10-QPeriod: Q1 FY2024

ROCKWELL AUTOMATION, INC Quarterly Report for Q1 Ended Dec 31, 2023

Filed January 31, 2024For Securities:ROK

Summary

Rockwell Automation, Inc. reported net sales of $2,052.1 million for the fiscal first quarter ended December 31, 2023, a 3.6% increase compared to the prior year period. While overall sales showed growth, driven by acquisitions and currency translation, organic sales saw a modest 1.0% increase. Profitability experienced a significant year-over-year decline, with net income attributable to Rockwell Automation falling to $215.2 million from $384.0 million in the prior year's quarter. This was reflected in a substantial decrease in diluted earnings per share (EPS) to $1.86 from $3.31. The reduction in profitability was attributed to lower segment operating earnings, increased investment spending, and a substantial decrease in pre-tax margin, impacted by the prior year's favorable investment gains. The company completed two acquisitions in the current fiscal year: Clearpath Robotics and Verve Industrial Protection, contributing to goodwill and intangible assets on the balance sheet. Despite the near-term pressure on profitability, the company's long-term strategy focuses on expanding human possibility and creating the future of industrial operations through digital transformation, automation, and sustainability initiatives. Investors should monitor ongoing supply chain improvements, macroeconomic factors affecting industrial demand, and the company's ability to leverage its strategic acquisitions to drive future growth and profitability.

Financial Highlights

52 data points
Beta

Revenue

$2.05B

38.7% Gross Margin

Net Income

$215.00M

10.5% Net Margin

EPS (Diluted)

$1.86

Total Assets

$11.33B

Cash & Equivalents

$439.00M

Free Cash Flow

-$35.00M

Financial Statements
Beta
Revenue$2.05B
Cost of Revenue$1.26B
Gross Profit$795.00M
SG&A Expenses$514.00M
Interest Expense$33.30M
Net Income$215.00M
EPS (Basic)$1.87
EPS (Diluted)$1.86
Shares Outstanding (Basic)114.60M
Shares Outstanding (Diluted)115.20M

Key Highlights

  • 1Total sales increased by 3.6% to $2.05 billion in the first quarter of fiscal 2024, with acquisitions and currency translation contributing positively to growth.
  • 2Organic sales grew by a more modest 1.0%, indicating that core business growth was slower than overall sales.
  • 3Net income attributable to Rockwell Automation decreased significantly to $215.2 million, down from $384.0 million in the prior year quarter.
  • 4Diluted Earnings Per Share (EPS) fell sharply to $1.86 from $3.31 year-over-year, reflecting the decline in net income.
  • 5Segment operating margin declined to 17.3% from 20.2% in the prior year quarter, primarily due to higher investment spend and lower supply chain utilization.
  • 6The company completed two strategic acquisitions in the period: Clearpath Robotics for $608.5 million and Verve Industrial Protection for $183.2 million, adding significant goodwill and intangible assets.
  • 7Free cash flow turned negative at -$35.3 million, compared to a positive $42.1 million in the prior year quarter, impacted by lower pre-tax income and higher incentive compensation payments.

Frequently Asked Questions

The decrease in net income and EPS was primarily driven by lower segment operating earnings and a significant reduction in pre-tax margin. This was largely due to higher investment spend, lower supply chain utilization, and importantly, the absence of substantial mark-to-market gains on the company's previous investment in PTC that boosted results in the prior year's comparable quarter.

Rockwell Automation completed the acquisitions of Clearpath Robotics and Verve Industrial Protection. These acquisitions contributed $27.8 million to reported sales in the quarter and resulted in the addition of $400.0 million in goodwill and $360.1 million in intangible assets to the balance sheet. While contributing to sales growth, the integration and related investments also impacted operating margins.

The company is seeing continued improvement in its supply chain environment and is actively managing it through various measures like extended order visibility, longer-term supply agreements, and re-engineering products. However, they acknowledge ongoing macroeconomic factors such as inflation and global business conditions, as well as regional variations like the slowdown in China, continue to influence demand and profitability.

Free cash flow turned negative in the quarter due to lower profitability and higher incentive payments. The company has a $1.5 billion unsecured revolving credit facility and actively uses commercial paper. As of December 31, 2023, short-term debt included $407.0 million in commercial paper. The company has approximately $820.0 million remaining under its share repurchase authorization, and its ability to access capital markets remains strong, supported by its credit ratings.