets Demand markets based, double begun hybrid quarter. high quarter,

close by Safety X% our now We we the Russia sales net Net growth, acquisitions and the which the quarter. a bridge. in had productivity divestitures. line and our did point and divestiture XX% drag the essentially March on up offset returned of also quarter, sales was we to for divestiture from with currency X business report up in

In million grew realize approximately to reflecting growth. continue strong of Backlog to businesses the Our of the X significant also backlog $XXX contributed approximately points quarter, and price. orders end $X.X million, billion price the $XXX quarter.

AspenTech summarize those on revenue explained reasons revenue call AspenTech that here. in mind Please XXX. I'll their keep for they below expectations was briefly ASC and under reports

affecting were play. call. AspenTech's There revenue GAAP explained factors on earnings So the factors in complex, are three as

was distribution first dynamic, transmission the The which This the and demand to project see recognition timing-related and out longer-than-planned project revenue continue the power is OSI pushed we trends execution of in strong business, from mainly milestones. market. a

lengths well, contract but SSE than shift business. expected, experienced upfront customers Overall, perpetual direct also and impact term the choosing has progressing contracts that we are to recognition. contract on AspenTech within shorter revenue is some a shorter from lengths term the

seeing which And the is then market, AspenTech. in heritage is chemical OpEx some lastly, in impacting weakness bulk AspenTech

is Emerson's specialty across bulk For chemical further clarification, chemical diversified more both both exposure spend. and and CapEx OpEx and

basis business exceptional world and execution Adjusted AspenTech area margin margin by mix exceeded cost segment points. improved EBITA excluding all accretive margin contributed growth, operations XX%. Leverage price the and sales reflect Strong improvement to favorable and XXX

Adjusted next the and XX% to chart. on discuss we'll EPS grew that $X.XX,

XX% and year-to-date. growth. prior year slight earnings and contributed that Lastly, flow up capital to in growth up working free XX% the versus The improvement was cash quarter strong

AspenTech contributed to million flow. free $XXX cash

last contributed a XX% our segment growth other $X.XX importantly, a EPS mainly net and was slide AspenTech contributed leverage tax XX% Of quarter-over-quarter. because operating headwind. discrete XX% we had level that, of $X.XX items items, to turn growth year, Please $X.XX. Currency sales headwind Most XX. and were income underlying favorable

$X.XX count, that reduced quarter, share billion the The share. per share to we from completed contributed earnings resulting the in repurchase first $X

overall adjusted EPS again, year-over-year. So grew XX%

slide we'll talk to XX, XXXX outlook. about revised and Please turn market our

continue our markets. particular, process In end see and We most updated to key markets. broad-based hybrid both strength for we've in expectations

growth continued our We back plans our increased was high-single energy to range and the on have digit expectation the chemical and process a This momentum. customers digit strong quarter low-double the spending market signal second for to year. market sales in for the continued energy, rest to of transition of favorable

Middle East strong US, we and chemicals, spending, see to Within continue Asia. CapEx particularly the in the

to trend. and and sciences expect to we Within term be continues mining in from a the topic hybrid grow XXXX. and we And digits customers high-single continued among life prevalent longer be Reshoring to space, metals this strong. and this market our near expect benefits

to as As years. I the for last few demand beginning markets mentioned, discrete is these cycle strong been earlier moderate have

as improvements optimism costs. We is about automation we this input on by first spend are seeing customers. Europe our hear Still, productivity industrial and rising production affected continue from to factory in

earnings our year. turn on sales Please and slide expectation to described our growth, Based for guidance I talk we continued we'll are strengths XX mid-single our and revised and about of digit orders guidance. market increasing the the

and sales sales to been X.X% XX.X%. increased X% underlying has year-on-year to XXXX, to XX% to net growth For

to range the We lower be this and near Control nearer Devices end. the expect to of top Software Intelligent

on for We leverage our achievement are second operating and half segment expectation also outlook. the first strong increasing our based half

AspenTech. be range Continued favorable operating in to We performance and cost sales segment now XX% leverage guide. to continued excluding strength, this low price mid confidence the give operational in us increasing expect

$X.XX has the $X.XX at at range been range guidance up of $X.XX EPS the Adjusted the to and raised of midpoint. a $X.XX, to to bottom

to operations than core is approximately which reduced Emerson our AspenTech expectation, improved AspenTech into is incorporated strength more contribute to offsetting guidance. The this expected guidance. $X.XX is the in

