Q1 2024 Emerson Electric Co Earnings Call

Operator: Good morning, and welcome to the Emerson First Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode.

Good morning, and welcome to the Emerson first quarter 2024 earnings Conference call. All participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star key, then 1 on your telephone keypad.

After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad.

Operator: To withdraw your questions, please press star then 2. Please note, this event is being recorded. I would now like to turn the conference over to our host, Colleen Mettler, Vice President of Investor Relations at Emerson. Go ahead. Good morning, and thank you for joining us for Emerson's first quarter 2024 earnings conference call. Today, I am joined by President and Chief Executive Officer Lal Karsanbhai.

To withdraw your question. Please press Star then two please.

Please note. This event is being recorded I would now like to turn the conference over to our host calling Mettler Vice President of Investor Relations at Emerson. Please go ahead.

Mettler: Good morning, and thank you for joining us for Emerson's first quarter 2024 earnings conference call.

Mettler: Today, I am joined by President and Chief Executive Officer, La Carson dye Chief.

Colleen Mettler: Chief Financial Officer Mike Fox, and Chief Operating Officer Ram Khanna. As always, I encourage everyone to follow along with the slide presentation, which is available on our website. Please join me on slides.

Mettler: Chief Financial Officer, Mike Bachmann and.

Mettler: And Chief operating Officer, Ron Christian.

Mettler: As always I encourage everyone to follow along with the slide presentation, which is available on our website. Please join me on slide two.

Colleen Mettler: This presentation may include forward-looking statements that contain a degree of business risk and uncertainty. Please take time to read the Safe Harbor Statement and note on non-GAAP measures. I will now pass the call over to Emerson's President and CEO, Lal Karsanbhai, for his opening remarks. Thank you, Colleen, and good morning.

This presentation may include forward looking statements, which contain a degree of business risks and uncertainty.

Mettler: Please take time to read the Safe Harbor statement and note on non-GAAP measures.

Carson Die: I will now pass the call over to Emerson's, President and CEO small Carson die for his opening remarks.

Carson Die: Thank you Colleen and good morning.

Lal Karsanbhai: I'd like to begin by thanking the Emerson team for delivering a strong start to 2024. I'd also like to extend my appreciation to the Emerson Board of Directors and to our customers for your continued confidence in us. Our first quarter results demonstrate the underlying strength of the markets we serve, the meaningfulness of our differentiated technology, and the relentless execution of our global team. Please turn to slide three.

Carson Die: I'd like to begin by thanking the Emerson team for delivering a strong start to 2024.

Carson Die: I would also like to extend my appreciation to the Emerson Board of directors.

Carson Die: To our customers for your continued confidence in us.

Our first quarter results demonstrate the underlying strength of the markets. We serve the meaningfulness of our differentiated technology and a relentless execution of our global teams.

Carson Die: Please turn to slide three.

Carson Die: Q1 was a strong start for Emerson as we continued our focus on executing and driving value creation for our shareholders.

Lal Karsanbhai: Q1 was a strong start for Emerson as we continued our focus on executing and driving value creation for our shareholders. The demand environment remains healthy for process and hybrid markets. We continue to see projects moving forward at a healthy pace in markets like chemical, LNG, life sciences, metals, and mining, and sustainability and decarbonization, even in the face of higher interest rates, ongoing geopolitical challenges, and upcoming elections in key global markets, including the U.S. Our customers' 2024 CapEx budgets are shaping up constructively and are largely supportive of the demand environment we are experiencing. This robust environment, along with continued Q1 orders.

Carson Die: The demand environment remains healthy for process and hybrid markets.

Carson Die: We continue to see projects moving forward at a healthy pace in markets like chemical LNG.

Carson Die: <unk> sciences metals, and mining and sustainability and de carbonization, even in the face of higher interest rates ongoing geopolitical challenges.

Carson Die: Upcoming elections in key global markets, including the U S.

Carson Die: Our customers 'twenty 'twenty four capex budgets are shaping up constructively.

Carson Die: And are largely supportive of the demand environment, we are experiencing.

Carson Die: This robust environment, along with continued execution by our teams is a key contributor to the Q1 performance.

Carson Die: Q1 orders.

Lal Karsanbhai: Sales, Operating Leverage, and Adjusted Earnings all exceeded expectations, providing confidence to increase our full-year guidance. This performance reflects our ability to win with a focused approach to our growth platforms and through continued investments in innovation. It is also a testament to our new differentiated portfolio with leading technology.

Carson Die: <unk> operating leverage and adjusted earnings all exceeded expectations, providing confidence to increase our full year guidance.

Carson Die: This performance reflects our ability to win with a focused approach to our growth platforms and some continued investments in innovation.

Carson Die: It is also a testament to our new differentiated portfolio with leading technology strong profit margins and <unk>.

Lal Karsanbhai: Strong Profit Margins – Exposure to the Important Global Secular Growth Market, This is exhibited by our gross margin and adjusted EBITDA expansion since 2021. Our business is well positioned to capture investments in areas like energy security and affordability, sustainability and decarbonization, digital transformation, and near shoring. Regarding our portfolio, we continue to reiterate that the large parts of our portfolio transformation are complete, and we do not expect any sizable transactions in 2024.

Carson Die: Well, we sure to the important global secular growth markets.

Carson Die: This is exhibited by our gross margin and adjusted EBITDA expansion since 2021.

Carson Die: Our business is well positioned to capture investments in areas like energy security and affordability sustainability and de carbonization digital transformation and near shoring.

Regarding our portfolio, we continue to reiterate that the large parts of our portfolio transformation are complete and we do not expect any sizable transactions in 2024.

Lal Karsanbhai: This is the portfolio we designed from the beginning, and we are excited to be executing with this set of businesses. On that note, Tests and Measurement is executing well and had a strong first quarter ahead of our expectations. The core of performance and an acceleration of synergy provide more confidence for our full year expectations from the business. Please turn to slide 4.

Carson Die: This is the portfolio, we designed from the beginning and.

Carson Die: And we are excited to be executing with this set of businesses.

Carson Die: On that note test and measurement is executing well and had a strong first quarter ahead of our expectations.

Carson Die: The quarter performance and an acceleration of synergies provide more confidence for our full year expectations from the business.

Carson Die: Please turn to slide four.

Lal Karsanbhai: Emerson's Q1 exceeded all expectations. Underlying orders continued to grow in the mid-single-digit range with 4% growth in Q1, process and hybrid markets were strong, and discrete orders remained down as expected. Multiple LNG projects were booked in the quarter, specifically in Europe and the Middle East. Life Sciences activity was also strong across the globe, with large project wins in the U.S., Canada, Europe, and Asia.

Carson Die: Emerson's Q1 exceeded all expectations.

Carson Die: Underlying orders continue to grow in the mid single digit range with 4% growth in Q1.

Carson Die: Process and hybrid markets were strong and discrete orders remained down as expected.

Carson Die: Multiple LNG projects booked in the quarter, specifically in Europe, and the Middle East.

Carson Die: Life Sciences activity was also strong across the globe with large project wins in the U S, Canada, Europe and Asia.

Lal Karsanbhai: The Q1 growth was also supported by some project activity shifting from Q2 to Q1. As you all know, orders can move around quarter to quarter, but we still expect low single-digit order growth in the first half of 2024 and mid-single-digit order growth for the full year, as discrete demand improves in the second half. Underlying sales for the quarter grew 10%, again, led by process and hybrid markets exceeding our expectations.

Carson Die: The Q1 growth was also supported by some project activity shifting from Q2 to Q1.

Carson Die: As you all know.

Carson Die: Orders can move around quarter to quarter, but we still expect low single digit order growth in the first half of 2024 and mid single digit order growth for the full year as discrete demand improves in the second half.

Carson Die: Underlying sales for the quarter grew 10% again led by process and hybrid markets exceeding our expectations.

Lal Karsanbhai: Energy transition markets and metals and mining were both bright spots in the quarter as we executed numerous projects across Europe, Latin America, and Australia. This volume, combined with favorable price costs and strong operational execution, resulted in 41% operating leverage in Q1, ahead of our mid-30s expectations. Adjusted EPS was $1.22, up 56% versus 2023, and free cash flow was $367 million, up 51%. Mike Bachman will go through the specifics shortly, but we are excited about our first quarter performance.

Carson Die: Energy transition markets and metals and mining were both bright spots in the quarter as we executed numerous projects across Europe, Latin America and Australia.

Carson Die: This volume combined with favorable price cost and our strong operational execution resulted in 41% operating leverage in Q1 ahead of our mid thirties expectations.

Carson Die: Adjusted EPS was $1 22 up 56% versus 2023 and free cash flow was $367 million up 51%.

Carson Die: Mike Bachman will go through the specifics shortly but we are excited about our first quarter performance.

Lal Karsanbhai: On slide five, our current strategic project funnel grew by approximately $200 million to $10.4 billion, and our growth programs continue to represent nearly two-thirds of this funnel. The continued expansion of this funnel is promising, with existing customers and new entrants continuing to plan and budget for capital projects in the coming years. In the first quarter, Emerson was awarded approximately $400 million of project content, with a little more than half from our growth programs, including three noteworthy deals in energy transition. First, Emerson was selected by DG Fuels in Louisiana to provide our comprehensive automation portfolio, including advanced sensing, control systems, and optimization software, for the production of sustainable aviation fuels. These fuels can be used in existing aviation and vehicle engines, and DG Fuels has previously announced agreements with aviation leaders including Air France, KLM, Delta, and Airbus.

Carson Die: On slide five our current strategic project funnel grew by approximately $200 million too.

Carson Die: To $10 4 billion and our growth programs continue to represent nearly two thirds of this funnel.

Carson Die: The continued expansion of the funnel is promising with existing customers and new entrants continuing to plan and budget for capital projects in the coming years.

Carson Die: In the first quarter Emerson was awarded approximately $400 million of project content with a little more than half from our growth programs, including three noteworthy deals in the energy transition.

Carson Die: First Emerson was selected by DG fuels in Louisiana to provide our comprehensive automated automation portfolio, including advanced sensing control systems and optimization software for the production of sustainable aviation fuels.

