Q2 2023 Rockwell Automation Inc Earnings Call
Speaker 2: at that time, please press star 1.
Speaker 2: At this time, I would like to turn the call over to Ayana Zellner, Head of Investor Relations and Market Strategy. Ms. Zellner, please go ahead. Thank you, Julian. Good morning and thank you for joining us for Rockwell Automation's second quarter of fiscal 2023 earnings release conference call.
Speaker 3: With me today is Blake Moret, our Chairman and CEO , and Nick Gangstad, our CFO .
Speaker 3: Our results were released earlier this morning and the press release and charts have been posted to our website.
Speaker 3: Both the press release and charts include, and our call today will reference, non-GAAP measures. Both the press release and charts include reconciliations of these non-GAAP measures.
Speaker 3: A webcast of this call will be available on our website for replay for the next 30 days.
Speaker 3: For your convenience, a transcript of our prepared remarks will also be available on our website at the conclusion of today's call.
Speaker 3: 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.
Speaker 3: 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 detailed in all our SEC filings.
Speaker 3: Our actual results made different material from our projections due to a wide range of risks and uncertainties that are described in our earnings release and detailed in all our SSE filing. So with that, I'll hand it over to Blake.
Speaker 4: Thanks, Ayana, and good morning, everyone. Thank you for joining us today.
Speaker 4: Let's turn to our second quarter results on slide 3.
Speaker 4: We had an outstanding quarter of strong growth in both sales and earnings.
Speaker 4: Our double-digit sales and margin growth continue to reflect rockwell's strong execution and focus on business resiliency as well as overall improvement in electronic component availability.
Speaker 4: The demand for our differentiated offerings continued to be strong, even in this uncertain economic environment.
Speaker 4: Through the first half of this fiscal year, our total orders were $4.8 billion.
Speaker 4: Spread evenly between the two quarters once we adjust for the estimated price-related pull-forward in our fiscal Q1.
Speaker 4: As expected, our order cancellation rates remain in the low single digits through April .
Speaker 4: Total sales grew over 25% versus prior year. Organic sales were up over 27% year over year and were above our expectations.
Speaker 4: Currency translation reduced sales by about 3%, and acquisitions contributed over a point of growth this quarter.
Speaker 4: As in the prior quarters, the split of sales by business segment, region, and industry was largely driven by access to electronic components and the composition of our backlog.
Speaker 4: In the Intelligent Devices Business segment, Organic Sales grew 27% versus prior year, with broad-based growth across all businesses.
Speaker 4: We continue to see wider adoption of our independent card technology in new applications across semiconductor, food and beverage, and life sciences.
Speaker 4: One example of a new application is wafer transport in semiconductor fabs. We continue to see increasing demand for this offering, including an important win with a large US company this quarter.
Speaker 4: This customer is investing in modernizing and expanding its material handling systems, and our independent cart technology helps increase wafer output and more efficiently utilizes existing fab space, leading to increased capacity and significant savings.
Speaker 4: Software and control organic sales increased over 40%. Strong growth versus prior year was led by Logix, where we continue to see the benefits of our resiliency investments and an overall improvement in supply chain.
Speaker 4: Lifecycle Services' organic sales were up 12% year over year. Book to bill in this segment was 1.27 led by strong order intake in our Sensia business.
Speaker 4: Information solutions and connected services sales grew about 10% versus prior year. We had another quarter of competitive multi-year wins across our software and cybersecurity services portfolio.
Speaker 4: Within information solutions, I am pleased with the increasing breadth of our new Plex customers as we continue to expand our SaaS Smart Manufacturing platform to new industries and geographies.
Speaker 4: One of our Plex wins this quarter was with AB InBev, the world's largest brewing company.
Speaker 4: and its startup business Evergrain, focused on upcycling grain byproduct into sustainable supply of nutritious food ingredients.
Speaker 4: Our modular and cloud-native Plex software is helping Evergrain quickly deploy mission-critical quality management capabilities today while providing the functionality for the business to scale in the future.
Speaker 4: In Connected Services, we saw another quarter of customer demand for our recurring cybersecurity and infrastructure as a service offerings as customers across many industries are continuing to invest in safety and security of their operations.
