Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rockwell Automation Inc (ROK, Financial) achieved double-digit growth in annual recurring revenue, now accounting for 10% of total revenue, up from 4% in 2018.
- The company realized $110 million in cost reductions in the second half of fiscal year 2024, exceeding their target by $10 million.
- Rockwell Automation Inc (ROK) reported strong performance in North America, with sequential orders growth in the region.
- The company secured strategic wins, including a significant project with Ford Motor Company and a strategic win at NTT for data center power needs.
- Rockwell Automation Inc (ROK) is expanding its market through recent acquisitions, contributing to growth in areas like data center power needs and cybersecurity.
Negative Points
- Rockwell Automation Inc (ROK) experienced a 21% decline in Q4 sales compared to the previous year, attributed to difficult year-over-year comparisons and lingering channel destocking effects.
- Orders were down low single digits sequentially in Q4, contrary to expectations for low single-digit improvement.
- The company anticipates a high single-digit decline in Q1 sales due to typical seasonality and slower orders in Q4.
- Segment margins decreased year-over-year, with Intelligent Devices and Software & Control segments experiencing significant margin declines.
- Rockwell Automation Inc (ROK) faces continued project delays across several end markets, impacting sales growth projections for fiscal year 2025.
Q & A Highlights
Q: Blake, you implied that maybe the election caused some noise. Do you see a restock happening imminently? Is that something that seems possible?
A: We're really not counting on anything at the beginning of the year, particularly in Q1. As we talked about before, we're nearing the end of the drain of excess stock at distributors and machine builders. Some machine builders and distributors are already back to that equilibrium point. But we're just not counting on some rapid acceleration for them to put additional inventory back on their shelf. - Blake Moret, CEO
Q: When you look at '25, do you think we're any closer to a bottom in discrete? Is there any kind of visibility that's helping you talk about relative stability in hybrid and process markets in '25?
A: In hybrid, food and beverage are still not seeing a lot of activity for greenfield investment, but we are working on planning for expansion projects. In life sciences, we may be coming off a bottom, especially with GLP-1 capacity. In discrete, automotive is the biggest component, and while there are investments, it's not at a point where we can sound the all-clear. We expect gradual sequential improvement in orders after Q1. - Blake Moret, CEO
Q: Just trying to understand, is the funnel converting into orders just a budgeting at year-end? And what's the timeline from order to shipment?
A: The funnel is tracked differently for products versus big greenfield projects. For products, once an order is placed, we can turn it around at a high rate, often within weeks. For Lifecycle Services, the average lead time is about 5 to 6 months, varying with the complexity of the project. - Blake Moret, CEO
Q: Can you elaborate on the Intelligent Devices outlook for Q1, given the expected sequential decline?
A: The step down is due to shipments outstripping incoming orders during 2024 and seasonal lows in Q1. The configure-to-order business will also be off somewhat in the first quarter. - Christian Rothe, CFO
Q: Could you provide more color on the non-R&D investments mentioned in the guidance? Are they OpEx or CapEx?
A: It's a mix of OpEx and CapEx. Some investments are in facilities, like expanding Cubic for data center growth and a new facility in India for resilience in Asia. We're also investing in digital infrastructure for internal and external productivity. - Blake Moret, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