Carson Die: These fuels can be used in existing aviation and vehicle engines and DG fuels has previously announced agreements with aviation leaders, including Air, France, KLM Delta and Airbus.

Lal Karsanbhai: Next, Emerson was chosen to automate a lithium ion recycling process based on our metals and mining expertise and experience throughout the lithium value chain. Emerson will provide Sungil Hitech, a specialist in lithium battery recycling in Korea, with advanced automation solutions for safe and reliable operations at its newest facility that is capable of supplying materials for approximately 400,000 electric vehicles each year.

Carson Die: Next Emerson was chosen to automate a lithium ion recycling process based on our metals and mining expertise and experience throughout the lithium value chain.

Carson Die: <unk> will provide soon deal high tech a specialist in lithium battery recycling in Korea with advanced automation solutions for safe and reliable operations at its newest facility that is capable of supplying materials for approximately 400000 electrical vehicle.

Carson Die: Electric vehicles each year.

Lal Karsanbhai: Lastly... Emerson and Aspen Tech were jointly selected for a large-scale LNG liquefaction facility in the Middle East. Project TWIN represents Emerson's strong presence in the region, including an already sizable LNG installed base. The win is also recognition of the collaboration and synergies between Emerson and Aspentech, as Emerson's Delta V was selected, along with Aspentech's Hysa simulation, showing the power and differentiation of our combined portfolio. As we look at the continued needs of Europe and its reliance on gas imports, the Middle East and Africa will play a pivotal role in gas exports.

Carson Die: Lastly, <unk>.

Carson Die: <unk> and Aspen Tech, we're jointly selected for a large scale LNG liquefaction facility in the middle East.

Carson Die: The project win represents Emerson strong presence in the region, including an already sizeable LNG installed base.

The win is also recognition of the collaboration and synergies between the Emerson in Aspen Tech.

Carson Die: Emerson's Delta V was selected along with Aspen Tech's high <unk>, showing the power and differentiation of our combined portfolio.

Carson Die: As we look at the continued needs of Europe, and its reliance on gas imports.

Carson Die: Middle East and Africa will play out.

Carson Die: Pivotal role and gas exports.

Lal Karsanbhai: Emerson is uniquely positioned with our local expertise, manufacturing, and installed base to serve the region and its LNG growth. These are just three examples of Emerson's continued leadership position in energy transition markets, spanning from established markets like LNG to newer markets like sustainable aviation fuel. Turning to slide six.

Carson Die: Emerson is uniquely positioned with our local expertise manufacturing and installed base to serve the region and its LNG growth.

Carson Die: These are just three examples of Emerson's continued leadership position in energy transition markets spanning from established markets like LNG to newer markets like sustainable.

Carson Die: <unk> fuels.

Carson Die: Turning to slide six.

Lal Karsanbhai: We remain focused on accelerating innovation for profitable growth. Our recent innovations and our continued technological leadership were recognized by IOT Breakthrough, who named Emerson its 2024 Industrial IOT Company of the Year. IOT Breakthrough received over 4,300 nominations for the 2024 competition, and Emerson was selected based on our unique ability to effectively leverage decades of expertise in digitalization and automation to help the industry transform operations. Among the innovations recognized were Emerson's Ovation Green portfolio for managing renewable power assets. Florida Cloud Solutions to continuously monitor critical production and energy efficiency data in factories. OneClick transfer software capable of accelerating the life sciences drug development process. Numerous releases focused on enabling the boundless automation vision, including the Delta V Edge environment.

Carson Die: We remain focused on accelerating innovation for profitable growth.

Carson Die: Our recent innovations in our continued technology leadership were recognized by Iot breakthrough, who named Emerson, It's 2020 for industrial Iot company of the year.

Carson Die: Iot breakthrough received over 4300 nominations for the 2020 for competition and Emerson was selected based on our unique ability to effectively leverage decades of expertise in digitalization and automation to help the industry transform operations.

Carson Die: Among the innovations recognized where emerson's ovation green portfolio for managing renewable power assets, Florida cloud solutions to continuously monitor critical production and energy efficiency data and factories.

Carson Die: One click transfer software capable of accelerating the life Sciences drug development process and numerous releases focus on enabling the boundless automation vision, including the delta the edge environment.

Lal Karsanbhai: As you recall, boundless automation is Emerson's vision for a cohesive automation ecosystem from device to enterprise. Integrating operations with a flexible automation architecture allows users to have access to all their data, enabling analytics and performance improvements across numerous domains like production, safety, reliability, and sustainability. All these innovations will be on display at Emerson's upcoming users exchange at the end of February. The event in Dusseldorf, Germany, will feature customer case studies, industry sessions, and a technology exhibit demonstrating Emerson's leading automation portfolio for process and hybrid industries.

As you'll recall boundless automation as Emerson division for a cohesive automation ecosystem from device to enterprise.

Carson Die: Integrating operations with a flexible automation architecture allows users to have access to all their data, enabling analytics and performance improvements across numerous domains like production safety reliability and sustainability.

Carson Die: All of these innovations will be on display at emerson's upcoming users exchange at the end of February.

Carson Die: Emerson exchange in Dusseldorf, Germany will feature customer case studies industry sessions, and a technology exhibit demonstrating emerson's, leading automation portfolio for process and hybrid industries.

Lal Karsanbhai: New this year are industry-focused exhibits showcasing Emerson's complete solutions for emerging industries like hydrogen, biofuels, and carbon capture, in addition to growth markets like life sciences and metals and mining. Please turn to slide 7 for an update on our Synergy Progress in Test and Measurement. We effectively used the time between signing and closing to plan all integration and synergy activities, utilizing a world-class M&A methodology as part of our Emerson management system. Given the strong team collaboration and current market environment, we have accelerated those synergy activities. In the first quarter, we worked closely with the new test and measurement leadership team to aggressively address public company and corporate costs while rapidly implementing phase one of our sales and marketing and research and development transformation. We are also leveraging our Emerson management system and best practices to progress operational execution and commercial excellence at test and measurement. This includes trade working capital, price realization, and procurement efficiencies in logistics and direct materials.

Carson Die: New this year, our industry focused exhibits showcasing emerson's complete solutions for emerging industries like hydrogen biofuels and carbon capture in addition to growth markets like life Sciences, and metals and mining.

Carson Die: Please turn to slide seven for an update on our synergy progress in test and measurement.

Carson Die: We effectively use the time between signing and closing to plan all integration and synergy activities utilizing our world class M&A methodology as part of our Emerson management system.

Carson Die: Given the strong team collaboration and current market environment, we have accelerated those synergy activities.

Carson Die: In the first quarter, we work closely with the new test and measurement leadership team to aggressively address public company and corporate costs, while rapidly implementing phase one of our sales and marketing and research and development transformations.

Carson Die: We are also leveraging our Emerson management system, and best practices to progress operational execution, and commercial excellence that test and measurement.

Carson Die: This includes trade working capital price realization and procurement efficiencies and logistics indirect materials.

Lal Karsanbhai: These efforts put TESA measurement ahead of schedule and give us the confidence to increase the cost synergy target to $185 million, which we now expect to achieve by the end of 2026, two years faster than originally expected. This includes approximately $80 million expected to be realized in 2024. Our planned cost to achieve these synergies increases slightly to $165 million, with the majority of the spend expected in the first two years.

Carson Die: These efforts put test <unk> measurement ahead of schedule and give us the confidence to increase the cost synergy target to $185 million, which we now expect to achieve by the end of 2026 two years faster than originally expected.

Carson Die: This includes approximately $80 million expected to be realized in 2024.

Carson Die: Our planned cost to achieve these synergies increased slightly to $165 million with the majority of the spend expected in the first two years.

Carson Die: We still expect adjusted segment EBITDA to reach approximately 31% by year five as sales grow on the reset cost base.

Mike Train: We still expect adjusted segment EBITDA to reach approximately 31% by year five as sales grow on the reset cost base. I'll now turn the call over to Mike Bachman to go through more detail on the quarter performance, including test and measurement, and our updated 2024 guide. Thanks, Lal, and good morning, everyone.

Carson Die: I'll now turn the call over to Mike Bachman to go through more detail on the quarter performance, including test and measurement and our updated 2024 guide.

Mike Train: Thanks, Laura and good morning, everyone. Please turn to slide eight where we have summarized our first quarter financial results.

Mike Train: Please turn to slide 8, where we have summarized our first quarter financial results. Underlying sales growth was 10%, led by our process and hybrid businesses. Intelligent Devices and Software and Control grew 11% and 9%, respectively. Discrete automation was down low single digits, as expected. All world areas were strong, with Asia, the Middle East, and Africa up 15%.

Mike Train: Underlying sales growth was 10% led by our process and hybrid businesses intelligent devices and software and control grew 11, 9% respectively.

Mike Train: Discrete automation was down low single digits as expected.

Mike Train: All world areas were strong with Asia, Middle East and Africa up 15%.

Mike Train: Europe up 10% and the Americas up 8%. Price contributed approximately two points of growth. Test and measurement, which is outside of the underlying sales measure, contributed $382 million, exceeding expectations for the quarter. I will discuss test and measurement performance in more detail on the next slide. Backlog is now $7.6 billion, which is up $500 million versus September 30th when excluding test and measurement. Emerson's adjusted segment EBITDA margin improved 190 basis points to 24.6%. Volume, margin accretive price costs, which included net material deflation, ongoing productivity programs, and the test and measurement performance all contributed to the margin improvement. Operating leverage excluding test and measurement was 41%.

Mike Train: Europe up 10% in the Americas up 8%.

Mike Train: <unk> contributed approximately two points of growth.

Mike Train: Test and measurement, which is outside of the underlying sales measure contributed $382 million exceeding expectations for the quarter.

Mike Train: I will discuss test and measurement performance in more detail on the next slide.

Mike Train: Backlog is now seven 6 billion, which is up $500 million versus September 30, when excluding test and measurement.

Mike Train: Emerson adjusted segment EBITA margin improved 190 basis points to 24, 6%.