This cash GAAP $XXX be which AspenTech is billion and future, earnings equivalent share. non-GAAP guidance adjusted net to million. we approximately per prior adjusted adjusted EBITA the is basis, free our flow an $X.X earnings express on for on XXX% XX% of other on cash with metrics, an consistent with conversion expected year, approximately net the of to flow adjusted key earnings flow approximately approximately contributes free is cash Free In conversion and will consistent net earnings basis. our

we convert we today average time conversion to cash of an has at business adjusted over that have on XXX% characteristics basis. expect strong The an

AspenTech adjusted be below XX% segment now EBITA year. We to slightly expect the for

is reminder, of renewals. seasonally contract quarter AspenTech's the quarter a due timing Emerson's As strongest third to

the that third and believe challenges. market operating results quarter reflects items We AspenTech's operating affected transitory

made. as as are AspenTech afforded ever, confident of strategic in ownership commitment We five long opportunity the year about $XXX synergy we the that term by our and million

Technologies expect the of we reminder, hope, sale, which interest excludes all guidance Climate income, a the XX. As and impact close, we of financial this of to May impact operations, the

reporting on provided treatment In of the financial we information Technologies. the post-closing have appendix, Climate

to that strong year. the reflects outlook for also turn to guide quarter, Briefly, the third the

sales We expect XX% growth of underlying XX%. to

mid $X.XX to high leverage year. midpoint in increase be XXs EPS XX% represents and expect an be We between in the quarter, to $X.XX. This adjusted prior and to the the at versus

quarter point challenges out, year's time, chain at the pushed impact the sales context, should million, China the into and We we approximately around last which for quarter was third estimated that electronics, impacted shutdowns with supply by quarter. serious being $XXX fourth China negatively third reduced by

Thank operator call you it I'll the now to for the your to attention. for back questions. turn open

Operator

Andrew morning's with this question And of Obin Instructions]. comes America. Bank [Operator from first

Andrew Obin

guess cash improving about on else But you're investors X will first working next to think the if of less if you flows. less debate over less starting perhaps How of dynamic question ordering releasing the and months? this with lead is lot releasing ordering impact you're XX do I free my And capital, is stuff. Clearly, orders, times working you're capital. maybe somebody ordering stuff, stuff. out a you're backlog, play

Lal Karsanbhai

just out expect and the comments Andrew. call, quarter Mid-single the of about, some still year. you digit heard the optimistic on rates, we at X%, range order which with that through as we're of that the run off continue to came the start remainder I'll environment, on Well, underlying

as environment and So there's and watching we those some our takes puts about based that. good very the on out outlined demand is carefully, strong. And whole, as correctly, and a feel we're but see Frank there,

well. backlog the obviously, that, said the the Having which work the further of robust did have to continue as We gives through second that company half. we backlog in for we very me confidence, a build and in performance quarter,

But started a very times and continued And orders. as with reflected of course, there's our largely still alleviated. Naturally, in come any to chain down. much, supply largely in out have consistent. saw pace there, very haven't issues challenges slow but you seen alleviated, few Lead order that sequentially, we to be quarter-over-quarter

anything Ram, to add?

Ram Krishnan

would again, our for of I Andrew, example, is a perspective, say I overall think less XX% lead from sales. than time distribution,

So, any we – ordering change times seen down, our patterns. with distributors, even we frankly, lead haven't can as come have in

business, KOBX is is the piece time Our dependent, which that be continues lead to other strong.

as fundamental change down. come patterns of all have to relates times no lead us as So customers, from it across us for our categories products ordering for

we others But know mentioned that. seen I the Now, have impact. to haven't date,

Andrew Obin

aligning Just Emerson channel. Aspen sales maybe on follow-up and a question

improve deep chemical said much broader. Aspen clearly visibility are question a highlighted Emerson improve access guys space, benefit Golden in the the now to of Aspen have, has? relationships I to do verticals? Emerson market synergies. Aspen, with one at what to lot What visibility But going Was of opportunities the there together, relationships work our that CIOs, at from key I right? key You affirmed because of guess in have also you for the Triangle's You can to and example, opportunities but you've closer you success as are clients, broad you the to at

