Emerson Electric Company · NYSE:EMR
Emerson Electric — Q3 2022 Earnings Presentation
35 slides from Emerson Electric's earnings presentation, Aug 9, 2022
Slide 1: Emerson Q3 Earnings Conference Call
Emerson Q3 Earnings Conference Call August 9, 2022
Slide 2: Safe Harbor Statement
Safe Harbor Statement Statements in this presentation and our commentary and responses to questions that are not strictly historical may be “forward-looking” statements, which involve risks and uncertainties, and Emerson undertakes no obligation to update any such statements to reflect later develop
Slide 3: Recent Portfolio Announcements
Recent Portfolio Announcements AC Q U I S I T I O N S DIVESTITURES AspenTech Transaction Closed May 16 InSinkErator Agreement to Sell Announced August 8 AspenTech Announces Agreement to Acquire End-to-End Software Leader for Mining Industry Sale Completed May 31 Emerson Acquires Life Sciences Leader
Slide 4: Net Zero
Net Zero Targets Net zero GHG emissions Net zero operations Scopes 1 and 2 (Scopes 1, 2 and 3) by GHG emissions and 25% reduction of Scope 3 GHG emissions by 2030 compared to 2021 baseline with a science-based aligned approach
Slide 5: Recent Project Wins Highlight Emerson's Leadership in the Energy Transition
Recent Project Wins Highlight Emerson’s Leadership in the Energy Transition Emerson Chosen by Mitsubishi for Emerson Software and Emerson to Automate Albioma World’s Largest Hydrogen Technologies Chosen to Automate Coal-Fired Power Plant Production and Storage Facility Fintoil Biorefinery Transforma
Slide 6: Investments Show Commitment to Regionalization, Factory Automation and Operational Excellence
Investments Show Emerson’s Continued Commitment to Regionalization, Factory Automation and Operational Excellence Emerson Opens New Emerson Inaugurates New Emerson Introduces New Professional Tools Facility in Integrated Manufacturing Facility Production Facility in Ash Flat, Arkansas in Chennai, In
Slide 7: Q3 Results
Q3 Results y. EMERSON.
Slide 8: 2022 Q3 Significant Items
2022 Q3 Significant Items ASPENTECH TRANSACTION On May 16, 2022, Emerson completed its transaction with AspenTech. In exchange for 55% ownership of the new AspenTech, Emerson contributed two business – OSI and Geological Simulation Software (now Subsurface Science and Engineering, or SSE) – plus $6B
Slide 9: 2022 Q3 Performance Summary
2022 Q3 Performance Summary Sales Adjusted Segment EBITA* Free Cash Flow* Adjusted EPS* $4.7B $5.0B 23.0% $1.38 21.3% $1.0B $1.19 $0.6B 7% Underlying* 170 bps 36% 16% 2021 2022 2021 2022 2021 2022 2021 2022 • $100M impact from China lockdowns; • Favorably impacted by portfolio actions; • Hig
Slide 10: 2021 Q3 to 2022 Q3 Adjusted EPS Bridge
2021 Q3 to 2022 Q3 Adjusted EPS* Bridge $0.08 $1.38 $0.09 $0.02 Operations $0.09 – 55% of $1.19 Net AspenTech Earnings Stock Comp $0.08 Operations Interest Expense on Share Repurchase $0.02 $3B of Debt to Fund Transaction ($0.01) Tax ($0.03) FX ($0.02) Other ($0.03) 2022 2021 Adjusted EPS* Adjusted
Slide 11: Supply Chain Challenges Continue With Electronics and China Lockdowns
Supply Chain Challenges Continue With Electronics and China Lockdowns Affecting the Quarter May Expectations Q3 Actual No operation in April Emerson elected for employees to stay home during lockdowns – no forced closed-loop operations or extended overnight stays China Re-opening expected to begin i
Slide 12: Full Year 2022 Outlook
Full Year 2022 Outlook y. EMERSON.