Speaker 4: One of these wins was with Darling Ingredients, a food processing company focused on reducing food waste by collecting and repurposing animal-based products.
Speaker 4: Our annual recurring revenue grew 15% year-over-year in Q2. Segment margin of 21.3% was up over 560 basis points year-over-year and was better than expected, we have is now acquired across 4.7% in Q2.
Speaker 4: Adjusted EPS grew over 81% year-over-year.
Speaker 4: We also completed the acquisition of Knowledge Lens this quarter, which adds significant scale to our Calypso Digital Services business.
Let's now turn to slide 4 to review key highlights of our Q2 end market performance.
Consistent with my earlier comments on the gradually improving supply chain environment, all three industry segments grew strong double digits versus prior year.
Our discrete sales were up about 20% in the quarter.
Within discrete automotive sales grew over 40% versus prior year.
We saw a number of strategic winds in EV and battery this quarter, both in the US and China, where a combination of our core automation and strong partner ecosystem helped edge out our biggest competitors.
At the mid point to the range. This represents 25% adjusted EPS growth up from prior guidance of approximately 17% growth at the mid point.
We expect full year fiscal twenty-three free cash flow conversion of about 95% of adjusted income.
A few additional comments on fiscal twenty-three guidance.
Corporate and other expenses still expected to be around $120 million.
Net interest expense for fiscal twenty-three is still expected to be around $130 million.
And we're assuming average diluted shares outstanding of $115 6 million shares.
Turning to slide 12 verse.
Versus our prior guidance, we are increasing the mid point for EPS by 75.
Our guidance reflects an increase in our core of one dollar five.
Driven by higher organic sales and are improved outlook and price cost.
We also deployed additional investments in sales and new product development as well as digital infrastructure that will generate future revenue growth and profitability.
Currency is adding <unk>.
Given the stronger outlook or incentive compensation is increased by 40 and.
And finally, our 50 basis point drop in our adjusted effective tax rate will add five.
With that I will turn it back over to Blake for some closing remarks before we start Q&A like banks.
Thanks, Nick.
We're still operating in a dynamic environment and are laser focused on execution through the rest of this fiscal year.
With that said, we are continuing to accelerate new product development and investments and cloud native technologies rare.
Revenue from our new offerings, both organic and inorganic is becoming a more meaningful contributor to growth and share games, where.
We are the largest pure play automation company with market, leading solutions across discrete hybrid and processing industries, and we are adding scaled to our differentiated offerings through strong partnerships and strategic acquisitions.
A recent acquisition of knowledge lens is adding 600 resources with cutting edge data science, AI and cloud solutions to our existing digital services business. This expanded team is already working with our key customers on their next generation plans I want to welcome all knowledge learned.
Employees to Rockwell.
Or close relationships with and customers are best in class ecosystem, and our talent give us confidence and the continued momentum for growth and profitability this year and beyond.
It will now begin to Q&A session.
I would like to get to as many views as possible. So please limit yourself to one question and a quick follow up thank you.
If you would like to ask a question. Please press star followed by the number one on your telephone keypad.
Your question please pass that one again.
Our first question comes from Andy Caplets from Citigroup. Please go ahead. Your line is open hey.
Good morning, everyone.
Sandy.
So just focusing on your comment in terms of the setup for 24, I know there'll be some investors, who will think about 9 billion of orders and say look a rock pointing tiller deceleration second half, but how do you think about the cycle in the context of your $9 billion plus Hulu shows we call it that you're coming close to hitting this year in the <unk>.
<unk> and the year with I know you suggested to your setup for 24 earnings growth, but can you talk about how you're thinking about the durability of the automation cycle based on the conversations you're having and do you have the capacity to grow beyond that $9 billion.
Sure well, let me take that first and we're continuing to add capacity. So at the same time that shifts supply is improving we're continuing to make sure that our labor and our facilities.
Ah redundancy across R.
Integrated supply chain operations is ready to handle continued growth. So let me start there now in terms of the demand.
This is playing out like like we thought it would we have said for some time now that we gave expect orders and shipments to converge as lead times improved and so that's exactly what you're seeing but the orders are continuing at a strong pace.
And to look at that let's take kind of a vertical by vertical view.
