Good day, and welcome to the Emerson Fourth Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode. 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 star then one on your telephone keypad. To withdraw your question, please press star then two. Please note that this event is being recorded. I would like to turn the conference over to Colleen Mettler. Please go ahead. Thank you. Good morning, and thank you for joining Emerson's fourth quarter and fiscal year-end earnings conference call. Today I am joined by President and Chief Executive Officer, Lal Karsanbhai, Chief Financial Officer, Frank Dellaquila, and Chief Operating Officer, Ram Krishnan. I encourage everyone to follow along with the slide presentation, which is available on our website. Please join me on slide two. As always, this presentation may include forward-looking statements which contain a degree of business risks and uncertainty. Please take time to read the Safe Harbor Statement and note on non-GAAP measures. As I turn to slide three, I would like to highlight two areas where Emerson is making a difference. First, Mike Train, our Chief Sustainability Officer, will be attending this year's United Nations Climate Change Conference, COP 26 in Glasgow. Mike will be a panelist at the adjacent Sustainable Innovation Forum, participating in two notable discussions. The first discussion will be how to support small-to-medium enterprises to adopt net-zero pathways, and the second on supporting breakthrough innovations to green hard-to-abate sectors. Mike has worked this year to drive many greening of, by, and with Emerson initiatives. One notable greening by example is in the recent announcement between BayoTech and Emerson to accelerate production and distribution of low-cost, low-carbon hydrogen. In the agreement, Emerson will deliver advanced automation technology, software, and products in support of BayoTech, building hundreds of fully autonomous hydrogen units to enable hydrogen fuel cell commercial trucking fleets, and abatement projects in steel and cement. Another exciting initiative is our $100 million commitment to corporate venture capital, Emerson Ventures, designed to accelerate innovation by providing insights into cutting-edge technologies that have the potential to solve real customer challenges. The investment commitment will advance the development of disruptive discrete automation solutions, environmentally sustainable technologies, and industrial software in key industries. A formal announcement and more information will be seen in tomorrow's press release. Finally, our investor conference historically has been in February. However, due to the recent announcement with AspenTech, we have decided to move our investor conference to May. It will be located at the New York Stock Exchange on May 17th, 2022. I'd like to now turn the presentation over to Emerson's President and CEO, Lal Karsanbhai, for his opening comments. Thank you, Colleen, and good morning, everyone. 2021 was a phenomenal year for Emerson. It developed very differently, obviously, than we planned a year ago. For one, I was named CEO and brought a new value creation agenda to the table. Equally important, we operated in an environment which was both rewarding and challenging for the organization. Through it all, our teams around the world did a fabulous job. I want to express my sincere gratitude to all the Emerson employees around the world. Thank you. I would also like to thank Emerson's Board of Directors and our shareholders for your support and confidence in the management team. 2021 was characterized by strong demand in our residential air conditioning business, as well as our hybrid and discrete markets in automation. Furthermore, we have experienced a recovery in process automation markets. The automation KOB3 mix for 2021 was up 2 points to 59%. Emerson's September three-month trailing orders were +16%. We grew 5.3% underlying and leveraged at 38% operationally, inclusive of a $140 million swing in our price cost assumptions from November through to the end of the fiscal year. The earnings quality of this company continues to be excellent, with free cash flow conversion of 129%. The fourth quarter, however, was challenged significantly by supply chain, logistics, and labor challenges, and that is not dissimilar from anything you've heard before. This was experienced in the form of material cost inflation, notably steel, electronics and resins, and lead time extensions. In addition, we experienced logistics challenges in availability of lanes and costs. Lastly, U.S. manufacturing labor, which was characterized by higher turnover rates, absenteeism, and overtime costs. In the quarter, we missed sales by $175 million. Alongside a challenging price cost environment in our climate business, it resulted in a negative $0.14 impact to EPS for the quarter, and a $0.19 impact to 2021 EPS. Having said that, the company grew 7% in the fourth quarter and had 19% operating leverage. Turning to 2022 and some initial thoughts, the first half of the year will not look dissimilar from the fourth quarter, with slight sequential