Blake Moret
Chairman & Chief Executive Officer at Rockwell Automation
Thanks, Aijana, and good morning, everyone. Thank you for joining us today. I'll make a couple of comments before we turn to our fourth quarter results. With the U.S. Federal Election Day now behind us, we're optimistic that the country will turn its focus to a smooth transition to newly elected leaders. We're pleased that policymakers recognize the essential role that U.S. manufacturing plays at the core of our economy. Rockwell is the clear leader in providing technology that helps U.S. manufacturers be more competitive, so we welcome policies that will benefit our most important market by spurring innovation, streamlining project approvals and leveling the playing field.
Orders continued to be soft in Q4, but we had solid execution on several fronts. Customer service levels and conversion of new orders to shipments are back to pre-pandemic levels across all businesses. We are growing profitable software and digital services lines of business, which helped to partially mitigate the impact of excess product inventory in our channel. Annual recurring revenue grew double-digits in the year and is now 10% of our total revenue. For comparison, ARR was about 4% of our revenue in 2018.
We've seen modest market share gains over the past few years based on U.S. market share reports, product-specific studies and comparison to the automation businesses of our closest competitors. Our best results in fiscal year '24 were in North America, our home market and China is now less than 5% of our revenue. First, we are broadening our cost-savings activities and Christian Rothe, our new CFO, has jumped into the effort with enthusiasm. He brings valuable new perspectives on additional opportunities. At the end of fiscal year '24, we were able to accelerate our savings to realize about $110 million of cost reductions in the second half of the year, $10 million above the target we first discussed in May. As of the end of October of 2024, our global headcount is down over 12% since Q2 of fiscal '24.
In the last call, we talked about multiple additional cost-down opportunities, including activities to reduce the price paid for purchase components and services as well as actions to increase the efficiency of our manufacturing plants. Despite the headwind of lower volume, we are still confident in our ability to save $250 million in fiscal year '25 from the combination of all our productivity actions. We continue to see positive impact from pricing actions. These have been difficult times, but I'm impressed by the resilience and sense of urgency of our teams as we position ourselves to deliver market-beating growth and profitability. Later on this call, Christian will cover our pricing, productivity and margin expansion actions for next year.
Let's now turn to our Q4 results on Slide 3. Our Q4 orders were down low-single digits sequentially compared to our expectations for low single-digit improvement. Similar to last quarter, the rate of reduction of lingering excess inventory at our distributors and machine builders was gated by slower end-user demand. Of note, we did see sequential orders growth in North America with Asia contributing the largest sequential decline. Going forward, we expect our Q1 orders to be flat sequentially and we expect our Q1 sales to be down high single-digits from last quarter, primarily due to typical seasonality in our configure to order and solutions businesses and slower orders in Q4 of fiscal '24. I'll talk more about our fiscal '25 outlook later on the call.
Despite weaker-than-expected orders, our Q4 organic sales came in largely in line with expectations. As I mentioned earlier, we quickly converted incoming product orders to shipments and lifecycle services capped off a year of improved performance with good execution in the quarter. Q4 sales for the company declined 21% versus prior year compared to 18% growth in Q4 of last year. The decline is due to the difficult year-over-year comparison, lingering channel destocking effects in our product businesses and slower end user demand.
Organic sales in our Intelligent Devices segment declined 20% year-over-year. Products were down with configured to order offerings and acquisitions growing year-over-year. I'm pleased with how our recent acquisitions are expanding our market. In particular, we saw good growth in our Cubic orders for data center power needs, where we continue to gain traction with leading hyperscalers and IT infrastructure providers. This quarter, we secured a strategic win at NTT, a leading data center colo provider. Rockwell is helping this customer achieve significant footprint savings by leveraging Cubic's modular, compact and switchgear agnostic custom design capabilities.
In Software and Control, organic sales were down over 30% year-over-year. Within this segment, Logix shipments were weaker due to slower end-demand in product centric end-markets. Despite the continuing volatility in product shipments, our PLC market share is slightly up, helped by our geographic mix and continued innovation. We recently introduced Logix SIS, a new process safety controller, building on Rockwell's established leadership and safety applications across discrete, hybrid and process applications and we're already helping key OEMs design significant upcoming Rockwell product releases into their new machine designs.
Other launches extend the differentiation of our software offering. Last quarter, we launched our Vision AI solution to help customers improve their quality and yield. In general, software was our best-performing area this year with good revenue growth across Fiix, Plex and other FactoryTalk offerings. The newest FactoryTalk design studio release features a Copilot, which boosts automation system design productivity and is integrated in this cloud-native application, which is an industry-first. You'll see many of these products at our automation fair in a few weeks.
Lifecycle Services organic sales grew about 2% versus prior year. Book-to-bill in this segment was 0.9 and slightly below our historical average for Q4. We saw a couple of customer delays in projects in our Sensia business this quarter. We continue to have a healthy pipeline of projects, which include both traditional and energy transition applications and reflect a general shift towards autonomous operations to improve safety and operational performance.
