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 third quarter fiscal 2023 earnings release conference call. With me today is Blake Moretz, 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 detailed 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 third quarter results on slide three. We saw good double-digit growth in both sales and earnings this quarter as component shortages continue to ease. Lead times also continue to reduce across our product lines with recovery to pre-pandemic lead times expected for all products by the end of the calendar year. We did miss almost a week of planned shipments in May because of a longer than expected changeover to a new third-party logistics supplier at our North American Distribution Center. Shipments from this distribution center recovered in June and we now have higher capacity in place for Q4 fiscal year 24 and beyond. Both total and organic sales grew over 13% versus prior year, with currency and acquisitions roughly netting each other out. Currency translation decreased sales by less than a point, and acquisitions contributed over a point of growth this quarter. Similar to prior quarters, the split of our sales by business segment, region, and industry was largely driven by the composition of our backlog. In the intelligent devices business segment, organic sales were up 8% versus prior year. The changeover in our distribution center had the biggest impact on this segment in the quarter. Within the intelligent devices segment, Independent cart technology continues to be a disruptive technology, and we had several more strategic material handling wins in the U.S. this quarter. The recent launch of our on-machine Armour Kinetics motion control products adds to our innovative material handling portfolio. We also had an important win in Europe with Sedum, one of the world's leading desalination companies, where our PowerFlex drives and services expertise are helping this customer deliver economical and sustainable drinking water to millions of people in developing regions. Software and control organic sales grew over 24% year over year. Logic sales were up almost 40% this quarter, reflecting the strong differentiation of our control platform and the continued benefits from supply chain resiliency investments we've made over the last year. Another example of our many ways to win within software and control is recent success at a well-known global parcel delivery company where the combination of our awesome industrial PCs, BIN manager, and VIEW software unseated a longstanding competitor as the customer standardizes its North America facilities on a Rockwell visualization platform. Lifecycle Services organic sales increased 8% versus prior year. Book to bill in this segment was 1.08, led by strong orders in Sensia and our services business. Sensia had another good quarter of orders and sales with multiple large deals across EMEA and Asia. We also delivered higher sequential margins in lifecycle services this quarter. Information solutions and connected services sales grew 10% versus prior year. We had multiple wins across our entire information solutions portfolio in Q3, including both our on-prem and cloud native software. This quarter, one of the world's top tire manufacturers, located in Asia Pacific, selected Rockwell's Factory Talk Production Center to develop its new global MES platform. Another important IS win in Asia was with a Japanese global leader in HVAC, where our cloud native Plex platform is being deployed on Microsoft Azure at one of their Greenfield plants. The customer chose our SaaS solution to quickly start up a manufacturing execution and quality management system without the need for extensive on-premise hardware, software, and support. We saw Plex synergy wins continue to ramp up in the quarter as our strong market access machine is contributing to new SAS logos. In the quarter, we saw the benefits of our software partnership with PTC with numerous recurring revenue wins through a combination of our digital services business and PTC's ThingWorx visualization platform. Also regarding PTC, we continue to monetize the investment we made in 2018. We now own less than 5% of total shares outstanding, and in accordance with the terms of our agreement, I am stepping off of their board. Our commercial relationship remains strong and was extended in June. In connected services, we had an important cybersecurity win with ADNOC, the Abu Dhabi National Oil Company. This customer is leveraging our network of security services and expertise, along with an intrusion detection system from our partner, Dragos, to help secure its network infrastructure and comply with cyber governance regulations. Our total annual recurring revenue grew a very strong 17% year-over-year this quarter. Segment margin of 21.1% was flat to last year and in line with our expectations despite the shipment shortfall. Adjusted EPS grew over 13% year-over-year. Backlog is beginning to reduce as lead times improve. Let's now turn to slide four to review key highlights of our Q3 end market performance. Our discrete sales were up about 10% versus prior year. Within discrete, automotive sales grew mid-teens year over year. One of the notable customer wins here this quarter was with a Korean Tier 1 supplier working on an EV battery project for a European brand owner. This customer is using our core automation offerings, including motion control, to provide tooling for battery thermal management. Another automotive win this quarter was with Jaguar Land Rover, where Rockwell was selected to support the JLR electrified architecture for three of their EV body shops in the UK. Semiconductor sales grew high teens this quarter. Building on strength over the last few quarters, we continue to see broader adoption of our wafer transport solutions by the world's leading semiconductor manufacturers. This quarter, we also had an important Plex win in semiconductor at SAC, Saudi Arabia, as the customer implements our smart manufacturing platform at its site in Riyadh. In e-commerce and warehouse automation, sales were down high teens versus prior year, driven by continued delays and some cancellations at our e-commerce customers. Moving to our hybrid industry segment, sales in this segment grew 15% year over year, led by strong growth in food and beverage and tire. Food and beverage sales were up mid-teens versus prior year. We continue to see both greenfield and brownfield investments in this vertical, with one of our most important multi-year wins this quarter focused on a customer's global fleet modernization program. A leading global food processing company is standardizing over 50 of its sites on our PlantPAX control platform. This competitive DCS win is a testament to our progress in process control applications in both technology and domain expertise. Life sciences sales grew mid-single digits versus prior year. This industry continues to see strong investments in CapEx and OpEx projects across all regions, both in traditional pharmaceuticals and newer advanced therapy medicinal products. We had a strategic win with Biocero, a member of the BiCo group in North America, where our combined technologies increased the speed and accuracy of new drug development. Biocero selected our independent CART technology to automate lab workflows for a cell and gene therapy program. Tire was up over 35% in the quarter. Turning to process industries, process sales were up 15% year over year, led by growth in oil and gas and mining. Turning now to slide five in our Q3 organic regional sales, as I said earlier, our growth by region this quarter and for the full year, fiscal year 23, reflects the composition of our backlog rather than the underlying customer demand. North America organic sales grew about 2% year over year against higher comps. Latin America was up 7%. Through Q3, our orders in the Americas are outpacing the rest of the world. EMEA sales grew 34% and Asia Pacific was up over 44%. We did see an uptick in order cancellations in China this quarter. Let's now move to slide six, fiscal 2023 outlook. We are confident that shipments in the fourth quarter will recover the shortfall in Q3 caused by the distribution center change. Shipments in July were in line with our forecast for the full year. Our fiscal 23 guidance assumes a total reported sales growth range of 14 to 16%, and we continue to expect organic sales growth of 15% at the midpoint. We now expect the impact from acquisitions and currency to offset each other. Nick will cover this in more detail later. We have said all along that we expect further normalization of ordering patterns as lead times and constrained products improve, and that's what we are seeing right now. With improving lead times, machine builders do not need as many months of products on order and are no longer placing unusually large advance orders. Their incoming orders and front log remain strong, and improving component lead times will help them improve their cash flow. We also expect distributor restock orders will pick up as they receive the last constrained items that allow them to clear their committed inventory and complete customer orders. our order cancellation rates remain low. We now expect our full-year fiscal year 23 orders to be in the $8.5 to $9 billion range. Given this updated order outlook, we now expect to finish the year with about $4.5 to $5 billion in backlog, with about 80% of that backlog shippable in fiscal year 24. We expect organic ARR to grow 15%. Segment margin is expected to increase by 160 basis points year over year. We are increasing the midpoint of our adjusted EPS guidance by 5 cents and now expect adjusted EPS to grow 25% versus prior year. And we now expect 80% free cash flow conversion due to higher working capital. Let me turn it over to Nick to provide more detail on our Q3 performance and financial outlook for fiscal 23. Nick?