MILWAUKEE — Rockwell Automation, Inc. today reported second-quarter fiscal 2023 results.
“We had another quarter of outstanding performance on both topline and bottom line, with sales up over 25% year over year. Our strong sales and margin growth reflect the continued improvement in component availability and our strong execution to deliver critical solutions to our customers,” said Blake Moret, Chairman and CEO.
Fiscal Q2 2023 Financial Results
Fiscal 2023 second quarter sales were $2,275 million, up 25.8% from $1,808 million in the second quarter of fiscal 2022. Organic sales increased 27.3%, currency translation decreased sales by 2.8%, and acquisitions increased sales by 1.3%.
Fiscal 2023 second quarter Net income attributable to Rockwell Automation was $300 million or $2.59 per share, compared to $53.9 million or $0.46 per share in the second 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 second quarter adjusted EPS was $3.01, up 81.3% compared to $1.66 in the second quarter of fiscal 2022 primarily due to higher sales and higher segment operating margin.
Pre-tax margin was 15.4% in the second quarter of fiscal 2023 compared to 2.3% in the same period last year. The increase in pre-tax margin was primarily due to higher sales and fair value adjustments related to our investment in PTC, partially offset by higher non-operating pension expense.
Total segment operating earnings were $484 million in the second quarter of fiscal 2023, up 70.8% from $283 million in the same period of fiscal 2022. Total segment operating margin was 21.3% compared to 15.7% a year ago primarily due to higher sales volume and positive price/cost, partially offset by higher incentive compensation and higher investment spend.
Cash flow generated by operating activities in the second quarter of fiscal 2023 was $187 million, compared to $90.8 million in the second quarter of fiscal 2022. Free cash flow in the second quarter of fiscal 2023 was $156 million, compared to $45.9 million in the same period last year. Increases in cash flow provided by operating activities and free cash flow were primarily driven by higher pre-tax income, partially offset by higher working capital.
Fiscal Year 2023 Outlook
The table below provides guidance for sales growth and earnings per share for fiscal 2023. Our updated guidance reflects first half performance and record backlog. It also assumes continued improvement in electronic component availability.
“Our market-leading solutions across discrete, hybrid, and process industries are helping customers build new plants faster, operate existing facilities more efficiently, and more seamlessly upgrade to next generation platforms. Rockwell is becoming even more important to industrial companies as they look for a trusted adviser with scalable technology, a strong installed base, and the best-in-class ecosystem to help them grow and expand over the next decade,” Moret continued.
Following is a discussion of second quarter results for our business segments.
Intelligent Devices
Intelligent Devices second quarter fiscal 2023 sales were $1,023 million, an increase of 26.5% compared to $809 million in the same period last year. Organic sales increased 26.8%, currency translation decreased sales by 2.7%, and the acquisition of CUBIC increased sales by 2.4%. Segment operating earnings were $207 million compared to $118 million in the same period last year. Segment operating margin increased to 20.2% from 14.6% a year ago. The increase from prior year was driven by positive price/cost and higher sales volume, partially offset by higher investment spend and incentive compensation.
Software & Control
Software & Control second quarter fiscal 2023 sales were $741 million, an increase of 38.5% compared to $535 million in the same period last year. Organic sales increased 41.6% and currency translation decreased sales by 3.1%. Segment operating earnings were $249 million compared to $132 million in the same period last year. Segment operating margin increased to 33.6% from 24.6% a year ago, driven by higher sales volume and positive price/cost, partially offset by higher investment spend and incentive compensation.
Lifecycle Services
Lifecycle Services second quarter fiscal 2023 sales were $511 million, an increase of 10.0% compared to $465 million in the same period last year. Organic sales increased 11.7%, currency translation decreased sales by 2.5%, and acquisitions increased sales by 0.8%. Segment operating earnings were $27.9 million compared to $33.7 million in the same period last year. Segment operating margin decreased to 5.5% from 7.3% a year ago. The benefit of higher sales was more than offset by higher incentive compensation costs and one-time items to expand future profitability.
Supplemental Information
ARR – Total ARR and Organic ARR grew 15% compared to the end of the second quarter of fiscal 2022.
Corporate and other – Fiscal 2023 second quarter Corporate and other expense was $29.2 million compared to $24.6 million in the second quarter of fiscal 2022. The increase was primarily due to mark-to-market adjustments related to our deferred and non-qualified compensation plans.
Purchase accounting depreciation and amortization – Fiscal 2023 second quarter Purchase accounting depreciation and amortization expense was $26.6 million, up $0.5 million from the second quarter of fiscal 2022.
Tax – On a GAAP basis, the effective tax rate in the second quarter of fiscal 2023 was 16.1% compared to (20.2)% in the second quarter of fiscal 2022. The higher effective tax rate was primarily due to the tax effects of fair value adjustments related to our investment in PTC. The adjusted effective tax rate for the second quarter of fiscal 2023 was 17.4% compared to 16.0% in the prior year.
Share repurchases – During the second quarter of fiscal 2023, the Company repurchased approximately 0.2 million shares of its common stock at a cost of $38.4 million. At March 31, 2023, $1.1 billion remained available under our existing share repurchase authorization.
Return on Invested Capital (ROIC) – ROIC was 19.7% for the twelve months ended March 31, 2023, compared to 13.2% for the twelve months ended March 31, 2022. The increase is primarily driven by higher pre-tax income, partially offset by a higher effective tax rate and higher invested capital.
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