Mike Train: Volume margin accretive price cost, which included net material deflation ongoing productivity programs and the test and measurement performance all contributed to the margin improvement.

Mike Train: Operating leverage excluding test and measurement was 41%.

Mike Train: Adjusted EPS grew 56% to $1.22, up $0.44, and is a strong start to the year. Double-digit sales growth and 41% operating leverage contributed to the 33 cents of operational improvement year-over-year. Non-operating items contributed $0.11 year-on-year, mainly due to lower stock compensation, which contributed $0.08 versus Q1 of 2023. As a reminder, all Legacy Mark-to-Market stock compensation plans are now gone. Also contributing to the non-operating items were interest income of 4% and Cher Count, which contributed two cents; tax was a three cent hit. Lastly, free cash flow for the quarter of $367 million was up 51% versus the prior year.

Mike Train: Adjusted EPS grew 56% to $1 22 up 44.

Mike Train: And as a strong start to the year.

Mike Train: Double digit sales growth and 41% operating leverage contributed to the 30 <unk> of operational improvement year over year.

Mike Train: Non operating items contributed 11 <unk> year on year, mainly due to lower stock compensation, which contributed <unk> <unk> versus Q1 of 2023.

Mike Train: As a reminder, all legacy Mark to market stock compensation plans are now complete.

Mike Train: Also contributing to the nonoperating items, where interest income of 4%.

Mike Train: And share count, which contributed two sons.

Mike Train: Tax was a <unk> <unk> headwind.

Mike Train: Lastly, free cash flow for the quarter of $367 million was up 51% versus the prior year.

Mike Train: This was in line with our expectations for the quarter as we saw modest improvement in working capital year on year. Headwinds related to acquisition fees and restructuring impacted the quarter by approximately $100 million, and CapEx was up $18 million, year on year. Aspen Tech sales in ACB were slightly weaker than our expectations for Q1, driven mainly by a delay in renewal from one customer.

Mike Train: This was in line with our expectations for the quarter as we saw modest improvement in working capital year on year.

Mike Train: Headwinds related to acquisition fees and restructuring impacted the quarter by approximately 100 million and Capex was up 18 million year on year.

Aspen Tech sales, an ACB were slightly weaker than our expectations for Q1, driven mainly by a delay in renewal from one customer.

Mike Train: This slight miss, however, did not have a material impact on total Emerson results versus our expectations for the quarter. PCB grew close to 10%, and the Aspen Tech team continues to see strong market dynamics in power transmission and distribution. Sustainability and Decarbonization, while at the same time utilizing Emerson relationships to win in LNG, life sciences, and power generation. Turning to slide nine, we will dive deeper into the first quarter performance of tests and measurements. Orders were in line with expectations, down 17% year-over-year, but they showed high single-digit sequential improvement led by the strength in aerospace. However, there was continued softness in semiconductor and automotive markets and ongoing weakness in China.

Mike Train: The slight Miss however, did not have a material impact on total Emerson results versus our expectations.

Mike Train: For the quarter.

Mike Train: <unk> grew close to 10% and the Aspen Tech team continues to see strong market dynamics and powertrains mission in distribution and sustainability and de carbonization, while at the same time utilizing emerson relationships to win an LNG life Sciences and power generation.

Mike Train: Turning to slide nine we will dive deeper into the first quarter performance of test and measurement.

Mike Train: Orders were in line with expectations down 17% year over year, but showed high single digit sequential improvement led by the strength in aerospace.

Mike Train: There was continued softness in semiconductor and automotive markets and ongoing weakness in China.

Mike Train: Continue to watch orders as a key indicator and still expect a turn in the second half on EASIERCOM. Sales for the quarter were $382 million, beating initial expectations. This was driven by stronger backlog conversion, lower than expected sales during the 11-day stub period prior to closing, and a little conservatism in the guide given the timing of the close. Sales were $401 million, including sales in the stop period. Test and measurement adjusted segment EBITDA margins were 26.5% in the quarter.

Mike Train: We continue to launch orders as a key indicator and still expect a turn in the second half on easier comps.

Mike Train: Sales for the quarter were $382 million, beating our initial expectations.

Mike Train: This was driven by stronger backlog conversion lower than expected sales during the 11 day stub period prior to closing and a little conservatism in the guide given the timing of the close.

Mike Train: Sales were $401 million, including the sales in the stub period.

Mike Train: Test and measurement adjusted segment EBITDA margins were 26, 5% in the quarter.

Mike Train: Feeding expectations due to higher sales and better than expected gross margins. Slightly Higher Cost Center. The Q1 adjusted segment EBITDA margin benefited from lower than expected sales in the stub period against ratable fixed costs. Test and measurement contributed $0.13 in the first quarter, including stock compensation expense and using the test and measurement tax rate, which is in the mid-teens.

Mike Train: Beating expectations due to higher sales better than expected gross margins and slightly higher cost synergies.

Mike Train: The Q1 adjusted segment EBITDA margin benefited from lower than expected sales in the stub period against ratable fixed costs.

Mike Train: Test and measurement contributed 13 in the first quarter, including stock compensation expense and using the test and measurement tax rate, which is in the mid teens.

Mike Train: The sub-period dynamic discussed earlier benefited the adjusted EPS contribution by approximately two pennies. Custom Measurement's March quarter-end sales volume has typically stepped down from its December quarter-end. We expect similar seasonality with second-quarter sales of approximately $350 million. Second quarter adjusted EPS contribution is expected to be $0.07, driven by leverage on the lower seasonal sales volume, partially offset by synergy. Turning to the full year, we have increased our expected adjusted EPS contribution from test and measurement to $0.40 to $0.45 to account for some of the Q1 upside. We still expect sales to be $1.5 to $1.6 billion as we continue to watch for orders. Sales volumes are expected to ramp from Q2 to Q4, turning positive in Q4, consistent with our prior expectations.

Mike Train: The stub period dynamic discussed earlier benefited the adjusted EPS contribution by approximately two pennies.

Mike Train: Test and measurement March quarter end sales volume is typically stepped down from its December quarter end.

Mike Train: We expect similar seasonality with second quarter sales of approximately $350 million.

Mike Train: Second quarter adjusted EPS contribution is expected to be seven.

Mike Train: Driven by leverage on the lower seasonal sales volume, partially offset by synergy savings.

Mike Train: Turning to the full year, we have increased our expected adjusted EPS contribution from test and measurement to 40% to 45 to account for some of the Q1 upside.

Mike Train: We still expect sales to be one five to $1 6 billion as we continue to watch the order strength.

Mike Train: Sales volumes are expected to ramp from Q2 to Q4, turning positive in Q4 consistent with our prior expectations.

Mike Train: While we expect sales to be lower versus 2023, we expect modest adjusted EBITDA expansion as we recognize the cost. Finally, I would like to thank the test and measurement team for an excellent quarter. The integration work has been performed exceedingly well, and your embrace of the Emerson management system is very much appreciated. Thank you again to the entire Tustin...

Mike Train: While we expect to be sales to be down versus 2023, we expect modest adjusted EBITDA expansion as we recognize the cost synergies.

Speaker Change: Finally, I would like to thank the test and measurement team for an excellent quarter.

Speaker Change: The integration work has been performed exceedingly well Andrew embrace of the Emerson management system is very much appreciated.

Speaker Change: Thank you again to the entire test and measurement team.

Mike Train: Please turn to slide 10 for details of our Q2 and full year 2024 guidance. After our strong Q1 performance, we are increasing our full year 2024 sales and adjusted EPS guidance. We now expect underlying sales growth of 4.5 to 6.5% driven by our process and hybrid business. We expect both intelligent devices and software in control to be within this guidance range for underlying sales. We continue to watch the discrete automation recovery closely, and we now expect sales to turn positive in Q4, consistent with test and measure. Full year Discrete Automation underlying sales are now expected to be down in the low single-digit range.

Speaker Change: Please turn to slide 10 for details of our Q2 and full year 2020 for guidance.

After our strong Q1 performance, we are increasing our full year 2020 for sales and adjusted EPS guidance.

Speaker Change: We now expect underlying sales growth of four five to six 5% driven by our process and hybrid businesses.

Speaker Change: We expect both intelligent devices and software and control to be within this guidance range for underlying sales.

Speaker Change: We continue to watch the discrete automation recovery closely and we now expect sales to turn positive in Q4, consistent with test and measurement.

Speaker Change: Full year discrete automation underlying sales are now expected to be down in the low single digit range.

Mike Train: FX is expected to be approximately flat versus 2023 compared to a one-point headwind embedded in our November guide. Operating leverage, excluding test and measurement, is now expected to be in the low-to-mid 40s in 2024 versus the mid-to-high 40s guidance from November. A modest reduction in our full-year target is solely attributed to the move in FX as the 1% increase in sales volume comes in at a lower margin. Our adjusted EPS range increases from $5.30 to $5.45, driven by our Q1 performance. Aspen Tech is still expected to contribute approximately 32 to 34 cents.

Speaker Change: FX is expected to be approximately flat versus 2023 compared to a one point headwind embedded in our November guidance.

Speaker Change: Operating leverage excluding test and measurement is now expected to be in the low to mid forties in 2024 versus the mid to high Forty's guidance from November.

Speaker Change: A modest reduction in our full year target is solely attributed to the move in FX as the 1% increase in sales volume comes in at a lower margin.

Speaker Change: Our adjusted EPS range increases from $5 30 to $5 45.

Speaker Change: Driven by our Q1 performance.

Speaker Change: Aspen Tech is still expected to contribute approximately 32 to 34.

Mike Train: Lastly, we are maintaining our free cash flow guidance of $2.6 to $2.7 billion. Share repurchase is expected to be approximately $500 million, of which $175 million was completed. For the second quarter, we expect underlying sales to increase 3.5 to 5.5 percent with leverage in the low to mid 40s. Tougher comps and discrete automation are expected to have an impact on reported sales growth for the quarter. However, volumes are expected to improve sequentially from Q1. Adjusted EPS is expected to be between $1.22 and $1.26.

