Rockwell Automation 10-Q 2024-03-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the Quarterly Period Ended March 31, 2024

OR

For the Transition Period from _______ to _______

Commission file number 1-12383

Rockwell Automation, Inc.

(Exact name of registrant as specified in its charter)

+1 (414) 382-2000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

114,003,176 shares of registrant’s Common Stock were outstanding on March 31, 2024.

INDEX

PART I. FINANCIAL INFORMATION

ROCKWELL AUTOMATION, INC.

CONSOLIDATED BALANCE SHEET

(Unaudited)

(in millions, except per share amounts)

See Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

(in millions, except per share amounts)

See Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited)

(in millions)

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Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains statements (including certain projections and business trends) that are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Words such as “believe”, “estimate”, “project”, “plan”, “expect”, “anticipate”, “will”, “intend”, and other similar expressions may identify forward-looking statements. Actual results may differ materially from those projected as a result of certain risks and uncertainties, many of which are beyond our control, including but not limited to:

• macroeconomic factors, including inflation, global and regional business conditions (including adverse impacts in certain markets, such as Oil & Gas), commodity prices, currency exchange rates, the cyclical nature of our customers’ capital spending, and sovereign debt concerns;

• the severity and duration of disruptions to our business due to pandemics, natural disasters (including those as a result of climate change), acts of war, strikes, terrorism, social unrest or other causes, liquidity and financial markets, demand for our hardware and software products, solutions, and services, our supply chain, our work force, our liquidity and the value of the assets we own;

• the availability and price of components and materials;

• the availability, effectiveness, and security of our information technology systems;

• our ability to attract, develop, and retain qualified employees;

• our ability to manage and mitigate the risk related to security vulnerabilities and breaches of our hardware and software products, solutions, and services;

• the successful integration and management of strategic transactions and achievement of the expected benefits of these transactions;

• laws, regulations, and governmental policies affecting our activities in the countries where we do business, including those related to tariffs, taxation, trade controls, cybersecurity, and climate change;

• the successful development of advanced technologies and demand for and market acceptance of new and existing hardware and software products;

• our ability to manage and mitigate the risks associated with our solutions and services businesses;

• the successful execution of our cost productivity initiatives;

• competitive hardware and software products, solutions, and services, pricing pressures, and our ability to provide high quality products, solutions, and services;

• the availability and cost of capital;

• disruptions to our distribution channels or the failure of distributors to develop and maintain capabilities to sell our products;

• intellectual property infringement claims by others and the ability to protect our intellectual property;

• the uncertainty of claims by taxing authorities in the various jurisdictions where we do business;

• the uncertainties of litigation, including liabilities related to the safety and security of the hardware and software products, solutions, and services we sell;

• our ability to manage costs related to employee retirement and health care benefits; and

• other risks and uncertainties, including but not limited to those detailed from time to time in our Securities and Exchange Commission (SEC) filings.

These forward-looking statements reflect our beliefs as of the date of filing this report. We undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. See Item 1A. Risk Factors, of our Annual Report on Form 10-K for the year ended September 30, 2023, for more information.

Non-GAAP Measures

The following discussion includes organic sales, total segment operating earnings and margin, adjusted income, adjusted EPS, adjusted effective tax rate, and free cash flow, which are non-GAAP measures. See Supplemental Sales Information for a reconciliation of reported sales to organic sales and a discussion of why we believe this non-GAAP measure is useful to investors. See Summary of Results of O****perations for a reconciliation of Income before income taxes to total segment operating earnings and margin and a discussion of why we believe these non-GAAP measures are useful to investors. See Adjusted Income, Adjusted EPS, and Adjusted Effective Tax Rate Reconciliation for a reconciliation of Net income attributable to Rockwell Automation, diluted EPS, and effective tax rate to adjusted income, adjusted EPS, and adjusted effective tax rate, respectively, and a discussion of why we believe these non-GAAP measures are useful to investors. See Financial Condition for a reconciliation of Cash provided by operating activities to free cash flow and a discussion of why we believe this non-GAAP measure is useful to investors.

Overview

Rockwell Automation, Inc. is the world’s largest company dedicated to industrial automation and digital transformation. Overall demand for our hardware and software products, solutions, and services is driven by:

• investments in manufacturing, including new facilities or production lines, upgrades, modifications and expansions of existing facilities or production lines;

• investments in basic materials production capacity, which may be related to commodity pricing levels;

• our customers’ needs for faster time to market, agility to address evolving consumer preferences, operational productivity, asset management and reliability, and business resilience, including security and enterprise risk management;

• our customers’ needs to continuously improve quality, safety, and sustainability;

• industry factors that include our customers’ new product introductions, demand for our customers’ products or services, and the regulatory and competitive environments in which our customers operate;

• levels of global industrial production and capacity utilization;

• regional factors that include local political, social, regulatory, and economic circumstances; and

• the spending patterns of our customers due to their annual budgeting processes and their working schedules.

Long-term Strategy

Our strategy is to expand human possibility. Our vision is to create the future of industrial operations. As the world’s largest company dedicated to industrial automation and digital transformation, our strategy is to bring the Connected Enterprise® to life. We understand and simplify our customers’ complex production challenges and deliver the most valued solutions that combine technology and industry expertise. As a result, we make our customers more resilient, agile, and sustainable, creating more ways to win. We deliver value by helping our customers optimize production, build resilience, empower people, become more sustainable, and accelerate transformation.

