Summary of Rockwell Automation Conference Call Company Overview - **Company**: Rockwell Automation (NYSE: ROK) - **Event**: Citi's 2026 Global Industrial Tech and Mobility Conference - **Date**: February 17, 2026 Key Points Industry and Market Position - Rockwell Automation has increased resilience by diversifying exposure across various verticals, with process making up 40% of total business [2][3] - The company is a leader in American manufacturing technology, with a growth algorithm targeting 5%-8% organic growth [3] - Focus on traditional and new verticals, including data centers, e-commerce, and warehouse automation [4] Financial Performance and Growth Outlook - Annual recurring revenue (ARR) constitutes over 10% of the business, with a goal of double-digit growth in earnings [2][6] - Mid-single-digit growth expected on the top line, with double-digit growth in earnings for the year [6] - Book-to-bill ratio in lifecycle services reported at 1.16, indicating positive sentiment and improved customer decision-making [15][16] Strategic Initiatives - Investment of $2 billion planned over the coming years in plants, talent, and digital infrastructure to expand market share and margins [5] - Focus on expanding margins through productivity improvements, including control of commercial expenses and manufacturing efficiency [5][61] - Emphasis on integrating artificial intelligence into workflows to enhance operational efficiency [5][39] Product and Technology Development - Strong growth in Logix products, with over 20% year-over-year growth globally and over 25% in North America [19] - Introduction of new products, including the L9 Logix controller, contributing to a healthy innovation pipeline [20] - Expansion into mobile robotics, creating a new market opportunity estimated at $4 billion to $5 billion [14] Competitive Landscape - Rockwell Automation maintains a strong position against competitors by leveraging domain expertise and integrated solutions [56] - The company is adapting to market changes, including the rise of AI, while ensuring that its software remains mission-critical and integrated with physical systems [32][33] Regional Performance - North America is expected to be the strongest region for growth, followed by Asia, particularly India and Southeast Asia [58] - Latin America has shown weakness, primarily due to challenges in Mexico, while Brazil remains comparatively stronger [58] Innovations and Future Trends - Key innovations include Software-Defined Automation and integrated robotics, which are expected to simplify automation projects and drive future growth [69] - The importance of domain expertise in understanding customer problems and simplifying automation processes is emphasized as a critical factor for success [69] Pricing Strategy - Rockwell has improved its pricing processes to allow for more immediate price realization in response to market changes [41] - The company is exploring opportunities for surgical pricing on specific SKUs to enhance overall pricing strategy [43] Conclusion - Rockwell Automation is positioned for continued growth through strategic investments, product innovation, and a focus on operational excellence, while navigating challenges in the global automation market [6][69]

Financial Data and Key Metrics Changes - The company reported a 12% year-over-year increase in sales for Q1, with approximately 2 points of growth attributed to currency and 3 points from organic growth driven by price [17][20] - Adjusted EPS for Q1 was $2.75, exceeding expectations, with a favorable tax rate contributing to this performance [10][19] - Gross margins expanded year-over-year due to positive price, cost, and productivity factors, with SG&A spending remaining flat [18][20] Business Segment Performance Changes - Intelligent Devices segment saw organic sales growth of 16% year-over-year, with strong performance in drives and motion [8][21] - Software and Control segment experienced a 17% increase in organic sales, with North American sales of Logix up over 25% [9][21] - Lifecycle Services segment's organic sales declined by 6% year-over-year, but margins improved to 14.1% [10][21] Market Data and Key Metrics Changes - Discrete sales were up low double digits year-over-year, driven by e-commerce and warehouse automation, with automotive sales growing mid-single digits [11][12] - E-commerce and warehouse automation sales grew over 60% in the quarter, reflecting strong demand in North America [11] - Process industries sales increased by 10% year-over-year, with notable growth in chemicals, water, and energy sectors [14][15] Company Strategy and Development Direction - The company aims to deliver solid top-line performance while increasing productivity and expanding margins, focusing on automation and digital transformation [4][5] - Plans for a new manufacturing facility in Wisconsin align with investments in plants, talent, and digital infrastructure, emphasizing commitment