Rockwell Automation Q1 2025 Earnings Call Transcript

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February 10, 2025
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Operator

Thank you for holding and welcome to Rockwell Automation's quarterly conference call. I need to remind everyone that today's conference call is being recorded. Later in the call, we will open up the lines for questions. At this time, I would like to turn the call over to Ajana Zellner, Head of Investor Relations and Market Strategy. Ms.

Operator

Zellner, please go ahead.

Aijana Zellner
Aijana Zellner
Vice President, Investor Relations & Market Strategy at Rockwell Automation

Thank you, Julianne. Good morning and thank you for joining us for Rockwell Automation's first quarter fiscal twenty twenty five earnings release conference call. With me today is Blake Moret, our Chairman and CEO and Christian Rote, our CFO. Our results were released earlier this morning and the press release and charts have been posted to our website. Both the press release and charts include and our call today will reference non GAAP measures.

Aijana Zellner
Aijana Zellner
Vice President, Investor Relations & Market Strategy at Rockwell Automation

Both the press release and charts include reconciliations of these non GAAP measures. A webcast of this call will be available on our website for replay for the next thirty days. For your convenience, a transcript of our prepared remarks will also be available on our website at the conclusion of today's call. Before we get started, I need to remind you that our comments will include statements related to the expected future results of our company and are therefore forward looking statements. Our actual results may differ materially from our projections due to a wide range of risks and uncertainties that are described in our earnings release and details in all our SEC filings.

Aijana Zellner
Aijana Zellner
Vice President, Investor Relations & Market Strategy at Rockwell Automation

So with that, I'll hand it over to Blake.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Thanks, Saijana, and good morning, everyone. Thank you for joining us today. I'll make a couple of general comments before we turn to our first quarter results. I'm pleased with the early benefits of our renewed focus on operational excellence and cost discipline as we create a solid foundation for market beating growth and performance. Continuing benefits from cost reductions in SG and A we took last year will be joined with benefits from reduced costs of direct and indirect purchases, manufacturing efficiency and additional price actions.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Overall, our plan to achieve $250,000,000 worth of productivity benefits versus last year is intact despite additional temporary headwinds such as the negative impact of currency. Additionally, we are confident that we're dealing with the recently announced tariffs in a way that mitigates the impact and maximizes our position as a large U. S. Manufacturer. We've been working on various scenarios since before the election.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Undoubtedly, there will be near term disruptions and volatility in the global supply chain, both for us and our customers, but we continue to believe Rockwell is a net beneficiary of policies that increase U. S. Manufacturing. Christian will cover some of the actions we are taking later in his section. In terms of demand, we are encouraged by better than expected order performance in the quarter.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

We had mid single digit sequential growth overall with sequential growth across all regions and business segments. Orders exceeded shipments in the quarter, giving us some additional backlog for the balance of the year. While there is still macroeconomic and policy uncertainty weighing on customers' CapEx plans, Rockwell won multimillion dollar strategic orders across multiple key industries in the quarter, especially in The U. S, our home market. Let's now turn to our Q1 results on Slide three.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Our Q1 orders grew 10% versus prior year and as I said, were up mid single digits sequentially. We saw particularly strong orders for logics, controllers and IO. We believe our order outperformance reflects true underlying demand based on the broad geographic outperformance, balanced mix of hardware, software and solutions orders and the fact that distributor and machine builder inventories continue to reduce. As customers are waiting for more certainty in the macroeconomic and U. S.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Policy environment, they're balancing their automation spend between increasing operational efficiency and making longer term capital investments. Our Q1 order outperformance includes a number of large customer projects that are slated to convert to sales over the coming quarters. Our Q1 reported sales declined about 8.5% year over year with slightly better than expected organic sales being offset by about a point of headwind from negative currency translation. Remember, our sales in the first half of fiscal twenty twenty four were still supported by a sizable product backlog, creating a difficult year over year comparison for us in fiscal twenty twenty five. We expect to return to year over year sales growth in the back half of the year.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Organic sales in our Intelligent Devices segment were down 12% versus prior year and in line with our expectations. Both Cubic and ClearPath, our recent acquisitions in this segment, saw double digit year over year growth in sales. We continue to grow our pipeline of multi year projects here with significant wins across our key industries and global customers. I'll touch on some of these wins in a few minutes. Software and Control organic sales declined about 12% year over year, but were above our expectations.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Logix exceeded our expectations this quarter with both orders and sales up double digits versus prior quarter. Logic's orders have recovered sequentially during the last six months. Some of our newer offerings we talked about at our Investor Day in November continue to set us apart and help get new customers. One of these competitive wins in the quarter was with Convergex Automation Solutions, a leading global machine builder, who is partnering with Rockwell to help a German end user build their first U. S.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Greenfield plant. The customer chose our cloud enabled optics platform for its hardware agnostic nature and its ability to seamlessly extract and aggregate data from various devices on a plant floor, significantly reducing the time, risk and cost to integrate solutions for multiple vendors. Lifecycle Services organic sales were up 5% year over year. Book to bill in this segment was 1.05 led by strong orders in our solutions business and tied to some of the larger multi year project wins I mentioned earlier. We also saw good growth in recurring services with strategic wins across automotive, tire and food and beverage.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Total ARR for the company grew 11% in the quarter, led by strong growth in our software offerings. One of our notable wins here this quarter was with Meraca, whose dairy factory is powered by renewable geothermal energy and is one of the lowest manufacturing carbon footprints in the industry. Our cloud native Plex software was chosen to help Meraca enhance their product traceability, improve quality and reduce cost. Segment margin was over 17% in the quarter and adjusted EPS was $1.83 both well above our expectations as we continue to execute on our cost down and longer term margin expansion projects. As we reiterated at our Investor Day a few months ago, we are committed to delivering $250,000,000 in year over year benefits from these actions in fiscal twenty twenty five.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

