Rockwell Automation, Inc.

Thank you for holding and welcome to Rockwell Automation's quarterly conference call. I need to remind everyone that today's call is being recorded. Later in the call, we will open up the lines for questions. If you have a question at that time, please press star 1. I would now like to turn the call over to Jessica Caracos, Head of Investor Relations. Ms. Caracos, please go ahead.

Good morning, and thank you for joining us for Rockwell Automation's third quarter fiscal 2020 earnings release conference call. With me today is Blake Morett, our chairman and CEO, and Patrick Gores, our CFO. Our results were released earlier this morning, and the press release and charts have been posted to our website. Both the press release and charts include, and our call today will reference, non-GAAP measures. Both the press release and charts include reconciliations of these non-GAAP measures. A webcast of this call will be available at that website for replay for the next 30 days. For your convenience, a transcript of our prepared remarks will also be available on our website at the conclusion of today's call. Before we get started, I need to remind you that our comments will include statements related to the expected future results of our company and are therefore forward-looking statements. Our actual results may differ materially from our projections, due to a wide range of risks and uncertainties that are described in our earnings release and details in all our SEC filings. So with that, I'll hand the call over to Blake.

Thanks, Jessica, and good morning, everyone. Thank you for joining us on the call today. Before we begin discussing our results and outlook, I'd like to make just a few opening remarks. While we as a company are managing well in this environment, We are highly sensitive to the toll this is taking on our employees during this time. Beyond the fear of a loved one getting sick, racial injustice is on our minds as we develop actions as a company and as individuals that will help put a permanent end to the denial of fundamental human rights. Additionally, thousands of our employees continue to work under very difficult conditions. including the temporary pay cuts we implemented in May. These pay cuts were necessary to better align our costs to current business conditions while preserving jobs, but there is a limit to how long they can remain in place. I had hoped we would be in a position to announce a firm end date to the temporary pay reductions by now, since our goal has always been to reverse them as soon as possible. However, Business conditions remain weak, and the recent surge of COVID-19 infections has worried all of us, and nobody can predict with accuracy when a combination of social distancing practices, therapeutic medicines, and eventual vaccines will turn the tide. We do intend to reverse the temporary pay reductions by the end of December and hopefully sooner. In addition, this quarter, we will make another special payment to our manufacturing associates worldwide who are on the front lines of maintaining our essential operations. There are many reasons to be optimistic, and I am immensely proud of all of our employees and the great work they are doing. Our environmental health and safety team is working around the clock to keep employees safe. And our technology is crucial to projects that are increasing mask and respirator production to far higher levels than four months ago. Candidate therapeutics and vaccines are being produced and packaged with the help of our innovation and expertise around the world. In short, our employees are having a direct impact on protecting the health of millions of people around the world, and I want to thank them all for their dedication. Turning now to our results on slide three. While business conditions remained difficult and results in Q3 were down year over year, earnings were higher than we expected for the quarter, primarily driven by better organic sales. Total sales declined by 16% versus the prior year, including a three-point contribution from inorganic investments. Organic sales were down about 17.5%, and better than the 20% decline we were expecting heading into the quarter. Product sales outperformed our expectations and were driven by better performance in logics, motion, and network and security infrastructure. We also had a number of new strategic wins in process applications against major process competitors. These wins span several industries this quarter, including life sciences, food and beverage, and oil and gas. One of the more notable wins was with Companhia Cacique de Café Soluvel, the largest exporter of instant coffee in Brazil and one of the largest in the world. They are building a new technologically advanced coffee plant to expand production capacity. This was a highly competitive greenfield win, and we beat our biggest competitors based on our technology, and track record with the customer. This win includes a broad suite of Rockwell technology, FactoryTalk Innovation Suite software, drives, connected services, as well as newly released process control technology within Logix that enhances our differentiation against traditional DCS systems. Turning to information solutions and connected services, sales were down slightly. partly due to travel restrictions and limited access to customer sites. However, ISCS orders grew double digits over the prior year and showed strong growth in both software as well as connected services. Turning now to earnings, adjusted EPS was $1.27, and our strong cash flow performance further reinforces our already strong balance sheet and liquidity position. Let's now turn to slide four, where I will provide a few highlights of our Q3 organic end market performance. A discrete market segment declined approximately 20%, with automotive performing better than we projected in April, based on the factory closures at that time. Semiconductors saw positive growth in the quarter, amid semi-digits, and continues to benefit from secular tailwinds in 5G, data centers, and the Internet of Things. We also see e-commerce as an important emerging driver of our discrete business due to the excellent fit of our technology with fulfillment center applications. Our hybrid market segment declined about 10%, with food and beverage and life sciences performing in line with our expectations. Food and beverage customers continue to experience extremely high demand, And as a result, we are helping them focus their resources on maximizing production. These customers continue to show strong interest in digital transformation solutions that will improve their resiliency and flexibility. Although timing around these projects has been delayed as a result of the pandemic, we would expect food and beverage to begin to improve over the coming months. One meaningful indicator for the food and beverage vertical continues to come from packaging OEMs, which showed positive growth in the quarter. Starting the life sciences, we continue to expect life sciences to have a strong finish to the year due to the industry's strong focus on digital transformation, as well as our involvement with the leading companies making significant investments in COVID-related vaccines and treatments. Process markets were down approximately 25%, with oil and gas a little weaker. In general, process markets are more solutions-based and require more hands-on interaction, both at the front end of a new project as well as at the back end for final commissioning and delivery. We saw physical restrictions and continuing lack of access to plants due to COVID having a more significant impact on these industries. Turning now to slide five in our organic regional sales performance in the quarter. North America declined by 20% with weaker process industries partly offset by better resiliency in discrete and hybrid industry segments. In this region, product sales performed better than our solutions and services. EMEA sales outperformed our expectations and benefited from PPE production and double-digit growth in information solutions and connected services. Asia-Pacific sales declined 10%, with year-over-year positive growth in automotive and semiconductor. China sales declined mid-single digits, but saw orders return to positive growth in the quarter. Broad-based Latin America declines were led by very weak automotive performance. Turning now to our outlook on slide six. Last quarter, we forecasted that our fiscal third quarter sales would be down approximately 20%, followed by sequential improvement in the fourth quarter. We came in slightly better than that in Q3, and our mix of product was also more favorable. However, the rate of recovery in our solutions and services business is slower than we anticipated due to the continued restricted movement of people. In addition, the COVID-19 pandemic and global efforts to respond to it are rapidly evolving. Our projections assume that a gradual recovery continues with no increase in pandemic-related facility closures or disruptions to the supply chain. Based on all the information we have available at this time, we expect organic sales to decline approximately 8% for the fiscal year, no change from our prior full-year guidance midpoint. We expect inorganic investments to contribute about four points of growth to the year and adjusted EPS to reach $7.50 at the midpoint. That's up from the guidance midpoint of $7.30 we set in April. And we continue to target free cash flow conversion at over 100%. With that, Let me now turn it over to Patrick, who will elaborate on our third quarter financial performance and fiscal 2020 outlook in his remarks.