improvements as we go to Q2. Price cost and supply chain challenges unwind in the second half of the year against the backdrop of continued strong demand. The price cost assumption in the year will be a positive $100 million for 2022. I'm very optimistic for 2022. The operating environment has unpredictability, but it is significantly more stable than a year ago and demand is much stronger. The residential AC cycle would moderate as we go through 2022. However, we expect automation markets to continue to strengthen, driven by digital transformation and modernizations, replacement and MRO markets, and select LNG and sustainability-driven KOB 1. Most notably, methane emissions reduction projects and carbon capture. I have confidence that we will deliver 30% incrementals on our underlying sales in 2022. This addresses execution, and as you know, that's one of the three pillars we identify as a management team for accelerated value creation. We have equally taken significant steps in our journey to modernize our culture and advance ESG initiatives. The board named Jim Turley as the company's Independent Chair of the Board. We named Mike Train as the company's first Chief Sustainability Officer, and we hired Elizabeth Adefioye as Emerson's first Chief People Officer. I'm very proud of the diversity targets we set for the enterprise, the changes to our long-term compensation and annual bonus structure to include ESG measures, and the commitments we have made to accelerate greenhouse gas intensity reductions. Lastly, turning to the portfolio. Please turn to slide four. We recently concluded a comprehensive portfolio review, which culminated in a two-day session with our Board of Directors in early October. We left the meeting with a defined portfolio roadmap and pathways. The key elements were as follows. Firstly, in terms of the portfolio today and how we are thinking about it, diversification is critical. We will continue to divest upstream oil and gas hardware assets. Secondly, we will action low growth or commoditized businesses. Lastly, we will action disconnected assets. All three of these actions will take place over time with intentionality, but patience and a keen awareness of cycles and meeting the value creation proposition to our shareholders. Secondly, we identified four large, profitable, high growth end markets, each with at least $20 billion of size and projected to grow higher than 4% a year into the future, supported by macros. The four end markets will be the hunting ground for our M&A activity. Lastly, we defined two possible end states for the portfolio and the journey that we'll embark on, and have embarked on. One of the four markets is industrial software, a $60 billion segment that we identified growing at 9%. The AspenTech transaction is an exciting step for Emerson and a very important transformational step for this corporation. AspenTech is one of the best run industrial software companies in the space with highly differentiated technology and a phenomenal leadership team led by Antonio Pietri, for who I have the greatest personal admiration. The AspenTech company will be a highly diversified business with transmission and distribution as its largest served market, and it's uniquely positioned to enable our energy customers to transition to a lower carbon future. I'm optimistic of the synergy opportunities that exist and believe the new AspenTech, which will be 55% owned by Emerson shareholders, will be a differentiated platform for future industrial software M&A. I'm very excited about this, as I hope you can tell. We expect to close the transaction in the second quarter of 2022, following the completion and approval of the customary regulatory items. With that, I will now turn the call over to Frank Dellaquila, Emerson's Chief Financial Officer. Thank you, Lal, and good morning, everyone. Please turn to slide six, if you would. We're really pleased with the financial results for fiscal 2021. As Lal said, we ended the year with a great deal of uncertainty and far exceeded the expectations we had at the beginning of the year. The underlying demand environment developed much, much as we thought it would. There was continued strength in global discrete and hybrid automation markets, and the North America process markets began to gain momentum later in the year. The global demand in our commercial residential markets was strong and broad-based, particularly in the U.S. residential air conditioning market, and it far exceeded the expectations that we had going into the year. Our operations team successfully worked through labor and supply chain issues, particularly toward the end of the year, and delivered the strong results that we're able to report to you today. Toward the end of the year, the intensifying combination of rising material costs, supply chain challenges, and labor constraints in the U.S. did begin to weigh on sales volume and profitability. We worked through that in the fourth quarter. We will continue to work through that in the first half of fiscal 2022. Despite these fourth quarter challenges, we're pleased to report that we