Lal Karsanbhai

large area and for there and on the by force example the projects, heart be And great that for a have control is is of one that's alignment with robust AspenTech. exist, an be in alignment was shared opportunity we leadership, with then that that as to question. AspenTech. – to you which pursuit sales well. commercial it There back is It's a proving the two industry capital quite a very Ram? system agreement goes and joined will world incentives, honestly our basis whitespace prove that robust areas, and approach in opportunities and more but a analysis I And systematic of very very to selling the of particularly by organizations, industry the

Ram Krishnan

early. of I have, way momentum metals in and more add, level the is shared think the But that with want have we innovation, of is to like mining. we before, Just drive systems DeltaV really XX% seat sciences as are the at life we really landscape three for many don't X,XXX customers. to you software our those and on control capability the of Certainly, markets AspenTech. customer projects there

agreement. So Aspen, those where the opportunities, unique are we're our commercial that's we of approach AMS bring systems we through taking the type can that the have

the We and effort are markets doesn't where where very, put. the very really being lot of where look geographically focused we is strength, as a well, that's at have Aspen

It's relationship. So that more we'll benefit whitespace the relates that see through. momentum but The it is early three quarters to the in, I come will described obviously, time. as come over in on projects,

Operator

Capital the Markets. Dray with RBC from next Deane And comes question

Deane Dray

the My appreciate us elsewhere progress with of first on on maybe demand especially the did chemical Is isolated side we some How verticals Because quarter? it the in specific are seeing the to please. slowing you're the but or side, moderating? through question Europe, is what color through some geographies? hearing it take discrete there,

Ram Krishnan

around order machine builders much North From sales sales which Europe, these quarter, domestic market negative discrete builder from as by backlog Germany, in slowdown in slowdown as and which primarily Deane, in a is go perspective, discrete the this Orders X.X%, we the perspective, by of strong the a growth serve We haven't – the seen close we in builders. do both America, segment a quarter, in business slowdown the quarter export. in slight activity from Ram a well was Europe. but machine did machine had good a Germany driven driven particularly growth here. segment in German Frankly, now XX% reduction. to slightly

of slowdown Asia remains Frankly, in probably China little holding bit really up, that's is the segment, a the good. So and UK. one

tougher as remain the that's expect positive expect we discrete into to color. turn the of through We they and second the So get before get XXXX. do half negative year, we into comparisons orders to

Deane Dray

a adjusted either And kind difference one cash needs is that this of that capital flow Free of given GAAP is supply I want year, follow time working hear Just chain? more from difference, it between much just climate? to up. also, Frank here. and Or more how

Frank Dellaquila

none of between – No, as difference the ratio, simply calculation the denominator. just earnings calculation, itself. talking and the free we difference these denominator cash guide Deane, the of flow and $X.X use there's differences is difference in the cash billion of or earnings the about the we're at that's whether the flow we use the GAAP all conversion no adjusted

Operator

comes the And with next Research. question Davis Melius Scott from

Scott Davis

don't a future? to I is that circumstance? chemical on the it and fixate bulk might something in AspenTech, perhaps is later, The that past it unusual will this typically perhaps, I that? anyways. can Or you we experienced Volatile? but of kind Is see in want OpEx, do the an they've

Ram Krishnan

chemical the customers suite. bit of think business of their see is gets the dynamic chain but demand the rates of day, say, because optimized, there manufacturing end the little and a I which you with No, slowing the software and the the portion chemical being typically bulk AspenTech at utilization many impacted supply of

or new purchases of terms slowdown. the that's in new we seeing around which that, forecast, where have into contracts built we're So

to chain the the that chemicals manufacturing OpEx really continues bulk on midstream in seen we've supply good. them continues So to large the the when side. upstream and slowdown, strong, in suite chemical and we and that's the refining slow where remain have for customers spending normal. down past remain seen Obviously, It's pretty

Scott Davis

a I is but there's there can but in Emerson. price know and assuming an down I integrating its quite stock some – taking interest highs, it always over from larger be AspenTech works entity those in time, discussed and the any in fully perhaps, it's stake even your into know Guys, is bit things restrictions,

Lal Karsanbhai

nearly have well. period it's address year – it works. the piece noted, vehicle. change committed No, I've the at for And now. year structure the from the standstill at we set then and seeing the look, technology you it about We're another point model closed that are that calendar ago forward in commercial a we're time then, like impetus think It past, but changes a a still value. the very not We'll in now. in said furthermore, we you working in as year We're as through And of then this to that know, we ownership the point. a and to

Operator

And from Citigroup. question comes with the next Andy Kaplowitz

Andy Kaplowitz

to low us Emerson I know Lal, for sustain supposed incremental record allowing in plus changed record supply Is both a maybe underlying you for mid more XXs, XXXX? the and able how chain price margin incrementals XX% cost it into over Emerson color could XXXX your you give improved much QX XX% the term thinking you're moving the performance is what's XXs, incrementals is about new in the little in but to QX, to mostly X% to in Emerson higher that's forward? well longer excess versus the that and and over Frank mentioned price environment?

