Financial Data and Key Metrics Changes - Total sales grew over 25% year-over-year, with organic sales up over 27% [12][87] - Adjusted EPS grew over 81% year-over-year, reaching $3.01 [21][7] - Segment operating margin expanded to 21.3%, a 560 basis point increase year-over-year [94][12] - Free cash flow of $156 million was $110 million higher compared to last year [22] Business Line Data and Key Metrics Changes - Intelligent Devices business segment saw organic sales growth of 27% year-over-year, with significant adoption of independent cart technology [5][12] - Software and Control organic sales increased over 40%, driven by strong demand in logic [13][12] - Lifecycle Services organic sales were up 12% year-over-year, with a book-to-bill ratio of 1.27 [88][12] - Information Solutions and Connected Services sales grew about 10% year-over-year [88] Market Data and Key Metrics Changes - North America organic sales grew 23% year-over-year, while EMEA sales grew 42% [92] - Semiconductor sales were up mid-teens year-over-year, reflecting strong demand [90] - Food and beverage sales increased almost 40% year-over-year, indicating robust growth in hybrid industries [91] Company Strategy and Development Direction - The company is focused on accelerating new product development and investments in cloud-native technologies [31] - Recent acquisition of Knowledge Lens is expected to enhance digital services capabilities [32] - The company anticipates exiting the year with backlog levels around $5 billion, positioning well for fiscal year '24 [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued demand for automation across various verticals, driven by trends such as workforce scarcity [108] - The company expects fiscal '23 sales growth of 14.5% and organic sales growth of 15% at the midpoint [10][99] - Management noted that improving supply chain conditions are expected to moderate order levels in the second half of the year [93][108] Other Important Information - The company repurchased approximately 140,000 shares at a cost of $38 million during the quarter [95] - Adjusted effective tax rate for the second quarter was 17.4% [22] Q&A Session Summary Question: What is the outlook for orders and backlog conversion? - Management indicated that improving chip supply is the primary factor for clearing backlog, with expectations to reduce backlog from $5.6 billion to around $5 billion by year-end [54][130] Question: Can you provide insights on the margins in different segments? - Management expects Software and Control margins to remain above 30%, with lifecycle services expected to exceed 10% margin in Q4 [72][133] Question: How is the company addressing the demand environment post-supply chain constraints? - Management noted that while backlog is being cleared, demand remains strong across verticals, and they are focused on reducing lead times [126][128] Question: What is the company's strategy regarding M&A and market access? - The company has a good pipeline for M&A, focusing on information management software and AI solutions [62] Question: How is the company positioned in the EV and battery markets? - Management highlighted strong demand in EV and battery sectors, with ongoing investments to enhance production capabilities [64][76]

Financial Guidance - Reported sales growth guidance for 2023 is projected at 12.5% - 16.5% with organic sales growth expected to be between 13.0% - 17.0%[114] - Diluted EPS guidance is set at $11.71 - $12.41, while adjusted EPS is forecasted to be $11.50 - $12.20[114] - The effective tax rate for fiscal 2023 is expected to be approximately 17.5%[140] Sales Performance - Total sales for the three months ended March 31, 2023, were $2,275.4 million, a 25.8% increase year over year, while sales for the six months were $4,256.4 million, up 16.1% year over year[116] - Organic sales increased by 27.3% for the three months and 18.5% for the six months ended March 31, 2023, with pricing contributing approximately 6.5% and 7.0% to total sales, respectively[117] - International sales accounted for less than 50% of total sales, with persistent supply chain disruptions and labor shortages impacting performance[109][110] Segment Performance - Intelligent Devices segment sales rose 26.5% for the three months and 14.7% for the six months ended March 31, 2023, with organic sales increasing by 26.8% and 16.2%, respectively[128] - Software & Control segment sales increased by 38.5% for the three months and 25.3% for the six months ended March 31, 2023, with organic sales growth of 41.6% and 28.8%, respectively[131] - Lifecycle Services sales grew by 10.0% and 8.3% year over year for the three and six months ended March 31, 2023, with organic sales increasing by 11.7% and 11.0%[133] Income and Earnings - Net income attributable to Rockwell Automation was $300.3 million or $2.59 per share for the three months ended March 31, 2023, compared to $53.9 million or $0.46 per share in the same period of 2022[125] - Adjusted EPS for the three months ended March 31, 2023, was $3.01, an 81.3% increase from $1.66 in the same period of 2022[125] - Total segment operating earnings increased by 70.8% for the three months ended March 31, 2023, driven by higher sales volume and pricing increases[122] Cash Flow and Debt - Cash provided by operating activities was $253.4 million for the six months ended March 31, 2023, compared to $78.8 million for the same period in 2022[142] - Free cash flow for the six months ended March 31, 2023, was $197.7 million, compared to $(3.2) million for the same period in 2022[142] - As of March 31, 2023, short-term debt included commercial paper borrowings of $434.5 million with a weighted average interest rate of 4.84%[144] Strategic Initiatives - The company aims for free cash flow to equal about 100% of adjusted income and expects acquisitions to contribute at least one percentage point to long-term sales growth annually[105] - The company is focused on enhancing market access through building channel capabilities and expanding its partner network[106] - Supply chain management includes securing longer-term supply agreements and diversifying the supplier base to mitigate risks associated with component procurement[111][115] Market Conditions - In the second quarter of 2023, U.S. sales accounted for over 50% of total sales, with Manufacturing PMI readings below 50 indicating contraction in the manufacturing sector[107][110] - The Producer Price Index (PPI) year-over-year increase has declined over the past four quarters, with March 2023 PPI showing a 2.7% increase compared to the previous year[108] - The company anticipates continued improvement in electronic component availability, which is critical for meeting demand and reducing backlog[113] Future Outlook - Future revenue growth rates are expected to reflect significant growth over the next five years before moderating to long-term average inflationary rates[163] - Margin assumptions indicate that recent cost pressures will be compensated through pricing on future orders[163] - Demand for Sensia products is sensitive to industry volatility, including commodity prices and supply and demand dynamics[163] Compliance and Risk - Environmental compliance and claims have not materially changed as of March 31, 2023[166] - The company believes there has been no material change in exposure to foreign currency risk and interest rate risk as of March 31, 2023[168]

Financial Data and Key Metrics Changes - Total sales grew almost 7% year-over-year, with organic sales up 10% [104] - Adjusted EPS grew 15% year-over-year, reaching $2.46 [124] - Segment operating margin expanded to 20.2%, a 110 basis point increase year-over-year [124] - Free cash flow of $42 million was $91 million higher compared to last year [124] Business Line Data and Key Metrics Changes - Intelligent Devices organic sales increased about 7% year-over-year [105] - Software and Control organic sales grew almost 16% year-over-year, driven by redesign efforts [105] - Lifecycle Services organic sales were up 10% year-over-year, with a book-to-bill ratio of 1.21 [106] - Information Solutions and Connected Services saw double-digit year-over-year growth [106] Market Data and Key Metrics Changes - North America organic sales grew 8% year-over-year, while EMEA sales increased by over 13% [121] - Semiconductor sales grew over 20% year-over-year, reflecting strong demand [117] - Food and beverage sales were up over 15% year-over-year, indicating robust market activity [119] Company Strategy and Development Direction - The company is focusing on automation to address customer challenges and enhance productivity [68] - There is an emphasis on expanding the annual recurring revenue (ARR) streams through software and services [5] - The company is positioning itself for a resilient and sustainable future, leveraging strong market share in the