achieved the key financial targets that we committed to you in August regarding underlying growth, Adjusted EBIT margin, adjusted earnings per share, and cash flow, and you can see all of that in the table. This was achieved in the face of an unexpected increase in key raw materials, namely steel and copper, that resulted in an unfavorable price cost swing of $140 million during the year versus the expectation and the guidance that we gave you a year ago. We're very grateful for the extraordinary effort of our operations teams at every level and the manufacturing employees who made this happen under some of the most challenging conditions that we have seen. Please turn to slide seven. This slide highlights our strong 2021 results. The continued recovery in our end markets drove strong full year underlying growth of more than 5%. Net sales were up 9% year- over- year, including a 1% impact from acquisitions, namely LSI, which closed at the beginning of the fiscal year. Adjusted segment EBIT benefited from strong leverage in operations, 38%, as well just mentioned, at Adjusted EBIT from underlying volume and the benefit of cost reset actions that were begun two years ago. These cost reductions more than offset price-cost headwinds, which as I said, were $140 million versus our expectation at the beginning of the year, and the supply chain challenges that raised costs and reduced availability. Cash flow was robust, up 18% year-over-year attributable to the strong earnings growth and working capital efficiency. Free cash flow conversion of net earnings was 129%. Adjusted earnings per share was $4.10, exceeding our guide by $0.03 at the midpoint and up 19% for the year. Automation Solutions underlying growth was flat year-over-year. Growth turned positive in the second half, driven by strong discrete and hybrid markets, while the later cycle process automation markets delivered sequential improvement as we moved through the year. Adjusted EBIT increased 230 basis points due to the strong leverage driven by cost reset benefits. Commercial and residential saw exceptional growth of 16% underlying year-over-year due to broad strength across the residential and commercial markets with mid-teens growth in all world areas. Adjusted EBIT increased 20 basis points versus prior year. Price cost headwinds worsened in the second half, particularly in the fourth quarter, as we anticipated on the call in August, but were offset for the full year by strong underlying leverage and spending restraints. Please turn to slide eight. Operational performance was strong throughout the year, adding $0.59 to adjusted EPS, overcoming a $0.19 Headwind from supply chain and $90 million of unfavorable price cost. Operations leveraged at more than 35% on volume and cost actions. Non-operating items contributed two cents net, overcoming a significant headwind from the stock comp mark-to-market accounting. Share repurchase totaled $500 million as we guided and added about three cents. In total, Adjusted EPS was $4.10, as I said, an increase of 19%. Please turn to slide nine. Regarding the fourth quarter, strong end market demand drove underlying growth of 7% with net sales up 9%. This growth was achieved despite a $175 million impact from supply chain, logistics, and labor constraints that affected both platforms in somewhat different ways. Adjusted segment EBIT dropped 10 basis points, reflecting a 200 basis point impact from supply chain volume constraints across the company and from the increasingly negative price cost headwind in commercial and residential. Free cash flow declined 39%, mainly due to higher working capital to support the growth versus the prior year. Adjusted earnings per share was $1.21, exceeding the guidance midpoint by $0.03 and up 10% versus the prior year. Automation Solutions underlying sales were up 3%, with strong recovery in the Americas, particularly in the power generation and chemical markets, partially offset by declines in other world areas. Sales were reduced by about $125 million or 4 points due to supply chain constraints. Our backlog was up 16% year- to- date and now sits at $5.4 billion, $100 million less than at the end of the third quarter. Typically, our backlog would reduce more in Q4. However, due to strong orders and supply chain constraints, backlog remained elevated above the levels we would otherwise have expected. Strong leverage and cost reductions drove a 170 basis point improvement in Adjusted EBIT. Commercial and Residential underlying sales increased 13% driven by continued strength in North America residential HVAC and home products as well as heat pump demand in Europe. Sales were reduced by about $50 million or 3 points due to supply chain constraints, which together with sharply increasing material cost headwinds, which were expected, perhaps a little worse than we expected in August, but were expected, drove a 340 basis points decline in Adjusted EBIT. With that, I'm going to turn it over to Ram to provide color around the price cost and some of the other operational issues that we're dealing with. Thank you, Frank. Please turn to slide 10. Clearly, as