Lal Karsanbhai

some I'll operating let Ram color. add

we quarter, XX through six believe guide strong months. the early in went we put together for that leverage full certainly we in on performance the given year the the As the first the

Look, there were things a that Obviously, positive. was exceptional. of lot execution the were

in The was we mix the quarter. the price volume very cost operating businesses the beneficial as and think the noted, exact. But well furthermore, sales at well in important, underlying I XX%. as were and performed executives growing very,

perform But way a our very businesses of lot that went is we've honestly, our designed enables a system high at management the things level. very a within working So that there. to important parameter

Ram?

Ram Krishnan

quarter, the North Other the in strong way certainly and we control instrumentation dynamics businesses our and that America went there. is got our performance strong in leverage final

the the So element in Lal on price-cost mentioned, leverage. fundamentally, mix, quarter growth dynamics are the does XX% that sales certainly help but,

went those favor. in our dynamics So all of

Andy Kaplowitz

Maybe you little by into us can color more seeing a give what you're region.

I think in you It China in like it's weak better was seems QX. for QX. relatively

QX. comparisons Lal, easy think, you mentioned I in

year. the moving about rest how do demand regional think So forward you of for the

Lal Karsanbhai

was down digits, for good. in as performance, up mid-single for It a in high quarter honestly us. terms a digits and mid-single sales Really China of and It's It outlined. orders, was single globally very goes. us sales quarter Frank the very flipped robust digits. in the in

in feel we for we remainder good. the And feel about year we So as of what the very see China well. good

that's So positive. a

North nearshoring processed, in strength, and broad with hybrid in lot growth, Look, driven a the very XX-ish growth it of and strength of America, by percent core sales. robust elements

year. the us Andy, growth honestly, very life And very in the strong. orders Europe, the energy, investments. by highlighted mid-teens, honestly, that's and the with sales, biggest It strong and surprise are to that in very XX% for science quarter very sustainability of been in continues be

the incredibly then rest an region. Middle significant Asia, sustainability of with investments Southeast and then the driven Asia, East as across well, LNG and India, in strong Africa And region and by

momentum in that weaknesses the the this discrete the talked through, very at So we've year. go of point the time, with continue rest global the we already as exception to strong of here see into through quarter

Operator

next Tusa Morgan. J.P. the with from And Steve comes question

Steve Tusa

for in price do the what And be it quarter? you the year? expect was capture What to

Frank Dellaquila

X% points to expect It to was in X year. we the be the X% quarter for and

Steve Tusa

not surprising integration of execution going a guess, doing, from on like high some curious acquisition Perhaps guess, they're a I of contracts. because though it, get was played guys of the, just the that it assets surprised way Aspen level, to by really things there. not clearly sure I like assets this there's governance knew. results, the some like phase an that sounds it's conversation in it those what market guys are call were boardroom I that how about I'm guess, contributing. them, I them a the even lot was the there to a I'm couple that work How you. that But I it perspective, does that Lal, the surprising the you out. on these you are there in seems has

Like, going how the out plays that's and that a your So, on I'm there discussion little color just how when of perspective type forward more curious. move perhaps to kind that thing happens. integration on and from of

Lal Karsanbhai

here four Maybe you give critical points. here. Yeah, there's some or no. color Absolutely, Steve. three I'll

it and important. I collectively solution to optimistic customer a begin be diverse very very me saying the Let be across continue by about base. a differentiation first business technology the as continue to and that we That's provides that

Secondly, pace. ahead the and both the progressing of execution synergies is commercial of technology the

our on the of I on across world, technology organizations, capital pursuits. we're a highlighted alignment and that a we have and funnel working the joint worked project We teams, across we have selling and many

happened in think talk to what here So dimensions important about. And Q? they're the I