We've talked about.
Historic generational spending levels in certain of the vertical set are important to us things like electric vehicle and battery and semi conductor, we're seeing additional expenditures and energy bode says the fossil fuel providers decarbonize and as.
Renewables become a bigger part of our business as well, but we're also seeing across all verticals an increased focus on automation and that's due to.
Large.
Durable trends things like scarcity of trained workforce.
And so the need to complement people with the technologies and the software and the services that we provide so as I look across that while we continue to pay close attention to macroeconomic conditions, we think the setup for multi year growth in automation and.
The information is there.
Very helpful. Blake and then maybe like her neck and can you give us a little more color on your margins in a segment if I look at sophomore and control it seems like when supply chain highlands or not <unk> and Pat him as soon as you can do sort of low to mid thirties and lifecycle. Obviously, you know still kind of lagging behind a little bit so.
Do you get lifecycle up now starting in the second half of the year and is that a fair assessment of software in control when it's sort of firing on all cylinders, it's an above 30% margin business.
Yeah, Andy let me take that as far as software and control with.
With what we're seeing in that business in the mix of what we're selling and the strength in the overall market there.
We do see 30 over 30% as a sustainable margin.
For that business in terms of lifecycle services, we see that.
That's gonna be sequentially going up and we.
We talked earlier about getting this to double digits, we see that happening in the fourth quarter and we think that's a good trajectory, we're gonna expect to see happen beyond 23 as well so.
So.
That's where we're seeing margins in those two segments.
Very helpful guys nice quarter.
Thanks. Thanks.
Our next question comes from Josh.
Morgan Stanley . Please go ahead your line is open.
Hi, good morning us.
Hey, Josh.
Nope.
Just on some of the order commentary I want a square the circle here a little bit.
Talking about I guess, you kinda compact comps sequentially.
Pull forward.
The price increase she said lead times are coming down a little bit so presumably customers sort of altering plans accordingly, but you still have to call. It flattish sequential order so something seemed to have gotten better it seems like.
The same markets, they get mentioned over and over again like.
And life Sciences, and you know a few others come in there, but did anything I guess.
Momentum quarter over quarter and anything in terms of March or April exit rates that that we should be aware of.
Yeah, a couple of things.
<unk> was it was fairly broad bug in addition to.
The usual suspects the thanks, I would've been talked about for awhile now I'd say oil and gas orders. So we're quite good we had some major competitive wins and our sense of your business that.
Build some great great backlog bear and I would also say within the orders North American orders were relatively stronger than Europe , and Asia, and we expect that to continue for the rest of the year.
Got it that's helpful and then there's the.
The obligatory question for Nick on investment spending since.
Pulled around a little bit, especially when when things are a little better than expected.
Was there any you know kind of reallocation of investment spending it should get more in this quarter and how should we think about the rest of the year.
Yeah, the investments spend for this particular for second quarter. It came up a few million dollars more than what we had in our initial plan for Q2, we are upping our investments spend in the third and fourth quarter. We started the year with what I would call a pretty conservative view of what we were gonna do on spending we were holding.
Some things in our back pocket, if things improve we would be ready to invest in and we are releasing that in the second half of the year all in that we see total investment spend.
For the full year versus what we had previously estimated.
Up by roughly.
$50 million.
It's up got it that's helpful a year over year $180 million I previously and the last guidance that it would be up 130 now up 180.
Roger that alright.
Best of luck.
Thanks, Josh Josh.
Our next question comes from Andrew from Bank of America. Please go ahead. Your line is open.
Yes, guys how are ya.
Andrew.
Good morning, just.
Getting questions on lead time.
<unk>, so how should I think about the 5 billion dollar number instead.
Instead of just.
This round calm to where you were versus you know physical band of physical twenty-two where you're sort of showed you are slightly above $5 billion right.
<unk> 9 billion is just very simple math or is there sort of dynamic updates to this number throughout the year is it just basically a place holder to help us think about the big framework or is that a number of sort of somebody manages to an updated from five to accompany every quarter.
Yeah, Hi, Andrew you should think about that as a slight reduction of the current backlog, which sits at about $5.6 billion, but still held up by continuing strong order rates. So.