you can see, the operating environment is a challenge as commodity inflation, electronics supply, logistics constraints, and labor availability continues to impact our global operations. Net material inflation headwinds accelerated through fiscal 2021, as you can see on the chart, primarily driven by steel prices, with majority of the impact being felt by our climate technologies business. North American cold rolled steel pricing increased once again in October, extending the streak of monthly price increases to 14 months. However, the magnitude of the increases have declined in recent months, and more importantly, hot rolled steel prices dropped around $20 a ton in October, a positive sign for us. We do anticipate steel prices to start to flatten out over the next few months, and net material inflation to peak in the first half of fiscal 2022. We continue to stay focused and diligent on our pricing plans by executing on our contractual material passthrough agreements, surcharges for freight, and more aggressive annual general price increases. We remain confident that price cost will turn green and will be a strong positive for the second half of fiscal 2022. Our current plans indicate that price cost will be approximately $100 million tailwind for the fiscal year. Turning to the next slide. On the commodity front, while steel prices are at elevated levels today, as I mentioned earlier, they are showing some signs of flattening, providing optimism that we will see North American cold rolled steel prices start to decline in the coming months. Plastic resin prices have remained elevated due to high price and elastic demand and weather-related supply challenges. Copper prices have also surged as of late, but our hedge positions will dampen the impact to the fiscal year. Now, while COVID-related restrictions are improving in Southeast Asia, capacity at key electronic suppliers remains constrained. Several key component suppliers have extended lead times and pushed out delivery forecasts, which has increased shortages and decommits to our EMS suppliers. Furthermore, we are closely watching the impact of industrial power outages in China, which have become a common occurrence at manufacturers and has led to an increase in silicon prices. For us, electronic shortages are impacting multiple business units in both platforms, and supply is expected to remain a challenge into FY 2022. Extended logistics lead times, particularly on ocean freight, has had an impact on our global operations, port congestion in the U.S., weather, and COVID-related disruptions in China being the key drivers. These dynamics are highlighting how critical regionalization is, even on lower variation parts and components, and the work we have done over the past many years to regionalize are clearly proving the importance of this strategy. This is exemplified by several of our businesses with strong regional supply bases, which have performed very well and avoided expensive air freight and significant expediting costs. Finally, hiring and retention challenges continue in many of our U.S. plants, predominantly in the Midwest, as competition for available labor is intense. High levels of turnover and absenteeism in these locations have impacted productivity and driven increased overtime. Now on slide 12, despite the unprecedented challenges, our supply chain and operations teams have worked tirelessly to continue to meet the needs of our global customers. Many creative solutions are being implemented on a real-time basis to ensure continuity of material supply to our global plants and availability of freight lines to make our shipment commitments. Our teams have leveraged strong supplier relationships, utilized pre-qualified alternate sources, leveraged contractual agreements, and stepped in to assist our suppliers where needed. Our regional manufacturing footprint and the enhanced resiliency of our supply network through multi-sourcing that we spent years developing has certainly been an advantage for us in these challenging times. Accelerated actions around hiring and production shifts to plants with stable workforces has ensured we continue to meet our customers' needs. Many of our global plants are producing at record levels as our disciplined investments in factory automation have allowed us to unlock additional capacity to combat labor availability challenges. Finally, I wanna take this opportunity to sincerely thank our global teams for delivering an outstanding operational year. With that, I'll turn it over to Lal to walk through our fiscal 2022 outlook. Thanks, Ram. Let's please turn to slide 14, and I'll give the team some color on the current environment. In looking forward to 2022, demand continues to be strong across both the platforms. The trailing three-month orders for Automation Solutions are up 20% versus the prior year, driven, as I said prior by continued automation investments in discrete and hybrid markets, and we believe that will continue into 2022, and of course, the strengthening of the Process Automation spend. While KOB 2 and KOB 3 drove most of the orders growth in 2021, the new infrastructure bookings for LNG and decarbonization will improve, I believe, through 2022, providing further upside. Increased site access will drive increased walk down and shut down turnaround activity in the business. To give you perspective, 2021 walk downs were up 50% year-over-year, with more than 5,000 globally, with each walk down driving substantial KOB3 pull-through. Shutdown turnaround bookings were up 40% in 2021, 10% year-over-year, driven by strong spring season that extended into the early summer. 