Chantelle But It's XX three to ACV robust challenges company we and the The that are business, the a challenges level, Antonio communication at not the CFO process, rule have with growth cash these operating with speak an and who's level. And strongly. flow. a we were first, exceeding strong perform And just basis. the continues XX% at board extremely quarter. there but in software a regular of on

those on in is a first The was obviously SSE, of the at we was The of perpetual to subscriptions, to. is converted one to they three assets the in was shorter we that converted one one – the that level. contracts four plan came AspenTech subscription. year basis term in more of which year The assumption reality contributed the license from that on subscriptions

that the conversion an of on that just accept in those traditional So recognition, market nature revenue customers impact that subscription space contracts journey the perpetual as and had over licenses.

It But you perp that And it. to business the few very the optimistic with growth to on been conversion, high a referenced a is is migration OSI. jointly strong. but component And business. know, as in also differentiated you execute a next segments, slower. It's through we business came very sub heavy has honestly, the second, integration a we that the software and The longer ultimately, expected. in will work to are be The orders from about there. the continue quarters business than taking to is service

earlier, And chemical business described Ram to then heritage the as the related segment slowdown there. in bulk lastly, AspenTech the

that tremendous has of having we reset. embedded And creation value investment continue the opportunity outlook the in that, And amount the CEO here. have process I CEO, very operating through we said But in It's our CFOs guide. all be we the I for conversations in part the there's results processes, – is of be the that look, and provided through team. and Emerson plan of Emerson been is still believe here a in shareholders. It's with board can of which as the committed. And which here discussions and think we to to both manage and best management the to directors to embedded

Steve Tusa

Are you in back bounce those your assuming a fourth quarter in results?

Lal Karsanbhai

look, with into embedded investors their call which Of perspective, their our we've guide. they course. think shared I on No, their

Operator

Research. from question Coe The Nigel Wolfe with next comes

Nigel Coe

Steve's just Frank. is Maybe to question better Maybe the in picking guide. the just about this Clearly, moving the there. some of by the moving maybe is you, up Maybe off a but bulk some driven of pieces conversion, of conversion, pieces. talk margin revenue uplift the question much

in stock of be Any changed that of sort comp. how's the Maybe helpful. major guide? lumps discrete would the AspenTech,

Frank Dellaquila

strong and the outlook all expect leverage main that the as as the operations. to year. second The execution the sales for obviously the the price driver the is strong have uplift things quarter third improved the in throughout operational realization, the The with we in rest well of drove in quarter,

that So, the that story. reduced strong overcome the is guide. mainly to enough And AspenTech is

we As the their down our year. they guide the Lal And said, took essentially guide numbers. for incorporate into

to pieces. guidance overcome the as we've from that move main those the we So are February those and are headwind current the

Nigel Coe

And $X.XX, mark-to-market $X.XX, that's AspenTech? what, on

Frank Dellaquila

yeah, year roughly, the For range. that in

Nigel Coe

on Maybe picking the Ram's DCS. base off of up of comment installed sort

just the but Does of I we now we've three that the You threshold know upgrade patching in upgrade an are see said some cycle? at cycles Was level with around that it cycle? in software? have more capabilities base don't where we precipitate about install around the capability. past, XX% talked upgrade might an software

Ram Krishnan

wave. But optimization I upgrade a focus one customers we're for is to stack we're digital major address automation where more their and Everybody area. benefits disciplined suite, don't with to an we're assets the and the the of more software Aspen overall on optimization reliability the that automation being manufacturing life across the power the to customers. installed more of industries, the in to programs their these some in system many improve interest performance across and sciences going more board, assets. it's in on I the important digitally of then of capabilities know and level approach around launch think asset very performance role And is play, if three the that each our has and uptime across the infrastructure. our interested management planning transformation And from of customers transforming primarily benefits a software APM the and brings seeing

the that's So journey.

going more more that. and of to you're think I see

Sustainability it's is deployed. wave. where But think big software another area gets don't I a

I more we time, over and opportunity think it's the a disciplined have it. wave drive to

Operator

from with And the next Research. Sprague Jeff Vertical question comes

Jeff Sprague

done ground big of it I has are touch Lal month and covered. on Climate to and lot wanted working deployment. the capital the like did But you're that you or Instruments just sense. you makes certainly six looks back also between a so A moves And bolt-ons said gap just indicate have and proceeds maybe that closing. National

over more wonder we could Are out actionable repurchase? there some the should kind period? be share that summer there? just timeframe? Is that expect that play might over how what bolt-ons for Just room there Or happening of

