Rockwell Automation, Inc.

Thank you for holding and welcome to Rockwell Automation's 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 one. At this time, I would like to turn the call over to Jessica Karakos, Head of Investor Relations. Ms. Karakos, please go ahead.

Thanks, Rob. Good morning and thank you for joining us for Rockwell Automation's second quarter fiscal 2022 earnings release conference call. With me today is Blake Moret, our chairman and CEO, and Nick Gangstad, 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 on our 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. Additional information and news about our company can also be found on Rockwell's Investor Relations Twitter feed using the handles at investors rock, that's at investors are okay. 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 detailed in all of 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 today. Before providing detail on second quarter results, which were below our expectations, I want to provide general comments on the business environment Through the first half of our fiscal year, two themes stand out. The first is broad-based demand growth across industries, geographies, and offerings. Substantial backlog in all three business segments, low cancellation rates, and detailed component supply forecasts give us confidence that we will achieve double digit revenue growth this fiscal year and reach $9 billion of profitable sales in the next couple of years. The second theme is persistent supply chain constraints and associated cost inflation, which put particular pressure on Q2 sales and earnings. Since our last earnings release in January, we've seen supplier pushouts and decommits for electronic component shipments The impact of unexpected COVID-related shutdowns in China and Russia start a war in Ukraine. These have had an impact on our results and guidance. So let's get into the detail on our quarter, the outlook, and what we are doing to maximize Rockwell's business performance and long-term value. Our second quarter results are summarized on slide three. Total orders grew by 37%. once again reflecting very strong demand across our portfolio of core automation and digital transformation solutions. Total revenue grew 2% year over year in the quarter. Organic sales grew a little over 1% versus prior year, worse than our expectations due to the supply chain challenges. Through six months, Rockwell's organic top line has grown 9% year over year. Order's momentum was broad-based across all three business segments. However, product shipments and solutions with significant hardware content were limited by multiple component shortages. In the intelligent devices business segment, organic sales declined 3% versus prior year, a sharp reversal from the 25% growth in the first quarter, reflecting volatile components supply. Within this segment's motion business, sales of our independent car technology grew strong double digits, and our orders more than doubled from a year ago. Software and control organic sales grew a little less than 1%, also reflecting component shortages. We continue to see strong order growth in this business, led by logics and visualization. In lifecycle services, Organic sales increased 11% versus the prior year, led by 24% growth at Sensia. Demand is broadly increasing in lifecycle services, as demonstrated by a 1.34 book to build. Information solutions and connected services grew strong double digits in both orders and revenue. Industrial cybersecurity demand was strong in the quarter, with orders of 90% year-over-year, as customers in life sciences, food and beverage, mining, and many other end markets are increasingly relying on us to provide the robust network technology and real-time domain expertise to keep their critical operations secure and resilient. In the quarter, one of our Plex wins was with RE Automotive, an automotive technology company an EV platform maker headquartered in the EMEA region, where our cloud-native smart manufacturing platform will enable their state-of-the-art plan with real-time production monitoring, inventory, and quality management, creating an agile manufacturing system needed for customized electric vehicles. You will recall that globalizing market access for Plexus software was an important synergy to be realized through this deal. Last month, Plex also became available on Microsoft's Azure Cloud in Europe, and we're partnering with Microsoft to promote this new capability. At FIX, we had another great quarter with ARR growing over 40%. We continue to win new logos, including our first wins in Asia. Our partnership with PTC continues to grow, and in the quarter we booked software subscriptions for digital performance management based on ThingWorx. This new solution helps identify, prioritize, and act on deep bottlenecking opportunities that have the greatest potential P&L impact in manufacturing sites. We combine great technology and domain expertise to create a very strong value proposition for our customers. In the quarter, organic ARR grew by 17%.