Rockwell Automation(ROK) - 2024 Q4 - Annual Results

Financial Highlights Rockwell Automation reported significant declines in Q4 and full-year 2024 sales and earnings, while providing fiscal 2025 guidance Q4 & Full Year 2024 Performance Summary The company experienced significant declines in Q4 and full-year 2024 sales and earnings, while Total Annual Recurring Revenue grew and fiscal 2025 guidance was introduced Fiscal 2024 Key Performance Indicators (vs. FY 2023) | Metric | Q4 2024 | Full Year 2024 | | :--- | :--- | :--- | | Reported Sales Growth | (21)% | (9)% | | Organic Sales Growth | (21)% | (10)% | | Diluted EPS | $2.09 (-20%) | $8.28 (-31%) | | Adjusted EPS | $2.47 (-32%) | $9.71 (-20%) | | Total ARR Growth | N/A | 16% | | Operating Cash Flow | $432M (-49%) | $864M (-37%) | Fiscal 2025 Guidance | Metric | Guidance Range | | :--- | :--- | | Reported & Organic Sales Growth | (4)% to 2% | | Diluted EPS | $7.65 - $8.85 | | Adjusted EPS | $8.60 - $9.80 | Management Commentary Management noted lower-than-expected orders due to market softness, while highlighting solid operating performance and strong growth in Lifecycle Services - Orders came in lower than expected, reflecting continued softness in many end markets[2] - The Lifecycle Services segment was highlighted for its strong performance, driven by higher exposure to process end markets, growth in digital services, and margin expansion[2] Consolidated Financial Results This section details Rockwell Automation's financial performance for Q4 and the full fiscal year 2024, highlighting key revenue, earnings, and cash flow metrics Fiscal Q4 2024 Financial Results Q4 2024 saw a 21% sales decrease to $2,036 million, with net income and adjusted EPS significantly declining and operating cash flow nearly halved Q4 2024 vs. Q4 2023 Financials | Metric | Q4 2024 | Q4 2023 | Change | | :--- | :--- | :--- | :--- | | Sales | $2,036M | $2,563M | (21)% | | Net Income | $239M | $303M | (21)% | | Diluted EPS | $2.09 | $2.61 | (20)% | | Adjusted EPS | $2.47 | $3.64 | (32)% | | Segment Operating Margin | 20.1% | 22.3% | (2.2 p.p.) | | Operating Cash Flow | $432M | $840M | (49)% | - The decrease in segment operating margin was driven by lower sales volume and unfavorable mix, partially offset by cost reduction actions and lower incentive compensation[6] Fiscal 2024 Full Year Financial Results Full fiscal year 2024 sales declined 9% to $8,264 million, with net income and adjusted EPS significantly lower and operating cash flow down 37% Full Year 2024 vs. 2023 Financials | Metric | FY 2024 | FY 2023 | Change | | :--- | :--- | :--- | :--- | | Sales | $8,264M | $9,058M | (9)% | | Net Income | $953M | $1,387M | (31)% | | Diluted EPS | $8.28 | $11.95 | (31)% | | Adjusted EPS | $9.71 | $12.12 | (20)% | | Segment Operating Margin | 19.3% | 21.3% | (2.0 p.p.) | | Operating Cash Flow | $864M | $1,375M | (37)% | - The decrease in cash flow was driven by lower pre-tax income, higher compensation payments based on prior year performance, and higher tax payments, partially offset by decreases in working capital[13] Fiscal Year 2025 Outlook This section outlines Rockwell Automation's financial projections and strategic expectations for the upcoming fiscal year 2025 FY2025 Guidance Rockwell Automation projects fiscal 2025 reported and organic sales growth between -4% and 2%, with diluted EPS expected between $7.65 and $8.85 Fiscal Year 2025 Guidance | Metric | Guidance Range | | :--- | :--- | | Reported Sales Growth | (4)% to 2% | | Organic Sales Growth | (4)% to 2% | | Diluted EPS | $7.65 - $8.85 | | Adjusted EPS | $8.60 - $9.80 | Management Outlook Commentary Management anticipates a soft Q1 2025 with gradual improvement, focusing on high-growth investments and margin expansion, with North America remaining the strongest market - Expects fiscal Q1 sales to be down from Q4 levels, with gradual sequential improvement through the year[16] - The company will continue to fuel high-growth areas and drive margin expansion projects[16] - North America continues to be the best-performing market[16] Business Segment Performance This section provides a detailed overview of the sales and operating margin performance across Rockwell Automation's key business segments Intelligent Devices The Intelligent Devices segment experienced sales declines of 19% in Q4 and 7% for the full year, with operating margins also contracting Intelligent Devices Performance | Period | Sales | Sales Change (YoY) | Operating Margin | | :--- | :--- | :--- | :--- | | Q4 2024 | $946M | (19)% | 20.6% | | FY 2024 | $3,804M | (7)% | 18.4% | Software & Control The Software & Control segment saw sharp declines, with Q4 sales down 39% and full-year sales down 24%, significantly impacting operating margins Software & Control Performance | Period | Sales | Sales Change (YoY) | Operating Margin | | :--- | :--- | :--- | :--- | | Q4 2024 | $502M | (39)% | 22.3% | | FY 2024 | $2,187M | (24)% | 24.2% | Lifecycle