It is not intended to be precise but on the other hand. It does reflect the trends that were saying and that is that is Lea Thompson crew were able to pull your past due backlog, but the overall number stays quite high due to the continuing strength of borders.
Gotcha in just a question on on plaques because you guys had a great demo at Hanover show can you just <unk>.
<unk> is pretty impressive but can we just talk about how <unk> is doing and how does rockwell sort of manage historical focus on large enterprise.
Trying to sort of.
<unk> is the product M. S M B and Marcia just evolution of <unk>, what the experience has been as I said, because clearly big focus of Hanover show. Thank you.
Sure.
Flex continues to be a really exciting addition to our offering and it's playing out like we hoped it would.
When we made that acquisition flex a smart manufacturing platform to be sure has mbas capability, but it also has quality management supply chain and even ERP functionality for small and medium sized businesses.
When we when we bought flex they had a great track record in certain verticals like tear automotives, but we knew that with our existing market access we could expand that into food and beverage and E V and Miami and we also knew that we had the opportunity.
Geographically diversify their customer base, and we're doing just that with wins.
And with including flex on to as you're in Europe , where we've already seen some nice wins there. So if that's synergy that's playing out and there is lots of room to run with that so it's working well I've mentioned before one of the things that we've done is to.
The seasoned veterans of selling cloud made obsess software and given them enterprise wide roles within Rockwell. So software sales leadership, our chief marketing officer, and a number of other functions are coming from plex. So it's not just the technology.
<unk> in the business. It's also the expertise that we're making sure that we don't Bury in the organization.
And other growth rates for commercial which was 15%.
Mine was set for the rest of the business better or worse, if you could just sort of a benchmark that yes.
Flex mode.
Sure Flexing sex are very supportive to the overall growth of our software business.
Thank you very much.
Our next question comes from Julian metals from Berkeley.
Please go ahead your line is open.
Hi, Good morning, maybe I'm, just wanted to try and drill into that book to bill element, a little bit more for the bat cause being well below one doesn't sound like yoga tub by that.
Trying to understand if we look at it and having a little bit more detail anything you'd colao around sort of hybrid versus process versus discrete markets may be way you see that book to bill all year on year orders pressure being most severe.
And this may be a question sort of more broadly on that for Blake.
Had this component flush driving this huge revenue surge right now.
Is this a review on the on the will or the demand environment post that flush tiny little in recent months.
Yeah, So Julian let me start I wouldn't characterize the.
The reduction in backlog as pressure, it's playing down in a way that we would hope it is in that were clearing past due backlog in improving customer service levels and adding additional orders.
In the business so.
You know historically bad Rockwall has been fortunate to being able to ship out products.
Pretty much in the same quarter that we get the order. So this is unusual to have product backlog and we.
Tend to.
Continue to reduce the lead times and products just as much as possible at the same time, a 127 book to Bill in our <unk>.
Lifecycle services business gives us good confidence about continuing demand for longer cycle projects. There. So I feel good about the way that this is working we obviously, we're focused on execution as well as creating additional demand going forward, but we feel this is a very healthy and.
<unk> to your second question about you know has anything changed in terms of the.
The component world being able to get chips I mean, we're always going to have a larger effort than we did pre supply chain constraints on making sure that our designers are resilient both in terms of.
Reevaluating existing products as well as.
New products and to make sure that they will go forward unless we have you know.
New levels of resiliency and components supply.
And robust designed to be able to reduce dependency on any one vendor. So that's here to stay we do believe his niche talked about.
Working capital with some of the inventory increases to go down and that supports the good cash flow for the year. So concern of those things aren't going to change all the way back to let's say pre pandemic, but we do expect a return to more normal levels in working capital and.
So on as we go forward as the ship constraints continued to resolve themselves.
That's helpful. Thank you <unk>.
And when you sort of look at the two components.
Customer demand being strong and of good pipeline of projects coming up plus at the same time I sort of accelerated backlog conversion.
<unk> because of supply chain.
Do you think we could be in for quite a prolonged period of having that book to bill below one sort of thinking that we get some adjustment for a couple of quarters and then it moves back into sync, it's sort of one to one like Rockwell's classic business model.