Speaker Change: Lastly, we are maintaining our free cash flow guidance of two six to $2 7 billion.

Speaker Change: Share repurchase is expected to be approximately $500 million of which $175 million was completed in Q1.

Speaker Change: For the second quarter, we expect underlying sales to increase three 5% to five 5% with leverage in the low to mid forties.

Speaker Change: Tougher comps in discrete automation are expected to have an impact on reported sales growth for the quarter.

Speaker Change: However volumes are expected to improve sequentially from Q1.

Speaker Change: Adjusted EPS is expected to between to be between $1 22, and $1 26.

Operator: And with that, we will now turn the call back to the operator for Q&A. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key.

Speaker Change: And with that we will now turn the call back to the operator for Q&A.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.

Andrew Kaplowitz: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we'll pause momentarily to assemble the roster. The first question comes from Andy Kaplowitz of Citigroup. Please go ahead. Good morning, everyone. Good morning, Andy.

If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then tail.

Speaker Change: At this time, we'll pause momentarily.

Speaker Change: While the roster.

Speaker Change: The first question comes from Andy Kaplowitz of Citigroup. Please go ahead.

Andrew Kaplowitz: Good morning, everyone.

Andrew Kaplowitz: Good morning, Andy.

Lal Karsanbhai: Lal, I think your backlog, at $7.6 billion, was up relatively significantly, even excluding the test and measurement addition with, you know, the orders, as you said, at plus 4%. Can you talk about organic order visibility going forward? seems like process hybrid has been relatively strong as you thought can you sustain that mid-single-digit kind of order growth going forward and then have you seen an inflection yet in natty related? Yeah, hi, Andy.

Andrew Kaplowitz: Well I think your backlog at $7 6 billion was up relatively significantly even excluding the test and measurement. In addition, with the orders as you said a plus 4% can you talk about organic order visibility going forward. It seems like you know process hybrid.

Andrew Kaplowitz: Relatively strong as you thought can you sustain that mid single digit kind of order growth going forward and then have you seen an inflection yet in natty related orders.

Lal Karsanbhai: No, I'm happy to give you some color on the orders. So obviously, as you know about our business, orders can fluctuate on a quarter to quarter basis, which is why we guided in that lower single-digit range in the first half of the year but finished the year in the mid single-digit range as we are now. We have a high degree of confidence about that based on two factors, Andy. The first being that our MRO business continues to be relatively strong. It represented approximately 65% of the revenue in Q1, and we expect that to remain robust as we go through the remainder of the year, and that provides us with a strong base of order activity. Secondly, the conversion in the funnel. We booked approximately $400 million.

Speaker Change: Yeah, Hi, Andy No happy to give you some color on the orders so obviously as you.

Speaker Change: As you know about our business orders can fluctuate on a quarter to quarter basis, which is why we guided in that lower single digit range in the first half of the year, but finishing the year in the mid single digit range as we are now.

Speaker Change: We have a high degree of confidence.

Speaker Change: That based on two factors Andy the first being our MRO business continues to be relatively strong. It represented approximately 65% of the revenue in Q1, and we expect that to remain robust as we go through the remainder of the year and that provides us a.

Speaker Change: Our strong base of of order activity secondly, the conversion into in the funnel.

Speaker Change: We booked approximately $400 million that represented almost a little over 90 projects that we want out of the funnel in the first quarter.

Lal Karsanbhai: That represented almost a little over 90 projects that we won out of the funnel in the first quarter. The funnel grew despite that, and we continue to see activity, particularly in energy transition driven by the Middle East and Africa in the sustainability area, life sciences, and, of course, a tremendous amount of investment. So, from an underlying Emerson perspective, the focus really is process and hybrid to continue to provide that underlying strength through the year. Now, what we will see is a recovery in the screen in the second half, and that's what we've got baked in here.

Speaker Change: The funnel grew despite that and we continue to see activity, particularly in energy transition driven by the middle East and in Africa.

Speaker Change: In the sustainability area life Sciences of course tremendous amount of activity in metals and mining so from an underlying Emerson perspective, the focus really is processed in a hybrid.

Speaker Change: To continue to provide that underlying strength of the euro now what we will see is the recovery in discrete in the second half.

Speaker Change: That's what we've got baked in here.

Speaker Change: We are still in the lower <unk>.

Single digits negative right now discrete markets, it's really demand driven as we've been talking about for the last couple of quarters, but we do expect a recovery in orders into the second half of course between comps and obviously some demand elements there.

Lal Karsanbhai: We are still in the lower single-digit range, and that's what we've got baked in here. Enhanced Systems Part 2, which is our second order. As far as NI is concerned, it's very much on plan to what we expect in terms of orders. We do also believe that there will be a positive second half return on the order activity. And we're starting to see early signs in markets, particularly in semiconductors, as you've seen these companies come out and report. So very much on plan on both ends, which gives us confidence in the underlying strength of the order activity. Helpful Law

Speaker Change: As far as Eni is concerned.

Speaker Change: So very much on plan to what we expect.

Speaker Change: In terms of orders.

Speaker Change: We do also believe that there is a second half.

Speaker Change:

Speaker Change: Positive return on the on the order activity and we're starting to see early signs in markets, particularly like semiconductor as you've seen these companies come out and report so very much on plan on both ends and which gives us confidence in the underlying strength of the order activity Andy.

Mike Train: You obviously had a good quarter and raised the outlook, but maybe just on free cash flow, you didn't change your guidance despite the better quarter and outlook. Did you raise your acquisition-related costs? Is CapEx going up? Anything that you could talk about on that side or on the working capital side? Hey, Andy, it's Mike.

Speaker Change: Hello, you, obviously had a good quarter and raised the outlook, but maybe just on free cash flow you Didnt change your guidance, despite the better quarter and outlook did you raise your acquisition related costs Capex going up you know anything that you could talk about them that centered on the working capital side.

Speaker Change: Hey, Andy it's Mike I'll take that one yes.

Mike Train: I'll take that one. Yeah, the guide was maintained at 2.6 to 2.7. And with respect to the $250 million that we called out in November, that's tracking right on plan, about $100 million in the quarter plus the cap, that's on the operating cash flow items, mostly integration related. And then we did see a little bit of elevated CapEx, again, very much in line with expectations. We thought a lot about the guide, obviously, and just to go through a little bit of the math, while we took up the earnings, we took up the sales, you know, the net of that is about $50 million in cash flow, still within the 2.6 to 2.7, so we elected not to take it up given where we sit in the first quarter, but certainly sitting here today, I can tell you we feel better about the cash flow guide than we did three That's great; I appreciate the color guys.

Mike: <unk> was maintained at two six to $2 seven and with respect to the two.

Mike: $250 million that we called out in November Thats tracking right on plan about $100 million in the quarter.

Mike: Plus the cap that's on the operating cash flow items, mostly integration related and then we did see a little bit elevated capex again very much in line with expectations.

Mike: We thought a lot about the guide obviously and just to go through a little bit of the math, while we took up the earnings we took up the sales. The net of that is about $50 million in cash flow is still within the $2 six to two seven.

Mike: So we elected not to take it up given where we set first quarter.

Mike: But certainly sitting here today I can tell you we feel better about the cash flow guide than we did three months ago and it's all it's all going to plan.

Speaker Change: That's great appreciate the color guys.

Andrew Kaplowitz: The next question comes from Steve Tusa of J.P. Morgan. Please go ahead. Hi, good morning.

Speaker Change: The next question comes from Steve Tusa of Jpmorgan. Please go ahead.

Stephen Tusa: Hi, good morning.

Stephen Tusa: Morning, Steve. Can you just talk about the just maybe the bridge a little more clarity there from the 13 cents you did for Natty to the 7 cents it doesn't look like all of that account you know was accounted for by 30 million dollar sales decline and then I guess on a just when you look out to this you know 1.55 billion dollar guidance going from what you've done in the first half do we expect that to be kind of linear from the 350 in q2 and sales or is it you know kind of heavily loaded in the fourth quarter, Yeah, Steve, it's Mike, I'll talk a little bit about the test and measurement performance and the EPS performance in the quarter, you know, we talked a little bit about this stub dynamic, which really was simply the early 11 day period that we didn't own them the first part of the quarter, the sales were much lower than we expected, we expected something that ratable, they were not ratable.

Stephen Tusa: Good morning, Steve.

Stephen Tusa: Can you just talk about the just maybe the bridge a little more clarity there from the 13, hence you did.

Stephen Tusa: For Natty seven doesn't.

Stephen Tusa: It doesn't look like all of that account was accounted for by $30 million sales decline.

Stephen Tusa: And then I guess on a just when you look out to this.

Stephen Tusa: 155 billion dollar guidance going from what you've done in the first half.

Stephen Tusa: We expect that to be kind of linear from the $3 50 in Q2 in sales or is it.

Stephen Tusa: Kind of heavily loaded in the fourth quarter.

Stephen Tusa: Yeah, Steve It's Mike I'll talk a little bit about the test and measurement performance and the EPS performance in the quarter.

Mike: You talked a little bit about this stuff dynamic, which really was simply the early <unk>.

Mike: 11 day period that we didnt own them in the first part of the quarter. The sales were much lower than we expected we expected something more ratable they were not ratable and that drove about 2% of improvement from what we expected and the business Leverages as you know really nicely so pushing those sales out into the core.

Stephen Tusa: And that drove about two cents of improvement from what we expected. And the business leverages, as you know, really nicely. So pushing those sales out into the quarter drove part of that $0.13 performance. Now on top of that, there was also some Q1 sales that we were expecting in Q2. And so when we thought about the guide, we took that $0.08 beat and we rolled five forward. And that's where we landed.

<unk>.

Mike: Drove part of that.

Mike: 13th performance now of that there was also.

Mike: Q1 sales that we were expecting in Q2, and so when we thought about the guide.

Mike: We took that eight b and we rolled five forward.

Mike: And that's where we landed so great performance on test and measurement and we're really off to a great start there.