Energy end markets overall were over 15% of our total business in fiscal '24. On the services side, we continue to increase customer penetration through managed services with a growing number of contracts generating recurring revenue. Total ARR for the company grew 16% in the quarter with double-digit growth across our software and services offerings. Segment margin was over 20% and adjusted EPS was $2.47.
Turning to Slide 4 to review key highlights of our Q4 industry segment performance. Similar to our overall top line results in the quarter, our performance by industry reflects difficult year-over-year comparisons with Q4 of last year being a record quarter of shipments. Sales in our discrete industries were impacted by continued declines in auto and semi, partially offset by growth in e-commerce and warehouse automation. In automotive, we saw another quarter of EV project delays as brand owners and tier suppliers wait for more policy certainty and an overall improvement in consumer spending. Despite this pause in EV, there is still activity and we continue to win business across traditional ICE and hybrid programs. Rockwell was selected by Ford Motor Company as the automation partner for their Louisville, Kentucky facility. Rockwell will be supplying a full portfolio of Logix controllers, drives, HMI and industrial components for the body and final assembly shops. There is also additional content for their next-generation truck programs.
Moving to semiconductor, while the industry is dealing with oversupply and uncertainty around future stimulus support, we secured an important win with a global leader in semiconductor manufacturing to automate their R&D facilities here in the U.S. We also continue to gain traction with our production logistics offering for material transport. E-commerce and warehouse automation sales increased 25% versus prior year. In addition to continued investments in warehouse upgrades by both e-commerce and traditional retail players, we see the benefits of data center investment, particularly in our Cubic business.
Turning to our hybrid industry, sales in this segment were impacted by double-digit year-over-year declines in food and beverage and life sciences. In food and beverage, we continue to see muted capacity investments as end-users are delaying projects and focusing on driving operational improvements across their existing facilities. With that said, we are working with leading food and beverage producers on their next greenfield plans. In the quarter, we had an important win with Kikkoman, the largest soy sauce manufacturer in the world. In partnership with the engineering firm CRB, we are delivering Rockwell's portfolio of Plex MES software and scalable plant-wide control, helping Kikkoman build their factory of the future here in Jefferson, Wisconsin.
Within our life sciences vertical, we're seeing the investment in GLP-1 drugs as key pharma companies and their contract manufacturers aggressively add manufacturing capacity to support soaring consumer demand. Sales growth in our process industries was impacted by difficult comps with over 25% growth in Q4 of last year for this industry segment.
Within oil and gas, similar to last quarter, we saw project pushouts in North America due to election uncertainty and potential policy changes given the impact they may have on funding of greenhouse gas-related projects. Sensia did grow double-digits in the quarter and continued to deliver improved profitability. In mining, customers are investing in the sustainability and safety of their operations. This quarter, Rockwell was chosen by Seriti, New Denmark in South Africa to upgrade their environmental monitoring system from a competitive software offering to ensure effective monitoring of environmental conditions and respond to potential hazards.
Let's turn to Slide 5 and our Q4 organic regional sales. In general, sales were down sharply year-over-year due to tough comparisons and the lingering impact of destocking. Orders were up sharply year-over-year due to the easy comparison with Q4 of fiscal year '23. Sequentially, orders were down low-single digits and shipments were flattish. The Americas, our home market continued to be our best-performing region. As I mentioned, orders were up sequentially in North America. While we are happy with our strong presence in the Americas, we continue to expand our share of wallet with European machine builders as they serve their end-users around the world.
In the quarter, we won an important project with Geia [Phonetic] in India. Geia is one of the world's largest system suppliers for the food, beverage and pharmaceutical sectors. The Geia portfolio includes machinery and plants as well as advanced process technology, components and comprehensive services. The end user will implement state-of-the-art technologies to ensure efficient water usage and replenishment.
Let's move to Slide 6 for key highlights of fiscal 2024. We finished the year with a 9% year-over-year decline in reported sales. Sales from our Clearpath and Verve acquisitions contributed about a point of growth as we expand our customer value in the production, logistics and cybersecurity spaces. Total ARR grew 16% with strong performance across our recurring software and services portfolio and is now over 10% of our total business. The 200 basis point decrease in our segment margin on a high single-digit year-over-year sales decline would have been worse without our more diverse business mix and the significant cost reduction actions we took earlier this year to align our cost structure with the current business environment. These actions also position us for expanded margins as markets recover. 60% free cash flow conversion was in line with our prior forecast.
Let's now move to Slide 7 to review our fiscal 2025 outlook. Given the uncertainty in the macroeconomic environment and continued project delays across a number of our end-markets, we're projecting sales growth in the range of positive 2% to negative 4%. After a sequential decline in Q1 shipments, primarily due to typical seasonality, we expect gradual sequential improvement in our top-line growth through the balance of fiscal year '25. Christian will cover the calendarization of our guidance in more detail later on this call.
We expect our annual recurring revenue to grow about 10%. Segment margin is projected to be down slightly versus prior year and adjusted EPS is expected to be $9.20 at the midpoint. We expect free cash flow conversion to return to 100% in fiscal year '25.
I'll now turn it over to Christian to provide more detail on our Q4 and full-year performance and financial outlook for fiscal '25. Christian?
