TechDogs-"Rockwell Automation Reports Third Quarter 2022 Results; Updates Fiscal 2022 Guidance"

Automation

Rockwell Automation Reports Third Quarter 2022 Results; Updates Fiscal 2022 Guidance

By Business Wire

Business Wire
Overall Rating
  • Total orders up 17% year over year
  • Reported sales up 6.5% year over year; organic sales up 7.1%
    • Acquisitions contributed 2.5%
    • Currency reduced sales (3.1)%
  • Total ARR up 59%; Organic ARR up 18%
  • Diluted EPS of $2.55 and Adjusted EPS of $2.66; up 10% and 15% year over year, respectively
  • Updates fiscal 2022 reported sales growth guidance to 10.5% - 12.5%; organic sales growth to 10% - 12%
  • Updates fiscal 2022 Diluted EPS guidance to $7.74 - $8.14; Adjusted EPS guidance to $9.30 - $9.70


MILWAUKEE--(BUSINESS WIRE)--Rockwell Automation, Inc. (NYSE: ROK) today reported third quarter fiscal 2022 results.

"Rockwell delivered a strong quarter, both on top line and bottom line, with Adjusted EPS growing over 15% year over year. Our continued order strength reflects the value our customers place on Rockwell’s differentiated offerings and the increased need for automation solutions. This, coupled with gradually improving supply chain, strong operating performance, and price/cost execution resulted in exceptional earnings in the quarter," said Blake Moret, Chairman and CEO.

Fiscal Q3 2022 Financial Results

Fiscal 2022 third quarter sales were $1,969 million, up 6.5% from $1,848 million in the third quarter of fiscal 2021. Organic sales increased 7.1%, currency translation decreased sales by 3.1%, and acquisitions increased sales by 2.5%.

Fiscal 2022 third quarter net income attributable to Rockwell Automation was $298 million or $2.55 per share, compared to $271 million or $2.32 per share in the third quarter of fiscal 2021. The increases in net income attributable to Rockwell Automation and Diluted EPS are primarily due to higher sales, including price increases, lower pension and post-retirement costs, partially offset by fair value adjustments recognized in fiscal 2022 as compared to fiscal 2021 in connection with our investment in PTC (the "PTC adjustments"). Fiscal 2022 third quarter Adjusted EPS was $2.66, up 15% compared to $2.31 in the third quarter of fiscal 2021 primarily due to higher sales and higher margin. Price/cost was positive in the quarter.

Pre-tax margin was 17.5% in the third quarter of fiscal 2022 compared to 17.0% in the same period last year.

Total segment operating earnings were $409 million in the third quarter of fiscal 2022, up 11.0% from $369 million in the same period of fiscal 2021. Total segment operating margin was 20.8% compared to 19.9% a year ago primarily due to higher sales and lower incentive compensation, partially offset by higher investment spend.

Cash flow generated by operating activities in the third quarter of fiscal 2022 was $345 million, compared to $462 million in the third quarter of fiscal 2021. Free cash flow in the third quarter of fiscal 2022 was $327 million, compared to $437 million in the same period last year. Decreases in cash flow from operating activities and free cash flow were due to increases in working capital.

Fiscal Year 2022 Outlook

The table below provides guidance for sales growth and earnings per share for fiscal 2022. Our guidance reflects our strong demand and record backlog along with our latest view of supply chain constraints.

Guidance

Prior Guidance

Reported sales growth

10.5% - 12.5%

11% - 15%

Organic sales growth

10% - 12%

10% - 14%

Inorganic sales growth

~2.5%

~2.5%

Currency translation

~(2.0)%

~(1.5)%

Diluted EPS

$7.74 - $8.14

$7.60 - $8.20

Adjusted EPS

$9.30 - $9.70

$9.20 - $9.80

"We continue to expect strong double-digit year-over-year and sequential sales growth in Q4. However, we are reducing the midpoint of our fiscal year organic growth range to reflect ongoing supply chain volatility in this environment. In volatile times like these, we are executing very well, and I'm proud of how our teams are working together with our partners, suppliers, and customers," Moret continued.