Mike Train: So great performance on test and measurement. And we're really off to a great start there. Ron, you want to talk about the Q4? Yeah, the second part of the question. Yeah, I think that it's not all in Q4. So you'll see it evenly distributed in Q3 and Q4, and it'll step up from the 350. So we feel pretty good about the $0.40 to $0.45. Right, and just one last one, just on the discrete, you guys have been a little more steady on that discrete performance relative to some of your peers who had a very strong backlog liquidation in the second half of last year. You guys kind of started to see some of that weakness, so the comps start getting easier in the fourth quarter, correct? Correct. The year over year counts.

Speaker Change: And your second part of the question, Yes, I think it's not all in Q4, so youll see evenly distributed in Q3 and Q4 it will step up from the $3 50, So we feel pretty good about the 40% to 45 as we sit here.

Right and just one last one just on the on the discrete.

Speaker Change: You guys have been a little more steady on that discrete performance of your relative to some of your peers, who had a very strong backlog liquidation in the second half of last year, you guys kind.

Speaker Change: Starting to see some of that weakness of the comps start getting easier.

Speaker Change: In the fourth quarter correct.

Speaker Change: Year over year comps, yeah actually in the third quarter from third and fourth quarter should be good quarters for us from industry perspective, correct. Although it is quite orders.

Lal Karsanbhai: Yeah, actually, in the third quarter, and the third and fourth quarters should be good quarters for us from a discrete perspective. Correct. In orders. In orders, and then sales will turn positive. Right, on an easier comp.

Speaker Change: <unk> sales will turn positive in Q4 right.

Speaker Change: On an easier comp.

Stephen Tusa: Correct. Yeah. Okay, great. Thanks a lot.

Speaker Change: Correct Yeah.

Speaker Change: Okay, great. Thanks, a lot I appreciate it.

Jeff Sprague: Appreciate it. The next question comes from Jeff Sprague of Vertical Research. Please go ahead. Hello, good morning, everyone. Good morning, Jeff. Good morning. Hey, Lal, two from me.

Speaker Change: The next question comes from Jeff Sprague of vertical research. Please go ahead.

Jeff Sprague: Hello, Good morning, everyone.

Jeff Sprague: Morning, Jeff.

Jeff Sprague: Hey, two from me first one just on LNG, obviously, it's a global business and you talked about the middle East, but can you just give us your perspective on.

Lal Karsanbhai: First one, just on LNG. Obviously, it's a global business, and you talked about the Middle East, but just give us your perspective on, you know, what the administration's done on approvals in the US and, you know, how that might impact your business, the funnel, you know, and anything related on your mind. Yeah, no, certainly we were disappointed with the administration's decision to halt permitting, export permitting, regarding LNG, not just from an Emerson perspective, but from an overall, as an American, to be very honest. But it is a global business. We have significant activity ongoing in Qatar, of course, in Mozambique, and in Guyana, which will provide ample activity and gives us confidence in the forecast that we have for the funnel movement. In terms of the projects we're executing in North America, we don't see any meaningful impact to 2024 at this point in time, Andy. The projects that we have won have the approvals required, not just for construction and transportation but ultimately for export.

Jeff Sprague: You know what the administration has done on approvals in the U S.

Jeff Sprague: How that might impact your business the funnel.

Jeff Sprague: And anything related on your mind.

Speaker Change: Yeah, No certainly we were disappointed with where the administration's decision to.

Speaker Change: Whole permitting export permitting.

Speaker Change: Regarding LNG not just from a numbers some perspective from an overall as an American to be very honest.

Speaker Change: But.

It is a global business.

Speaker Change: We have significant activity ongoing in Qatar of course in Mozambique and in Guyana.

Speaker Change: Which will provide ample activity and gives us confidence in the forecast that we have in the funnel movement in terms of the projects we are executing in North America.

We don't see any meaningful impact to 2024 at this point in time Andy.

Speaker Change: Projects that we have one have the approvals required not just for construction transportation, but ultimately for exports and all partners Bechtel and noted that we've discussed on these calls have have given us the confidence Jeff that we are.

Lal Karsanbhai: And our partners, Pactel, and others that we've discussed on these calls have given us the confidence, Jeff, that we are, Excuse me, that we are, that 2024 is relatively solid. Then, as we go forward, we'll see. You know, we continue to see accelerated strength on the East Coast of Africa and in the Middle East, and there's some activity up in Canada as well.

Speaker Change: Excuse me that we are.

Speaker Change: With the 2024 is relatively solid and as we go forward we will see.

Speaker Change: We continue to see accelerated strengthen.

Speaker Change: In the East Coast of Africa, and the Middle East and.

Speaker Change: And there is some activity up in Canada as well, so we'll see where that goes.

Lal Karsanbhai: So we'll see where that goes related to the US decision. And then, and then just to be totally clear, Lal, the project funnel that you illustrate for us quarterly, do some of the non-, you know, I guess, pending approval US projects are they in that funnel? Yes, they're in the funnel.

Speaker Change: Related to the U S decision.

Speaker Change: And then and then just to be totally clear law.

Speaker Change: The project funnel that you illustrate for us quarterly and some of the non <unk>.

Speaker Change: I guess pending approval U S projects are they in that funnel.

Speaker Change: Yes, they are in the funnel.

Lal Karsanbhai: Depending on the year that we had expectations, our funnel looks at about a three-year lens of activity. So there are in the funnel there. And as you know, the construction of a liquefaction plant, excuse me, Jeff, a liquefaction plant is a four to five-year event. So certain decisions will continue to be made based on assumptions of export licenses being awarded down the stretch. Right. And then just shifting on Natty real quick, you know, certainly suspected your synergies, you know, initially laid out were somewhat conservative.

Depending on the year that we had expectation that funnel looks at about a three year lens of activity. So there are in the funnel there and as you know A&D our construction of a liquefaction plant as excuse me, Jeff liquefaction plant is a four to five year events. So certain decision.

Speaker Change: We will continue to be made based on assumptions of export licenses being awarded down the stretch Jeff.

Speaker Change: Great and then just shifting on Natty real quick.

Jeff Sprague: Certainly suspect that your synergies initially laid out were somewhat conservative, but I wonder if you could address the three year versus five years. So you know kind of the underlying cost synergies I'm not surprised there going up I think part of the reason, though you talked about five years was.

Jeff Sprague: But I wonder if you could address the, you know, the three-year versus the five-year. So, you know, kind of the underlying cost synergies. I'm not surprised they're going up. I think, you know, part of the reason that you talked about five years was really treading carefully on Salesforce, you know, R&D organization, that sort of thing. So just give us your thoughts on where that is and maybe the cultural side of the integration, I guess, is the heart of the question.

Jeff Sprague: Really treading carefully on sales force.

Jeff Sprague: R&D organization that sort of thing.

Speaker Change: So just give us your thoughts on where that is.

Speaker Change: That'd be the cultural side of the integration I guess since that was the heart of the question.

Lal Karsanbhai: Well, I will start with this, Jeff. We have a phenomenal management team led by Ritu Favre and a great integration team here at Emerson that works very closely with the business. The team spent a significant amount of time between signing in close to do the work so that we could hit the ground running. But, of course, as you can imagine, this is a very large transaction, and we bought this company because we believe it can grow and it can run better. And we wanted to have a degree of caution in how fast we could go, what we could accomplish. And to many degrees, we've been pleased with the degree of execution, the speed at which it's been done, and the energy that the team has had around the effort, which then gave us confidence not just to increase the number, but to increase the time and the effort. And to decrease the time of execution to three years. Rom, any color on that?

Speaker Change: Well I'll start with this Jeff we have a phenomenal management team led by <unk> and a great integration team here at.

Speaker Change: At Emerson that works very closely with the business.

Speaker Change: The team spent a significant amount of time between signing and close to do the work. So that we can hit the ground running but of course as you can imagine. This is a very large transaction. We bought this company because we believe it can grow and he can run better.

Speaker Change: And we wanted to have a degree of caution in how fast we could go well conclude could accomplish and into many degrees. We've been pleased with the degree of execution the speed at which it has been done and the energy that the team has had around the effort, which then gave us confidence not just to increase the number but to increase the time of execution to decrease the ton of.

Speaker Change: <unk> three years, Rob any color on that yes, you said it I think I think the team as they as we both reviewed the plans I felt very very good and the quality of the opportunities that we've identified and there is a shared vision around trying to get this done faster and moving the business along and that's where we've been.

Lal Karsanbhai: Yeah, you said it. I think the team, as we both reviewed the plans, felt very, very good about the quality of the opportunities that we'd identified. And there's a shared vision around trying to get this done faster and moving the business along. And that's where we've been very pleasantly surprised by the cultural similarity between how we both think, the customer-centricity, and how we apply the rules to these synergy actions. I think we feel very confident that we could move faster, and that's the reason we raised it.

Speaker Change: Pleasantly surprised that cultural similarity between how we bought bank customer Centricity and how we apply the rules to do so you do the synergy actions I think we feel very confident that we could we could move faster and thats. The reason we raised it and we also believe we can do.

Jeff Sprague: And we also believe we can get it done by the end of year three. Great. Good luck. Thanks.

Speaker Change: Get it done by the end of year three.

Speaker Change: Alright, good luck thanks.

Nigel Coe: Thank you. The next question comes from Nigel Coe of Wolf Research. Please go ahead. Thanks. Good morning, everyone.

Speaker Change: Thank you.

Speaker Change: The next question comes from Nigel Coe of Wolfe Research. Please go ahead.

Nigel Coe: Thanks, Good morning, everyone.

Mike Train: So, obviously, lots of questions on NASI so far, National Instruments, I guess. You've obviously accelerated the timeline for percentages. As Jeff mentioned, you've raised it by $20 million. But you kept the 31% margin targets. Just wondering if there's anything kind of offsetting the upside to cost synergies that we should consider. Nigel, it's Mike.

Nigel Coe: So.

Nigel Coe: Obviously, a lot of questions on that the sofa, Netherlands since I guess the.

Nigel Coe: You've obviously accelerated the timeline for the synergies that as Jeff mentioned to you raised it by $20 million, but you kept the three 1%.

Margin targets, just wondering if there's anything kind of offsetting the upside the cost synergies that we should consider.