U.S. [68] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the improving supply chain landscape, although challenges remain [12] - The company anticipates a high backlog at the end of fiscal 2023, setting up for strong growth in 2024 [38] - There is a recognition of macroeconomic concerns, but the company expects continued strong demand across key verticals [82] Other Important Information - The company is increasing its adjusted EPS guidance to $10.70 to $11.50, representing 17% growth [66] - The fiscal 2023 guidance projects total reported sales growth of 12% and organic sales growth of 13% [122] - The company repurchased approximately 600,000 shares at a cost of $156 million during the quarter [133] Q&A Session Summary Question: How is the current cycle for CapEx affecting recurring revenues? - Management highlighted a focus on adding annual recurring revenue (ARR) and noted double-digit growth in this area, although it remains a small part of the total business [4][5] Question: What is the status of electronics availability? - Management characterized the landscape as generally improving, with ongoing efforts to mitigate supply chain risks [11][12] Question: Are customer order patterns still impacted by lead times? - Management indicated that while lead times are still a factor, they are seeing improvements and strong demand continues [24][82] Question: How is the Inflation Reduction Act impacting customer investment decisions? - Management acknowledged that some customers are waiting for clarity on treasury guidance, which could influence their investment decisions [20] Question: What are the expectations for backlog and CapEx plans? - Management confirmed that backlog levels will remain high, driven by strong demand across various industries [38][130]

STATEMENT PUBLIC | Copyright ©2023 Rockwell Automation, Inc. | 2 ▶ Cancellations flat to prior quarter and remain in low single digits ▶ Acquisitions contributed 0.8% ▶ Segment margin of 20.2%, up 110 bps YOY Q1 FY23 vs. Q1 FY22 Semiconductor up ~20% e-Commerce & Warehouse Automation down low teens DISCRETE ~ 30% Up mid single digits | --- | --- | --- | --- | --- | |-------|-------|-------|--------------------------------------|------------------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The unaudited consolidated financial statements detail the company's financial position and performance [Consolidated Balance Sheet](index=4&type=section&id=Consolidated%20Balance%20Sheet) Consolidated Balance Sheet | Metric | Dec 31, 2022 (millions) | Sep 30, 2022 (millions) | | :-------------------------------- | :---------------------- | :---------------------- | | **ASSETS** | | | | Cash and cash equivalents | $460.0 | $490.7 | | Receivables | $1,839.4 | $1,736.7 | | Inventories | $1,270.5 | $1,054.2 | | Total current assets | $3,859.5 | $3,610.7 | | Total assets | $11,149.8 | $10,758.7 | | **LIABILITIES AND SHAREOWNERS' EQUITY** | | | | Short-term debt | $548.2 | $359.3 | | Current portion of long-term debt | $608.5 | $609.1 | | Accounts payable | $1,034.5 | $1,028.0 | | Total current liabilities | $3,746.7 | $3,572.2 | | Long-term debt | $2,866.9 | $2,867.8 | | Total shareowners' equity | $3,200.6 | $3,016.7 | | Total liabilities and shareowners' equity | $11,149.8 | $10,758.7 | [Consolidated Statement of Operations](index=5&type=section&id=Consolidated%20Statement%20of%20Operations) Consolidated Statement of Operations | Metric | Dec 31, 2022 (millions) | Dec 31, 2021 (millions) | | :------------------------------------ | :---------------------- | :---------------------- | | Sales | $1,981.0 | $1,857.3 | | Cost of sales | $(1,167.4) | $(1,108.2) | | Gross profit | $813.6 | $749.1 | | Selling, general and administrative expenses | $(469.5) | $(447.5) | | Change in fair value of investments | $140.6 | $7.6 | | Income before income taxes | $467.9 | $282.5 | | Income tax provision | $(89.2) | $(43.6) | | Net income | $378.7 | $238.9 | | Net income attributable to Rockwell Automation, Inc. | $384.0 | $241.5 | | Basic EPS | $3.33 | $2.08 | | Diluted EPS | $3.31 | $2.05 | [Consolidated Statement of Comprehensive Income](index=6&type=section&id=Consolidated%20Statement%20of%20Comprehensive%20Income) Consolidated Statement of Comprehensive Income | Metric | Dec 31, 2022 (millions) | Dec 31, 2021 (millions) | | :---------------------------------------------------- | :---------------------- | :---------------------- | | Net income | $378.7 | $238.9 | | Other comprehensive income | $64.3 | $4.9 | | Comprehensive income | $443.0 | $243.8 | | Comprehensive income attributable to Rockwell Automation, Inc. | $448.3 | $246.4 | [Consolidated Statement of Cash Flows](index=7&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows) Consolidated Statement of Cash Flows | Metric | Dec 31, 2022 (millions) | Dec 31, 2021 (millions) | | :------------------------------------------ | :---------------------- | :---------------------- | | Cash provided by (used for) operating activities | $66.3 | $(12.0) | | Cash used for investing activities | $(18.3) | $(48.7) | | Cash used for financing activities | $(105.3) | $(52.0) | | Effect of exchange rate changes on cash | $18.0 | $(9.5) | | Decrease in cash, cash equivalents, and restricted cash | $(39.3) | $(122.2) | | Cash, cash equivalents, and restricted cash at end of period | $468.6 | $557.2 | [Consolidated Statement of Shareowners' Equity](index=8&type=section&id=Consolidated%20Statement%20of%20Shareowners'%20Equity) - Cash dividends declared were **$1.18 per share** for the three months ended December 31, 2022, up from $1.12 per share in the prior year[19](index=19&type=chunk) Consolidated Statement of Shareowners' Equity | Metric | Sep 30, 2022 (millions) | Dec 31, 2022 (millions) | | :------------------------------------------------ | :---------------------- | :---------------------- | | Balance at beginning of period | $3,016.7 | $2,725.6 | | Net income (loss) | $378.7 | $384.0 | | Other comprehensive income | $64.3 | $64.3 | | Share repurchases | $(156.0) | $(156.0) | | Cash dividends declared | $(135.9) | $(135.9) | | Balance at end of period | $3,200.6 | $2,914.8 | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Detailed notes explain accounting policies, revenue, acquisitions, and other key financial statement components - The unaudited Consolidated Financial Statements include all necessary adjustments for fair presentation, primarily normal, recurring adjustments[22](index=22&type=chunk) - The company retroactively adopted a new FASB standard in October 2021 regarding contract assets and liabilities in business combinations, which did not materially impact the financial statements[27](index=27&type=chunk) - The company is currently assessing the impact of a new FASB standard issued in September 2022, requiring disclosures about supplier finance programs[28](index=28&type=chunk) [Note 1. Basis of Presentation and Accounting Policies](index=9&type=section&id=Note%201.%20Basis%20of%20Presentation%20and%20Accounting%20Policies) This note outlines the basis of preparation, key accounting policies, and recent accounting pronouncements - Receivables are recorded net of an allowance for doubtful accounts (**$15.7 million** at Dec 31, 2022) and an allowance for customer returns, rebates, and incentives (**$16.3 million** at Dec 31, 2022)[23](index=23&type=chunk) - Non-cash investing and financing activities included capital expenditures accrued within Accounts payable and Other current liabilities (**$32.9 million** at Dec 31, 2022) and outstanding common stock share repurchases recorded in Accounts payable (**$0.8 million** at Dec 31, 2022)[25](index=25&type=chunk) Earnings Per Share Calculation | Metric | Dec 31, 2022 (millions, except per share) | Dec 31, 2021 (millions, except per share) | | :------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net income attributable to Rockwell Automation, Inc. | $384.0 | $241.5 | | Net income available to common shareowners | $382.5 | $240.8 | | Basic weighted average outstanding shares | 114.8 | 116.0 | | Diluted weighted average outstanding shares | 115.5 | 117.3 | | Basic EPS | $3.33 | $2.08 | | Diluted EPS | $3.31 | $2.05 | [Note 2. Revenue Recognition](index=10&type=section&id=Note%202.