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

Intelligent Devices

Intelligent Devices third quarter fiscal 2022 sales were $878 million, a decrease of 0.5% compared to $883 million in the same period last year. Organic sales increased 2.7% and currency translation decreased sales by 3.2%. Segment operating earnings were $173 million compared to $194 million in the same period last year. Segment operating margin decreased to 19.7% from 21.9% a year ago primarily driven by higher investment spend.

Software & Control

Software & Control third quarter fiscal 2022 sales were $607 million, an increase of 19.1% compared to $510 million in the same period last year. Organic sales increased 13.4%, currency translation decreased sales by 2.8%, and our Plex acquisition increased sales by 8.5%. Segment operating earnings were $191 million compared to $128 million in the same period last year. Segment operating margin increased to 31.4% from 25.2% a year ago, driven by higher sales.

Lifecycle Services

Lifecycle Services third quarter fiscal 2022 sales were $484 million, an increase of 6.1% compared to $456 million in the same period last year. Organic sales increased 8.7%, currency translation decreased sales by 3.2%, and acquisitions increased sales by 0.6%. Segment operating earnings were $45.4 million compared to $46.8 million in the same period last year. Segment operating margin decreased to 9.4% from 10.3% a year ago driven by supply chain constraints and higher investment spend, partially offset by higher sales and lower incentive compensation. Segment operating margin was up 210 bps sequentially from prior quarter margin primarily due to higher sales.

Supplemental Information

ARR - Total ARR grew 59% and organic ARR grew 18% compared to the end of the third quarter of fiscal 2021.

Corporate and Other - Fiscal 2022 third quarter corporate and other expense was $15.6 million compared to $29.2 million in the third quarter of fiscal 2021. The decrease was primarily due to mark-to-market adjustments related to our deferred and non-qualified compensation plans.

Purchase Accounting Depreciation and Amortization - Fiscal 2022 third quarter purchase accounting depreciation and amortization expense was $25.9 million, up $13.0 million from the third quarter of fiscal 2021 primarily related to the August 2021 acquisition of Plex Systems.

Tax - On a GAAP basis, the effective tax rate in the third quarter of fiscal 2022 was 14.4% compared to 14.2% in the third quarter of fiscal 2021. The Adjusted Effective Tax Rate for the third quarter of fiscal 2022 was 14.5% compared to 14.6% in the prior year.

Share Repurchases - During the third quarter of fiscal 2022, the Company repurchased approximately 0.8 million shares of its common stock at a cost of $176 million. At June 30, 2022, $1.3 billion remained available under our existing share repurchase authorization.

ROIC - Return on invested capital was 12.8% compared to 40.4% in the third quarter of fiscal 2021. The decrease is driven by lower pre-tax income primarily related to PTC adjustments and higher debt due to the acquisition of Plex Systems.

Definitions

Non-GAAP Measures - Organic sales, total segment operating earnings, total segment operating margin, Adjusted Income, Adjusted EPS, Adjusted Effective Tax Rate, free cash flow, free cash flow conversion, and return on invested capital are non-GAAP measures that are reconciled to GAAP measures in the attachments to this release.

Organic ARR - Annual recurring revenue (ARR) is a key metric that enables measurement of progress in growing our recurring revenue business. It represents the annual contract value of all active recurring revenue contracts at any point in time. Recurring revenue is defined as a revenue stream that is contractual, typically for a period of 12 months or more, and has a high probability of renewal. The probability of renewal is based on historical renewal experience of the individual revenue streams, or management's best estimates if historical renewal experience is not available. Organic ARR growth is calculated as the dollar change in ARR, adjusted to exclude the effects of currency translation and acquisitions, divided by ARR as of the prior period. The effects of currency translation are excluded by calculating Organic ARR on a constant currency basis. When we acquire businesses, we exclude the effect of ARR in the current period for which there was no comparable ARR in the prior period. Organic ARR growth is also used as a financial measure of performance for our annual incentive compensation. Because ARR is based on annual contract value, it does not represent revenue recognized during a particular reporting period or revenue to be recognized in future reporting periods and is not intended to be a substitute for revenue, contract liabilities, or backlog.