Nigel Coe: Nigel It's Mike No there is.

Mike Train: No, it's really on plan, and remember that it's five years out that we were talking about 31%. We are on track. I think the important thing for the near term is that our expectation around that adjusted EBITDA margin will be that it's a little bit up year-over-year on down sales reflecting Synergy Options. And moving forward, no, there's really no change to our longer-term expectation around the profitability of Tuscany. No, no, but the $20 million gives you an extra point of margin. So I was wondering if there's anything to offset that.

Nigel Coe: Really on plan and remember that's five years out that we were talking about 31%. We are on track I think the important thing for the near term is that our expectation around that adjusted EBITA margin will be that it's a little bit up year over year.

Nigel Coe: On down sales, reflecting.

Nigel Coe: The synergy actions and moving forward no theres really no change to our longer term expectation around the profitability of customers right.

No no, but the $20 million gives you an extra point of margin. So just wondering if there's anything to offset that it doesn't sound like there is but just necessary with the question.

Nigel Coe: It doesn't sound like there is, but that's just the spirit of the question. There is. I mean, I think. Yeah, go ahead. No, there isn't.

Speaker Change: Yes go ahead.

Mike Train: There isn't necessarily anything we've identified to offset the $20 million. I mean, the 31% margin target's five years out. I mean, obviously, what we are finding are good investment opportunities, and right now, we're focused on executing the synergies by year three. You know, if we find good investment opportunities, we'll make that, because I think 31% is the target we've set, and we feel pretty comfortable getting there. But if the 185 comes through with no additional investment opportunities, maybe the number goes up, but that's a five-year-out number. OK. No, that's fair enough. I know I'm bean-counting, but it's worth a question.

Speaker Change: No there isn't.

Speaker Change: Isn't necessarily anything we've identified to offset the $20 million I mean, the 31% margin target is five years out I mean, obviously, what we are finding is good investment opportunities and right now we're focused on executing the synergies by year three.

Speaker Change: If we find good investment opportunities, we'll make that because I think 31% is the target we have set and we feel pretty comfortable getting there Bob.

Speaker Change: If the 185 comes through with no additional investment opportunities may be the number goes up but that top line growth number okay, no spin I know I'm being counting but.

Speaker Change: Just this one question and then.

Lal Karsanbhai: And then, you know, you had some extraordinarily strong growth numbers within ID, the 28% within measurement analytics. It looks like it's just an easy comp, so maybe just talk about that a little bit, but more importantly, there's this theory out there that, you know, the process and hybrid markets are on a lag to the discrete, and therefore, this butt-butt we're seeing in discrete automation right now is sort of like a precursor for what you might see, you know, six months down the road. So can you maybe address that point and just, you know, anything unusual or concerning that you're seeing? It doesn't sound like it, but certainly, just maybe address that concern out there.

Speaker Change: You had some extraordinary strong growth numbers within.

Speaker Change: The 28% within measurement analytics it looks like it's just an easy comp. So just maybe just talk about that a little bit but more importantly, there is a theory out there that the process and hybrid markets, serving a lack of discrete.

Speaker Change: And therefore, the spot both machine in discrete.

Speaker Change: Right now, it's sort of like a <unk>.

Speaker Change: Precursor for what you might see six months down the road can you just maybe address that points in them.

Speaker Change: Unusual or concerning or you seeing it doesn't sound like it but just maybe address that concern out there.

Lal Karsanbhai: Yeah, happy to, Nigel. You know, I've been speaking and being asked about this for the last three quarters or so, and again, what we experienced in the quarter continues to be very consistent with our initial commentary. The drivers around process and hybrid are being supported by the secular macros that we've been discussing, whether it's energy security, affordability, near-shoring, sustainability, or digital transformation, and I think those macro-secular drivers are robust enough and secular in nature that they will go through a different type of cycle than we've seen historically. Historically, we did not experience a boom-and-bust environment in the process space over the last cycle

Speaker Change: Two nine Julian I have been speaking and been asked about this for the last three quarters or so and again, what we experienced in the quarter continues to be very consistent with our initial commentary.

Speaker Change: Drivers.

Around process and hybrid are being supported by the secular macros that we've been discussing whether its energy security affordability near shoring sustainability to a digital transformation.

Speaker Change: I think those macro secular drivers are robust enough and secular in nature that they will go through.

Speaker Change: A different type of cycle than we've seen historically.

Speaker Change: Secondly, we did not experience a boom and bust.

Just the environment in the process space in over the last cycle. This is a much more moderated capital cycle that we experience. So we don't have the overcapacity situations in the overbuild situations that we have typically experienced there was much more discipline in the capital layouts by our customers and that's a benefit as well.

Lal Karsanbhai: This was a much more moderated capital cycle that we experienced, so we don't have the over-capacity situations and the over-bill situations that we have typically experienced. There was much more discipline in the capital allocations by our customers, and that's a benefit as well. So our business continues to be very robust, obviously. We continue to have confidence in the order runs and in the execution through the year.

Speaker Change: Our business continues to be very robust obviously.

Speaker Change: We continue to have confidence in the order runs and ending in the execution through the year.

Scott Reed Davis: Yeah, and just to answer the first part of your question, measurement solutions are up 28%. That's a function of the supply chains coming back into that business. If you remember, it was an easier comparison. In Q1 of last year, we had significant challenges on the electronics front, which have alleviated, so orders are up high single digits, and sales are up 28% driven by improving supply chains. So it's clearly a data point driven by weaker, easier comparisons, I would say, with Q1 of last year. Great, that's a great cut. The next question comes from Scott Davis of Mellius Research. Please go ahead. Hey, good morning, everybody.

Speaker Change: Just to answer the first part of your question measurement solutions up 28%, that's a function of the supply chains coming back in that business. If you remember it was an easier comparison in Q1 of last year, we had significant challenges on the electronics front, which are alleviated. So our orders are up high.

Speaker Change: Single digit sales up 28% driven by improving supply chain. So I'd say, it's a clearly a data point driven by weaker.

Speaker Change: The easier comparisons I would say with Q1 of last year.

Speaker Change: Alright, thats great color. Thanks.

Speaker Change: The next question comes from Scott Davis Melius Research. Please go ahead.

Scott Reed Davis: Hey, good morning, everybody congrats.

Scott Reed Davis: Congratulations on the good start. Thank you. I wanted to back up a little bit, you know, when you talk about R&D transformation at test and measurement, what do you mean? Is it, is it like an 80-20 type thing that you're doing or refocusing or, or just, I know there are both those.

Scott Reed Davis: Congrats on a good start.

Scott Davis: Yes.

Scott Reed Davis: I wanted to back up a little bit when you when you talk about R&D transformation that test and measurement what.

Scott Reed Davis: Do you mean is it is it like an 80 20 type thing that youre doing a refocusing or just I know there are those.

Scott Reed Davis: Good folks.

Lal Karsanbhai: Good folks. Natty always spent a lot of money, but was it generally unfocused, do you think, or how do you guys think about it? Yeah, I think it's purely on prioritization of the projects. I think we've gone in with our management system on how do we focus on the critical few priorities that can move the needle from a growth perspective. I mean, there's lots of opportunity, and the beauty of what we're finding at NADI is a culture of innovation, plenty of opportunities across four very important market segments where we can move the needle macros around those markets like EVs, ADAS, and semiconductors that are supportive of. I think we're bringing some discipline into how we prioritize, how we look at where these resources need to be in order to balance best cost capabilities, particularly in I will just add, Scott, to that.

Scott Reed Davis: <unk> always spent a lot of money but was.

Scott Reed Davis: Was it generally unfocused, you think or how you guys think about it yes.

Scott Reed Davis: Yes, I think it's purely on prioritization of the project. So I think we've gone in with our management system on how do we focus on the critical few priorities that can move the needle from a growth perspective, I mean, there's lots of opportunity the beauty of what we're fine to get Natty is a culture of innovation plenty of opportunities across the board.

Scott Reed Davis: Very important market segments, where we can move the needle macros around those markets like Evs, a das in semiconductors that are supportive of <unk>.

Scott Reed Davis: Strong innovation, but I think we're bringing some discipline into how do we prioritize how do we look at where do these resources need to be in order to balance best cost capabilities, particularly in software versus Austin for example, and I think these are prudent moves that will allow us.

Scott Reed Davis: It's to drive more innovation at <unk>.

Scott Reed Davis: Better cost from an R&D as a percent of sales.

Speaker Change: I will just add Scott to that I think.

Lal Karsanbhai: I think a company like NI, with the market position it has in the space and the legitimacy of its technology, will always have a role in the research element of innovation. That's always going to be a responsibility that we have in the space to continue to move that needle forward. We will, by all means, as we do in all our businesses, continue to do that. Having viable commercial programs is important.

Speaker Change: A company like an eye with a market position. It has in this space and the legitimacy of its technology will always have a role in our in the research element of innovation Thats always going to be a responsibility that we have in this space to continue to move that needle forward and we will by all means as we do in all our business.

Speaker Change: Since continue that but having viable commercial programs is important and.

Lal Karsanbhai: That's where parking some cars and investing heavily in the ones that we believe and management believes will ultimately result in customer success is really important. Really good work and thoughtful work being done by the team here, led by ROM, of course, and RETOOTH, helpful context. If we back up a little bit again, you know, you cited the SAF wind with DG fuels. What is the scope when you when you classify something like that? Are you talking flow meters, valves? Are there controls?

Speaker Change: And thats, where parking some cars and investing heavily in the ones that we believe our management believes will.

Speaker Change: We will ultimately result in in customer success is really important so really good work and thoughtful work being done by the team here led by ROM of course in retail.

Speaker Change: Helpful context, if we back up a little bit again.

Speaker Change: <unk>.

Speaker Change: Saf win with DG fuels.

Speaker Change: What is the scope when you when you classify something like a win like that are you talking low meters valves. <unk> controls is there is it kind of across the full suite of offering or is there a more specific stuff that you target for those types of.