Yeah.
Beyond.
Kind of unusual levels of disclosure about the setup for 24, we've already given and I'm not going to yes.
Guess further about that but we do believe that the demand for automation in the specific vertical side I've talked about and as well as a general setup is something that's a positive reed going forward and our intention is to reduce.
Product level lead times.
Closer and closer to what they were before.
For these constraints, but with an incoming order right far above what they were pre pandemic.
Great. Thank you.
Yeah. Thanks Julian.
Our next question comes from Steve too Sir from J P. Morgan. Please go ahead to your line is open.
Hey, guys good morning.
HD.
Congrats on the on the execution on this on this backlog I missed part of the call, but did you guys talk about the sequential <unk>.
Change and that and the backlog from four Q R. Sorry, one Q2 Q.
See what we talked about is that the backlog at the middle of the year for US now stands at $5.6 billion, that's versus 5.2 that it was at the beginning of the year, so up $400 million for the first for the first.
For the first six months of the year.
Okay. That's great and then just on the on the margins at <unk> at SMC.
How much of that is like did you break down at all how much of that was the <unk>.
Products related.
This cost spread maybe just a little bit more color on the year over year margin drivers how much came from the the products in that business and how much came from the software there.
Haven't provided the product versus the software mix, but in terms of the things that are causing the margin expansion.
Biggest factor by far is the volume growth that we're experiencing in the leverage we are getting on that the second biggest thing that is improving that margin is the favorable price costs versus where we were in second quarter last year.
And then offsetting that to some extent to bring it down to eight 900 basis point year on year increase.
We have increased investment spend a year over year in software and control and we also are facing noticeably higher incentive compensation those are the two negative things.
On on the margin in.
In the year over year Q2 for software and control.
And then were you expecting that margin to and.
Where do you expect that margin to finish the year just for the end of the annual SMC margin yet.
We think it will be over 30%, it's and that's up from what I, what I have said in the past that we see that that margin being able to.
Sustain into the second half of the year.
At <unk>.
Levels fairly similar to what we're seeing in in our in our second quarter. So full year, we're going to be.
Above 30% could be a few percentage points above 30%.
Great Okay. Thanks.
Thank you.
Our next question comes from Geico call from Rolf Ray Sexy. Please go ahead. Your line is open.
Oh, Thanks, good morning, Thanks for the question.
So I assume it's some of the call so I apologize with where.
<unk>.
I'll be asking the questions are not about three times, but just just wondering about the backlog kind of conversion means.
Supply chains.
This is normal in terms of the times and converting this backlog is it moral constraints of just the lead times cause it labor as a customer acceptance project timing.
What could cause the backlog to convert even tossed in the second half of the year.
Yeah Nigel this is.
Good development and that as the chip.
Chip supply.
Is easing that's.
That's really the the primary limiting factor is we're clearing as we're clearing older backlog there as we've said we've got about $5.6 billion worth of backlog.
And we're expecting that to go down to around $5 billion by the end of the year, but it's held up by continuing good order in case, there and also the.
The contribution from lifecycle services with its strong to bill So it's primarily.
The chip supply.
Feel good about our ability to continue to add labor and our facilities around the world.
We've been adding for some time now additional equipment, but as you know.
We're not really a very capital intensive operation. So it's not like we're having to add a lot of heavy equipment. Because we are you know.
Primarily an intellectual capital company and showed the equipment that we need has relatively short lead times and if we were in.
Heavier manufacturing type operations.
That's great that's perfect and then another.
Start with the backlog you know.
I'll be seen that the mix of the backlog shifting.
To some of the larger projects, particularly with the system.
The plans et cetera.
We've seen some of the larger system <unk> coming through in the backlog and then just kind of another part of that would be important to <unk> in the first half of two in the second half.
What.
A 4.2 still a very healthy level no question about it but what what's causing that dropdowns perfect timing is it the time for customers channels are just not play.
Placing kind of the same <unk>, what what kind of visibility you have to about second half the celebration notice again very healthy level, but you all pointing to the climbing holders.
So.
First of all in terms of composition the backlog I don't I don't think we are.
Seeing any fundamental change in the type of orders now obviously as we move through.
Backlog drug has richer pricing is.