Conference Call

A conference call to discuss the quarterly results will be held at 8:30 a.m. Eastern Time on July 27, 2022. The call will be an audio webcast and accessible on the Rockwell Automation website (https://ir.rockwellautomation.com/investors/). Presentation materials will also be available on the website prior to the call.

Interested parties can access the conference call by dialing the following numbers: (888) 330-2022 in the U.S. and Canada; (646) 960-0690 for other countries. Use the following passcode: 5499533. Please dial in 10 minutes prior to the start of the call.

Both the presentation materials and a replay of the call will be available on the Investor Relations section of the Rockwell Automation website through August 27, 2022.

This news release contains statements (including certain projections and business trends) that are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Words such as “believe”, “estimate”, “project”, “plan”, “expect”, “anticipate”, “will”, “intend”, and other similar expressions may identify forward-looking statements. Actual results may differ materially from those projected as a result of certain risks and uncertainties, many of which are beyond our control, including but not limited to:

  • the availability and price of components and materials;
  • the severity and duration of disruptions to our business due to pandemics (including the COVID-19 pandemic), natural disasters (including those as a result of climate change), acts of war (including the Russia and Ukraine conflict), strikes, terrorism, social unrest or other causes, including the impacts of the COVID-19 pandemic and efforts to manage it on the global economy, liquidity and financial markets, demand for our hardware and software products, solutions, and services, our supply chain, our work force, our liquidity, and the value of the assets we own;
  • macroeconomic factors, including inflation, global and regional business conditions (including adverse impacts in certain markets, such as Oil & Gas), commodity prices, currency exchange rates, the cyclical nature of our customers’ capital spending, and sovereign debt concerns;
  • the availability and cost of capital;
  • our ability to attract, develop, and retain qualified personnel;
  • the successful integration and management of strategic transactions and achievement of the expected benefits of these transactions;
  • laws, regulations, and governmental policies affecting our activities in the countries where we do business, including those related to tariffs, taxation, trade controls (including sanctions placed on Russia), and climate change;
  • the availability, effectiveness, and security of our information technology systems;
  • our ability to manage and mitigate the risk related to security vulnerabilities and breaches of our hardware and software products, solutions, and services;
  • the successful development of advanced technologies and demand for and market acceptance of new and existing hardware and software products;
  • our ability to manage and mitigate the risks associated with our solutions and services businesses;
  • the successful execution of our cost productivity initiatives;
  • competitive hardware and software products, solutions, and services, pricing pressures, and our ability to provide high quality products, solutions, and services;
  • disruptions to our distribution channels or the failure of distributors to develop and maintain capabilities to sell our products;
  • intellectual property infringement claims by others and the ability to protect our intellectual property;
  • the uncertainty of claims by taxing authorities in the various jurisdictions where we do business;
  • the uncertainties of litigation, including liabilities related to the safety and security of the hardware and software products, solutions, and services we sell;
  • risks associated with our investment in common stock of PTC Inc., including the potential for volatility in our reported quarterly earnings associated with changes in the market value of such stock;
  • our ability to manage costs related to employee retirement and health care benefits; and
  • other risks and uncertainties, including but not limited to those detailed from time to time in our Securities and Exchange Commission (SEC) filings.

Rockwell Automation, Inc. (NYSE: ROK), is a global leader in industrial automation and digital transformation. We connect the imaginations of people with the potential of technology to expand what is humanly possible, making the world more productive and more sustainable. Headquartered in Milwaukee, Wisconsin, Rockwell Automation employs approximately 25,500 problem solvers dedicated to our customers in more than 100 countries. To learn more about how we are bringing The Connected Enterprise(R) to life across industrial enterprises, visit www.rockwellautomation.com.