In addition to the structural productivity, we're deploying temporary cost measures to help mitigate the unfavorable currency impact on our earnings. Christian will cover this in more detail later. Turning to Slide four to review key highlights of our Q1 industry segment performance. Consistent with our overall sales results in the quarter, our performance by industry reflects difficult year over year comparisons with Q1 of last year still benefiting from a large product backlog. Our discrete sales were down mid single digits year over year with declines in auto and semi, partially offset by strong growth in e commerce and warehouse automation.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Within discrete, automotive and semiconductor sales continue to be impacted by delays as customers focus on driving operational efficiencies and profitability amidst increasing uncertainty from trade and policy changes in the upcoming months. E commerce and warehouse automation sales grew over 30% versus prior year and were above our expectations. We saw a significant uptick of customer activity this quarter, especially in North America and Europe. Our strong position with leading machine builders and systems integrators in this space is helping us gain additional share of wallet with key end users, both in the traditional e commerce space and global logistics sector with a common theme of facility modernization and optimization. Recent new product introductions have also enhanced our competitiveness in this vertical.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Given the acceleration in customer investments, we now expect e commerce and warehouse automation to grow high single digits year over year in fiscal twenty twenty five. Moving to hybrid, sales in this industry segment was slightly above our expectations led by better performance in Food and Beverage and Home and Personal Care verticals. In Food and Beverage, our customers continue to prioritize spend on digital services and modernization programs over large capacity investments. We expect modest improvement in this vertical as we go through the year. In Life Sciences, we saw a number of strategic wins in the quarter, showcasing the breadth and differentiation of our offerings to serve this market.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

In addition to follow on orders for GLP-one related investments, we secured a large competitive win with our FactoryTalk MES software, helping one of the largest European life sciences companies standardize their global facilities on our platform to increase tech transfer speed and reduce cost. Another important win this quarter was with Thermo Fisher, our OTO autonomous mobile robots were selected to help address Thermo's workforce challenges by optimizing their warehouses through Auto's AI enabled path determination and movement flexibility and freeing up labor to focus on more value adding tasks. Turning to Process Industries. Sales in these verticals were down high single digits year over year on difficult prior year comps, especially within our energy market where oil and gas grew over 25% in Q1 of last year. While the new administration support for more oil production in North America should benefit our customers in the long run, we see a mixed reaction from our energy customers near term as they continue to prioritize capital discipline and operational efficiency over adding more production in The U.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

S. This quarter, Rockwell and EPIC Industrial, a leading EPC company in the energy and chemical space, were chosen by one of the world's largest oil and gas producers to help achieve this year's this end user's goal of net zero emissions by 02/1950. Another important process win was in our mining vertical. Vale selected Rockwell to help increase production and reduce water consumption at their new processing plant in Brazil. Our winning combination of integrated hardware, software and services is the reason Vale chose Rockwell as their single partner to integrate end to end solutions for this greenfield.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Let's turn to Slide five in our Q1 organic regional sales. As you can see, The Americas continued to outperform other regions for us this quarter. EMEA sales were down 14%. We continue to see weakness across most of the region, particularly in Germany and France, with some early signs of stabilization at Italian machine builders. Asia Pacific sales declined 9% led by a double digit year over year decline in China.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

While the automation market in the region is expected to stabilize later in 2025, we expect Asia Pacific to be our weakest region in fiscal twenty twenty five. Let's now move to Slide six to review our fiscal twenty twenty five outlook. We continue to expect a gradual sequential sales improvement as we move through this fiscal year. We're keeping our organic sales growth range of positive 2% to negative 4%, but we are updating our reported sales midpoint to $8,100,000,000 reflecting 1.5 points of negative contribution from currency translation. Christian will cover FX and the calendarization of our guidance in more detail later on the call.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Annual recurring revenue is projected to grow about 10% this year. As I mentioned earlier, we are taking additional cost measures to offset the negative impact of currency headwinds on our bottom line, which means we continue to expect segment margin in the 19% range and are reaffirming our adjusted EPS of $9.2 at the midpoint. We expect free cash flow conversion of 100% in fiscal year twenty twenty five. I'll now turn it over to Christian to provide more detail on our Q1 and financial outlook for fiscal twenty twenty five. Christian?

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

Thank you, Blake. Good morning, everyone. I'll start on Slide seven, first quarter key financial information. First quarter reported sales were down about 8.5% versus prior year. The impact of acquisitions was negligible and currency had a negative impact of 90 basis points in the quarter.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

But one point of our organic growth came from price and price cost was favorable. Segment operating margin was 17.1 compared to 17.3% a year ago, with lower sales volume mostly offset by the benefits of cost from cost reduction and margin expansion actions like mentioned earlier. Adjusted EPS is $1.83 was above our expectations primarily due to the beat on segment operating margins. Looking into more detail when we discuss the EPS bridge and the cost reduction actions, but I'd like to take a moment to commend the team for outstanding performance in the first quarter. It was about strong execution and good cost controls.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

The adjusted effective tax rate for the first quarter was 17.5% below the prior year rate of 17.9%. We remain on track to achieve a 17% ETR for fiscal twenty twenty five. Free cash flow of $293,000,000 was $328,000,000 higher than prior year. Free cash flow conversion was 140% in the first quarter of this year, reflective of continued working capital management by the team as well as zero incentive payouts on fiscal twenty twenty four performance. This is in contrast to the first quarter of last year where we had our cash bonus payout for 2023 performance.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

Two additional items not shown on the slide. We repurchased approximately 400,000 shares in the quarter at a cost of $99,000,000 On December 31, we had approximately $1,200,000,000 remaining under our repurchase authorizations. Return on invested capital was 14.5% for the first quarter of fiscal twenty twenty five and four hundred basis points lower than the prior year, primarily driven by lower pretax income. Slide eight provides a sales and margin performance overview for our three operating segments. Intelligent Devices margin of 14.9% decreased by 130 basis points year over year.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