Lal Karsanbhai: Is it kind of across a full suite of offerings? Or is there more specific stuff that you target for those types of projects you would classify as wind? Yeah, no, this was a if you think about our automation stack, this was pretty much across the entire stack. The final control elements, the muscle in the plant, the sensing elements that we use both flow, pressure level, and temperature, the Delta V control system, and then the analytics packages alongside it.

Speaker Change: Projects, you would classify as a win.

Speaker Change: Yes, no. This was a if you think about our the automation.

Speaker Change: Stack this was pretty much across the entire stack.

Speaker Change: The final control elements the muscle in the plant of sensing elements that we use both flow pressure level and temperature the delta be.

Speaker Change: Control system and the analytics packages alongside it. So this was a holistic full package, 100% Emerson win which really proved out the value of the portfolio and how it all comes together at a customer site.

Lal Karsanbhai: So this was a holistic, full package 100% Emerson win, which really proved the value of the portfolio and how it all comes together at a customer site. Helpful. Thank you. Congratulations. I'll pass on.

Speaker Change: Helpful. Thank you congrats I'll pass on.

Scott Reed Davis: Have a good luck this year. Thanks, sir. The next question comes from Julian Mitchell of Barclays. Please go ahead.

Speaker Change: Hey, good luck this year.

Speaker Change: Thanks.

Speaker Change: The next question comes from Julian Mitchell of Barclays. Please go ahead.

Julian Mitchell: Hi, good morning. Just wanted to circle back to the discussion around sort of process investments by large customers, particularly in the oil and gas and energy worlds. Because it does seem as if, you know, there's understandably a clear effort on their part to sort of shovel more of their cash to shareholders, whether they're governments in the Middle East or public shareholders in the West. So just wondered, you know, your thoughts, Lal, on the kind of... sustainability of that high single-digit order growth in process that you saw in Q1. Should we expect that to moderate over the next sort of 12 months or Yeah, you know, it's a great question, Julian.

Julian Mitchell: Hi, good morning.

Julian Mitchell: Just wanted to circle back to the discussion around sort of process investments by the large customers, particularly in the sort of oil and gas and energy world because it does seem as if there is understandably a clear effort on their part to sort of.

Julian Mitchell: Shovel more of our cash to shareholders, whether the governments in the middle east or public shareholders in the west.

Julian Mitchell: So just wanted your thoughts on the kind of sustain.

Julian Mitchell: Sustainability of that high single digit orders growth in process that you saw in Q1.

Julian Mitchell: Should we expect that to moderate over the next sort of 12 months or so.

Julian Mitchell: And does that then pulled the backlog down with it.

Julian Mitchell: Order book to Bill was so high that the backlog can still grow with moderating orders.

Julian Mitchell: Yeah, It's a great question Julian.

Lal Karsanbhai: I just returned from the Middle East, where our team spent time with significant customers in Saudi Arabia, Abu Dhabi, and Qatar. And I can tell you that the environment's very robust, predominantly around sustainability and energy transition, those two elements. And I think there's enough demand-driven activity that will give us confidence in the sustained, a mid-single-digit kind of exit rate on process on the total company orders at the end of the year. So at this point, you know, we've been thinking and analyzing this now for about three quarters or so, but we haven't seen any kind of deceleration in the process, particularly in the spaces that you're asking As a matter of fact, we continue to see very disciplined spending, very intentional around core elements of automation that can differentiate production around reliability, efficiency, productivity, of course, and safety. And that hasn't waned yet.

Speaker Change: Just returned from the Middle East, where our teams spent in.

Speaker Change: India and the Middle East our team spent time with significant customers in Saudi Arabia, Abu Dhabi Qatar.

Speaker Change: And I can tell you that the environment is very robust.

Speaker Change: Predominantly around sustainability and energy transition those two elements and I think there is.

Speaker Change: Enough demand driven activity.

Speaker Change: Well.

Speaker Change: Gives us confidence in the sustained.

Speaker Change: Mid single digit kind of exit rate on process on the total company orders at the end of the year. So at this point.

Speaker Change: We've been thinking and analyzing this now for about three quarters or so, but we haven't seen.

Speaker Change: Any kind of deceleration in the process, particularly in the spaces that you're asking about as a matter of fact, we continue to see very disciplined spending.

Speaker Change: Very intentional around core elements of automation that can differentiate production around reliability efficiency productivity of course in safety.

And that hasn't changed yet and I don't we don't foresee that as we go through the year.

Julian Mitchell: And we don't foresee that as we go through the year. That's helpful, thank you. And then just a much sort of near-term, fiddly question, just looking at the second quarter guide on slide 10, you know, so the EPS at the midpoint is going up, you know, maybe two cents sequentially from Q1, despite a decent revenue and volume increase sequentially. Partly that's the test and measurement earnings falling sequentially, but just wondered if there was anything else like in the base business changing in terms of mix No, you hit it right with the test and measurement comment, and, you know, the leverage in the low to mid 40s coming through reflects no big change in mix or trajectory. So, no, really nothing there on the Q2 guide.

Speaker Change: That's helpful. Thank you and then just.

Speaker Change: I'm much more sort of near term.

Speaker Change: Question, just looking at the second quarter.

Speaker Change: On slide 10.

Speaker Change: So the EPS at the midpoint.

Speaker Change: Is going up maybe two cents sequentially from.

Speaker Change: From Q1, despite a decent revenue and volume increased sequentially.

Speaker Change: That's the test and measurement earnings falling sequentially, but just wondered if there was anything else like in the base business changing in terms of mix or something like that as you move from sort of Q1 to Q2.

Speaker Change: No you hit it right with the test and measurement comment and the leverage in the low to mid Forty's coming through reflects no big change in mix or trajectory. So no not really nothing nothing there on the Q2 guide.

Mike Train: Great, thank you. The next question comes from Chris Snyder of UBS. Please go ahead. Thank you. I also wanted to ask about National Instruments. You know, Q1 came in about $80 million above the guide, but you guys are now talking to a full year of 1.5 to 1.6. You know, all the commentary on the last call was 1.6.

Speaker Change: Great. Thank you.

Speaker Change: The next question comes from Chris Snyder of UBS. Please go ahead.

Chris Snyder: Thank you I also wanted to ask on National Instruments'.

Chris Snyder: Q1 came in about $80 million above the guide.

Chris Snyder: But you guys are now talking to a full year of one five to one six I mean, all the commentary on the last call was one six.

Chris Snyder: So I guess, you know, why that range follows the beat? Is it just a rounding error? Or is National Insurance maybe turning a little bit slower than you thought previously? Yeah, Chris, if you go back to the November guide, that range has remained consistent. I think it was just a rounded one six that was being said. Thank you.

Chris Snyder: So I guess why that range. Following the beat is it just a rounding error or is national insurance, maybe turning a little bit slower than you thought previously thank you.

Speaker Change: Yes, Chris.

Speaker Change: You go back to.

Speaker Change: November guide and that range has remained consistent I think it was just a rounded one six that would be spoken about.

Speaker Change: Yes. Thank you.

Chris Snyder: And then I just want to ask on margins, you know, it's been a real bright spot for the company the last couple of years, be the incremental guide again here in Q1. But I believe the full year guide on the incrementals was lowered, I think, to the low to mid-40s from the mid to high, despite the Q1 beat. I don't know, is there anything on mix there or something that we should be aware of?

Speaker Change: And then I just want to ask on margins, it's been a real bright spot for the company. The last couple of years you guys beat.

Speaker Change: The incremental guide again here in Q1, but I believe the full year guide on the Incrementals was lower I think from low to mid Forty's for mid to high. Despite the Q1 beat I mean is there anything there on mix or something that we should be aware of thank you.

Mike Train: Thanks. Yeah, Chris, in the comments, we talked about the effect of foreign exchange. We changed the assumption there, and it had a one point increase on FX, which comes into the leverage number with a much lower profitability attached to it. The drivers around leverage remain the same with volume and leverage and price cost and then continue to drive the Emerson management process with cost reductions to offset inflation. So yeah, to answer your question specifically, the change in the guide was really solely attributed to that FX element.

Speaker Change: Yes, Chris in the comments, we talked about the effect of foreign exchange, we changed the assumption there in about a one point increase on FX, which comes into the leverage number with a much lower profitability attached to it.

Speaker Change: The drivers around leverage remain the same with volume leverage and price cost.

Speaker Change: We continue to drive the numbers and management process with cost reductions to offset inflation. So.

Speaker Change: Yes, but to answer your question specifically the change in the guide was really solely attributed to that FX on.

Chris Snyder: Okay. Thank you. The next question comes from Deane Dray of RBC Capital Markets. Please go ahead.

Speaker Change: Understood. Thank you.

Speaker Change: The next question comes from Deane Dray of RBC capital markets. Please go ahead.

Deane Dray: Thank you. Good morning, everyone. Good morning, Deane.

Deane Dray: Thank you and good morning, everyone.

Deane Dray: Morning Deane.

Deane Dray: Hey, look, there's been a lot of focus on the progress you're making on the cost synergies front in national instruments. Can we talk a bit about expectations for revenue synergies? It might be too early, but just timing, size, and where they might come from?

Deane Dray: Hey look there's been a lot of focus on the progress you're making on the cost synergies front in national instruments can we talk a bit about expectations for revenue synergies it might be too early but just timing and size and where it might come from is it cross selling or their new customers.

Lal Karsanbhai: Is it cross-selling? Are there new customers you've been opened up to? But just so you know, what's the expectation?

Deane Dray: <unk> been opened up too, but just whats the expectation now.

Lal Karsanbhai: Now, I'll let Ron add a little bit of color, but certainly it's something that we're keenly working on. Obviously, the focus was on the commitment to cost, and we do believe, alongside management, that that is, had been, and is an obvious opportunity. Having said that, we are – I'm not going to suggest that we're, you know, three or maybe even six months away from coming out publicly with some sales ideas, but we're certainly working on customer-specific ideas on sales synergies. Ron and I and Ritchie have held a number of customer meetings jointly and are thinking through opportunities that we have across the Emerson portfolio as it comes in with NI. Ron?