ROCKWELL AUTOMATION, INC.

SALES AND EARNINGS INFORMATION

(in millions, except per share amounts and percentages)

Three Months Ended

Nine Months Ended

June 30,

June 30,

2022

2021

2022

2021

Sales

Intelligent Devices (a)

$

878.3

$

882.9

$

2,587.2

$

2,454.8

Software & Control (b)

606.9

509.6

1,655.7

1,452.9

Lifecycle Services (c)

483.5

455.7

1,391.2

1,281.9

Total sales (d)

$

1,968.7

$

1,848.2

$

5,634.1

$

5,189.6

Segment operating earnings

Intelligent Devices (e)

$

173.2

$

193.6

$

504.4

$

535.8

Software & Control (f)

190.6

128.3

439.7

411.2

Lifecycle Services (g)

45.4

46.8

103.6

121.1

Total segment operating earnings (1) (h)

409.2

368.7

1,047.7

1,068.1

Purchase accounting depreciation and amortization

(25.9

)

(12.9

)

(78.1

)

(37.7

)

Corporate and other

(15.6

)

(29.2

)

(69.6

)

(87.6

)

Non-operating pension and postretirement benefit credit (cost)

11.9

(34.3

)

(5.0

)

(48.3

)

Change in fair value of investments

(5.2

)

43.3

(138.3

)

624.6

Legal settlement

70.0

Interest expense, net

(30.2

)

(22.1

)

(88.9

)

(67.2

)

Income before income taxes (i)

344.2

313.5

667.8

1,521.9

Income tax provision

(49.4

)

(44.5

)

(84.7

)

(252.2

)

Net income

294.8

269.0

583.1

1,269.7

Net loss attributable to noncontrolling interests

(3.1

)

(2.3

)

(10.2

)

(9.9

)

Net income attributable to Rockwell Automation, Inc.

$

297.9

$

271.3

$

593.3

$

1,279.6

Diluted EPS

$

2.55

$

2.32

$

5.06

$

10.91

Adjusted EPS (2)

$

2.66

$

2.31

$

6.45

$

7.10

Average diluted shares for diluted EPS

116.5

117.0

116.9

117.1

Segment operating margin

Intelligent Devices (e/a)

19.7

%

21.9

%

19.5

%

21.8

%

Software & Control (f/b)

31.4

%

25.2

%

26.6

%

28.3

%

Lifecycle Services (g/c)

9.4

%

10.3

%

7.4

%

9.4

%

Total segment operating margin (1) (h/d)

20.8

%

19.9

%

18.6

%

20.6

%

Pre-tax margin (i/d)

17.5

%

17.0

%

11.9

%

29.3

%

(1) Total segment operating earnings and total segment operating margin are non-GAAP financial measures. We exclude purchase accounting depreciation and amortization, corporate and other, non-operating pension and postretirement benefit credit (cost), change in fair value of investments, the $70 million legal settlement in fiscal 2021, interest expense, net, and income tax provision because we do not consider these items to be directly related to the operating performance of our segments. We believe total segment operating earnings and total segment operating margin are useful to investors as measures of operating performance. We use these measures to monitor and evaluate the profitability of our operating segments. Our measures of total segment operating earnings and total segment operating margin may be different from measures used by other companies.

(2) Adjusted EPS is a non-GAAP earnings measure that excludes purchase accounting depreciation and amortization, non- operating pension and postretirement benefit credit (cost), change in fair value of investments, and net loss attributable to noncontrolling interests, including their respective tax effects. See "Other Supplemental Information - Adjusted Income, Adjusted EPS, and Adjusted Effective Tax Rate" section for more information regarding non-operating pension and postretirement benefit credit (cost) and a reconciliation to GAAP measures.

ROCKWELL AUTOMATION, INC.