As we work as we work through the years. So that's that's a good read but in terms of the number of big EEV projects or.
Semiconductor facilities management systems are independent card or just continuing MRO I don't think you're going to see a big change because a lot of these investments cycles and those areas are multi year.
We're in it for the long haul with.
Some of these positive areas now in terms of where you might see a little bit of the contribution from the the moderation in orders probably the most specific area is lead times improve as they are across a lot of our product lines.
You'll see machine builders not having to provide orders of the same size to have as many months of coverage on fear backlog. So as they are concerned about their cash flow and they can look at shorter lead times then they can reduce the size of their orders because they don't need as many months cover.
For the machines that they've already booked so I think that's probably the most specific contribution to to some of the orders moderation.
It makes sense like.
Yep. Thank you.
Our next question comes from Rob Nathan <unk>. Please go ahead your line is open.
Oh, yes. Good morning, Thanks for the question.
Called out <unk>, several times and around oil and gas so it sounds like things are.
Positioned to accelerate further there but.
Any thoughts just on it's still looks like maybe we're pulling through an operating loss just based on the minority interest how profitability.
Shift as we go forward over the next 612 months it Cynthia.
Yes.
Well you said it I mean, we're seeing some good scene.
Seen some good growth there, we had a particularly strong orders order and others.
Very strong backlog in the business and so as we move through the coming quarters. We expect a positive contribution of censure spoke in terms of growth and profitability.
To to have an impact on first on lifecycle services and then.
More broadly across Rockwell.
Rob just just to build on that in my prepared remarks, I talked about some one time costs that we took in the second quarter to expand profitability. Some of that is focused in the <unk> area, where we made some investments to simplify business infrastructure.
<unk> that we think will make it even more.
Build it for more profitability in the future and so that's part of what we're seeing in our second quarter results for Cynthia.
Excellent just as a follow up to.
Any thoughts I didn't hear any commentary specific to China, just exactly what you're seeing on the ground the China and.
How that recovery is playing out in your business.
Yeah. So.
A couple of things first of all.
In general.
Growth is strong in in China.
Across the business and it's a lot of the same contributors that we've seen in the past with area slight like EEV and life Sciences and so on.
So we think that.
Our business. There is is posed for for continued growth.
Pretty good thank you.
Yeah. Thanks, Rob.
Our next question comes from <unk> Oppenheimer. Please go ahead your line is open.
Hi, This is Andrea <unk> Noah.
The M&A pipeline you've previously.
Defined isds and market access in Europe , and Asia and advanced material handling his priorities.
You give us any color on what's most near term for years of focus and how accurate the app IMAX connect.
Yeah, Andre it's a good pipeline and you said it those are those are the priorities.
That's fairly broad but within that.
There's a lot of information management software when the production world. So there's some there's some decent targets there.
Cyber security has been extremely successful force both organically and as we've added additional capabilities through some acquisitions advanced material handling we talk all the time about our independent car technology about some of the things we're doing.
And robotics applications as the lines get blurred between robot control and programmable line control and.
And we think there's there's some very interesting things going on there.
<unk>.
AI and autonomy to some of these areas and there's new dimensions for for value for customers and then Europe and Asia. We're very happy for instance, with what we're doing in with awesome.
The Italian manufacturer of industrial Pcs that also has some great software that's.
Forming the basis for some of our most exciting new introductions. So.
I would say the pipeline is good across all of those fronts.
Great. Thank you.
Thanks, and you are also just get an update.
Pipeline and customer needs and the <unk> transition, starting with the upstream opportunity and lithium and and the impact of the IRL domestic battery in vehicle production.
Customers and that vertical broken most right now.
Well.
They're all focused on building up there.
Fleet capacity.
So that they can get a return on these giant investments you don't get that unless you put more jobs per hour out the door and.
So there are all working you know to be able to expand their production output. If you look on the.
On the road today, you still don't see a ton of electric vehicles and all of them. If you listen to those goals and you look at the trends versus a multiyear process and.
And from start to finish starting with the the lithium mine.
The basic materials that are needed for the batteries during the battery, making facilities through the electric vehicle Assembly.
And all of that has to build out to be able to get us to a point, where you start seeing.
