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 Ajana Zellner, Head of Investor Relations and Market Strategy. Ms. Zellner, please go ahead.

Thank you, Julianne. Good morning. And thank you for joining us for Rockwell Automation's second quarter fiscal 2023 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. 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 it over to Blake.

Thanks, Ayjana, and good morning, everyone. Thank you for joining us today. Let's turn to our second quarter results on slide three. We had an outstanding quarter of strong growth in both sales and earnings. Our double-digit sales and margin growth continue to reflect Rockwell's strong execution and focus on business resiliency, as well as overall improvement and electronic component availability. The demand for our differentiated offerings continue to be strong, even in this uncertain economic environment. Through the first half of this fiscal year, our total orders were $4.8 billion. spread evenly between the two quarters once we adjust for the estimated price-related pull forward in our fiscal Q1. As expected, our order cancellation rates remain in the low single digits through April. Total sales grew over 25% versus prior year. Organic sales were up over 27% year over year and were above our expectations. Currency translation reduced sales by about 3%, and acquisitions contributed over a point of growth this quarter. As in the prior quarters, the split of sales by business segment, region, and industry was largely driven by access to electronic components and the composition of our backlog. In the intelligent devices business segment, organic sales grew 27% versus prior year, with broad-based growth across all businesses. We continue to see wider adoption of our independent cart technology in new applications across semiconductor, food and beverage, and life sciences. One example of a new application is wafer transport in semiconductor fabs. We continue to see increasing demand for this offering, including an important win with a large U.S. company this quarter. This customer is investing in modernizing and expanding its material handling systems, and our independent cart technology helps increase wafer output and more efficiently utilizes existing fab space, leading to increased capacity and significant savings. Software and control organic sales increased over 40%. Strong growth versus prior year was led by logics. where we continue to see the benefits of our resiliency investments and an overall improvement in supply chain. Life cycle services organic sales were up 12% year over year. Book to bill in this segment was 1.27, led by strong order intake in our Sensia business. Information solutions and connected services sales grew about 10% versus prior year. We had another quarter of competitive multi-year wins across our software and cybersecurity services portfolio. Within information solutions, I am pleased with the increasing breadth of our new Plex customers as we continue to expand our SaaS smart manufacturing platform to new industries and geographies. One of our Plex wins this quarter was with AB InBev. the world's largest brewing company, and its startup business, Evergrain, focused on upcycling grain byproduct into sustainable supply of nutritious food ingredients. Our modular and cloud-native Plex software is helping Evergrain quickly deploy mission-critical quality management capabilities today while providing the functionality for the business to scale in the future. In connected services, we saw another quarter of customer demand for our recurring cybersecurity and infrastructure as a service offerings as customers across many industries are continuing to invest in safety and security of their operations. One of these wins was with Darling Ingredients, a food processing company focused on reducing food waste by collecting and repurposing animal-based products. Our annual recurring revenue grew 15% year-over-year in Q2. Segment margin of 21.3% was up over 560 basis points year-over-year and was better than expected. Adjusted EPS grew over 81% year-over-year. We also completed the acquisition of Knowledge Lens this quarter. which adds significant scale to our Calypso Digital Services business. Let's now turn to slide four to review key highlights of our Q2 end market performance. Consistent with my earlier comments on the gradually improving supply chain environment, all three industry segments grew strong double digits versus prior year. Our discrete sales were up about 20% in the quarter. Within discrete, automotive sales grew over 40% versus prior year. We saw a number of strategic wins in EV and battery this quarter, both in the US and China, where a combination of our core automation and strong partner ecosystem helped edge out our biggest competitors. While some customers are optimizing operating costs in the near term, they still continue to invest in building out new capacity to meet their production goals. Semiconductor sales were up mid-teens year over year. I already mentioned one semiconductor win. Another example of how Rockwell is expanding our existing semi footprint now with wafer transport applications is our multi-year project win with analog devices. Our independent cart technology was chosen to automate ADI's material handling applications at several of their global fabs. By implementing our technology, ADI will improve operator productivity by at least 20% by moving away from manually delivering lots across the fab. In e-commerce and warehouse automation, our Q2 sales were down mid-single digits versus prior year. While we continue to see a pause in greenfield announcements, e-commerce players, traditional retailers, and many consumer packaged goods companies continue to invest in modernizing their warehouses. Turning to our hybrid industries, sales in this segment increased 35% year over year, led by strong growth in food and beverage. Food and beverage sales were up almost 40% versus prior year. We also saw a number of large orders this quarter, with customers in this vertical continuing to invest in making their brownfield facilities more efficient and resilient. Demand in our dairy and agriculture processing business remains especially strong. Life sciences sales grew 20% year over year. One of the important wins this quarter was with a leading European healthcare company, where our Calypso Digital Services used our Emulate 3D simulation software to model and test multiple plant layouts to eliminate potential bottlenecks and increase worker safety. Tire was up over 50% in the quarter. Moving to process, this segment was up over 25% versus prior year, once again led by growth in oil and gas and metals. Within process, we had an important sustainability win. Through Occidental Petroleum's 1.5 subsidiary, Rockwell is providing control systems for direct air capture units that help remove carbon dioxide from the atmosphere. We are proud to be a part of Oxy's low carbon strategy to deliver large scale carbon management solutions that accelerate a net zero economy. Turning now to slide five in our Q2 organic regional sales. Similar to prior quarters, our growth by region reflects the electronic component availability and what's in our backlog rather than the underlying customer demand. North America organic sales grew 23% year over year. Latin America increased 16%. EMEA sales grew 42%. and Asia Pacific was up 32%. Let's now move to slide six, fiscal 2023 outlook. We have previously said that the fiscal 23 sales performance is primarily based on our ability to shift backlog. Given our performance in the first half, improving chip supply and the benefits of our resiliency actions, we are increasing our sales and earnings outlook for fiscal 23. Our fiscal 23 guidance projects total reported sales growth of 14.5%. We expect organic sales growth of 15% at the midpoint. We expect acquisitions to contribute over a point of growth and currency to be a headwind of a point and a half. Nick will touch more on this later. Organic ARR is expected to grow 15%. Segment margin is expected to increase by over 150 basis points year over year. Adjusted EPS is expected to grow 25% versus prior year. And we continue to target 95% free cash flow conversion. Before I turn it over to Nick, let me share some of our thoughts on the setup for fiscal year 24. With more than half of this fiscal year behind us, And through our continued discussions with end customers, we believe we have better visibility into our full year orders and backlog levels. We expect our fiscal 23 orders to be about $9 billion, which implies a slight moderation of orders in the second half of this year. This is consistent with our expectations of improving component availability and the subsequent reduction in customer lead times. With our current orders outlook, We anticipate exiting the year with backlog levels of around $5 billion, positioning us well for fiscal year 24. Also, as the largest pure play, we have an impressive record of earnings growth, and we expect that to continue given our unique market, focus, and differentiation. Let me turn it over to Nick to provide more detail on our Q2 performance and financial outlook for fiscal 23.