Purely focusing on decremental conversion, the segment had decrementals in the 20s year over year in the first quarter, which reflects strong execution on cost out programs against the double digit organic sales decline. Software and Control margin of 25.1% was flat with the prior year. This segment typically has very high decrementals with strong execution on our cost out programs and good price cost performance kept our year over year decremental margins in the 20s, performing above our expectations. It's important to note that R and D spend in this segment was in the low teens as a percentage of sales, reflecting our continued focus on new product introductions and long term growth and differentiation. Lifecycle services margin of 12.5 decreased 190 basis points year over year and was slightly below our expectations, mostly driven by Sensia shipments.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

Incrementals were solid year over year, reflecting the low single digit volume growth and strong execution on our cost out programs. Before moving on to EPS, let's expand a little on orders and demand. As Blake mentioned, orders came in better than expected, surpassing $2,000,000,000 in the first quarter and book to bill was greater than one, which hasn't been the case for the last seven quarters. This is a good sign, but didn't materially change the calendarization of our outlook. The outperformance was largely from project orders scheduled to ship later in the year.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

Another favorable data point. In the first quarter, new demand placed on our distributors is slowing through at close to 100% in terms of new orders on Rockwell, matching historical levels giving us further evidence that the destocking cycle is mostly behind us. The next slide, nine, provides the adjusted EPS walk from Q1 fiscal twenty twenty four to Q1 fiscal twenty twenty five. Core performance was down $0.55 on an 8% organic sales decrease. Those sales declines were primarily in our higher margin products in both intelligent devices and software and control, which impacts flow through.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

Importantly, the organization took some temporary cost measures in Q1, which helped keep the core decremental flow through on the high single digit sales decline to this level. Cost reduction and margin expansion actions, which reflect more structural productivity, provided about $70,000,000 of benefit in the quarter, slightly above our expectations and were a $0.5 tailwind. Compensation, which reflects merit and incentive compensation, was a $0.2 headwind. This year over year delta reflects merit increases that came into effect at the beginning of fiscal year as well as higher incentive comp versus prior year. Recall that our full year 2025 guide was for compensation and inflation to be about $190,000,000 headwind compared to fiscal twenty twenty five with $160,000,000 of that coming from compensation.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

The inflation impact is captured inside of core in this bridge. We expect compensation to be about $0.9 of headwind for the remaining three quarters of the year spread about equally. All our items resulted in a $0.04 net benefit. Moving on to the next slide, 10 to discuss our updated guidance for the full year fiscal twenty twenty five. Our thesis for the year remains largely intact with a couple of changes.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

We expect organic sales in a range from negative 4% to positive 2%. While our initial guide for reported revenue for fiscal twenty twenty five did not anticipate any significant impacts from currency, the recent strengthening of the dollar requires a modification in our guide. At current rates, we expect currency headwind to be about 1.5 points, which takes our guidance on reported sales down to slightly below $8,100,000,000 at the midpoint. We expect price to contribute about a point of growth for the year. This excludes any tariff related price actions.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

At the midpoint of our reported sales guidance, which is now negative 2.5%, Our current expectations are for Intelligent Devices sales to be down mid single digits and Software and Control and Lifecycle Services to be approximately flat year over year. From a margin standpoint, we expect ITD margin to be down year over year on lower sales, Software and Control margins to expand year over year on flat sales, and we expect Lifecycle Services margin to be flat to slightly down year over year. Our adjusted EPS range is unchanged at $8.6 to $9.8 with a $9.2 midpoint. Talk about calendarization. The dollar strengthening late in the first quarter has continued into the second quarter and is a sequential headwind of less than 1%.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

Our expectations for reported sales grow low to mid single digits sequentially from Q1 to Q2. After Q2, we are expecting gradual sequential sales growth through the remainder of the year. On a year over year basis, the 1.5 points of sales headwind from FX is expected to result in a $0.35 headwind on EPS, which is split evenly to the remaining three quarters of the year. As Blake said earlier, we're taking additional temporary measures on spending to offset this impact. The team performed well in spending control in the first quarter.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

We're going to hold those range tight so we can continue to drive toward that adjusted EPS midpoint of $9.2 Specific to Q2, we expect segment operating margins to expand about 100 basis points sequentially on the incremental sales volume, resulting EPS of those sales and margin expectations would be in the neighborhood of two dollars per share. A few additional comments on fiscal twenty twenty five guidance for your models. Corporate and other expense is expected to be around $145,000,000 Net interest expense for fiscal twenty twenty five is expected to be about $140,000,000 We're assuming average diluted shares outstanding of 113,400,000.0 shares with about $300,000,000 of share repurchases targeted during the year. Moving away from the slides, I'd like to expand on a couple of topics. First, focusing on cost reduction and margin expansion activities, which gave us a benefit of approximately $0.5 of EPS in the first quarter.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

For the full year, we continue to expect a benefit of $250,000,000 or about $1.85 per share. As discussed at our Investor Day in November, there are hundreds of projects supporting these initiatives. And while each one individually may only be a couple of basis points or 10 basis points of yield, when put together and annualized, they are giving us a yield in the hundreds of basis points. The timing and magnitude continues to fluctuate as we execute against these plans. The first quarter was a good one and we tracked slightly ahead of our goal for the quarter.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

The primary driver of the outperformance was manufacturing efficiencies and effective sourcing. There's a lot of year left in front of us and a great deal of work to be done, but I'd like to thank the team for their efforts. Nice work. Well, you may see this initiative as cost out because that's what we're tracking and reporting to our investors. It's important to note that the ultimate goal of productivity is to drive revenue through competitiveness and speed.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