Slide 13: Emerson Trailing Three-Month Underlying Orders Versus Prior Year
Emerson Trailing Three-Month Underlying Orders Versus Prior Year APR MAY JUN Automation Solutions 16% 13% 13% Commercial & Residential Solutions 2% 3% 5% 60% 55% EMERSON 11% 9% 10% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% (5%) (10%) (15%) (20%) (25%) Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21
Slide 14: 2022 Guidance
2022 Guidance ENVIRONMENT / May 2022 August 2022 KEY ASSUMPTIONS Guidance Guidance Net Sales Growth 8% – 10% 7% – 8% Acquisitions ~0 pts 1-2 pts Divestitures ~0 pts (~1 pt) FX (~1 pt) (2-3 pts) Order strength and backlog support Q4 growth Underlying Sales Growth* 9% – 11% 9% – 10% Automation Solutio
Slide 15: 2022 Guidance Bridges
2022 Guidance Bridges GAAP EPS BRIDGE ADJUSTED EPS* BRIDGE May Guide GAAP EPS $4.77 – $4.92 May Guide Adjusted EPS* $4.95 – $5.10 Lowering Top End of Guide – ($0.05) Lowering Top End of Guide ($0.05) Operations and Therm-O-Disc Operations Operations and Therm-O-Disc Operations Subtotal $4.77 – $4.87
Slide 16: 2022 GAAP EPS to Adjusted EPS Guidance
2022 GAAP EPS to Adjusted EPS* Guidance GAAP EPS $5.25 – $5.35 Restructuring / Related Costs ~$0.20 Amortization of Intangibles ~$0.47 Gain on Subordinated Interest ($0.60) Therm-O-Disc Divestiture ($0.72) Russia Exit $0.29 AspenTech Transaction Costs and Interest Expense1 $0.16 Adjusted EPS* $5.05
Slide 17: Q&A
Q&A § EMERSON.
Slide 18: Appendix
Appendix y. EMERSON.
Slide 19: 2022 Q3 P&L Summary
2022 Q3 P&L Summary (MILLIONS, EXCEPT EPS) 2021 2022 Change Sales $4,697 $5,005 6.6% Gross profit $1,982 $2,097 % of sales 42.2% 41.9% (30 bps) SG&A expense $1,073 $1,052 % of sales 22.9% 21.0% (190 bps) EBIT* $821 $1,245 % of sales* 17.5% 24.9% 740 bps Adjusted EBITA* $942 $1,143 % of sales* 20.1%
Slide 20: 2022 Q3 Earnings & Cash Flow
2022 Q3 Earnings & Cash Flow (MILLIONS) 2021 2022 Change Adjusted segment EBITA* $1,000 $1,151 15% % of sales* 21.3% 23.0% 170 bps Stock compensation ($66) ($16) $50 Corporate pension and OPEB $24 $25 $1 Adjusted corporate and other* ($16) ($17) ($1) Adjusted interest expense, net* ($37) ($41) ($4)
Slide 21: 2022 Q3 World Area Underlying Sales Growth
2022 Q3 World Area Underlying Sales Growth Commercial & Automation Residential Solutions Solutions Emerson Americas 12% 16% 14% Europe (2%) 6% 0% Asia, Middle East & Africa (3%) 5% (1%) China (2%) (18%) (6%) 4% 13% 7% Note: Excludes heritage AspenTech, Therm-O-Disc (previously reported in Commercial
Slide 22: Segment Details – Reclassified Financials
Segment Details – Reclassified Financials Following Emerson’s transaction with AspenTech, Emerson contributed two software businesses (OSI and Subsurface Science and Engineering, or SSE) to AspenTech. These businesses, previously reported in Automation Solutions, have been reclassified to the AspenT
Slide 23: Segment Details – Reclassified Financials
Segment Details – Reclassified Financials Following Emerson’s transaction with AspenTech, Emerson contributed two software businesses (OSI and Subsurface Science and Engineering, or SSE) to AspenTech. These businesses, previously reported in Automation Solutions, have been reclassified to the AspenT
Slide 24: Segment Details – Reclassified Financials
Segment Details – Reclassified Financials Following Emerson’s transaction with AspenTech, Emerson contributed two software businesses (OSI and Subsurface Science and Engineering, or SSE) to AspenTech. These businesses, previously reported in Automation Solutions, have been reclassified to the AspenT
Slide 25: AspenTech Contribution to Emerson 2022 Q3 Adjusted EBITA