to the U.S. market [16] - The company is maintaining its organic sales growth outlook of 2%-6% for fiscal 2026, with expectations for margin expansion [16][25] Management's Comments on Operating Environment and Future Outlook - The macro environment remains fluid with geopolitical uncertainties impacting capital spending, but long-term trends in automation and digital transformation are strong [5][28] - Management expressed cautious optimism regarding capital expenditure budgets, noting that while there is positive sentiment, orders need to materialize for a more favorable outlook [36][96] - The company anticipates continued growth in recurring revenue and expects full-year segment margin expansion of over 100 basis points [16][25] Other Important Information - The company is on track to close the Sensia joint venture by April 1, with expectations of no significant impact on adjusted EPS [10][25] - Free cash flow in Q1 was $170 million, generally in line with expectations, but lower than the previous year due to changes in working capital [20][86] Q&A Session Summary Question: Can you reconcile cautious comments with CapEx budgets being slightly higher? - Management noted optimism in certain areas but emphasized the need for a broader release of orders before adjusting guidance [34][35] Question: How do you see margin drivers playing out across segments? - Slight sequential improvement in sales and modest margin expansion is expected across segments, with Lifecycle Services maintaining around 14% margin [44][45] Question: What is the outlook for Logix and hybrid industries? - Logix is expected to continue strong growth, with hybrid industries also showing positive trends, particularly in food and beverage [50][51] Question: Can you provide insights on semiconductor opportunities? - The semiconductor market remains volatile, but there are positive signs in industrial semiconductors, with ongoing investments in AI and environmental controls [66][67] Question: What is the outlook for process markets? - Process markets performed well in Q1, particularly in energy and specialty chemicals, with cautious optimism for continued growth [92][93]

Financial Data and Key Metrics Changes - The company reported a 12% year-over-year increase in sales for Q1, with approximately 2 points of growth attributed to currency and 3 points from organic growth driven by price increases [17][18] - Adjusted EPS for Q1 was $2.75, exceeding expectations, with a favorable tax rate contributing to this performance [10][19] - Total company segment margin was 20.7%, reflecting improvements driven by higher volume, favorable mix, and strong productivity [10][18] Business Segment Performance Changes - Intelligent Devices segment saw organic sales growth of 16% year-over-year, with strong performance in drives and motion [8][21] - Software and Control segment experienced a 17% increase in organic sales, with North American sales of Logix up over 25% year-over-year [9][21] - Lifecycle Services segment organic sales declined by 6% year-over-year, consistent with expectations, but margins improved to 14.1% [10][21] Market Data and Key Metrics Changes - Discrete sales were up low double digits year-over-year, driven by strong demand in e-commerce and warehouse automation, which grew over 60% [11][12] - The process industries segment reported a 10% increase in sales, with notable growth in chemicals, water, and energy [14][15] - Life sciences sales declined low single digits year-over-year, primarily due to project delays, but the pipeline remains strong [14] Company Strategy and Development Direction - The company aims to expand margins while maintaining solid top-line performance, focusing on productivity and structural efficiency [4][5] - Investments in new manufacturing facilities and digital infrastructure underscore the company's commitment to the U.S. market [16] - The company is well-positioned to lead in automation and digital transformation as customers accelerate their Factory of the Future initiatives [5] Management's Comments on Operating Environment and Future Outlook - The macro environment remains fluid with geopolitical uncertainties impacting capital spending, but there are positive signals in certain sectors [5][28] - The company maintains an organic sales growth outlook of 2%-6% for fiscal 2026, with expectations for gradual improvement throughout the year [16][24] - Management expressed cautious optimism regarding capital expenditures, noting that while there are positive indicators, a broad-based release of orders is still needed [36][96] Other Important Information - The company plans to close the Sensia joint venture on April 1, which is expected to have no significant impact on adjusted EPS but will reduce annualized sales by approximately $250 million [25] - Free cash flow in Q1 was $170 million, which was lower than the previous year due to changes in working capital and incentive compensation payments [20][86] Q&A Session Summary Question: CapEx budgets and spending behavior - Management noted that while there is optimism in certain areas, a broad-based release of orders is needed before adjusting guidance higher [36][37] Question: Margin drivers and segment performance - Management expects slight sequential improvement in margins across segments, with Lifecycle Services maintaining around 14% margin [44][45] Question: Demand trends and project orders - Management indicated good demand for modernizations and new capacity, but orders are not coming through at the expected speed [71][73] Question: Semiconductor market opportunities - Management acknowledged a tough comp in Q1 for semiconductors but noted ongoing opportunities in industrial applications and AI-related investments [66][68] Question: Process market outlook - Management highlighted strong performance in the process segment, particularly in energy and specialty chemicals, while remaining cautious about capital spending in oil and gas [91][92]

Financial Data and Key Metrics Changes - First quarter reported sales increased by 12% year-over-year, with approximately 2 percentage points of growth attributed to currency and 3 percentage points from organic growth driven by price [17][18] - Adjusted EPS for Q1 was $2.75, exceeding expectations, with gross margins expanding year-over-year due to positive price, cost, and productivity factors [10][18] - Free cash flow in Q1 was $170 million, which was $123 million lower than the prior year due to changes in working capital and incentive compensation payments [19][20] Business Segment Performance Changes - Intelligent Devices segment saw organic sales growth of 16% year-over-year, with strong performance in drives and motion [7][20] - Software and Control segment experienced organic sales growth of 17%, with North American sales of Logix up over 25% year-over-year [9][20] - Lifecycle Services segment's organic sales declined by 6% year-over-year, with a book-to-bill ratio of 1.16 [10][20] Market Data and Key Metrics Changes - E-commerce and warehouse automation sales grew over 60% year-over-year, driven by strong demand in North America [11][12] - Sales in the discrete market were up low double digits year-over-year, with automotive sales growing mid-single digits [11][12] - Process industries sales increased by 10% year-over-year, with strong growth in chemicals, water, and energy [13][14] Company Strategy and Development Direction - The company is focused on delivering solid top-line performance while increasing productivity and expanding margins, with a strong emphasis on automation and digital transformation [4][5] - Plans for a new manufacturing facility in southeastern Wisconsin were announced, reinforcing the company's commitment to the U.S. market [16] - The company aims to maintain organic sales growth outlook of 2%-6% for fiscal 2026, with expectations for segment margin expansion of over 100 basis points [16][25] Management's Comments on Operating Environment and Future Outlook - The macro environment remains fluid with geopolitical uncertainties impacting capital spending, but long-term trends driving automation and digital transformation are strong [5][28] - Management expressed cautious optimism regarding capital expenditure budgets, noting that while there is some positive sentiment, a broad-based release of orders is still needed [36][95] - The company expects to see mid-single-digit sales growth in Q2, with modest margin expansion anticipated [26][74] Other Important Information - The company is on track to end the Sensia joint venture, with the return of the profitable process automation business to full Rockwell control expected by April 1 [10][25] - The adjusted effective tax rate for Q1 was about 17%, lower than expected due to discrete tax items, which is anticipated to improve the full-year tax rate guidance [19][20] Q&A Session Summary Question: CapEx budgets and spending behavior - Management noted that while there is optimism in certain areas, a broad-based release of orders is needed before adjusting guidance higher [36] Question: Margin drivers and sequential improvement - Management expects slight sequential improvement in margins across segments, with Lifecycle Services maintaining around 14% margin [42][44] Question: Demand trends and project orders - Management indicated good demand for modernizations and investment in brownfields, with new capacity business contributing positively [71][72] Question: Semiconductor market opportunities - Management acknowledged a tough comp in Q1 for semiconductors but noted ongoing opportunities in industrial semiconductors and AI-related applications [64][66] Question: Process market outlook - Management highlighted strong performance in the process segment, particularly in energy and specialty chemicals, while remaining cautious about capital spending in oil and gas [90][92]

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