Rockwell Automation, Inc. · NYSE:ROK
Rockwell Automation — Q2 2020 Earnings Presentation
30 slides from Rockwell Automation's earnings presentation, Apr 28, 2020
Slide 1: Fiscal Year 2020 Second Quarter Conference Call
Fiscal Year 2020 Second Quarter Conference Call April 28, 2020 PUBLIC 1
Slide 2: Safe Harbor Statement
Safe Harbor Statement THIS PRESENTATION INCLUDES GUIDANCE AND OTHER STATEMENTS RELATED TO THE EXPECTED FUTURE RESULTS OF THE COMPANY AND ARE THEREFORE FORWARD-LOOKING STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTIONS DUE TO A WIDE RANGE OF RISKS AND UNCERTAINTIES, MANY OF WHICH
Slide 3: Priorities in Response to COVID-19 Impact
Priorities in Response to COVID-19 Impact Employees Customers ▪ Support well-being of employees ▪ Laser focused on helping and communities customers manage through the crisis ▪ Early initiation of our business continuity plans ▪ Digital technologies used to support customers remotely ▪ Successfully
Slide 4: Q2 FY20 Results Highlights
Q2 FY20 Results Highlights Solid Adjusted EPS and Free Cash Flow growth ▪ Reported sales up 1.5% YOY – Inorganic investments contributed 3% ▪ Organic sales flat YOY, in line with expectations – Logix up 8%, driven by North American Auto and Food & Beverage – Strong growth in Independent Cart Technol
Slide 5: Organic Industry Segment Performance
Organic Industry Segment Performance % of Q2 FY20 Q2 FY20 Sales vs. Q2 FY19 Q2 FY20 vs. Q2 FY19 Discrete Up high single Automotive up double digits ~ 25% digits Semiconductor up double digits Hybrid Food & Beverage up low single digits ~ 40% Flat Life Sciences down mid single digits Tire d
Slide 6: Q2 FY20 Organic Sales Growth
Q2 FY20 Organic Sales Growth North America +1.4% EMEA Highlights * (1.9)% • North America results driven by strength in Automotive and weakness in Oil & Gas • EMEA down, but saw growth in Automotive, Food & Beverage, Life Sciences, and Semiconductors Asia Pacific • Asia Pacific grew excluding China
Slide 7: How We Are Navigating The Current Environment
How We Are Navigating The Current Environment Our focus remains on helping our customers and employees ▪ Employee safety is our first priority ▪ Helping customers provide critical goods in the fight against COVID-19 ▪ Addressing supply chain and operational challenges ▪ Taking actions to better alig
Slide 8: Inorganic Investments Highlights
Information Solutions / Connected Services Inorganic Investments Highlights Process Expertise Market access in Europe / Asia Leading provider of Industrial PCs, Human Software delivery and consulting firm Machine Interface (HMI) hardware and specializing in the digital transformation of so
Slide 9: FY20 Full Year Outlook Highlights
FY20 Full Year Outlook Highlights Revising guidance as a result of rapid deterioration in macro environment ▪ Organic sales down (8)% YOY at the guidance midpoint – Expect ~20% decline in Q3 YOY with a sequential improvement in Q4 – IS/CS expected to benefit from strong backlog built in Q2 ▪ Inorgan
Slide 10: Organic Industry Segment Outlook
Organic Industry Segment Outlook FY20 vs FY19 FY20 Assumptions at Guidance Midpoint Discrete Down high single Automotive down double digits (2nd half down ~35%) digits Semiconductor up mid single digits Hybrid Food & Beverage down low single digits Down mid single Life Sciences flat digits
Slide 11: Q2 FY20 Key Financial Information
Q2 FY20 Key Financial Information ($ in millions, except per share amounts) Q2 FY20 Q2 FY19 YOY B/(W) Organic Growth (0.2)% Inorganic Growth +3.2% SALES $1,681 $1,657 Currency Translation (1.5)% Reported Growth +1.5% SEGMENT OPERATING MARGIN 22.1% 21.3% 80 bps GENERAL CORPORATE - NET $18 $27 $9 ADJU
Slide 12: Q2 FY20 Segment Results
Q2 FY20 Segment Results SALES SEGMENT OPERATING HIGHLIGHTS ($ in millions) MARGIN ▪ Strong Logix performance $757.1 30.7% ▪ Segment operating margin YOY increase mainly ARCHITECTURE Organic +4.0% +230 bps due to ~200 bps tailwind from lower incentive & SOFTWARE Inorganic +0.1% compensation expense,
Slide 13: Q2 FY19 to Q2 FY20 Adjusted EPS Walk
Q2 FY19 to Q2 FY20 Adjusted EPS Walk ~ $0.20 ~ $(0.15) ~ $0.05 ~$ 0.30 $2.43 $2.04 FY19 Q2 Core Incentive FX Net Interest Tax Rate Acquisitions FY20 Q2 2 Compensation Expense 1 (excl. Interest) & Share Count 1 Includes net interest expense related to Sensia. 2 Sensia within acquisitions consists o
Slide 14: Strong Balance Sheet and Liquidity
Strong Balance Sheet and Liquidity ▪ Total debt of $2.1B at March 31 Debt – $82M of short-term debt, primarily commercial paper borrowings Structure – $2.0B of long-term debt (next maturity is 2025) ▪ $400M term loan executed in April Current ▪ Cash on balance sheet in excess of $1.0 billion, includ
Slide 15: Supply Chain and Operations Update
