Rockwell Automation Sales Up in 3Q 2023, Updates Guidance

MILWAUKEE, Wis. — Rockwell Automation, Inc. today reported third quarter fiscal 2023 results.

“Rockwell delivered a good quarter of double-digit sales and earnings growth with continued improvement in electronic component availability. In May, we made a change in our U.S. distribution center that added capacity to support higher revenue in fiscal Q4 and beyond. This transition impacted the timing of shipments within the second half of the fiscal year, and our full-year organic sales expectations remain unchanged,” said Blake Moret, Chairman and CEO.

Fiscal Q3 2023 Financial Results

Fiscal 2023 third quarter sales were $2,239 million, up 13.7% from $1,969 million in the third quarter of fiscal 2022. Organic sales increased 13.2%, currency translation decreased sales by 0.7%, and acquisitions increased sales by 1.2%.

Fiscal 2023 third quarter Net income attributable to Rockwell Automation was $400 million or $3.45 per share, compared to $298 million or $2.55 per share in the third quarter of fiscal 2022. The increases in Net income attributable to Rockwell Automation and diluted EPS were primarily due to higher sales and higher pre-tax margin. Fiscal 2023 third quarter adjusted EPS was $3.01, up 13.2% compared to $2.66 in the third quarter of fiscal 2022 primarily due to higher sales.

Pre-tax margin was 21.1% in the third quarter of fiscal 2023 compared to 17.5% in the same period last year. The increase in pre-tax margin was primarily due to higher sales volume and fair value adjustments related to our investment in PTC.

Total segment operating earnings were $473 million in the third quarter of fiscal 2023, up 15.6% from $409 million in the same period of fiscal 2022. Total segment operating margin was 21.1% compared to 20.8% a year ago.

Cash flow generated by operating activities in the third quarter of fiscal 2023 was $282 million, compared to $345 million in the third quarter of fiscal 2022. Free cash flow in the third quarter of fiscal 2023 was $240 million, compared to $327 million in the same period last year. Decreases in cash flow provided by operating activities and free cash flow were primarily driven by higher working capital and higher income tax payments, partially offset by higher pre-tax income.

Fiscal Year 2023 Outlook

The table below provides guidance for sales growth and earnings per share for fiscal 2023. Our updated guidance reflects our performance to date and assumes continued supply chain improvement.

“Rockwell continues to add more ways to win at customers around the world. Our traditional sources of value are vibrant, as evidenced by strong Logix growth and profitability, while newer offerings including Software as a Service and Independent Cart Technology are making meaningful contributions to both our customer value and financial performance,” Moret continued.

Following is a discussion of third quarter results for our business segments.

Intelligent Devices

Intelligent Devices third quarter fiscal 2023 sales were $968 million, an increase of 10.2% compared to $878 million in the same period last year. Organic sales increased 8.2%, currency translation decreased sales by 0.4%, and the acquisition of CUBIC increased sales by 2.4%. Segment operating earnings were $163 million compared to $173 million in the same period last year. Segment operating margin decreased to 16.8% from 19.7% a year ago. The decrease from prior year was driven by higher investment spend, unfavorable mix, and higher incentive compensation, partially offset by positive price/cost.

Software & Control

Software & Control third quarter fiscal 2023 sales were $751 million, an increase of 23.7% compared to $607 million in the same period last year. Organic sales increased 24.4% and currency translation decreased sales by 0.7%. Segment operating earnings were $262 million compared to $191 million in the same period last year. Segment operating margin increased to 34.8% from 31.4% a year ago, driven by higher sales volume and positive price/cost, partially offset by higher investment spend.

Lifecycle Services

Lifecycle Services third quarter fiscal 2023 sales were $520 million, an increase of 7.5% compared to $484 million in the same period last year. Organic sales increased 8.0%, currency translation decreased sales by 1.0%, and acquisitions increased sales by 0.5%. Segment operating earnings were $48.4 million compared to $45.4 million in the same period last year. Segment operating margin was 9.3% compared to 9.4% a year ago.

Supplemental Information

ARR – Total ARR and Organic ARR grew 17% compared to the end of the third quarter of fiscal 2022.

Corporate and other – Fiscal 2023 third quarter Corporate and other expense was $32.3 million compared to $15.6 million in the third quarter of fiscal 2022. The increase was led by the year-over-year impact of mark-to-market adjustments related to our deferred and non-qualified compensation plans.

Purchase accounting depreciation and amortization – Fiscal 2023 third quarter Purchase accounting depreciation and amortization expense was $27.2 million, up $1.3 million from the third quarter of fiscal 2022.

Tax – On a GAAP basis, the effective tax rate in the third quarter of fiscal 2023 was 15.5% compared to 14.4% in the third quarter of fiscal 2022. The adjusted effective tax rate for the third quarter of fiscal 2023 was 14.1% compared to 14.5% in the prior year.

Share repurchases – During the third quarter of fiscal 2023, the Company repurchased approximately 0.2 million shares of its common stock at a cost of $61.8 million. At June 30, 2023, $1.0 billion remained available under our existing share repurchase authorization.

Return on Invested Capital (ROIC) – ROIC was 20.9% for the twelve months ended June 30, 2023, compared to 12.8% for the twelve months ended June 30, 2022. The increase is primarily driven by higher pre-tax income, partially offset by a higher effective tax rate and higher invested capital.