These actions are setting us up for long term growth of both sales and earnings. To that end, I want to follow-up on some other operational excellence topics from our Investor Day. The Rockwell operating model continues to develop as we build a foundation to sustain our long our cost out initiatives as well as drive margin expansion for the long term. During the first quarter, we had another 1,300 Rockwell employees complete Yellow Belt training. In addition, we rationalized over 21,000 SKUs as we seek to simplify our operations and improve customer experience.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

Our product resiliency index continues to improve as we steadily reduce single points of failure in our operations. While those initial efforts arose from the supply chain crisis, as we enter into an era of change in tariffs and trade, this resiliency enables us to respond to dynamic conditions. Moving on, I'd like to go into some depth around the potential tariff impact to our business, including our short term actions as well as longer term thoughts. As Blake mentioned earlier, the Rockwell team has taken initial steps in response to new tariffs. We had planned for a number of scenarios and remain ready to adapt quickly.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

Our priorities are a combination of maintaining profitability and utilizing resiliency in our operations and supply chain to mitigate impacts under a variety of scenarios. I want to size our exposure so you have context. Cost of finished goods imported from Mexico, Canada and China in total were less than 10% of our U. S. Revenue in fiscal twenty twenty four.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

Separately, in fiscal twenty twenty four, our direct imports into The United States from Mexico, both from third parties as well as from our own manufacturing facilities were approximately $350,000,000 Imports from Canada and China were each approximately $100,000,000 Our tariff mitigation plan is multifaceted. For the near term, this will be primarily through price and we have implemented price changes from the additional China tariffs that were enacted on February 4. We have made and will continue to make changes to manufacturing locations where there's an attractive ROI. Canada and Mexico tariffs, if they happen in March or sometime in the future, will impact both standard products as well as a portion of our configured order sales. We will enact price increases on impacted products and also intend to reprice our backlog to reflect our new price list.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

These actions are disruptive for our customers, of course, and there will likely be some noise in the near term. We are working hard to minimize that disruption and ensure continued levels of customer service. With that said, due to our immediate actions and substantial U. S. Manufacturing footprint, we do not expect these tariffs to have a material impact on our profitability for the full year.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

Beyond pricing, we have a number of projects that are in flight to mitigate tariff costs through alternative sourcing and movement of production locations. We'll be leveraging the resiliency that's been built into our operations and supply chain, including moving some production in response to tariffs. For example, we have some products that are produced in Mexico and destined for The U. S. But similar production that occurs in The U.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

S. Where the destination is outside The United S. We're swapping those out, moving the production for non U. S. Customers outside The U.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

S. In order to create capacity to manufacture production for U. S. Customers inside The U. S.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

It's a small portion of our overall tariff impacted operations, but a good example of quick moves we can make. As Blake mentioned at our Investor Day, our operations team has done a good job of keeping infrastructure in place for second shift, sometimes third shift in locations that have been challenged with lower volume in the last twelve months. That creates an opportunity to move production into The U. S. To avoid tariffs with a limited time lag.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

As you know, we're in a very dynamic environment, so we will continue to leverage our agile supply chain and take additional steps as necessary. With that, I'll turn it back over to Blake for some closing remarks before we start Q and A.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Thanks, Christian. As I mentioned, we're seeing some encouraging new project activity across multiple end markets. Many of these involve U. S. User sites, but they involve multiple points of influence around the world and we're doing a good job of coordinating this global effort.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

We expect the impact of so called mega projects to be meaningful in the next few years. We continue to track new legislation and executive orders as they are announced. With our large U. S. Manufacturing footprint and strong market position, we're confident that we can respond quickly to these changes.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

I'm pleased with the progress our teams are making toward our long term productivity and margin expansion targets, and I'm confident we are making the right investments to drive sustained growth and profitability. The framework for superior growth and performance through the cycle that we outlined over a year ago is intact and we are working that plan. I'm also taking a moment to thank our employees and partners for their dedication and hard work. I'm proud to have such a strong team to help us navigate through this dynamic period. Nobody is better positioned than Rockwell and our partners to help American manufacturers create the future of industrial operations.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Ayjana will now begin the Q and A session.

Aijana Zellner
Aijana Zellner
Vice President, Investor Relations & Market Strategy at Rockwell Automation

Thanks, Blake. We would like to get to as many of you as possible, so please limit yourself to one question and a quick follow-up. Julienne, let's take our first question.

Operator

Our Our first question comes from Scott Davis from Melius Research. Please go ahead. Your line is open.

Scott Davis
CEO & Chairman at Melius Research LLC

Hey, good morning guys, Blake and Christiane and Johnna.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Good morning.

Scott Davis
CEO & Chairman at Melius Research LLC

Hey, I want to start with this SKU rationalization thing because it's kind of relatively newish for you guys and $21,000 sounds like a lot. I know you sell a lot of stuff, so maybe it's not. But in context, it sounds like a lot. But are there puts and takes on how that impacts 2025? Meaning I would have expected maybe some top line impact, but perhaps an offsetting impact on positive impact on margins.

Scott Davis
CEO & Chairman at Melius Research LLC

Is that is there any way to kind of drill down into that a little bit?

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

Yes, sure, Scott. I'll start and if Blake wants to jump in afterwards, certainly. But from the SKU rationalization, let's be really honest here that this hasn't been done in the history of Rockwell. So really we're starting with a low hanging fruit. So that $21,000 really reflects a lot of no sales and low sales SKUs.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

So from an impact perspective within the year, you should be thinking about it as any impact at all or no significance of impact. It's really again trying to help us streamline those operations. As we get farther along in the process and we've got another 39,000 that we're looking at right now, that will continue to have a little bit more of an adjustment. But again, don't expect it to have a material impact.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Yes. And this is think of this as part of a spectrum of activities as we go in and take a little bit closer look to those total SKU portfolio. As Christian mentioned, you have those that are easy to reduce from our bills of material. And then you look at what are the items that we might want to keep, but we can do something with price on beyond just the general price increases that we do. So we're working through that in a methodical way.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

I expect this activity to continue on an ongoing basis, but the early results as you said are significant because when you can reduce those catalog items then it reduces the ability for those items to attract cost in some way as they move through the manufacturing footprint.