CONDENSED STATEMENT OF OPERATIONS INFORMATION

(in millions, except percentages)

Three Months Ended

Nine Months Ended

June 30,

June 30,

2022

2021

2022

2021

Sales (a)

$

1,968.7

$

1,848.2

$

5,634.1

$

5,189.6

Cost of sales

(1,166.3

)

(1,083.8

)

(3,418.5

)

(3,011.3

)

Gross profit (b)

802.4

764.4

2,215.6

2,178.3

Selling, general and administrative expenses (c)

(442.0

)

(436.9

)

(1,318.0

)

(1,232.8

)

Change in fair value of investments (1)

(5.2

)

43.3

(138.3

)

624.6

Other income (expense)

19.8

(34.9

)

(1.0

)

20.1

Interest expense

(30.8

)

(22.4

)

(90.5

)

(68.3

)

Income before income taxes

344.2

313.5

667.8

1,521.9

Income tax provision

(49.4

)

(44.5

)

(84.7

)

(252.2

)

Net income

294.8

269.0

583.1

1,269.7

Net loss attributable to noncontrolling interests

(3.1

)

(2.3

)

(10.2

)

(9.9

)

Net income attributable to Rockwell Automation, Inc.

$

297.9

$

271.3

$

593.3

$

1,279.6

Gross profit as percent of sales (b/a)

40.8

%

41.4

%

39.3

%

42.0

%

SG&A as percent of sales (c/a)

22.5

%

23.6

%

23.4

%

23.8

%

(1) Primarily relates to the change in fair value of investment in PTC.

ROCKWELL AUTOMATION, INC.

CONDENSED BALANCE SHEET INFORMATION

(in millions)

June 30,

September 30,

2022

2021

Assets

Cash and cash equivalents

$

482.9

$

662.2

Receivables

1,702.2

1,424.5

Inventories

989.1

798.1

Property, net

568.5

581.9

Operating lease right-of-use assets

339.5

377.7

Goodwill and intangibles

4,518.5

4,647.7

Long-term investments

1,201.0

1,363.5

Other assets

998.2

846.0

Total

$

10,799.9

$

10,701.6

Liabilities and Shareowners’ Equity

Short-term debt

$

601.5

$

509.7

Accounts payable

989.2

889.8

Long-term debt

3,464.1

3,464.6

Operating lease liabilities

279.9

313.6

Other liabilities

2,779.6

2,829.8

Shareowners' equity attributable to Rockwell Automation, Inc.

2,391.2

2,389.6

Noncontrolling interests

294.4

304.5

Total

$

10,799.9

$

10,701.6

ROCKWELL AUTOMATION, INC.

CONDENSED CASH FLOW INFORMATION

(in millions)

Nine Months Ended

June 30,

2022

2021

Operating activities:

Net income

$

583.1

$

1,269.7

Depreciation and amortization

178.2

135.7

Change in fair value of investments (1)

138.3

(624.6

)

Retirement benefits expense

61.7

117.8

Pension contributions

(23.1

)

(26.7

)

Receivables/inventories/payables

(413.8

)

(82.9

)

Contract liabilities

96.8

81.0

Compensation and benefits

(114.9

)

141.6

Income taxes

(202.6

)

(8.9

)

Other operating activities

120.0

54.2

Cash provided by operating activities

423.7

1,056.9

Investing activities:

Capital expenditures

(100.3

)

(76.6

)

Acquisition of businesses, net of cash acquired

(16.5

)

(283.0

)

Purchases of investments

(48.5

)

(9.1

)

Proceeds from sale of investments

66.0

Other investing activities

0.1

(3.5

)

Cash used for investing activities

(99.2

)

(372.2

)

Financing activities:

Net issuance of short-term debt

301.8

Repayment of debt

(210.0

)

Cash dividends

(390.4

)

(372.9

)

Purchases of treasury stock

(218.5

)

(238.5

)

Proceeds from the exercise of stock options

46.1

122.7

Other financing activities

(7.5

)

(14.1

)

Cash used for financing activities

(478.5

)

(502.8

)

Effect of exchange rate changes on cash

(25.3

)

27.3

(Decrease) increase in cash, cash equivalents, and restricted cash (2)

$

(179.3

)

$

209.2

(1) Primarily relates to the change in fair value of investment in PTC.