%20Revenue%20Recognition) This note details revenue recognition policies, breaking down revenue by segment and geographic region - Revenue is recognized as products are transferred or services are performed, with offerings including hardware, software, custom-engineered systems, technical support, asset management, and training[30](index=30&type=chunk)[31](index=31&type=chunk) - As of December 31, 2022, the company expects to recognize approximately **$1,260 million** of revenue from unfulfilled performance obligations, with **$625 million** expected within the next 12 months[33](index=33&type=chunk) Revenue by Segment and Geographic Region (millions) | Geographic Region | Intelligent Devices (2022) | Software & Control (2022) | Lifecycle Services (2022) | Total (2022) | Intelligent Devices (2021) | Software & Control (2021) | Lifecycle Services (2021) | Total (2021) | | :---------------- | :------------------------- | :------------------------ | :------------------------ | :----------- | :------------------------- | :------------------------ | :------------------------ | :----------- | | North America | $567.4 | $384.1 | $227.4 | $1,178.9 | $558.9 | $324.1 | $217.7 | $1,100.7 | | EMEA | $171.2 | $85.8 | $115.8 | $372.8 | $157.8 | $88.4 | $108.5 | $354.7 | | Asia Pacific | $131.3 | $68.4 | $96.8 | $296.5 | $123.3 | $73.7 | $81.9 | $278.9 | | Latin America | $66.3 | $35.0 | $31.5 | $132.8 | $60.3 | $27.7 | $35.0 | $123.0 | | **Total Company Sales** | **$936.2** | **$573.3** | **$471.5** | **$1,981.0** | **$900.3** | **$513.9** | **$443.1** | **$1,857.3** | [Note 3. Share-Based Compensation](index=12&type=section&id=Note%203.%20Share-Based%20Compensation) This note details share-based compensation expense and the types and fair values of shares granted - Pre-tax share-based compensation expense was **$18.4 million** for the three months ended December 31, 2022, up from $15.5 million in the prior year[42](index=42&type=chunk) Share-Based Compensation Grants | Type of Grant | Grants (2022, thousands) | Wtd. Avg. Share Fair Value (2022) | Grants (2021, thousands) | Wtd. Avg. Share Fair Value (2021) | | :-------------------------------- | :----------------------- | :-------------------------------- | :----------------------- | :-------------------------------- | | Stock options | 233 | $77.62 | 164 | $87.68 | | Performance shares | 66 | $340.77 | 37 | $481.28 | | Restricted stock and restricted stock units | 211 | $259.67 | 139 | $348.32 | | Unrestricted stock | 6 | $259.81 | 3 | $350.76 | [Note 4. Inventories](index=12&type=section&id=Note%204.%20Inventories) This note provides a breakdown of inventory components as of December 31, 2022, and September 30, 2022 Inventory Breakdown | Inventory Component | Dec 31, 2022 (millions) | Sep 30, 2022 (millions) | | :------------------ | :---------------------- | :---------------------- | | Finished goods | $385.5 | $325.0 | | Work in process | $372.7 | $317.3 | | Raw materials | $512.3 | $411.9 | | **Total Inventories** | **$1,270.5** | **$1,054.2** | [Note 5. Acquisitions](index=12&type=section&id=Note%205.%20Acquisitions) This note details the company's acquisition activities, including the recent acquisition of CUBIC - In October 2022, Rockwell Automation acquired CUBIC, a company specializing in modular systems for electrical panels, for a net purchase consideration of **$133.8 million**[44](index=44&type=chunk) - Goodwill from the CUBIC acquisition was assigned to the **Intelligent Devices** segment, while goodwill from 2022 acquisitions (AVATA and Swinton Technology) was assigned to the **Lifecycle Services** segment[44](index=44&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk) CUBIC Preliminary Purchase Price Allocation | Asset/Liability | Amount (millions) | | :-------------------------- | :---------------- | | Receivables | $21.3 | | Inventories | $17.7 | | Property | $27.0 | | Goodwill | $64.5 | | Other intangible assets | $36.4 | | All other assets | $1.5 | | Total assets acquired | $168.4 | | Less: Total liabilities assumed | $(34.6) | | **Net assets acquired, excluding cash** | **$133.8** | [Note 6. Goodwill and Other Intangible Assets](index=13&type=section&id=Note%206.%20Goodwill%20and%20Other%20Intangible%20Assets) This note provides a breakdown of changes in goodwill by segment and details other intangible assets - The company performs an annual goodwill impairment evaluation in the second quarter and found **no triggering events** for interim quantitative testing in the first quarter of 2023[51](index=51&type=chunk) Changes in Goodwill by Segment | Segment | Sep 30, 2022 (millions) | Acquisition of business (millions) | Translation (millions) | Dec 31, 2022 (millions) | | :------------------ | :---------------------- | :------------------------- | :--------------------- | :---------------------- | | Intelligent Devices | $503.0 | $64.5 | $19.1 | $586.6 | | Software & Control | $2,398.7 | — | $22.4 | $2,421.1 | | Lifecycle Services | $622.3 | — | $10.6 | $632.9 | | **Total** | **$3,524.0** | **$64.5** | **$52.1** | **$3,640.6** | Other Intangible Assets (millions) | Intangible Asset | Carrying Amount (Dec 31, 2022) | Accumulated Amortization (Dec 31, 2022) | Net (Dec 31, 2022) | Carrying Amount (Sep 30, 2022) | Accumulated Amortization (Sep 30, 2022) | Net (Sep 30, 2022) | | :------------------------------- | :----------------------------- | :-------------------------------------- | :----------------- | :----------------------------- | :-------------------------------------- | :----------------- | | Software products | $98.6 | $60.2 | $38.4 | $97.6 | $57.9 | $39.7 | | Customer relationships | $598.8 | $115.9 | $482.9 | $582.7 | $107.2 | $475.5 | | Technology | $422.8 | $133.2 | $289.6 | $410.8 | $119.3 | $291.5 | | Trademarks | $84.7 | $22.0 | $62.7 | $70.4 | $19.4 | $51.0 | | Other | $7.6 | $6.8 | $0.8 | $6.4 | $5.8 | $0.6 | | Total amortized intangible assets | $1,212.5 | $338.1 | $874.4 | $1,167.9 | $309.6 | $858.3 | | Allen-Bradley trademark (not amortized) | $43.7 | — | $43.7 | $43.7 | — | $43.7 | | **Total Other intangible assets** | **$1,256.2** | **$338.1** | **$918.1** | **$1,211.6** | **$309.6** | **$902.0** | [Note 7. Short-Term and Long-Term Debt](index=14&type=section&id=Note%207.%20Short-Term%20and%20Long-Term%20Debt) This note provides details on the company's short-term and long-term debt balances and fair values - Short-term debt at December 31, 2022, included **$462.0 million** in commercial paper borrowings (weighted average interest rate of 4.40%) and **$50.0 million** from Sensia's new line of credit (interest rate of 5.35%)[54](index=54&type=chunk) Fair Value of Debt (millions) | Debt Type | Carrying Value (Dec 31, 2022) | Fair Value (Dec 31, 2022) | Carrying Value (Sep 30, 2022) | Fair Value (Sep 30, 2022) | | :-------------------------- | :---------------------------- | :-------------------------- | :---------------------------- | :-------------------------- | | Current portion of long-term debt | $608.5 | $592.6 | $609.1 | $589.1 | | Long-term debt | $2,866.9 | $2,503.6 | $2,867.8 | $2,485.4 | [Note 8. Other Current Liabilities](index=15&type=section&id=Note%208.%20Other%20Current%20Liabilities) This note itemizes the components of other current liabilities Other Current Liabilities Breakdown | Liability Component | Dec 31, 2022 (millions) | Sep 30, 2022 (millions) | | :-------------------------------- | :---------------------- | :---------------------- | | Unrealized losses on foreign exchange contracts | $16.1 | $31.2 | | Product warranty obligations | $15.9 | $16.5 | | Taxes other than income taxes | $44.6 | $65.6 | | Accrued interest | $38.2 | $18.1 | | Income taxes payable | $111.8 | $81.1 | | Operating lease liabilities | $87.2 | $83.3 | | Other | $94.1 | $107.2 | | **Total Other current liabilities** | **$407.9** | **$403.0** | [Note 9. Investments](index=15&type=section&id=Note%209.%20Investments) This note details the company's investments, primarily consisting of fixed income and equity securities - Equity securities (level 1) primarily consist of PTC Inc. common stock, valued at **$925.0 million** at December 31, 2022[59](index=59&type=chunk) Investment Portfolio | Investment Type | Dec 31, 2022 (millions) | Sep 30, 2022 (millions) | | :---------------------- | :---------------------- | :---------------------- | | Fixed income securities | $12.4 | $12.6 | | Equity securities (level 1) | $925.0 | $928.8 | | Equity securities (other) | $76.4 | $76.4 | | Other | $56.2 | $50.8 | | **Total investments** | **$1,070.0** | **$1,068.6** | | Less: Short-term investments | $(12.4) | $(12.6) | | **Long-term investments** | **$1,057.6** | **$1,056.0** | Investment Gains and Losses | Metric | Dec 31, 2022 (millions) | Dec 31, 2021 (millions) | | :-------------------------------- | :---------------------- | :---------------------- | | Net gain on equity securities (level 1) | $141.0 | $14.4 | | Equity method loss on Other investments | $(0.4) | $(6.8) | | **Change in fair value of investments** | **$140.6** | **$7.6** | | Total net unrealized gain on equity securities | $107.1 | $14.4 | [Note 10. Retirement Benefits](index=16&type=section&id=Note%2010.