Rockwell Automation stands at the intersection of the technological and societal trends that are shaping the future of industrial operations. We see converging megatrends including digitization and artificial intelligence, energy transition and sustainability, shifting demographics, and an increased need for resiliency.

Our long-term profitable growth framework outlines how we will deliver accelerated growth while we continue to transform our company to meet stakeholder expectations over the longer term:

• achieve faster secular growth in traditional markets due to customer needs for resiliency (including cybersecurity), agility, sustainability, and mitigating impacts of labor shortages;

• grow share and create new ways to win through technology differentiation, industry focus, go to market acceleration, expanded offerings and new markets;

• accelerate growth in annual recurring revenue;

• add an average of 1% growth from acquisitions over time; and

• deliver profitable growth within a disciplined financial framework.

Outlook

To adjust our cost structure in line with lower than expected orders and revenue this fiscal year, we intend to im

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Information with respect to our exposure to foreign currency risk and interest rate risk is contained in Item 7A. Quantitative and Qualitative Disclosures About Market Risk, of our Annual Report on Form 10-K for the year ended September 30, 2023. We believe that at March 31, 2024, there has been no material change to this information.

Disclosure Controls and Procedures: We, with the participation of our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)) as of the end of the quarter covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the quarter covered by this report, our disclosure controls and procedures were effective.

Internal Control Over Financial Reporting: There has not been any change in our internal control over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) during the quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Information with respect to our legal proceedings is contained in Item 3. Legal Proceedings, of our Annual Report on Form 10-K for the year ended September 30, 2023. We believe that at March 31, 2024, there has been no material change to this information.

Information about our most significant risk factors is contained in Item 1A. Risk Factors, of our Annual Report on Form 10-K for the year ended September 30, 2023. We believe that at March 31, 2024, there has been no material change to this information.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Share Repurchases

The table below sets forth information with respect to purchases made by or on behalf of us of shares of our common stock during the three months ended March 31, 2024:

(1) All of the shares purchased during the quarter ended March 31, 2024, were acquired pursuant to the repurchase program described in (3) below.

(2) Average price paid per share includes brokerage commissions.

(3) On May 2, 2022, the Board of Directors authorized us to expend an additional $1.0 billion to repurchase shares of our common stock. Our repurchase program allows us to repurchase shares at management’s discretion or at our broker’s discretion pursuant to a share repurchase plan subject to price and volume parameters.

During the quarter ended March 31, 2024, the following officers of the Company adopted Rule 10b5-1 trading arrangements that are each intended to satisfy the affirmative defense of Rule 10b5-1(c) promulgated under the Exchange Act, with such details of the arrangements as further follows:

• Nicholas C. Gangestad, Senior Vice President and Chief Financial Officer, adopted a Rule 10b5-1 trading arrangement on February 29, 2024, that will terminate on the earlier of December 31, 2024, or the execution of all trades in the trading arrangement. Mr. Gangestad’s trading arrangement covers the sale of shares of the Company’s common stock required to be sold to cover taxes on upcoming restricted stock unit and performance share vests.

• Veena M. Lakkundi, Senior Vice President, Strategy and Corporate Development, adopted a Rule 10b5-1 trading arrangement on February 28, 2024, that will terminate on the earlier of December 31, 2024, or the execution of all trades in the trading arrangement. Ms. Lakkundi’s trading arrangement covers the sale of the number of shares of the Company’s common stock required to be sold to cover taxes on upcoming restricted stock unit and performance share vests.

• Tessa M. Myers, Senior Vice President, Intelligent Devices, adopted a Rule 10b5-1 trading arrangement on February 29, 2024, that will terminate on the earlier of December 31, 2024, or the execution of all trades in the trading arrangement. Ms. Myers’ trading arrangement covers the sale of (i) the shares of the Company’s common stock remaining following the sale to cover taxes on the vesting of 776 restricted stock units on June 6, 2024 and (ii) the number of shares of the Company’s common stock required to be sold to cover taxes on an upcoming restricted stock unit vest and performance share vests.

• Cyril Perducat, Senior Vice President and Chief Technology Officer, adopted a Rule 10b5-1 trading arrangement on February 29, 2024, that will terminate on the earlier of December 31, 2024, or the execution of all trades in the trading arrangement. Mr. Perducat’s trading arrangement covers the sale of (i) up to 1,079 long shares of the Company's common stock and (ii) the number of shares of the Company’s common stock required to be sold to cover taxes on upcoming restricted stock unit and performance share vests.

For the arrangements above referencing transactions to sell shares to cover taxes on vests, the aggregate number of shares to be sold pursuant to each trading arrangement described above is dependent on the taxes on the applicable restricted stock unit and performance share vests, and, therefore, is indeterminable at this time.

During the quarter ended March 31, 2024, no director or officer of the Company adopted or terminated a “non-Rule 10b5-1 trading arrangement,” as defined in Item 408 of Regulation S-K, no director of the Company adopted or terminated a Rule 10b5-1 trading arrangement, and no officer of the Company terminated a Rule 10b5-1 trading arrangement.

(a) Exhibits:

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.