(2) Cash, cash equivalents, and restricted cash at June 30, 2022, includes restricted cash of $17.2 million recorded in Other assets in the Condensed Balance Sheet. Cash, cash equivalents, and restricted cash at June 30, 2021, includes restricted cash of $25.8 million recorded in Other assets in the Condensed Balance Sheet.

ROCKWELL AUTOMATION, INC.

OTHER SUPPLEMENTAL INFORMATION

(in millions, except percentages)

Organic Sales

We translate sales of subsidiaries operating outside of the United States using exchange rates effective during the respective period. Therefore, changes in currency exchange rates affect our reported sales. Sales by acquired businesses also affect our reported sales. We believe that organic sales, defined as sales excluding the effects of acquisitions and changes in currency exchange rates, which is a non-GAAP financial measure, provides useful information to investors because it reflects regional and operating segment performance from the activities of our businesses without the effect of acquisitions and changes in currency exchange rates. We use organic sales as one measure to monitor and evaluate our regional and operating segment performance. When we acquire businesses, we exclude sales in the current period for which there are no comparable sales in the prior period. We determine the effect of changes in currency exchange rates by translating the respective period’s sales using the same currency exchange rates that were in effect during the prior year. When we divest a business, we exclude sales in the prior period for which there are no comparable sales in the current period. Organic sales growth is calculated by comparing organic sales to reported sales in the prior year, excluding divestitures. We attribute sales to the geographic regions based on the country of destination.

The following is a reconciliation of reported sales to organic sales for the three and nine months ended June 30, 2022, compared to sales for the three and nine months ended June 30, 2021:

Three Months Ended June 30,

2022

2021

Reported Sales

Less: Effect
of Acquisitions

Effect of
Changes in
Currency

Organic
Sales

Reported Sales

North America

$

1,239.9

$

39.7

$

(4.7

)

$

1,204.9

$

1,086.7

EMEA

352.6

3.8

(40.6

)

389.4

377.3

Asia Pacific

246.8

0.4

(12.5

)

258.9

274.8

Latin America

129.4

1.9

1.1

126.4

109.4

Total

$

1,968.7

$

45.8

$

(56.7

)

$

1,979.6

$

1,848.2

Nine Months Ended June 30,

2022

2021

Reported Sales

Less: Effect
of Acquisitions

Effect of
Changes in
Currency

Organic
Sales

Reported Sales

North America

$

3,412.2

$

120.0

$

(1.5

)

$

3,293.7

$

3,064.7

EMEA

1,056.2

4.6

(81.6

)

1,133.2

1,052.8

Asia Pacific

791.9

0.4

(14.2

)

805.7

743.6

Latin America

373.8

1.9

(3.4

)

375.3

328.5

Total

$

5,634.1

$

126.9

$

(100.7

)

$

5,607.9

$

5,189.6

The following is a reconciliation of reported sales to organic sales for our operating segments for the three and nine months ended June 30, 2022, compared to sales for the three and nine months ended June 30, 2021:

Three Months Ended June 30,

2022

2021

Reported Sales

Less: Effect
of Acquisitions

Effect of
Changes in
Currency

Organic
Sales

Reported Sales

Intelligent Devices

$

878.3

$

$

(28.0

)

$

906.3

$

882.9

Software & Control

606.9

43.1

(14.2

)

578.0

509.6

Lifecycle Services

483.5

2.7

(14.5

)

495.3

455.7

Total

$

1,968.7

$

45.8

$

(56.7

)

$

1,979.6

$

1,848.2


Contacts

Marci Pelzer
Media Relations
Rockwell Automation
414.382.5679

Aijana Zellner
Investor Relations
Rockwell Automation
414.382.8510


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