%20Retirement%20Benefits) This note outlines the components of net periodic pension and postretirement benefit cost - The service cost component is included in Cost of sales and SG&A, while other components are in Other income[64](index=64&type=chunk) Net Periodic Benefit (Credit) Cost (millions) | Component | Pension Benefits (2022) | Pension Benefits (2021) | Other Postretirement Benefits (2022) | Other Postretirement Benefits (2021) | | :-------------------------------- | :---------------------- | :---------------------- | :----------------------------------- | :----------------------------------- | | Service cost | $10.6 | $20.4 | $0.1 | $0.2 | | Interest cost | $39.2 | $32.4 | $0.6 | $0.3 | | Expected return on plan assets | $(51.3) | $(59.4) | — | — | | Amortization of net actuarial (gain) loss | $(1.0) | $22.3 | $0.1 | $0.2 | | Amortization of prior service credit | — | — | — | $(0.2) | | **Net periodic benefit (credit) cost** | **$(2.5)** | **$15.7** | **$0.8** | **$0.5** | [Note 11. Other Income](index=17&type=section&id=Note%2011.%20Other%20Income) This note outlines the components of net periodic pension and postretirement benefit (credit) cost Other Income Breakdown | Component | Dec 31, 2022 (millions) | Dec 31, 2021 (millions) | | :---------------------------------------- | :---------------------- | :---------------------- | | Interest income | $1.3 | $0.5 | | Royalty income | $2.5 | $2.7 | | Legacy product liability and environmental charges | $(2.8) | $(3.2) | | Non-operating pension and postretirement benefit credit | $12.4 | $4.4 | | Other | $3.9 | $(1.5) | | **Total Other income** | **$17.3** | **$2.9** | [Note 12. Accumulated Other Comprehensive Loss](index=17&type=section&id=Note%2012.%20Accumulated%20Other%20Comprehensive%20Loss) This note details changes in Accumulated other comprehensive loss, including reclassifications into net income - For the three months ended December 31, 2022, the company reclassified **$9.6 million** in pre-tax net gains related to cash flow hedges from Accumulated other comprehensive loss into the Consolidated Statement of Operations[70](index=70&type=chunk)[143](index=143&type=chunk) Changes in Accumulated Other Comprehensive Loss | Component | Sep 30, 2022 (millions) | Other comprehensive income (loss) before reclassifications (millions) | Reclassifications (millions) | Dec 31, 2022 (millions) | | :---------------------------------------------------- | :---------------------- | :---------------------------------------------------- | :--------------------------- | :---------------------- | | Pension and other postretirement benefit plan adjustments, net of tax | $(447.8) | — | $(0.5) | $(448.3) | | Accumulated currency translation adjustments, net of tax | $(465.0) | $85.9 | — | $(379.1) | | Net unrealized losses on cash flow hedges, net of tax | $(4.7) | $(12.0) | $(9.1) | $(25.8) | | **Total accumulated other comprehensive loss, net of tax** | **$(917.5)** | **$73.9** | **$(9.6)** | **$(853.2)** | [Note 13. Commitments and Contingent Liabilities](index=19&type=section&id=Note%2013.%20Commitments%20and%20Contingent%20Liabilities) This note addresses various lawsuits and claims, which are not expected to have a material effect - The company is a defendant in asbestos lawsuits but believes it has meritorious defenses and substantial insurance coverage, expecting **no material impact** on its financial condition[73](index=73&type=chunk)[74](index=74&type=chunk) - Liabilities from divested businesses are **not expected to have a material effect**, and no material indemnification claims related to intellectual property were probable or reasonably possible as of December 31, 2022[75](index=75&type=chunk)[76](index=76&type=chunk) [Note 14. Income Taxes](index=20&type=section&id=Note%2014.%20Income%20Taxes) This note explains the company's effective tax rate and details unrecognized tax benefits - The effective tax rate was lower than the U.S. statutory rate of 21% in both periods, primarily due to **lower non-U.S. tax rates** and, in 2021, excess income tax benefits from share-based compensation[80](index=80&type=chunk) - An income tax liability of **$233.7 million** related to the U.S. transition tax under the Tax Cuts and Jobs Act of 2017 is recorded in Other liabilities[81](index=81&type=chunk) - Gross unrecognized tax benefits were **$3.9 million** at December 31, 2022, with a potential reduction of up to **$3.4 million** in the next 12 months due to resolution of tax matters and lapse of statutes of limitations[82](index=82&type=chunk)[83](index=83&type=chunk) Effective Tax Rate | Metric | Dec 31, 2022 | Dec 31, 2021 | | :---------------- | :----------- | :----------- | | Effective tax rate | 19.1% | 15.4% | [Note 15. Business Segment Information](index=21&type=section&id=Note%2015.%20Business%20Segment%20Information) This note presents sales and operating results for the company's three reportable segments - Total segment operating earnings **increased by 12.9%** year-over-year, primarily due to higher sales and pricing increases, partially offset by higher input costs and investment spend[114](index=114&type=chunk) Segment Sales and Operating Earnings | Segment | Sales (2022, millions) | Sales (2021, millions) | Segment Operating Earnings (2022, millions) | Segment Operating Earnings (2021, millions) | | :------------------ | :--------------------- | :--------------------- | :------------------------------------------ | :------------------------------------------ | | Intelligent Devices | $936.2 | $900.3 | $209.4 | $213.0 | | Software & Control | $573.3 | $513.9 | $167.3 | $117.6 | | Lifecycle Services | $471.5 | $443.1 | $24.3 | $24.5 | | **Total** | **$1,981.0** | **$1,857.3** | **$401.0** | **$355.1** | [Report of Independent Registered Public Accounting Firm](index=22&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) - The independent registered public accounting firm, Deloitte & Touche LLP, concluded that **no material modifications** are needed to the interim financial information for conformity with U.S. GAAP[88](index=88&type=chunk) - The firm expressed an **unqualified opinion** on the consolidated financial statements for the year ended September 30, 2022, and confirmed the fair statement of the September 30, 2022 consolidated balance sheet[89](index=89&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance, condition, and future outlook - The company is a global leader in industrial automation and digital transformation, aiming to enhance productivity and sustainability through its "Connected Enterprise" strategy[96](index=96&type=chunk) - Long-term financial goals include **above-market organic sales growth**, increasing recurring revenue, EPS growth exceeding sales growth, return on invested capital over 20%, and free cash flow equal to about 100% of adjusted income[97](index=97&type=chunk) - Acquisitions are expected to contribute a percentage point or more per year to long-term sales growth[97](index=97&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) This subsection details operational performance, segment results, and the company's financial outlook - The discussion includes non-GAAP measures such as organic sales, total segment operating earnings and margin, adjusted income, adjusted EPS, adjusted effective tax rate, and free cash flow, which management believes are useful for investors to assess operating performance[95](index=95&type=chunk) - Overall demand for products and services is driven by investments in manufacturing, basic materials production, customer needs for productivity and risk management, quality/safety/sustainability improvements, industrial production levels, and regional economic factors[96](index=96&type=chunk) - The company's growth strategy focuses on exceeding automation market growth, expanding core platform market share, driving double-digit growth in information solutions, connected services, and annual recurring revenue (ARR), and strategic acquisitions[98](index=98&type=chunk) [Forward-Looking Statements](index=23&type=section&id=Forward-Looking%20Statements) The report contains forward-looking statements subject to risks and uncertainties - Forward-looking statements are identified by words like "believe," "estimate," "project," "plan," "expect," and "anticipate"[93](index=93&type=chunk) - Key risks include component availability and price, macroeconomic factors (inflation, currency rates), supply chain disruptions (pandemics, war), ability to attract talent, IT system security, integration of acquisitions, regulatory policies, and competitive pressures[94](index=94&type=chunk) [Non-GAAP Measures](index=24&type=section&id=Non-GAAP%20Measures) This section defines non-GAAP financial measures used to provide useful information and compare performance - Non-GAAP measures like organic sales, total segment operating earnings and margin, adjusted income, adjusted EPS, adjusted effective tax rate, and free cash flow are used to provide useful information to investors and compare operating performance[95](index=95&type=chunk) [Overview](index=24&type=section&id=Overview) This section describes Rockwell Automation as a global leader in industrial automation and digital transformation - Rockwell Automation aims to achieve **above-market organic sales growth**, increase recurring revenue, and drive EPS growth above sales growth, with acquisitions contributing to long-term sales growth[97](index=97&type=chunk) - The company helps customers reduce time to market, lower total cost of ownership, improve asset utilization, and manage enterprise risks[98](index=98&type=chunk) [U.S. Economic Trends](index=25&type=section&id=U.S.