MILWAUKEE — Rockwell Automation, Inc. today reported second quarter fiscal 2024 results.
“Execution in the second quarter was solid, and we continue to see sequential order improvement. However, there is more excess inventory at our customers, particularly machine builders, than we originally expected. As a result, we are not yet seeing the accelerated order ramp this fiscal year and are reducing our full-year guidance. Despite the lower FY24 outlook, we are gaining share across many of our most important product lines and in North America, our largest market,” said Blake Moret, Chairman and CEO.
Fiscal Q2 2024 Financial Results
Fiscal 2024 second quarter sales were $2,126 million, down 6.6% from $2,275 million in the second quarter of fiscal 2023. Organic sales decreased 8.1%, currency translation increased sales by 0.1%, and acquisitions increased sales by 1.4%.
Fiscal 2024 second quarter Net income attributable to Rockwell Automation was $266 million or $2.31 per share, compared to $300 million or $2.59 per share in the second quarter of fiscal 2023. The decreases in Net income attributable to Rockwell Automation and diluted EPS were primarily due to lower pre-tax margin. Fiscal 2024 second quarter adjusted EPS was $2.50, down 16.9% compared to $3.01 in the second quarter of fiscal 2023 primarily due to lower segment operating margin.
Pre-tax margin was 14.6% in the second quarter of fiscal 2024 compared to 15.4% in the same period last year. The decrease in pre-tax margin was primarily due to lower sales volume, partially offset by lower non-operating pension expense.
Total segment operating earnings were $404 million in the second quarter of fiscal 2024, down 16.5% from $484 million in the same period of fiscal 2023. Total segment operating margin was 19.0% compared to 21.3% a year ago. The decrease in segment operating margin was primarily due to lower sales volume, partially offset by lower incentive compensation.
Cash flow generated by operating activities in the second quarter of fiscal 2024 was $120 million, compared to $187 million in the second quarter of fiscal 2023. Free cash flow in the second quarter of fiscal 2024 was $68.6 million, compared to $156 million in the same period last year. Decreases in cash flow provided by operating activities and free cash flow were primarily due to lower pre-tax income and higher tax payments, partially offset by decreases in working capital.
Fiscal Year 2024 Outlook
The table below provides updated guidance for sales growth and earnings per share for fiscal 2024.
(1) Organic sales growth and Adjusted EPS are non-GAAP measures. See Other Supplemental Information for detail on these non-GAAP measures.
“The reduced guide for the fiscal year only strengthens our commitment to building a strong foundation for future growth and profitability. We have built an unmatched portfolio with both our traditional offerings and new sources of value. As we couple this with our focus on margin expansion through cost discipline, operational excellence, and organic growth, we will achieve the longer-range targets introduced in November and create significant shareowner value,” Moret continued.
Following is a discussion of second quarter results for the business segments.
Intelligent Devices
Intelligent Devices second quarter fiscal 2024 sales were $974 million, a decrease of 4.9% compared to $1,023 million in the same period last year. Organic sales decreased 7.4%, currency translation increased sales by 0.2%, and acquisitions increased sales by 2.3%. Segment operating earnings were $161 million compared to $207 million in the same period last year. Segment operating margin decreased to 16.5% from 20.2% a year ago. The decrease from prior year was driven by lower sales volume and unfavorable mix, partially offset by lower incentive compensation.
Software & Control
Software & Control second quarter fiscal 2024 sales were $570 million, a decrease of 23.1% compared to $741 million in the same period last year. Organic sales decreased 23.2% and currency translation increased sales by 0.1%. Segment operating earnings were $146 million compared to $249 million in the same period last year. Segment operating margin decreased to 25.7% from 33.6% a year ago, driven by lower sales volume partially offset by lower incentive compensation, positive price/cost, and favorable mix.
Lifecycle Services
Lifecycle Services second quarter fiscal 2024 sales were $583 million, an increase of 14.0% compared to $511 million in the same period last year. Organic sales increased 12.4% and acquisitions increased sales by 1.6%. Segment operating earnings were $96.9 million compared to $27.9 million in the same period last year. Segment operating margin was 16.6% compared to 5.5% a year ago driven by lower incentive compensation, higher sales volume, and higher margins in Sensia.
CFO Transition
Rockwell Automation also announced today that Nicholas Gangestad, Senior Vice President and Chief Financial Officer, will retire from the Company. A search for his successor has been underway, and Mr. Gangestad will continue to serve in his role until the new CFO is appointed. Mr. Gangestad will work with the Board and management team to help ensure a smooth transition.
Supplemental Information
ARR – Total ARR grew 20% and Organic ARR grew 17% compared to the end of the second quarter of fiscal 2023.
Corporate and other – Fiscal 2024 second quarter Corporate and other expense was $28.2 million compared to $29.2 million in the second quarter of fiscal 2023.
Purchase accounting depreciation and amortization – Fiscal 2024 second quarter Purchase accounting depreciation and amortization expense was $37.1 million, up $10.5 million from the second quarter of fiscal 2023 primarily related to the acquisitions of Clearpath Robotics and Verve Industrial Protection.
Tax – On a GAAP basis, the effective tax rate in the second quarter of fiscal 2024 was 14.5% compared to 16.1% in the second quarter of fiscal 2023. The adjusted effective tax rate for the second quarter of fiscal 2024 was 14.8% compared to 17.4% in the prior year. These decreases were related to the impact of discrete items recognized in the current quarter.
Share repurchases – During the second quarter of fiscal 2024, the Company repurchased approximately 0.7 million shares of its common stock at a cost of $194.7 million. At March 31, 2024, $0.6 billion remained available under our existing share repurchase authorization.
Return on Invested Capital (ROIC) – ROIC was 18.0% for the twelve months ended March 31, 2024, compared to 19.7% for the twelve months ended March 31, 2023. The decrease is primarily driven by a higher trailing twelve month effective tax rate and higher invested capital.
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