Supply Chain and Operations Update Supply Chain Operations Solutions & Services ▪ Proactively increased inventory ▪ Enhanced our global safety and ▪ Thousands of domain experts levels of selected components hygiene processes to keep our delivering and supporting and finished goods employees safe cus
Slide 16: Overview of Cost Actions
Overview of Cost Actions Aligning our cost structure with current and anticipated market conditions ▪ Anticipate no payout for incentive compensation plans ▪ Cost structure changes: – Eliminating all discretionary spend – Delays of non-critical investments – Contract labor adjustments – Deferral of
Slide 17: FY20 Order and Revenue Trends and Estimates
FY20 Order and Revenue Trends and Estimates China Product Orders Growth YoY 40% Total ROK Organic Sales Growth YoY 0.0% 20% 0% -5.0% -20% -40% -10.0% Jan Feb Mar Apr MTD (as of 4/24) Italy Product Orders Growth YoY -15.0% 40% 20% -20.0% 0% -20% -25.0% Q1 Q2 Q3* Q4* -40% Jan Feb Mar Apr MTD *FY20 Q3
Slide 18: FY20 Guidance
FY20 Guidance January Guidance April Guidance Sales Midpoint ~ $7.0B ~ $6.35B Organic Growth Range (1.5)% - 1.5% (9.5)% - (6.5)% Inorganic Growth ~ 4% 4.0% - 4.5% Currency Translation ~ (0.5)% ~ (1)% Segment Operating Margin ~ 21.5% 18.5% - 19.5% Adjusted Effective Tax Rate1 ~ 15.5% ~ 13% Adjusted E
Slide 19: FY20 January Guidance to April Guidance Adjusted EPS Walk
FY20 January Guidance to April Guidance Adjusted EPS Walk At the midpoint of guidance ~$(1.55) ~$(0.15) ~$0.20 ~$(0.10) $8.90 $7.30 FY20 January Core FX Tax Rate Acquisitions FY20 April Guidance 1 Guidance (excl. Interest) 1 Sensia within acquisitions consists of the incremental operating earnings,
Slide 20: Appendix
Appendix Supplemental Financial Information and Reconcilations to Non-GAAP Measures 20
Slide 21: Q2 FY20 Results: Summary
Q2 FY20 Results: Summary ($ in millions, except per share amounts) Q2 2020 Q2 2019 Total Sales $ 1,681.3 $ 1,657.2 Total Segment Operating Earnings $ 371.5 $ 353.8 Purchase Accounting Depreciation and Amortization (9.5) (4.3) General Corporate - Net (17.7) (26.7) Non-operating pension and postretire
Slide 22: Free Cash Flow
Free Cash Flow ($ in millions) Q2 2020 Q2 2019 Net Income $ 130 $ 346 Depreciation/Amortization 42 39 Retirement Benefits Expense 32 17 Receivables/Inventory/Payables (12) (50) Compensation and Benefits (61) (5) Pension Contributions (10) (9) Income Taxes (62) (79) Change in fair value of investment
Slide 23: Industry Segmentation
Industry Segmentation % of FY19 Sales Discrete Hybrid Process ~10% Automotive ~20% Food & Beverage ~10% Oil & Gas ~5% Semiconductor ~5% Life Sciences ~5% Mining, Aggregates & ~5% Household & Personal Care Cement ~5% General Industries ~5% Tire ~5% Metals • Warehousing & Logistics • Printing & Publis
Slide 24: Reconciliation to Non-GAAP Measures
Reconciliation to Non-GAAP Measures Organic Sales ($ in millions) Three Months Ended March 31, 2020 2019 Reported Acquisition Currency Organic Effect of Sales Growth Growth Growth Growth Effect of Changes in Organic (Decline) (Decline) (Decline) (Decline) Sales(a) Acquisitions(e)1 Currency(d) Sales(
Slide 25: Reconciliation to Non-GAAP Measures
Reconciliation to Non-GAAP Measures Segment Operating Margin ($ in millions) Three Months Ended March 31, 2020 March 31, 2019 Sales Architecture & Software (a) $ 757.1 $ 739.7 Control Products & Solutions (b) 924.2 917.5 Total sales (c) $ 1,681.3 $ 1,657.2 Segment operating earnings Architecture & S
Slide 26: Reconciliation to Non-GAAP Measures
Reconciliation to Non-GAAP Measures Adjusted Income, Adjusted EPS, and Adjusted Effective Tax Rate ($ in millions, except per share amounts) Three Months Ended March 31, 2020 March 31, 2019 Net Income attributable to Rockwell Automation $ 132.2 $ 346.0 Non-operating pension and postretirement benefi
Slide 27: Reconciliation to Non-GAAP Measures
Reconciliation to Non-GAAP Measures Return On Invested Capital ($ in millions) Twelve Months Ended March 31, 2020 2019 (a) Return Net income $ 714.8 $ 970.8 Interest expense 105.7 80.1 Income tax provision 165.0 285.8 Purchase accounting depreciation and amortization 27.7 16.9 Return 1,013.2 1,353.6
Slide 28: Reconciliation to Non-GAAP Measures
Reconciliation to Non-GAAP Measures Logix Sales Growth Three Months Ended March 31, 2020 Logix Logix reported growth 6 % Effect of currency translation 2 % Logix organic growth 8 % Control Products & Solutions Sales Growth Three Months Ended March 31, 2020 Control Products Control Products reported
Slide 29: Reconciliation to Non-GAAP Measures
Reconciliation to Non-GAAP Measures Fiscal 2020 Guidance ($ in billions, except per share amounts) Organic Sales Fiscal 2020 Guidance Organic sales growth (9.5)% - (6.5)% Inorganic sales growth 4.0% - 4.5% Foreign currency impact ~ (1)% Reported sales growth (6.5)% - (3.0)% Segment Operating Margin
Slide 30: Thank you
Thank you www.rockwellautomation.com 30