%20Economic%20Trends) This section analyzes U.S. economic indicators, noting a softening in both the IP Index and PMI in Q1 2023 - U.S. sales account for **over half of total sales**, with key indicators being the IP Index and Manufacturing PMI[99](index=99&type=chunk) - The IP Index declined in Q1 2023 versus Q4 2022, and Manufacturing PMI softened, with December 2022 being the **second consecutive month below 50**[99](index=99&type=chunk) - The Producer Price Index (PPI) year-over-year increase declined over the past three quarters, though still higher than historic measures (**6.2% increase** at Dec 31, 2022)[100](index=100&type=chunk) U.S. Economic Indicators | Quarter Ended | IP Index | PMI | | :------------ | :------- | :-- | | Dec 2022 | 101.0 | 48.4 | | Sep 2022 | 101.7 | 50.9 | | Jun 2022 | 101.8 | 53.0 | | Mar 2022 | 101.1 | 57.1 | | Dec 2021 | 100.1 | 58.8 | | Sep 2021 | 98.8 | 60.5 | [Non-U.S. Economic Trends](index=25&type=section&id=Non-U.S.%20Economic%20Trends) This section discusses economic trends outside the U.S., noting lower industrial output and softening PMI readings - Non-U.S. sales account for **less than half of total sales**, with international demand driven by regional industrial economy strength, infrastructure investments, and expanding consumer markets[101](index=101&type=chunk) - Industrial Output outside the U.S. was lower in Q1 2023 compared to Q4 2022, with many countries' **PMI readings ending the quarter below 50**[102](index=102&type=chunk) - Persistent supply chain disruptions, labor shortages, global inflation, and elevated geopolitical instability continue to impact non-U.S. markets[102](index=102&type=chunk) [Supply Chain](index=26&type=section&id=Supply%20Chain) This section addresses ongoing global supply chain challenges and the company's mitigation actions - Supply chain stress has led to difficulties in procuring components, increased costs for commodities, and delays in delivering products and services[104](index=104&type=chunk)[108](index=108&type=chunk) - The company is managing its supply chain by extending order visibility, securing longer-term supply agreements, re-engineering products for resiliency, investing in capacity, and qualifying additional suppliers[104](index=104&type=chunk)[108](index=108&type=chunk) [COVID-19 Pandemic](index=26&type=section&id=COVID-19%20Pandemic) The company continues to monitor the impacts of the COVID-19 pandemic, focusing on employee health and customer needs - The company continues to monitor the impacts of the COVID-19 pandemic, acknowledging ongoing uncertainty due to its evolving nature and government responses[105](index=105&type=chunk) - Priorities include employee health and safety, customer needs, and protecting critical investments for long-term differentiation[105](index=105&type=chunk) [Outlook](index=26&type=section&id=Outlook) This section provides the company's sales growth and earnings per share guidance for fiscal year 2023 - The updated guidance reflects **strong first-quarter performance** and a record backlog, assuming a gradual improvement in the supply chain environment[106](index=106&type=chunk) Fiscal Year 2023 Guidance | Metric | Guidance | | :-------------------- | :---------------- | | Reported sales growth | 10.0% - 14.0% | | Organic sales growth | 11.0% - 15.0% | | Inorganic sales growth | ~1.0% | | Currency translation | ~(2.0)% | | Diluted EPS | $10.99 - $11.79 | | Adjusted EPS | $10.70 - $11.50 | [Summary of Results of Operations](index=27&type=section&id=Summary%20of%20Results%20of%20Operations) This section provides a consolidated overview of the company's sales and operating results - Total segment operating earnings and margin are non-GAAP measures used to monitor and evaluate segment profitability, excluding items not directly related to operating performance[109](index=109&type=chunk) Q1 2023 Financial Highlights | Metric | Dec 31, 2022 (millions) | Dec 31, 2021 (millions) | YoY Change | | :------------------------------------ | :---------------------- | :---------------------- | :--------- | | Total sales | $1,981.0 | $1,857.3 | +6.7% | | Total segment operating earnings | $401.0 | $355.1 | +12.9% | | Income before income taxes | $467.9 | $282.5 | +65.6% | | Net income attributable to Rockwell Automation | $384.0 | $241.5 | +58.9% | | Diluted EPS | $3.31 | $2.05 | +61.5% | | Adjusted EPS | $2.46 | $2.14 | +15.0% | | Pre-tax margin | 23.6% | 15.2% | +8.4 pp | | Total segment operating margin | 20.2% | 19.1% | +1.1 pp | [Three Months Ended December 31, 2022, Compared to Three Months Ended December 31, 2021](index=28&type=section&id=Three%20Months%20Ended%20December%2031%2C%202022%2C%20Compared%20to%20Three%20Months%20Ended%20December%2031%2C%202021) This section provides a detailed comparison of financial performance for Q1 2023 versus Q1 2022 - Sales **increased 6.7%** year over year, with organic sales up 9.9%, while currency translation decreased sales by 4.0 percentage points; acquisitions added 0.8 percentage points[110](index=110&type=chunk) - Pricing increased total company sales by approximately **7 percentage points**, primarily in the Intelligent Devices and Software & Control segments[110](index=110&type=chunk) - Income before income taxes increased significantly to **$467.9 million** (from $282.5 million), mainly due to fair value adjustments from the PTC investment and higher sales, partially offset by higher input costs[114](index=114&type=chunk) - Diluted EPS increased to **$3.31** (from $2.05), and adjusted EPS rose **15.0% to $2.46** (from $2.14), driven by higher sales and PTC adjustments, despite increased input costs[116](index=116&type=chunk) [Sales](index=28&type=section&id=Sales) This sub-section details overall sales performance, including growth by geographic region - Sales results by region and segment were primarily influenced by **component availability** rather than underlying demand[111](index=111&type=chunk) Sales by Geographic Region | Geographic Region | Sales (2022, millions) | Change vs. 2021 | Change in Organic Sales vs. 2021 | | :---------------- | :--------------------- | :-------------- | :------------------------------- | | North America | $1,178.9 | 7.1% | 7.7% | | Europe, Middle East and Africa | $372.8 | 5.1% | 13.3% | | Asia Pacific | $296.5 | 6.3% | 16.0% | | Latin America | $132.8 | 8.0% | 6.3% | | **Total Company Sales** | **$1,981.0** | **6.7%** | **9.9%** | [Corporate and Other](index=28&type=section&id=Corporate%20and%20Other) This sub-section reports corporate and other expenses for Q1 2023 compared to the prior year - Corporate and other expenses decreased slightly to **$27.3 million** in Q1 2023 from $29.4 million in Q1 2022[113](index=113&type=chunk) [Income before Income Taxes](index=28&type=section&id=Income%20before%20Income%20Taxes) This sub-section highlights the significant increase in income before income taxes - Income before income taxes increased to **$467.9 million** in Q1 2023 from $282.5 million in Q1 2022, a **65.6% increase**[114](index=114&type=chunk) - The increase was primarily driven by **fair value adjustments** from the PTC investment and higher sales, partially offset by higher input costs[114](index=114&type=chunk) [Income Taxes](index=28&type=section&id=Income%20Taxes) This sub-section discusses the effective and adjusted effective tax rates for the current and prior periods - The increase in both effective and adjusted effective tax rates was mainly due to **reduced excess income tax benefits** from share-based compensation[115](index=115&type=chunk) Tax Rate Comparison | Metric | Dec 31, 2022 | Dec 31, 2021 | | :------------------------ | :----------- | :----------- | | Effective tax rate | 19.1% | 15.4% | | Adjusted effective tax rate | 17.1% | 15.3% | [Diluted EPS and Adjusted EPS](index=28&type=section&id=Diluted%20EPS%20and%20Adjusted%20EPS) This sub-section reports the diluted and adjusted EPS for the current and prior periods - Increases in Net income attributable to Rockwell Automation and diluted EPS were primarily due to **PTC adjustments** and higher sales, partially offset by higher input costs[116](index=116&type=chunk) EPS Comparison | Metric | Dec 31, 2022 | Dec 31, 2021 | YoY Change | | :----------- | :----------- | :----------- | :--------- | | Diluted EPS | $3.31 | $2.05 | +61.5% | | Adjusted EPS | $2.46 | $2.14 | +15.0% | [Intelligent Devices](index=29&type=section&id=Intelligent%20Devices) This sub-section details the performance of the Intelligent Devices segment - Intelligent Devices sales **increased 4.0%** year