Rockwell Automation, Inc.

Automation quarterly conference call. I need to remind everyone that today's conference call is being recorded. Later in the call, we will open up the lines for questions. If you have a question at that time, please press star 1. At this time, I would like to turn the call over to Jessica Caracas, head of Amistad Relations. Ms. Caracas, please go ahead.

Thank you, Tanya. Good morning, and thank you for joining us for Rockwell Automation's second quarter fiscal 2021 earnings release conference call. With me today is Blake Moretz, our chairman and CEO, Nick Gangstad, our CFO, and Steve Edsel, our senior vice president of finance. 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 calls 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. Supplemental information related to our new business segments can be found in the Investor Relations section of our corporate website. To get started, I need to remind you that our comments will include statements related to the expected future results of our company. 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. Slide three. Strong orders momentum we saw last quarter accelerated and broadened across verticals in fiscal Q2. Surpassed $2 billion, which is a new record. Panic orders grew double digits from last year's orders. As you may recall, COVID did not significantly impact our business until the June quarter of last year. Total reported sales grew 6%, including a two-point contribution from recent acquisitions, including Awesome, Ellipso, and Fix. Organic sales grew a little over 1% versus prior year, despite significant supply chain constraints. Manufacturing supply chain continues to be stressed by sharply increased demand, along with various well-publicized events around the world that have reduced output and narrowed freight lanes. We'll continue to navigate these challenges in the coming months to take measures to continue increasing supply chain resiliency. I'll now comment on our top line performance by business segment. Intelligent devices organic sales increased 6% by strong broad-based demand for our automation products. Our motion control offering continues to shine double digits. CPG companies continue to add packaging flexibility. Software and control organic sales also grew 6% by strong demand across this segment. We saw growth in logics control, visualization hardware and software, network and security infrastructure, across the balance of our factory-taught software portfolio. Product sales growth is over 12% for this segment. Works for the intelligent devices and software and control business segments both strong double digits year-over-year and sequentially. Turning to lifecycle services, panic sales declined 11% versus the prior year. primarily impacted by weaker performance in oil and gas. On a sequential basis, revenue and orders through mid-single digits expect continued sequential sales improvement in this segment, balance of the year. Information Solutions and Connected Services had another strong quarter, organic sales and orders from double digits, contribution across a variety of end markets. This quarter's orders also included a number of meaningful software and infrastructure-as-a-service open-year wins for some of the world's largest food and beverage manufacturers. This included Kraft Heinz, where we actively monitor their industrial network and cybersecurity environments. These wins also contribute to ARR, which grew double digits year over year. Total backlog. through strong double digits on an organic basis, both year-over-year and sequentially. Turning to profitability, segment operating margin of 22% and adjusted EPS of $2.41 were above expectations and overcame headwinds from the reinstatement of the bonus and higher costs related to supply chain constraints. Stronger volume, favorable business mix, timing of spending all contributed to our strong profit performance in the quarter as we continue to increase our business resiliency. Let's now turn to slide four, where I'll provide a few highlights of our Q2 and market performance. Figures are for organic sales. We had a very good growth in our discrete industry segment. High single-digit sales growth significantly above our expectations. Within this industry segment, automotive sales were in line with expectations, climbing mid-single digits versus a strong prior year period when auto grew by over 20%. We continue to estimate 10% organic sales growth for the year in this vertical as MRO continues to grow and as an increasing number of capital projects are expected to launch in the second half of the year. Despite chip shortages impacting automotive production, we are not seeing related delays in capital or operational spending for our products. The semiconductor vertical significantly outperformed our expectations this quarter, growing about 15%. We believe strong secular tailwinds increasing capital spend, broadening share of wallet with customers are all driving our growth and share gains in this vertical. As a result, we are raising our semiconductor growth outlook approximately 15% for the year, up from our original November guidance of mid-single-digit growth. Another highlight within discrete was our performance in e-commerce, with sales growing over 70% versus prior year. Once again, our differentiated offering, featuring our independent cart technology, is enabling e-commerce applications at a growing number of marquee accounts. This vertical has significant secular tailwinds, of course, and has become a bigger growth driver for our overall discrete industry segment. Turning now to our hybrid industry segment, These verticals also had a terrific quarter. Food and beverage grew over 10% as our strong product portfolio enables these customers to efficiently add SKUs as they seek to differentiate their offering and maximize their growth. We saw increased capital spending by food and beverage customers in the quarter. Not surprisingly, packaging OEMs are also very They contributed another quarter of double-digit growth versus the prior year. Life Sciences grew about 15% in Q2, led by strong demand in North America and Asia Pacific. One important MES project during the quarter, helping the Don AST pharmaceutical company face the challenge of exporting products that need to comply with FDA regulations Don AST is expecting production efficiency and quality to improve by going paperless with their choice of Rockwell's PharmaSuite MES. Based on the broad-based increase in life sciences demand, the share gains we are seeing in this market, we are raising our view on life sciences and expect it to grow about 20% in fiscal 21. Process markets were down approximately 10% and were weaker than expected, led by larger declines in oil and gas. Process verticals typically lag our discrete business by about half a year. That said, we saw sequential improvement again in North America for oil and gas during Q2. Mining customers are also becoming more active. We saw low single-digit growth in the quarters. Turning now to slide five in our Q2 organic regional sales performance. North America organic sales grew by 2% versus the prior year, primarily due to strong growth in food and beverage, e-commerce, and life sciences. Indian sales declined 7%, driven by oil and gas, metals, and auto, partially offset by strength in food and beverage. Sales in the Asia-Pacific region grew 16%, broad-based growth led by semiconductor, chemicals, and life sciences. Asia-Pacific backlog reached another record high in the quarter. We expect strong sales growth in the region both the upcoming quarter and full year. In China, we saw over 30% organic growth driven by strong growth in all three industry segments including particular strength in EV and semiconductor in discrete, tire, life sciences, and food and beverage in hybrid, and mining and chemical in process. We expect growth in China will exceed the company average for the year as our longer cycle businesses kick in. Let's now turn to slide six, highlights for the full year outlook. Quarter's momentum in the first half of the year is expected to drive strong sales growth in the balance of the year, especially as we enter a period of easier comps. Higher top-line guidance is driven by improvements during the quarter in our discrete and hybrid industry segments that more than offset incremental declines in process. A new outlook for total reported sales is over 10% year-over-year growth at the midpoint including 7% organic growth. Foreign automation is not the only driver of growth this year, as we also expect double-digit sales growth in information solutions and connected services. We're seeing good contribution from both organic and inorganic sources, and we also expect double-digit ARR growth in fiscal 21. We expect margins to stay relatively flat with last year, despite the reinstatement of our bonus and the incremental one-time investments we spoke about last quarter that will largely impact the second half. Our new adjusted EPS target, $9.15 at the midpoint of the range, represents over 16 percent growth compared to the prior year. A more detailed view into our outlook by end market is found on slide seven. I won't go into the details on this slide, but as you can see, we continue to expect broad-based organic sales growth this year with oil and gas lagging. Our diversification across higher growth and markets is one aspect of the increasing business resilience that we talked about during Investor Day in November. With that, let me now turn it over to Nick, who will elaborate on our second quarter performance and updated financial outlook fiscal 21.