Services The Lifecycle Services segment demonstrated strong growth, with Q4 sales up 3% and full-year sales up 10%, accompanied by significant operating margin expansion Lifecycle Services Performance | Period | Sales | Sales Change (YoY) | Operating Margin | | :--- | :--- | :--- | :--- | | Q4 2024 | $588M | 3% | 17.4% | | FY 2024 | $2,273M | 10% | 16.1% | - The significant increase in segment operating margin was driven by lower incentive compensation, strong project execution, and Sensia margin improvement[23][24] Supplemental Financial Information This section provides additional financial details, including recurring revenue growth, restructuring charges, share repurchases, and tax and ROIC analysis Key Metrics and Corporate Items The company reported strong 16% growth in Total Annual Recurring Revenue, alongside significant restructuring charges and share repurchases - Total Annual Recurring Revenue (ARR) grew 16% year-over-year, while Organic ARR grew 14%[26] - Full-year restructuring charges were $97 million, primarily for severance benefits related to a program to optimize cost structure and expand margins[28] - The company repurchased 2.2 million shares for $594 million during fiscal year 2024[30] Tax and ROIC The effective tax rate decreased to 13.8% in FY 2024, while Return on Invested Capital (ROIC) declined to 15.2% due to lower pre-tax income Tax Rate Comparison | Tax Rate | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Effective Tax Rate (GAAP) | 13.8% | 20.5% | | Adjusted Effective Tax Rate | 15.1% | 16.4% | - Return on Invested Capital (ROIC) decreased to 15.2% in FY 2024 from 20.9% in FY 2023, primarily due to lower pre-tax income[31] Financial Statements and Reconciliations This section presents the company's condensed financial statements and detailed reconciliations of non-GAAP financial measures Condensed Statement of Operations The condensed statement of operations shows a decrease in full-year 2024 sales to $8,264.2 million and a decline in net income to $952.5 million Full Year Statement of Operations Highlights (in millions) | Line Item | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Sales | $8,264.2 | $9,058.0 | | Gross Profit | $3,193.4 | $3,717.0 | | Income Before Income Taxes | $1,099.1 | $1,608.5 | | Net Income Attributable to Rockwell | $952.5 | $1,387.4 | Condensed Balance Sheet The balance sheet as of September 30, 2024, indicates total assets of $11,232.1 million, a significant decrease in cash, and increased total debt Balance Sheet Highlights (in millions) | Account | Sept 30, 2024 | Sept 30, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $471.0 | $1,071.8 | | Goodwill and intangibles | $5,059.6 | $4,381.6 | | Total Assets | $11,232.1 | $11,304.0 | | Total Debt | $3,639.5 | $2,966.2 | | Total Shareowners' Equity | $3,498.3 | $3,561.6 | Condensed Cash Flow Statement Fiscal year 2024 saw operating cash flow decrease to $863.8 million, with significant cash usage for investing and financing activities, resulting in a net cash decrease Full Year Cash Flow Summary (in millions) | Activity | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Cash from Operating Activities | $863.8 | $1,374.6 | | Cash (used for)/from Investing Activities | ($982.5) | $854.3 | | Cash used for Financing Activities | ($502.8) | ($1,675.6) | | Net (Decrease)/Increase in Cash | ($609.4) | $572.5 | Reconciliation of Non-GAAP Measures This section provides detailed reconciliations of non-GAAP financial measures, including Organic Sales, Adjusted EPS, and Free Cash Flow, for clearer operational insights Organic Sales Reconciliation Reported sales are reconciled to organic sales by adjusting for acquisitions and currency effects, showing a 10% organic sales decline for FY 2024 FY 2024 Sales Reconciliation (in millions) | Description | Amount | | :--- | :--- | | Reported Sales | $8,264.2 | | Less: Effect of Acquisitions | ($96.0) | | Less: Effect of Currency Changes | ($4.5) | | Organic Sales | $8,163.7 | - For the full year, reported sales growth was (9)%, while organic sales growth was (10)%, with acquisitions contributing 1% to growth[54] Adjusted Income and EPS Reconciliation Adjusted Income and EPS are reconciled from GAAP figures by excluding specific non-recurring items, resulting in an Adjusted EPS of $9.71 for FY 2024 FY 2024 EPS Reconciliation | Description | Per Share Amount | | :--- | :--- | | Diluted EPS (GAAP) | $8.28 | | Adjustments (net) | $1.43 | | Adjusted EPS (Non-GAAP) | $9.71 | Free Cash Flow Reconciliation Free cash flow is derived by subtracting capital expenditures from operating cash flow, resulting in $639.1 million for FY 2024 and a 57% conversion rate FY 2024 Free Cash Flow (in millions) | Line Item | Amount | | :--- | :--- | | Cash provided by operating activities | $863.8 | | Capital expenditures | ($224.7) | | Free cash flow | $639.1 | - The free cash flow conversion rate was 57% in FY 2024, a significant decrease from 86% in FY 2023[67]