over year, with organic sales up 6.6% and the CUBIC acquisition adding 1.5 percentage points, while currency translation decreased sales by 4.1 percentage points[117](index=117&type=chunk) - Segment operating margin **decreased to 22.4%** from 23.7%, primarily due to higher investment spend and unfavorable currency impact, partially offset by pricing increases[118](index=118&type=chunk) [Software & Control](index=29&type=section&id=Software%20%26%20Control) This sub-section reports the performance of the Software & Control segment - Software & Control sales **increased 11.6%** year over year, with organic sales up 15.5%, while currency translation decreased sales by 3.9 percentage points[119](index=119&type=chunk) - Segment operating margin **increased to 29.2%** from 22.9%, driven by higher sales, pricing increases, and the favorable year-over-year impact from the Plex acquisition, partially offset by higher input costs[120](index=120&type=chunk) [Lifecycle Services](index=29&type=section&id=Lifecycle%20Services) This sub-section details the performance of the Lifecycle Services segment - Lifecycle Services sales **increased 6.4%** year over year, with organic sales up 10.2% and acquisitions adding 0.4 percentage points, while currency translation decreased sales by 4.2 percentage points[121](index=121&type=chunk) - Segment operating margin **decreased slightly to 5.2%** from 5.5%[122](index=122&type=chunk) [Supplemental Segment Information](index=30&type=section&id=Supplemental%20Segment%20Information) This section provides a breakdown of certain costs not allocated to operating segments for internal measurement Purchase Accounting Depreciation and Amortization by Segment | Segment | 2022 (millions) | 2021 (millions) | | :------------------ | :-------------- | :-------------- | | Intelligent Devices | $1.0 | $0.7 | | Software & Control | $16.9 | $17.3 | | Lifecycle Services | $7.8 | $7.9 | Non-operating Pension and Postretirement Benefit Credit by Segment | Segment | 2022 (millions) | 2021 (millions) | | :------------------ | :-------------- | :-------------- | | Intelligent Devices | $(3.9) | $(2.1) | | Software & Control | $(3.9) | $(2.1) | | Lifecycle Services | $(5.3) | $(2.8) | [Adjusted Income, Adjusted EPS, and Adjusted Effective Tax Rate Reconciliation](index=31&type=section&id=Adjusted%20Income%2C%20Adjusted%20EPS%2C%20and%20Adjusted%20Effective%20Tax%20Rate%20Reconciliation) This section provides reconciliations of GAAP measures to non-GAAP adjusted measures - Adjusted measures exclude non-operating pension and postretirement benefit credit, purchase accounting depreciation and amortization, change in fair value of investments, and net loss attributable to noncontrolling interests, along with their tax effects[125](index=125&type=chunk) - **Adjusted EPS** is used as a financial measure for annual incentive compensation[126](index=126&type=chunk) GAAP to Non-GAAP Reconciliation Summary (millions, except per share data) | Metric | Dec 31, 2022 | Dec 31, 2021 | | :---------------------------------------------------- | :----------- | :----------- | | Net income attributable to Rockwell Automation | $384.0 | $241.5 | | Adjusted income | $285.3 | $251.3 | | Diluted EPS | $3.31 | $2.05 | | Adjusted EPS | $2.46 | $2.14 | | Effective tax rate | 19.1% | 15.4% | | Adjusted effective tax rate | 17.1% | 15.3% | [Financial Condition](index=33&type=section&id=Financial%20Condition) This subsection analyzes the company's financial health, focusing on cash flows, debt, and liquidity - The company expects future uses of cash to include working capital, capital expenditures, retirement plan contributions, acquisitions, dividends, share repurchases, and debt repayments, funded by existing cash, operating activities, commercial paper, or new debt/securities[134](index=134&type=chunk) - The majority of cash and cash equivalents are held by non-U.S. subsidiaries, with earnings of a limited number of these subsidiaries indefinitely reinvested[135](index=135&type=chunk) [Cash Flow Summary](index=33&type=section&id=Cash%20Flow%20Summary) This sub-section summarizes cash flows and presents free cash flow, a non-GAAP measure - The year-over-year increases in operating cash flow and free cash flow were primarily due to **higher pre-tax income** and lower income tax payments, partially offset by increases in working capital[130](index=130&type=chunk) - The company generated **$144.8 million** in gross inflow from sales of PTC shares in the first three months of fiscal 2023[131](index=131&type=chunk) Cash Flow Activities | Activity | Dec 31, 2022 (millions) | Dec 31, 2021 (millions) | | :------------------------------------------ | :---------------------- | :---------------------- | | Cash provided by (used for) operating activities | $66.3 | $(12.0) | | Cash used for investing activities | $(18.3) | $(48.7) | | Cash used for financing activities | $(105.3) | $(52.0) | | Effect of exchange rate changes on cash | $18.0 | $(9.5) | | Decrease in cash, cash equivalents, and restricted cash | $(39.3) | $(122.2) | Free Cash Flow Reconciliation | Metric | Dec 31, 2022 (millions) | Dec 31, 2021 (millions) | | :-------------------------------- | :---------------------- | :---------------------- | | Cash provided by (used for) operating activities | $66.3 | $(12.0) | | Capital expenditures | $(24.2) | $(37.1) | | **Free cash flow** | **$42.1** | **$(49.1)** | [Share Repurchases](index=33&type=section&id=Share%20Repurchases) This sub-section details the company's share repurchase activities - The company repurchased approximately **0.6 million shares** of common stock for **$156.0 million** in the first three months of fiscal 2023[133](index=133&type=chunk) - As of December 31, 2022, approximately **$1,095.3 million** remained authorized for share repurchases under existing board authorizations[133](index=133&type=chunk) [Debt and Credit Facilities](index=34&type=section&id=Debt%20and%20Credit%20Facilities) This sub-section provides information on the company's debt and credit facilities - Short-term debt at December 31, 2022, included **$462.0 million** in commercial paper borrowings (4.40% weighted average interest rate) and **$50.0 million** from Sensia's $75.0 million line of credit (5.35% interest rate)[132](index=132&type=chunk) - In June 2022, the company replaced its $1.25 billion revolving credit facility with a new five-year **$1.5 billion unsecured revolving credit facility**, which uses SOFR as the primary basis for interest payments[136](index=136&type=chunk)[137](index=137&type=chunk) Credit Ratings | Credit Rating Agency | Short-Term Rating | Long-Term Rating | Outlook | | :------------------- | :---------------- | :--------------- | :------ | | Standard & Poor's | A-1 | A | Negative | | Moody's | P-2 | A3 | Stable | | Fitch Ratings | F1 | A | Stable | [Foreign Currency Risk Management](index=35&type=section&id=Foreign%20Currency%20Risk%20Management) This sub-section explains how the company uses foreign currency forward exchange contracts to manage risks - The company uses foreign currency forward exchange contracts to hedge exposure to foreign currency exchange rate variability in expected future cash flows and net investments in non-U.S. subsidiaries[142](index=142&type=chunk) - During the three months ended December 31, 2022, **$12.7 million** in pre-tax net gains related to cash flow hedges were reclassified from Accumulated other comprehensive loss into the Consolidated Statement of Operations[143](index=143&type=chunk) - Approximately **$16.0 million** of pre-tax net unrealized gains on cash flow hedges as of December 31, 2022, are expected to be reclassified into earnings within the next 12 months[143](index=143&type=chunk) [Supplemental Sales Information](index=36&type=section&id=Supplemental%20Sales%20Information) This section defines "organic sales" and provides reconciliations of reported sales to organic sales - Organic sales, a non-GAAP measure, excludes the effects of acquisitions and changes in currency exchange rates to reflect regional and operating segment performance[146](index=146&type=chunk) [Reconciliation of Reported Sales to Organic Sales by Geographic Region](index=36&type=section&id=Reconciliation%20of%20Reported%20Sales%20to%20Organic%20Sales%20by%20Geographic%20Region) This sub-section provides a table reconciling reported sales to organic sales for each geographic region Geographic Region Sales Reconciliation | Geographic Region | Reported Sales (millions) | Less: Effect of Acquisitions (millions) | Effect of Changes in Currency (millions) | Organic Sales (millions) | | :---------------- | :------------------------ | :-------------------------------------- | :--------------------------------------- | :----------------------- | | North America | $1,178.9 | $1.2 | $(8.1) | $1,185.8 | | Europe, Middle East and Africa | $372.8 | $11.7 | $(40.9) | $402.0 | | Asia