Scott Davis
CEO & Chairman at Melius Research LLC

Yes. That makes sense. Hey, guys, this was

Scott Davis
CEO & Chairman at Melius Research LLC

a more, I think, upbeat

Scott Davis
CEO & Chairman at Melius Research LLC

and positive call than you've had in a few quarters and orders obviously supportive of that and a lot of progress you've made on the margin side for sure and incremental certainly way better than you had in the past. But when you think about the guidance for 2025 on just organic growth, Considering the orders that you had and the commentary, I would expect that there's a little bit of a positive bias to that guidance. Is that fair to say? Would you characterize as you're still being just a little bit conservative and appropriately so I suppose given the state of affairs in the world, but it appears a bit conservative. Would you characterize as that?

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Scott, there's no question we had a good start to the year. As we've been saying, we expected gradual sequential growth through the year. We over performed a little bit in order. So we're happy to see that early in the year. But it still keeps our thesis intact.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

We needed to see growth. We've started off with growth and we expect to see that continue through the year.

Scott Davis
CEO & Chairman at Melius Research LLC

Okay, fair enough. Best of luck guys. Thank you.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Yes, thanks.

Operator

Our next question comes from Andy Kaplowitz from Citigroup. Please go ahead. Your line is open.

Andrew Kaplowitz
Andrew Kaplowitz
Managing Director at Citi

Good morning everyone. Nice quarter.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Hey Andy.

Andrew Kaplowitz
Andrew Kaplowitz
Managing Director at Citi

Blake or Christian, orders up

Andrew Kaplowitz
Andrew Kaplowitz
Managing Director at Citi

mid single digits sequentially. I know you had flash more color in terms of what you think happened in the quarter? It seems based on Christian's comments that maybe lack of destock was slightly better than expectations. And you did mention Blake the improvement in e commerce. You sound a little better on hybrid markets in Food and Beverage and Life Sciences.

Andrew Kaplowitz
Andrew Kaplowitz
Managing Director at Citi

How much of that improvement is actually markets getting better versus your improved product offering? And did the positive order trend you saw in fiscal Q1 continue in January?

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Yes. I think that the performance in Q1 and then January, which does support the outlook for Q2 and the balance of the year does represent some improvement in the underlying markets. As Christian said, we saw the orders, the new demand placed on our distributors pretty much right on top of the new demand that we're seeing, which indicates that the destock is pretty much done in most parts of our market with the possible exception of China. It's broad based. Importantly, it was manifested in the hybrid space with food and beverage and home and personal care.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

We We mentioned that we saw some green shoots in Italian machine builders, which is mainly packaging for life sciences in food and beverage. Within the discrete space, automotive is still challenged, But as we mentioned, e commerce, warehouse automation is quite strong. That includes a few areas. It includes e commerce as new fulfillment centers are being built. It includes the modest exposure we have to data centers, but that modest exposure is growing really fast.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

And then it's a parcel handling companies that are looking to complement scarce people with technology and we're seeing some really good project activity in parcel handling companies. And this is also where we mentioned new product introductions, our on machine portfolio, FactoryTalk Optics for operator interface and edge data management, auto, mobile robots, all of those are playing a role. They're not only winning on their own merit, but for precisely the reason that we acquired these companies, they're pulling through larger solutions as customers are confident that we have the breadth to be able to meet their needs. And I'll finish by saying, process, we're not seeing a weakening in Oil and Gas. More of the performance there was based on very strong But we continue to expect energy to contribute positive growth in the year and then mining within the process industry is also a source of optimism.

Andrew Kaplowitz
Andrew Kaplowitz
Managing Director at Citi

Very helpful, Blake. And then Christian, your cost reduction and margin expansion actions, as you said, were at $0.5 in Q1, '1 point '8 '5 dollars expected for the year. I think, Christian, at the Investor Day, you mentioned the cost actions from your combined overall cost add program are going to continue to ramp as $25 evolves. And you mentioned slightly more positive impact than you mild in sourcing and manufacturing in Q1. So you actually see a little more benefit than that $185,000,000 I know it's early, but how would you respond to that?

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

Yes. Andy, it's really more about the timing of those. So we did certainly and again, I think we've understood the timing of magnitude is always going to be a little bit tough for us to gauge. And so some of it did come through a little bit earlier in the year in the first quarter than what we'd expected. It didn't see anything in there though that would say that we would be changing that number.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

And so from the perspective of the overall program, the size of the program is still the same. And keep in mind that this program really started in the second half of last year. So as we're coming up against those comparables as we get into the second half of this year, Again, we're going to be building on that base, but we have to make progress against the cost of that were already in place from the prior year.

Andrew Kaplowitz
Andrew Kaplowitz
Managing Director at Citi

Appreciate the color. Thank you.

Operator

Our next question comes from Chris Schneider from Morgan Stanley. Please go ahead. Your line is open.

Chris Snyder
Chris Snyder
Executive Director at Morgan Stanley

Thank you. I wanted to just kind of follow-up on some of that commentary around orders here improving into December. Do you think that there was any positive impact of moving past the election? We heard from a lot of companies in late summer and the fall that there was maybe some freezing ahead of the election. So do you think that had any impact, whether it's some of these projects moving forward or distributors or integrators just willing to hold a little bit more product given improved expectations?