Electric vehicles come anywhere near approaching internal combustion vehicles on the road. So this is multiple years and.
All of these manufacturers.
Focused on Debottlenecking that whole supply chain, which is going to be in the news for years to come.
I think the one other question I mean, the irna.
Obviously that helps there as well as it does with other.
Other renewable.
Providers, we've talked before about for solar for instance.
We talked about <unk>, one five initiative.
So we're seeing more and more of these come online across our verticals and people are doing it because it's important for their business models and again that's not.
An ephemeral thing that's that's going to be over multiple years.
Great. Thank you so much.
Yep. Thank you.
Our next question comes from <unk> from Bahrenburg. Please go ahead. Your line is open.
Oh, Hi, good morning. Thanks for the question I was hoping you could expand on the topic of I guess, the older tunnel or pipeline rather than the backlog I'm wondering if you're more excited about the funnel.
And process markets generally speaking more so than discrete or hybrid at this point you towards hopefully about different customer examples and those like <unk> and such.
Trying to get a handle on how aggregation studies big process versus discrete time buckets, So, which finally is getting fuller if you will.
Perhaps you can remind us if there's any structural margin differential between noticed that'd be great.
Sure Yeah.
Yes, it's broad based.
We're very happy with the way that our business is balanced between discrete and hybrid and process applications with big opportunities and all of them I mean, as we talk about EV and battery in.
Discreet, we talk about food and beverage and life Sciences, food and beverages, our single biggest vertical and and hybrid and then process I highlighted some particularly strong order activity with <unk>, but we also.
Continued to see.
Good good activity and models as well so it's across all of them now.
In terms of the.
Margin one to the next hi.
High margin opportunities and each one I would say that the the engineered systems are concentrated a little bit more heavily on the process side. Those customers are more often looking for engineering content to complement the hardware coming from the same provider, so you'd probably see a little bit lower.
<unk>, they're due to the people intensity of that but.
Good opportunities in the final.
Four.
Near in midterm orders across all of the.
Industry segments.
Okay, great. Thank you and just in terms of the different topic margins, who I know you've touched on the software and control margin.
The drop through between the three different businesses is quite.
Quite different depending on which one you are looking at and I know that there's been a lot of things bouncing around at the moment. So I guess I was just trying to get a handle on how you think about the H two margin evolution for each of the three businesses relative to each one is there anything that you could point out.
That we should be bearing in mind beyond software I'm in control. Please thanks.
<unk> software and control, which I already covered still when I look at intelligent devices, that's been a little over 20% about 21% margin in the first half of this year I think for the full year, it's going to be close to that may be between 20 and 21% for the full year.
Margin for for intelligent devices.
Between 20, and 21% for intelligent devices and then stopped.
Excuse me lifecycle services.
I don't see is crossing the threshold into double digit margin.
Until the fourth quarter, So I C Q3 being.
Okay. That's very helpful. Thank you very much.
Hi, Thanks for taking my question.
The news go from spot welding, two giga costing and things like that.
Yeah. So the.
We we provide directly and so when that is replaced by some of the operations in electric vehicles, most notably the battery.
Formation and packing and assembly, that's more of an assembly type operation and there's aspects at the front end of that with.
Batch batch processes and those are all.
It's more complex press operations and Rockwell has great press control systems. So as the metal formation becomes more complex again those are really good applications for Rockwell with our program will control as well as our expanded drive.
Control. So we feel good about those opportunities and then added to those basic automation applications. It's the software that's a more pervasive part of the electric vehicle and battery manufacturing process and we have really good solutions there.
Have your things in one way to find me.
Illinois.
Given at outlook I think the one one area of it's actually declined seems to be chemicals.
From a hyphen.
Did ya.
No double double digit so can you explain that.
No.
I don't I don't have a specific answer for where chemical is his.
His moderating other than to say, our focus and chemical is more on the specialty chemical.
A find chemical as opposed to bulk chemicals.
Okay got it thank you.
Yep. Thank you.
We have no further questions I'd like to get a call back over to Miss down there for closing remarks.
Thank you everyone for joining us today that concludes today's call.
That concludes today's conference call at this time you may disconnect. Thank you.
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