Pacific | $296.5 | $2.7 | $(29.7) | $323.5 | | Latin America | $132.8 | — | $2.1 | $130.7 | | **Total Company Sales** | **$1,981.0** | **$15.6** | **$(76.6)** | **$2,042.0** | [Reconciliation of Reported Sales to Organic Sales by Operating Segment](index=36&type=section&id=Reconciliation%20of%20Reported%20Sales%20to%20Organic%20Sales%20by%20Operating%20Segment) This sub-section provides a table reconciling reported sales to organic sales for each operating segment Operating Segment Sales Reconciliation | Operating Segment | Reported Sales (millions) | Less: Effect of Acquisitions (millions) | Effect of Changes in Currency (millions) | Organic Sales (millions) | | :------------------ | :------------------------ | :-------------------------------------- | :--------------------------------------- | :----------------------- | | Intelligent Devices | $936.2 | $13.7 | $(37.6) | $960.1 | | Software & Control | $573.3 | — | $(20.2) | $593.5 | | Lifecycle Services | $471.5 | $1.9 | $(18.8) | $488.4 | | **Total Company Sales** | **$1,981.0** | **$15.6** | **$(76.6)** | **$2,042.0** | [Critical Accounting Estimates](index=37&type=section&id=Critical%20Accounting%20Estimates) No material changes to critical accounting estimates are reported as of December 31, 2022 - No material changes to critical accounting estimates were reported as of December 31, 2022, referring to the Annual Report on Form 10-K for detailed information[148](index=148&type=chunk) [Environmental Matters](index=37&type=section&id=Environmental%20Matters) No material changes to information regarding environmental matters are reported as of December 31, 2022 - No material changes to information regarding environmental matters were reported as of December 31, 2022, referring to the Annual Report on Form 10-K[149](index=149&type=chunk) [Recent Accounting Pronouncements](index=37&type=section&id=Recent%20Accounting%20Pronouncements) This section directs readers to Note 1 in the Consolidated Financial Statements for details - Information on recent accounting pronouncements is provided in Note 1 of the Consolidated Financial Statements[150](index=150&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to market risk disclosures are reported as of December 31, 2022 - No material changes to quantitative and qualitative disclosures about market risk were reported as of December 31, 2022, referring to the Annual Report on Form 10-K[151](index=151&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's CEO and CFO concluded that disclosure controls and procedures were effective - The CEO and CFO concluded that disclosure controls and procedures were **effective** as of December 31, 2022[152](index=152&type=chunk) - **No material changes** in internal control over financial reporting occurred during the quarter[153](index=153&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) No material changes to legal proceedings are reported since the last Annual Report on Form 10-K - No material changes to information regarding legal proceedings were reported as of December 31, 2022, referring to the Annual Report on Form 10-K[155](index=155&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors are reported since the last Annual Report on Form 10-K - No material changes to information regarding risk factors were reported as of December 31, 2022, referring to the Annual Report on Form 10-K[156](index=156&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's share repurchase activities during the first quarter of fiscal 2023 - The company repurchased **635,087 shares** of common stock at an average price of **$245.62 per share** during the three months ended December 31, 2022[157](index=157&type=chunk) - As of December 31, 2022, approximately **$1,095.3 million** remained authorized for share repurchases under existing board programs[157](index=157&type=chunk) [Share Repurchases](index=38&type=section&id=Share%20Repurchases) Share Repurchase Activity | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Maximum Approx. Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | | :------------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------------------------- | | October 1 - 31, 2022 | 359,580 | $233.60 | $1,167,267,571 | | November 1 - 30, 2022 | 243,087 | $261.61 | $1,103,672,484 | | December 1 - 31, 2022 | 32,420 | $259.00 | $1,095,275,574 | | **Total** | **635,087** | **$245.62** | | [Item 6. Exhibits](index=39&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including officer certifications and data files - Exhibits include certifications from the CEO (31.1, 32.1) and CFO (31.2, 32.2) as required by the Securities Exchange Act and Sarbanes-Oxley Act, as well as the independent auditor's letter (15) and Interactive Data Files (101, 104)[159](index=159&type=chunk) [Signatures](index=40&type=section&id=Signatures) This section contains the required signatures confirming the submission of the Form 10-Q - The report was signed by Nicholas C. Gangestad, Senior Vice President and Chief Financial Officer, and Terry L. Riesterer, Vice President and Controller, on January 26, 2023[162](index=162&type=chunk)

Financial Data and Key Metrics Changes - Total revenue for Q4 2022 was over $2.1 billion, up 17.6% year-over-year, with organic sales growing 20.5% compared to the prior year [8][32] - Adjusted EPS grew 30% year-over-year to $3.04, reflecting strong operational performance [15][33] - Segment operating margin expanded to 23.3%, a 540 basis point increase driven by higher sales and positive price costs [32] Business Line Data and Key Metrics Changes - Intelligent Devices segment saw organic sales growth of over 16%, with significant contributions from PowerFlex drives and motion technology [10][11] - Software & Control segment experienced organic sales growth of over 32%, exceeding expectations [11][37] - Lifecycle Services organic sales were up 16% year-over-year, with a book-to-bill ratio of 1.02 [12][37] Market Data and Key Metrics Changes - North America organic sales grew by 20%, while EMEA sales increased over 24% and Latin America sales were also up 20% [25] - Discrete industries sales were up almost 20%, with automotive sales increasing by 25% [17] - Hybrid industry segment sales grew over 20%, led by food and beverage and life sciences [21][23] Company Strategy and Development Direction - The company is focused on expanding its intelligent devices and software offerings, with recent acquisitions enhancing its capabilities in renewable energy and data centers [15][16] - Continued investment in innovation and talent retention is a priority, with plans to introduce new cloud-native applications and solutions [65][126] - The company anticipates a conservative approach for fiscal 2023, projecting total reported sales growth of 9.5% [29][50] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to navigate supply chain challenges and highlighted a record backlog as a positive indicator for future growth [26][63] - The company expects continued demand in key sectors such as EV, semiconductor, and food and beverage, despite macroeconomic headwinds [79] - Fiscal 2023 guidance includes expectations for adjusted EPS growth of 12% and free cash flow generation of over $1.1 billion [51][52] Other Important Information - The company completed the acquisition of CUBIC, enhancing its market access and capabilities [15] - Free cash flow for Q4 was $359 million, up $200 million from the prior year, driven by higher pretax income [34] - The backlog grew by over 75% year-over-year, providing strong visibility into future revenue [49] Q&A Session Summary Question: Can you provide insights on expected inflection points in end markets for 2023? - Management highlighted continued investment in EV and battery sectors, with strong demand from established brands and startups [74][75] Question: Are there any one-time items affecting Q1 guidance? - Management noted a decline in Software & Control segment due to specific component shortages impacting Q1 results [90][91] Question: What percentage of revenue is underwritten by existing backlog? - Approximately 60% of the full year is covered by backlog, which is significantly higher than the typical coverage [93] Question: How is the order intake being affected by supply chain normalization? - Management indicated that while lead times are decreasing, customer demand remains strong, with no significant reduction in order requests [138]

| --- | --- | --- | --- | --- | |---------------------------------|-------|-------|--------------------------------------|------------------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | VININ | | | | | | on expanding human possibility® | | | Q4 Fiscal 2022 Earnings Presentation | November 2, 2022 | nt Safe Harbor Statement 2 THIS PRESENTATION INCLUDES GUIDANCE AND OTHER STATEMENTS RELATED TO THE EXPECTED FUTURE RESULTS OF THE COMPANY AND ARE THEREFORE FO ...