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

I think there's a little bit of that. I think as we've talked to customers really around the world, but especially here in our home market, there is a general optimism. Now that being said, there's obviously remaining volatility, which offsets a bit of that. But the general mood out there as evidenced by PMI in The U. S.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Finally getting above 50 for the first time in a long time, is that there's a general optimism and these companies can't wait to get on with their plans for increasing efficiency or transforming their operations. And at some point, they're all concerned about waiting too long and losing share to companies that move more assertively. So I think we did see a little bit of that as evidenced by the broad based project activity that we mentioned in the first quarter.

Chris Snyder
Chris Snyder
Executive Director at Morgan Stanley

Thank you. I appreciate that. And then for my follow-up and maybe one for Christian. So software and control margins obviously real stand up this quarter up year on year despite double digit revenue decline. I guess, what should we expect the rest of the year there for margins?

Chris Snyder
Chris Snyder
Executive Director at Morgan Stanley

Because it seems like revenue should continue to build sequentially as the year goes on. And I would think with that, those volumes lift up margin for the segment as the

Chris Snyder
Chris Snyder
Executive Director at Morgan Stanley

year goes on? Thank you.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

Yes, sure, Chris. So yes, as the year goes on, again, we talked about favorable mix and Blake specifically mentioned logic and IO being nice contributors in the quarter. And as we talked about for the full year, we are expecting that that business year over year is going to be in that flat range, but should get some expanded margins.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

So really nice start to the year, but from an overall margin perspective, again, we're just looking for that to continue to progress gradually during the course of the year.

Chris Snyder
Chris Snyder
Executive Director at Morgan Stanley

Thank you.

Operator

Our next question comes from Julian Mitchell from Barclays. Please go ahead. Your line is open.

Julian Mitchell
Equity Research Analyst at Barclays Investment Bank

Oh, yes. Hi. Good morning. Maybe my first question was just around trying to understand again, sorry to go back to the orders and understood year on year is up double digits, but also very depressed based a year ago. So maybe if we think about the book to bill, it's a bit easier.

Julian Mitchell
Equity Research Analyst at Barclays Investment Bank

I think maybe that was about 1.07 in your first quarter. I imagine it's always above one early in the year and below one second half of

Julian Mitchell
Equity Research Analyst at Barclays Investment Bank

the

Julian Mitchell
Equity Research Analyst at Barclays Investment Bank

year. So is there any sort of historical context you could put around that book to bill kind of what is it typically in the first quarter company wide? Any way you could sort of flesh that out and how we should think about that book to bill moving over the balance of the year?

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Yes, Julian, I don't know that we have as reliable a correlation in orders at the beginning of the year as we do with what you mentioned and that is at the end of the year, certainly Q4, you can typically count on higher shipments particularly in our configured order and lifecycle services business. We did see orders a little bit better than expectations in the first quarter. We mentioned mid single digit growth overall. Products were actually a

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

little bit better than that

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

in terms of sequential growth. And products in terms of orders probably are affected by calendarization the least unless it has to do with holidays typically occurring in one quarter or the other. So to be sure the performance was a little bit better than expected in the first quarter. And then as we mentioned, January performance was consistent with our outlook for Q2 and the rest of the year.

Julian Mitchell
Equity Research Analyst at Barclays Investment Bank

Thanks very much. And then just to understand the differences between sort of intelligent devices versus software and control. So it looks like in intelligent devices maybe the channel or your partners are a bit further behind in the destocking, whereas Logix in Software and Control, you're firmly in the sort of early stage of an upturn. I just wondered if that's a fair characterization and what sort of typical operating leverage we should expect from Logix in a sales recovery?

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Yes. I think you can also look at the performance of Logix as being impacted by the reduction of any excess inventory in our machine builders. Obviously Logix was foundational to the solutions that our machine builders around the world use. And it was recovering to be sure from a low base at the very beginning of last year. Now, Intelligent Devices is a broader set of SKUs relatively than software and control hardware.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

It has to be said Intelligent Devices does have a lot of exposure to Automotives, which as we've mentioned hasn't really hit that same growth curve that some of the performance between those two sets of hardware.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

Maybe I'll just add one

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

other thing around the configure to order portion of the business in intelligent devices typically starts the first quarter, but it's seasonally low as well. Yes. Yes. That's right.

Julian Mitchell
Equity Research Analyst at Barclays Investment Bank

Great. Thank you.

Operator

Our next question comes from Joe O'Dea from Wells Fargo. Please go ahead. Your line is open.

Joseph O'Dea
Joseph O'Dea
Managing Director at Wells Fargo

Hi, good morning. Thanks for taking my questions. Good morning. On the cost out and the $250,000,000 and I think a little more than half of that on the COGS side, Can you just talk about the status of actions there with respect to, I think, a year that's framed as COGS really kicking in some of the contribution to cost savings in the back half of the year. But of that $130,000,000 any sense of how much has been actioned, how much will be actioned by the time you start the first half or the second half of the year?

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

Yes. Joe, a lot of that's already in flight. And certainly some of that and the timing of those coming in already in the first quarter. And again, that will continue to ramp as the year goes on. The delta that we saw from those activities in the first quarter really did come from manufacturing efficiency and sourcing, so really areas that are going to impact COGS.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

And that was a pretty broad range, everything from freeing up some additional capacity, which reduced them over time at a couple of our facilities, That also actually those facilities had some better improvements in quality, which reduced material expense. We also implemented barcode scanning at a number of facilities, starting to see some really good early wins in that regard. Logistics gave us a touch of outperformance in the quarter. And then I would also say on the material side, and these are smaller dollar items as far as the delta impact. But again important.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

So things like metal fab, raws, stamping, all of which contributed a few hundred thousand dollars each to that outperformance that we saw in the first quarter. So momentum is building. It's going well. We're pretty happy with it so far. And again, you're going to see more that helps in the second half.