Speaker Change: I'll, let rob add a little bit of color, but certainly it's something that we're keenly working on.

Rob: Obviously, the focus was on the commitment on cost and we do believe alongside management that that is a <unk> had.

Rob: It had been in is an evident opportunity having said that.

Speaker Change: We are.

Rob: I'm not going to suggest that we or three or maybe even six months away to come out publicly with some sales ideas, but we're certainly working on customer specific.

Rob: He is on.

Rob: On sales synergies Robyn I, and we too have held a number of customer meetings jointly and thinking through opportunities that we have across the Emerson portfolio as it comes in with Ni ROM, Yes, and just the two end markets are clearly going to be EV batteries were on a holistic basis, where we play on the <unk>.

Lal Karsanbhai: Yeah, and just the two end markets are clearly going to be EV batteries. Those were, you know, on a holistic basis where we play on the production automation, and NI plays on the validation and test systems on the R&D side, and then similarly in semiconductors. Two markets where I think there's enough customer overlap and a joint capability that provides meaningful value to our customers from R&D through validation through production are where we will see the opportunities. We're working on it. We're not ready yet to commit and, you know, quantify the sales synergies, but these are certainly in focus, and we're working through the process. And then just answer the second question.

Rob: Production automation ni plays on.

Rob: Validation and test systems on on the R&D side, and then similarly in semiconductors to markets, where I think there is enough customer overlap and a joint capability that provides meaningful value to our customers from R&D through validation through production is where we will see the opportunities we're working at.

Speaker Change: Not ready yet to commence.

Speaker Change: <unk> quantified our sales synergies, but these are certainly in focus and we're working through the process.

Speaker Change: Great and then just second quick question I joined a bit late so I apologize if you've covered this on China.

Deane Dray: I joined a bit late, so I apologize if you've covered this. On China, a lot of anxiety about the macro there. It doesn't look like your position in areas like real estate that are experiencing the most pressure. But just what are the expectations?

Speaker Change: A lot of anxiety about the macro there it doesn't look like your position in the areas like real estate that are having the most pressure.

Speaker Change: Pressure, but just what are the expectations what are the opportunities over the near term.

Lal Karsanbhai: What are the opportunities over the near term? Yeah. We grew high single digits in the quarter in China sales. We expect in that high, mid to high single digits for the year.

Speaker Change: We grew high single digits in the quarter in China sales, we expect in that high mid to high single digits for the year.

Lal Karsanbhai: Our business continues to be relatively robust, again aligned to those same macro secular drivers that we're seeing globally. It's no different in China.

Speaker Change: Our business continues to be relatively robust again aligned.

Speaker Change: Dean to those same macro secular drivers that we're seeing globally.

Speaker Change: And it's no different in China, perhaps the end markets are slightly different.

Lal Karsanbhai: Perhaps the end markets are slightly different, specialty chemicals and a few other things. But our position is very strong. Our regionalization strategy has been very strong, and we expect to continue to win in China as we go through the round. Yeah, you said it.

Speaker Change: Specialty chemicals and a few other things, but our position is very strong our regionalization strategy has been very strong and we expect to continue to win in China. As we go through the ROM anything yes, I think in our core process hybrid business power and chemical will drive the growth I mean, obviously what.

Lal Karsanbhai: I think in our core process, hybrid business, power, and chemicals will drive the growth. I mean, obviously, what's not in the underlying numbers is test and measurement. Test and measurement is consistent with discrete off to a tougher start in China, but expecting a second half recovery consistent with what we're seeing with the, Thank you. The next question comes from Joe O'Day from Wells Fargo. Please go ahead.

Speaker Change: <unk> is not in the underlying numbers as test and measurement and test and measurement is consistent with discrete.

Speaker Change: Off to a tougher start in China, but expecting a second half recovery consistent with what we're seeing with the discrete business.

Speaker Change: Thank you.

Speaker Change: The next question comes from Joe O'dea from Wells Fargo. Please go ahead.

Joe Ritchie: Hi, good morning. Good morning, Joe. Just in terms of the remaining nine months of the year and the guide, obviously off to a strong start, but organically, any change in how you're thinking about that versus, throughout the world? The Organic Side of the Expo. No, we remain very positive about the environment. Obviously, we couple that with the strong execution by our teams.

Joe Ritchie: Hi, good morning.

Joe Ritchie: Good morning, Joe.

Joe Ritchie: Just in terms of the the remaining.

Joe Ritchie: The remaining nine months of the year and the guide obviously off to a strong start but organically any change in how youre thinking about that versus three months ago. It seems like not much change and what's implied in the organic growth rate if anything I think the math would suggest that margins could it ticked down.

Joe Ritchie: A touch but I just wanted to make sure of is the message that the.

Joe Ritchie: Last nine months of the year no no real change in kind of the organic side of the expectations.

Speaker Change: No we remain very positive on the <unk>.

Speaker Change: Environment, obviously the.

Speaker Change: Couple that with the strong execution by our teams.

Lal Karsanbhai: But in terms of the organic outlook, no, no change. Okay. And then related to strength and measurement and analysis, you know, I understand some commentary on easier comps, but the stacks did improve sequentially. And so, you know, as it relates to the supply chain, where are you on normalization? I mean, the, you know, orders up in the high single digits is a pretty encouraging number. Are you at a point now where there's still some pent-up backlog to ship out? Or do you view it as having, you know, gotten pretty close to normal?

Speaker Change: But in terms of the organic outlook.

Speaker Change: No change.

Speaker Change: Okay, and then related to the strength and measurement and analytical.

Speaker Change: I understand some commentary on easier comps, but the stacks did improve sequentially.

Speaker Change: And so as it relates to supply chain, where are you on a normalization in the orders up high single digits is a pretty encouraging number or are you at a point now where there's there's still some pent up backlog to ship out or do you view it as having gotten pretty.

Speaker Change: Close to more normalization at this point, yes, the supply chains of normalized so in terms of our ability to procure electronics and lowered factories and drive production out of factories, we feel.

Lal Karsanbhai: Yeah, the supply chains have normalized. So in terms of our ability to procure electronics and load factories and drive production out of factories, we feel that's normalized. Now, certainly in the measurement and analytical business, there is some overdue backlog that will shift through Q2. The easier comparisons and our ability to shift that backlog are what drove the 28% in Q1. You'll see that in the measurement and analytical business.

That's normalized now certainly in the measurement and analytical business. There is some overdue backlog that will ship through Q2.

Speaker Change: Easier comparisons and our ability to ship that backlog is what drove the 28% in Q1, you'll see that in the measurement and analytical business. That's the last business normalizing from a supply chain perspective.

Lal Karsanbhai: That's the last business normalizing from a supply chain perspective, but the demand environment for that business still remains very healthy with orders up in the high single digits. Got it. Thank you. The next question comes from Brett Lindsey of Mizzouho. Please go ahead. Hey, good morning.

The demand environment for that business still remains very healthy with orders up in the high single digits.

Speaker Change: Got it thank you.

Speaker Change: The next question comes from Brett Linzey of Mizuho. Please go ahead.

Brett Linzey: Hey, good morning, Thank you.

Brett Lindsey: Thank you. I wanted to come back to the project funnel. I was hoping you might be able to give some color on the profitability of the growth platforms. And is there anything different or unique about the aftermarket or service attachment rates and the way those, you know, those deals are structured and Emerson's wallet share there? No, nothing really different. Look, the profitability certainly varies between MRO and project activities, but that's well known. I think you know that well.

Brett Linzey: Wanted to come back to the project funnel I was hoping you might be able to give some color on the profitability of the growth platforms and is there anything different or unique about the aftermarket or service attachment rates and the way those those deals were structured in emerson's wallet share there.

Speaker Change: No nothing really different look.

Speaker Change: The profitability.

Speaker Change: Certainly varies between MRO and project activity, but that's well known for I think you know that well, but in terms of the mix within the funnel, there's not really a significant difference between our growth platform and traditional project work there.

Lal Karsanbhai: But in terms of the mix within the funnel, there's not really a significant difference between a growth platform and traditional project work there. Of course, we have $150 billion installed base around the world. And with that, some of that is obtained through and managed through service contracts, a large portion of it, where we have commitments for replacement and maintenance with many of our global customers, and others are upgrades, activities, and things of that sort.

Speaker Change: Of course, we have $150 billion installed base around the world.

Speaker Change: And with that.

Speaker Change: Some of that is is obtained through and manage through service contracts a large portion of it where we have commitments.

Speaker Change: For replacement and maintenance with many of our global customers and others are upgrades activities and things of that sort.

Brett Lindsey: Okay, great. And then just shifting to price cost, I think the original guy was about two points. You had two points in the quarter.

Speaker Change: Okay, Great and then just shifting the price cost I think the original guide was about two points you had two points in the quarter is the expectation changed at all for the year and then any movement on material or non material inflation that is shifting expectations at all on the cost side.

Lal Karsanbhai: Has the expectation changed at all for the year? And then any movement on material or non-material inflation that is shifting expectations at all on the cost side? Now prices, two points in the quarter, two points for the year.

Speaker Change: Now prices two points in the quarter two points for the year. If we feel good no change there in terms of our net material inflation.

Lal Karsanbhai: If we feel good, no change there. In terms of our net material inflation, you know, I think we're seeing continued opportunities that we're driving on the direct material side. The logistics costs have come down. We don't see any impact in terms of inflation, or it's de minimis from the dynamics around what's going on in the Red Sea or the Panama Canal.

Speaker Change: We're seeing continued opportunities that we're driving on the direct material side. The logistics costs have come down we don't see any impact in terms of inflation or its de minimus from the dynamics around what's going on with the in the rent CEO. The Panama Canal, So, we see NII or net particularly inflation continuing to.

Brett Lindsey: So we see NMI, or net material inflation, continuing to improve as we go through. Okay, great. Appreciate the insight. Best of luck. This concludes our question and answer session, and the conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change: As we go through the year.

Speaker Change: Okay, Great I appreciate the insight best of luck.

Speaker Change: This concludes our question and answer session and the conference is now concluded. Thank you for attending today's presentation. You may now disconnect.