Lal Karsanbhai

come the the But, work closing That's here. aggressively. as be look, regulatory pacing Instruments may those months of key Jeff. sooner. obviously see. Frank no, going on as well approvals. we We'll the towards It know, six items, over National to let comment I'll Depends you

aggressively work them The within businesses. we the bolt-ons,

small of will in And are we we looking dollar competitive price looking at have now we're processes, sub point deals, those billion to two time. evaluating. type that are It of These at right at do some so. purchase a continue any And and not. and have or we're number others three given

the repurchase. out or we committed our and continue into shareholders, as return XXXX, share to cash is, plan Look, go lay that. to appropriate through And what we will the be we'll to there very dividends whether communicate that's

to anything add? Frank,

Frank Dellaquila

gaps Jeff, tremendous debt as capital of After I of Climate and have share it the balance of NI. repurchase the EBITDA we closing that's a X amount in broadly view wouldn't strategy. to and the more kind view sheet context we'll decisions of well NI, I closing close flexibility. between below part allocation a financial would

that context. make decisions continue in to So those just we'll

Jeff Sprague

do why because of just seeing business color there shouldn't Just chem. obviously, in maybe understand there back a lot I that right little issues a sign we what a CapEx of the chem pressure to are. across you're in more as diverse kind industry this kind profitability have more warning bit now. And and early core and than an Aspen, you view of but of business

Ram Krishnan

and in North particularly in capital good Pacific is methanol the ethylene as we Asia have specialty particularly us, America. in East, chemical, For chemical, it, seen and cycle Middle investments as

So, slow. for cycle capital us, we haven't seen the

is to the sales I customers dynamic chain chemical impact suite to slowing production them However, but that. that's that them. referenced in OpEx of point, demand, referencing throttle as purchases, the is is they what manufacturing they've purchases, a and It's small Aspen response think given in their their to the impacting it's really supply mix, translates MSC XX% at spend therefore this

seen been in we have the our emerging really markets. wins date of chemical/petrochemical any many then have haven't we major slowdown honest, be to been that in sharing But project space, with the KOBX And in you certainly or KOBX chemical. to particularly

in don't feedstock despite point industry, as slowdown So inflection that higher or the at an costs. this point, we a see the

Operator

from question Fargo. Joe The O'Dea with next comes Wells

Joe O'Dea

America you're bit continued natural impact in of whether wonder the it's North last kind flip battery on like I seeing it side over ordered the macro of and just the few elaborate of standpoint, on just the strength then interplay you some structural sort semiconductors. what's if of that But years? and and discrete, of a whether could you're between been little uncertainty sort any a the having is that that, or just seeing electric from the digestion of cyclical more anything industrial sounds general

Ram Krishnan

momentum we the with honest, a a in than don't a on it but to in markets. more is to play the obviously, We be play haven't we'll and batteries seen America, in obviously date, – exposure seeing Instruments. obviously in way North we yet. slowdown DeltaV In process dynamic the side, America, we automation our play that In slower business get we're machine fashion core we smaller with in seen National business. lot the discrete big significant a But to that haven't North semiconductors

Joe O'Dea

you're about next process to and ensure successful integration wanted efforts of standing what up, ask are sort the to say, underway the integration launch six and just over there. currently Natty of Also, that planning months a

Lal Karsanbhai

we In is [ph]. last a the week we've a a committee We've on Vincent have on and team. each functional or with We does across eight day case, management that half value And integration I Eric Obviously, been the This basis, a kicked team named steering and Lal. Cervello that then drivers team. assembled identified. integration in leader as steering have our leadership Starkoff Austin so participate committee. the the over off with

So that's off and running. Meetings are taking place.

we this integrations. have a We now we'll ahead work with full really then we to group on up, And Great organizational all Louis large kickoff of be close. and in-person in discussions and us start. good already off But about the as coming will a are here excited have place. St. taken running head

Operator

question-and-answer you both Thank presentation. you. well attending This so today's event concludes session the as the itself. Thank for much as

disconnect now your lines. may You

Emerson Electric (EMR) 3 May 232023 Q2 Earnings call transcript