Joseph O'Dea
Joseph O'Dea
Managing Director at Wells Fargo

And then just wanted to circle back on channel inventories. I mean, pretty encouraging a view that at this point in time, a lot of that is sorted out. I think previously maybe some timing expectations that it would take until second quarter maybe even drift into third quarter. So perhaps that's sorting out a little faster than anticipated. But just regionally, if you talk about kind of North America, say Europe in particular, because it seems like that was still an inventory overhang up until recently.

Joseph O'Dea
Joseph O'Dea
Managing Director at Wells Fargo

And then it sounds like maybe China is the only area left that you would say still has some drag effect, but just any regional color on what you've seen there over the past couple of months?

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Yes. I think you characterized the shape of it. Biggest factor in North America would be distribution because so much of our business goes through distributors and that's mostly done at this point. In Europe, the inventory at big machine builders is an important factor and the relatively high sequential growth in orders that we saw in Europe we think is indicative of that playing out and normalizing there. And as you said, China might take into end of Q2, Q3, but it's a small part of our business as China's total revenue is now a little bit less than 5% of our total revenue.

Joseph O'Dea
Joseph O'Dea
Managing Director at Wells Fargo

Great. Thank you.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Yes. Thanks.

Operator

Our next question comes from Steve Cusa from JPMorgan. Please go ahead. Your line is open.

Chigusa Katoku
Vice President, Equity Research at JP Morgan Chase & Co

Hi. This is Chigusa Kotoku on for Steve. Thanks for taking my question. Just a little bit more on the first half to second half ramp. It's still the first half seasonality still seems a little weaker than historical seasonality.

Chigusa Katoku
Vice President, Equity Research at JP Morgan Chase & Co

And you mentioned before, you booked some orders during this quarter that are some big orders that are expected to ship in toward the end of the year. If you could provide some any more color on what's going to support the first half to second half ramp, that would be great.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Yes. Thanks for your question. We do see as we enter the year an expectation for gradual sequential improvement through the year. And actually the year started from an order standpoint a little bit better than expected, which reduces that ramp from first half to second half.

Chigusa Katoku
Vice President, Equity Research at JP Morgan Chase & Co

Okay. And then on the second quarter, if you were to do similar decremental margins to the first quarter, it looks like there's some upside to the $2 in EPS that you mentioned. But is there any reason you can't do similar decrementals to the first quarter?

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

Yes. So obviously, we don't go into that level of detail on our guide. We are expecting sequentially that we're going to see margin expansion on segment operating margins going from 17% to that 18% kind of number, which again is consistent with our ramp that we talked about for the full year guide at the outset of our guide in last quarter's call, but also just reiterating that in this call as well. So as far as the modeling year over year, we'll leave that up to you to take a look at that.

Operator

Okay. Thank you. Our next question comes from Noah Kaye from Oppenheimer. Please go ahead. Your line is open.

Andre Adams
Research Associate - Sustainable Growth and Resource Optimization at Oppenheimer & Co. Inc.

Hi, there. This is Andre Adams on for Noah. Could you just give us some more color on some of the drivers of margin upside in the quarter? And what the contribution was between mix versus cost action? And how mix factors into the reiterated segment margin guidance and the EPS outlook given FX headwind?

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

Yes, sure. Let me just I'll go after this and let me know if I answered the question properly. But really, I believe your question was around just generally the outperformance versus where our original thesis was for the quarter. If we break that out, there were kind of three primary drivers behind it. The first portion was that we did have a favorable mix that is the software and control business performed better than what we had expected against the lifecycle business, which was a little bit below our expectations.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

So favorable mix was the first item. The second one was that as Blake discussed and I also discussed, we had these temporary cost measures that the organization performed really well against. You'll see that inside of our core in that bridge schedule. And then the last one was that we also had a better performance on our cost reduction and margin expansion activities that was expected to be more equal throughout the year kind of leading up to that $250,000,000 for the full year. We had a little bit of performance there.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

So all three of those are about equal as far as the helping us to perform in the first quarter.

Andre Adams
Research Associate - Sustainable Growth and Resource Optimization at Oppenheimer & Co. Inc.

Great. Thank you. And just as a follow-up, like a project still seen as a tailwind for fiscal twenty twenty five. Can you just talk about any impact of the funding pause for IRA, IIJA, loans program office funding on the magnitude of that tailwind?

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Sure. We do continue to see mega projects as a tailwind, both in terms of year over year and as a nice contributor to our growth this year as well as for the next few years. So this is multi year, it's multi industry. And as we've talked to companies for instance in energy about any impact that the change in administration is having on their plants, they're continuing on with those projects. So we highlighted a project by a major oil and gas company on a sustainability project this quarter and we're tracking a lot of those through this year and into the next year.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

In fact, renewables in terms of new project introductions continues to be a major contributor to the new announcement. So these projects are going to have to stand on their own merit. They're going to have to have a good ROI, but we think there's a lot of those out there whether it's direct air capture, carbon capture and sequestration and so on. And then obviously in terms of traditional development of energy resources that continues to be a big part of our business with energy overall about 15% of our total revenue.

Andre Adams
Research Associate - Sustainable Growth and Resource Optimization at Oppenheimer & Co. Inc.

Great. Thank you so much.

Operator

Our next question comes from Jeff Sprague from Vertical Research. Please go ahead. Your line is open.

Jeffrey Sprague
Founder and Managing Partner at Vertical Research Partners

Hey, thank you. Good morning, everyone. Good morning. I just want to come back Hey, good morning, Blake. Just want to come back to order.

Jeffrey Sprague
Founder and Managing Partner at Vertical Research Partners

Sorry, I guess, it's for the umpteenth time on this call. But I just want to be clear on the $2,000,000,000 plus number that was given. I don't quite get there based on the year over year and sequential changes you talked about. Maybe my base is a little bit off. But is that a reported number, an organic number?