Rockwell Automation, Inc. (NYSE:ROK) Q3 2022 Earnings Conference Call July 27, 2022 8:30 AM ET Company Participants Aijana Zellner – Head-Investor Relations Blake Moret – Chairman and Chief Executive Officer Nick Gangestad – Chief Financial Officer Conference Call Participants Scott Davis – Melius Research Josh Pokrzywinski – Morgan Stanley Andy Kaplowitz – Citigroup Julian Mitchell – Barclays Noah Kaye – Oppenheimer & Company Steve Tusa – J.P. Morgan Andrew Obin – Bank of America Operator Thank you for hol ...

| --- | --- | --- | --- | --- | |---------------------------------|-------|-------|--------------------------------------|---------------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | INVINIA | | | | | | on expanding human possibility" | | | Q3 Fiscal 2022 Earnings Presentation | July 27, 2022 | n & Safe Harbor Statement THIS PRESENTATION INCLUDES GUIDANCE AND OTHER STATEMENTS RELATED TO THE EXPECTED FUTURE RESULTS OF THE COMPANY AND ARE THEREFORE FORWARD ...

PART I. FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The company's unaudited quarterly financial statements detail its financial position, performance, and cash flows [Consolidated Balance Sheet](index=4&type=section&id=Consolidated%20Balance%20Sheet) Total assets slightly increased to $10.80 billion, marked by higher inventories and lower cash equivalents Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2022 | September 30, 2021 | | :--- | :--- | :--- | | **Total Assets** | **$10,799.9** | **$10,701.6** | | Cash and cash equivalents | $482.9 | $662.2 | | Inventories | $989.1 | $798.1 | | Goodwill | $3,582.2 | $3,625.9 | | **Total Liabilities** | **$8,114.3** | **$8,007.5** | | Long-term debt | $3,464.1 | $3,464.6 | | **Total Shareowners' Equity** | **$2,685.6** | **$2,694.1** | [Consolidated Statement of Operations](index=5&type=section&id=Consolidated%20Statement%20of%20Operations) Quarterly sales grew 6.5% to $1.97 billion, though nine-month net income fell due to investment value changes Statement of Operations Summary (in millions, except per share amounts) | Metric | Q3 2022 | Q3 2021 | 9 Months 2022 | 9 Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Total Sales | $1,968.7 | $1,848.2 | $5,634.1 | $5,189.6 | | Gross Profit | $802.4 | $764.4 | $2,215.6 | $2,178.3 | | Change in fair value of investments | $(5.2) | $43.3 | $(138.3) | $624.6 | | Net income attributable to Rockwell | $297.9 | $271.3 | $593.3 | $1,279.6 | | Diluted EPS | $2.55 | $2.32 | $5.06 | $10.91 | [Consolidated Statement of Cash Flows](index=7&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows) Operating cash flow for the nine-month period decreased significantly to $423.7 million due to working capital needs Cash Flow Summary - Nine Months Ended June 30 (in millions) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Cash provided by operating activities | $423.7 | $1,056.9 | | Cash used for investing activities | $(99.2) | $(372.2) | | Cash used for financing activities | $(478.5) | $(502.8) | | **(Decrease) increase in cash** | **$(179.3)** | **$209.2** | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Key disclosures cover revenue recognition, the Plex Systems acquisition, goodwill, and the PTC Inc investment - As of June 30, 2022, the company had approximately **$1,080 million in unfulfilled performance obligations**, with about $540 million expected to be recognized as revenue in the next 12 months[37](index=37&type=chunk) - In August 2021, the company acquired Plex Systems for a net purchase consideration of **$2.205 billion**, resulting in $1.728 billion of goodwill allocated to the Software & Control segment[53](index=53&type=chunk)[54](index=54&type=chunk) - The annual evaluation of Goodwill in the second quarter of fiscal 2022 concluded that **these assets were not impaired**[63](index=63&type=chunk) - The company's investment in PTC Inc common stock was valued at **$1.066 billion** as of June 30, 2022, with fair value changes being a significant source of earnings volatility[69](index=69&type=chunk)[71](index=71&type=chunk)[73](index=73&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strong demand and record backlog offset by supply chain constraints and inflation - The company is experiencing stress on its global supply chain due to increased demand and global events, leading to disruptions, difficulty in procuring components, increased costs, and delivery delays[120](index=120&type=chunk) Fiscal 2022 Guidance (as of July 27, 2022) | Metric | Guidance | | :--- | :--- | | Reported sales growth | 10.5% - 12.5% | | Organic sales growth | 10% - 12% | | Diluted EPS | $7.74 - $8.14 | | Adjusted EPS | $9.30 - $9.70 | [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Q3 sales grew 6.5% organically, but nine-month pre-tax income fell sharply due to unfavorable PTC investment adjustments Sales Growth by Region - Q3 2022 vs Q3 2021 | Region | Reported Change | Organic Change | | :--- | :--- | :--- | | North America | 14.1% | 10.9% | | Europe, Middle East and Africa | (6.5)% | 3.2% | | Asia Pacific | (10.2)% | (5.8)% | | Latin America | 18.3% | 15.5% | | **Total Sales** | **6.5%** | **7.1%** | - **Adjusted EPS for Q3 2022 was $2.66**, a 15.2% increase from $2.31 in Q3 2021, driven by higher sales and lower incentive compensation, which offset higher input and investment costs[134](index=134&type=chunk) [Segment Analysis](index=34&type=section&id=Segment%20Analysis) The Software & Control segment drove performance with strong sales growth and margin expansion in Q3 2022 Segment Performance - Q3 2022 vs Q3 2021 | Segment | Sales Change | Operating Margin Q3 2022 | Operating Margin Q3 2021 | | :--- | :--- | :--- | :--- | | Intelligent Devices | (0.5)% | 19.7% | 21.9% | | Software & Control | 19.1% | 31.4% | 25.2% | | Lifecycle Services | 6.1% | 9.4% | 10.3% | [Financial Condition, Liquidity and Capital Resources](index=38&type=section&id=Financial%20Condition) Free cash flow declined sharply due to increased working capital, while liquidity was enhanced with a new credit facility Free Cash Flow (in millions) | Metric | Nine Months Ended June 30, 2022 | Nine Months Ended June 30, 2021 | | :--- | :--- | :--- | | Cash provided by operating activities | $423.7 | $1,056.9 | | Capital expenditures | $(100.3) | $(76.6) | | **Free cash flow** | **$323.4** | **$980.3** | - In the first nine months of fiscal 2022, the company **repurchased approximately 1.0 million shares for $225.5 million**, with $1.33 billion remaining under share repurchase authorizations[149](index=149&type=chunk) - On June 29, 2022, the company entered into a **new five-year $1.5 billion unsecured revolving credit facility**, replacing its former $1.25 billion facility[153](index=153&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no material changes to its market risk exposures since its last annual report - As of June 30, 2022, there has been **no material change** to the company's exposure to foreign currency risk and interest rate risk as reported in the fiscal 2021 Form 10-K[174](index=174&type=chunk) [Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's **disclosure controls and procedures were effective** as of the end of the fiscal quarter[175](index=175&type=chunk) - There were **no material changes** in the company's internal control over financial reporting during the quarter[176](index=176&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) No material changes to legal proceedings were reported since the last annual report - As of June 30, 2022, there has been **no material change** to the legal proceedings information disclosed in the company's fiscal 2021 Form 10-K[177](index=177&type=chunk) [Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) No material changes to significant risk factors were reported since the last annual report - As of June 30, 2022, there has been **no material change** to the risk factors information disclosed in the company's fiscal 2021 Form 10-K[178](index=178&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 860,134 shares in the quarter and increased its buyback authorization by $1.0 billion Share Repurchases - Three Months Ended June 30, 2022 | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2022 | — | $— | | May 2022 | 408,755 | $204.71 | | June 2022 | 451,379 | $204.70 | | **Total** | **860,134** | **$204.71** | - On May 2, 2022, the Board of Directors authorized an **additional $1.0 billion** for the company's share repurchase program[180](index=180&type=chunk) [Exhibits](index=45&type=section&id=Item%206.%20Exhibits) Filed exhibits include a new $1.5 billion credit agreement and required officer certifications - A key exhibit filed is the **$1,500,000,000 Five-Year Credit Agreement** dated as of June 29, 2022[182](index=182&type=chunk)