AspenTech Contribution to Emerson 2022 Q3 Adjusted EBITA* The below illustrates how AspenTech reported financials flow into Emerson. Please note certain items are captured under Emerson corporate. AspenTech Reported Financials Emerson Reported AspenTech Segment Quarter Quarter (MILLIONS) (MILLIONS)
Slide 26: AspenTech Contribution to Emerson 2022 Q3 GAAP EPS
AspenTech Contribution to Emerson 2022 Q3 GAAP EPS The below illustrates how AspenTech reported financials flow into overall Emerson EPS. E m er s on E P S C ont r i but ion BEFORE TRANSACTION April 1, 2022 – May 15, 2022 (OSI / SSE 100% Contribution) (MILLIONS, EXCEPT EPS) Results Sales $33 Net ear
Slide 27: AspenTech Contribution to Emerson 2022 Q3 Adjusted EPS
AspenTech Contribution to Emerson 2022 Q3 Adjusted EPS* The below illustrates how AspenTech reported financials flow into overall Emerson adjusted EPS*. BEFORE TRANSACTION AFTER TRANSACTION April 1, 2022 – May 15, 2022 (OSI / SSE 100% Contribution) May 16, 2022 – June 30, 2022 (55% Contribution of E
Slide 28: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures This information reconciles non-GAAP measures (denoted with a *) with the most directly comparable GAAP measure (dollars in millions, except per share amounts) Commercial Automation & Residential Q3 2022 Underlying Sales Change Solutions Solutions Emerson Reported
Slide 29: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures This information reconciles non-GAAP measures (denoted with a *) with the most directly comparable GAAP measure (dollars in millions, except per share amounts) EBIT Q3 FY21 Q3 FY22 Pretax earnings (GAAP) $ 784 $ 1,195 Interest expense, net 37 50 Earnings before in
Slide 30: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures This information reconciles non-GAAP measures (denoted with a *) with the most directly comparable GAAP measure (dollars in millions, except per share amounts) Q3 Earnings Per Share Q3 FY21 Q3 FY22 Change Earnings per share (GAAP) $ 1.04 $ 1.54 48% Restructuring a
Slide 31: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures This information reconciles non-GAAP measures (denoted with a *) with the most directly comparable GAAP measure (dollars in millions, except per share amounts) Business Segment EBIT Q3 FY21 Q3 FY22 Change Pretax earnings (GAAP) $ 784 $ 1,195 52% Corp. items and in
Slide 32: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures This information reconciles non-GAAP measures (denoted with a *) with the most directly comparable GAAP measure (dollars in millions, except per share amounts) Pretax Earnings Q3 FY21 Q3 FY22 Change Pretax earnings (GAAP) $ 784 $ 1,195 52% Restructuring and relate
Slide 33: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures This information reconciles non-GAAP measures (denoted with a *) with the most directly comparable GAAP measure (dollars in millions, except per share amounts) Corporate and Other Q3 FY21 Q3 FY22 Change Corporate and other (GAAP) $ (33) $ 242 $ 275 Restructuring a
Slide 34: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures This information reconciles non-GAAP measures (denoted with a *) with the most directly comparable GAAP measure (dollars in millions, except per share amounts) Automation Solutions Segment EBIT Margin Q3 FY21 Q3 FY22 Change Automation Solutions Segment EBIT margin
Slide 35: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures This information reconciles non-GAAP measures (denoted with a *) with the most directly comparable GAAP measure (dollars in millions, except per share amounts) Q3 Cash Flow Q3 FY21 Q3 FY22 Change Operating cash flow (GAAP) $ 1,105 $ 740 (33)% Capital expenditures
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