Jeffrey Sprague
Founder and Managing Partner at Vertical Research Partners

Maybe you could be a little bit more precise on that if there's anything else to add.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

Yes, Jeff. So that is a that's a reported number. And I'm not sure exactly what the number is that you're looking at from the prior year, but we are being consistent with the metric and how we've thought about it historically. Again, knowing that we didn't always and we haven't always given the exact number on orders. It was really more of the I think a lot of folks are getting that order number based on the delta and what happened with backlog versus shipments.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

But again, we thought it was notable that we were back over $2,000,000,000 and we want to call that out.

Jeffrey Sprague
Founder and Managing Partner at Vertical Research Partners

Yes. That's what I'm doing to the implied orders based on backlog and revenue changes, but fine. I'll play with that. And then also just wanted to come back to kind of the cost reductions. It looks like your corporate expense actually, you raised the corporate expense for the year, if I have that correctly.

Jeffrey Sprague
Founder and Managing Partner at Vertical Research Partners

What is going on in that line item?

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

Yes. So corporate expense obviously has a number of smaller items that move around from quarter to quarter and throughout the year. Probably the biggest change in the delta on we did take that number up for the full year is really around some of the execution costs on some of the kind of margin expansion and cost reduction activities. We're going to take those on the corporate side. So that's the reason why that number went up slightly.

Jeffrey Sprague
Founder and Managing Partner at Vertical Research Partners

And maybe just one other quick one. I think you said you expect Asia Pacific to be the weakest region for the year even though EMEA is starting off weaker. Are you implicitly assuming there's kind of a tangible pickup in EMEA over the balance of the year? Do you have some visibility on that?

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

We do. Again, a lot of that business is driven by the machine builders. So we call down specifically the stabilization at the Italian machine builders and we expect particularly because it's coming off of a low base that that machine builder business to recover in Europe as they're back to normal in terms of their inventories. China is expected to continue to suffer from a, let's say, mild deflation through the year. So while we see some recovery, it's going to be slow and they've got some structural challenges there.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

China is a small part of our business, but it's a big manufacturing economy and so it remains important to us. And then India, mid and long term continues to be very bright, but we're not expecting any any heroic growth from India this year.

Jeffrey Sprague
Founder and Managing Partner at Vertical Research Partners

Great. Thank you very much.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Yes. Thanks.

Aijana Zellner
Aijana Zellner
Vice President, Investor Relations & Market Strategy at Rockwell Automation

Julien, we'll take one more question.

Operator

Certainly. Our last question today will come from Rob Mason from Baird. Please go ahead. Your line is open.

Robert Mason
Senior Research Analyst at Robert W. Baird & Co

Yes. Good morning, Mike, Christian.

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Hey, Rob.

Robert Mason
Senior Research Analyst at Robert W. Baird & Co

Thanks for taking the question. Hey, I appreciate the level of detail you provided us around your manufacturing footprints and imports into The U. S. From various regions maybe tariff exposed. Could you just and I know you've made a lot of changes over the last few years around how you execute on pricing.

Robert Mason
Senior Research Analyst at Robert W. Baird & Co

Can you just remind us some of those changes? And how quickly, I guess, matter of days, weeks, what have you, would you actually be able to put through incremental price around the tariff enactment?

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

Yes. The short answer is immediately. Tariffs can be handled a little bit different than normal price increases. But as we talked about in the past being able to move to a fixed discount pricing structure, which was some changes that we implemented during the supply chain crisis over the last couple of years has allowed us much faster response to general price increases. But with tariffs, we implemented them fairly quickly the first time around back in 2018 and I would say even more immediately this time because the impact was potentially larger.

Robert Mason
Senior Research Analyst at Robert W. Baird & Co

And

Robert Mason
Senior Research Analyst at Robert W. Baird & Co

repricing backlog is would that be a

Robert Mason
Senior Research Analyst at Robert W. Baird & Co

new experience for your customers?

Blake Moret
Blake Moret
Chairman & CEO at Rockwell Automation

I think in general, yes, that would be.

Christian Rothe
Christian Rothe
Senior VP & CFO at Rockwell Automation

We have been very communicative around the terms and conditions and how we've been selling to those customers for some of those projects over the last several months knowing that this was a potential. Again, that's what happens in a scenario where we were imagining and indeed did seem to be the case for a little while, which was immediacy around tariffs and wanted to ensure that again if we're incurring the cost, we're going to find a way to recover it.

Robert Mason
Senior Research Analyst at Robert W. Baird & Co

Excellent. Thanks. I'll turn it back. Thank you.

Aijana Zellner
Aijana Zellner
Vice President, Investor Relations & Market Strategy at Rockwell Automation

Thank you for joining us today. That concludes today's conference call.

Executives
    • Aijana Zellner
      Aijana Zellner
      Vice President, Investor Relations & Market Strategy
    • Blake Moret
      Blake Moret
      Chairman & CEO
    • Christian Rothe
      Christian Rothe
      Senior VP & CFO
Analysts
    • Scott Davis
      CEO & Chairman at Melius Research LLC
    • Andrew Kaplowitz
      Managing Director at Citi
    • Chris Snyder
      Executive Director at Morgan Stanley
    • Julian Mitchell
      Equity Research Analyst at Barclays Investment Bank
    • Joseph O'Dea
      Managing Director at Wells Fargo
    • Chigusa Katoku
      Vice President, Equity Research at JP Morgan Chase & Co
    • Andre Adams
      Research Associate - Sustainable Growth and Resource Optimization at Oppenheimer & Co. Inc.
    • Jeffrey Sprague
      Founder and Managing Partner at Vertical Research Partners
    • Robert Mason
      Senior Research Analyst at Robert W. Baird & Co
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ICICI Bank Q1 2025
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