2022 shutdown turnaround outage activity spend is expected to be up mid-single digits, led by chemicals and refining, leading to high single-digit bookings growth. Turning to Commercial & Residential Solutions, the U.S. and Europe order rates continue to be strong heading into 2022, while Asia has begun to moderate. Overall, the 23-month orders were 9% in September. In thinking a little bit further into 2022, many of our key climate technologies and markets will continue to have momentum, including aftermarket refrigeration, commercial HVAC, food retail, and food service driven by new store builds and quick service restaurants and residential heat pumps. Turning to slide 15. Looking ahead to 2022, it will be a year characterized by strong underlying demand and an improving operating environment. The late cycle Process Automation business will continue its recovery with mid-single-digit annual growth. Meanwhile, Discrete and Hybrid momentum will endure with high-single-digit and mid-single-digit growth respectively. Growth will moderate in residential markets as demand stabilizes, but improving commercial and industrial environments will benefit Commercial & Residential Solutions. Decarbonization and sustainability projects, as noted earlier, will provide further growth opportunities as budgets get allocated towards these projects. Based on this macro landscape, we believe we continue to expect demand to be strong in 2022. Supply chain and price cost headwinds continue through the first half, pressuring first quarter leverage but turn to significant tailwinds in the second half and end positive in the year. The team has done a significant amount of work progressing our restructuring programs. Emerson's 2021 Adjusted EBITDA of 23.1% surpassed our previous record. Over 90% of our restructuring spend communicated in our investor conference is complete, and over 70% of the savings have been realized with remaining longer term facility projects left to be completed. Great work by the team. Let's turn to slide 16 and talk about guidance. Given this landscape, we expect underlying sales growth of 6%-8% in 2022 and net sales growth of 46%. Underlying sales growth for Automation Solutions will be 6%-8% while Commercial & Residential Solutions will be 6%-9%. As Ram discussed, we expect price cost to turn into tailwind for the year of approximately $100 million. $150 million of restructuring activities includes the minimal remaining spend on our cost reset program and additional programs including footprint activities that have been identified and are planned in the fiscal year. Historically, our Adjusted EPS excludes restructuring and other items like first-year purchase accounting in the calculation. Looking at the 2021 column of the bridge to the right, our prior Adjusted EPS of $4.10 increases to $4.51 when removing the impact of intangibles amortization expense of $0.41. For 2022, the amortization expense is expected to be approximately $0.42 driving, excuse me, our Adjusted EPS to between $4.82 and $4.97. Additional details on the calculation are provided in the appendix as well as accounting tables in the press release. Please note that all guidance does not include the impact of the AspenTech transaction which is expected to close, as I said earlier, in the second quarter of calendar year 2022. Turning to slide 17. We expect the first quarter 2022 underlying sales growth of 7%-9% with broad underlying strength across Automation Solutions and Commercial & Residential Solutions. Automation Solutions will experience underlying sales growth in the mid- to high-single-digit%, while Commercial & Residential Solutions underlying sales growth will be in the high-single- to low-double-digit% range. Adjusted EPS is expected to be between $0.98 and $1.02. Amortization for the quarter is expected to be roughly $0.10. With that, I'll turn the call back over to Colleen Mettler. Thank you. Thank you, Lal. We will now turn the call to the operator to start the Q&A portion of our call. We will now begin the question- and- answer session. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. The first question is from Andy Kaplowitz from Citigroup. Please go ahead. Hey, good morning, guys. Good morning, Andy. Good morning, Andy. Lal, maybe you could give us a little more color into how you're thinking orders play out in FY 2022. Obviously, a nice recovery has continued in Automation Solutions, but you mentioned that you think KOB 1 bookings could come in LNG and decarb. When do you see those types of projects hitting? Could they help maintain bookings growth at current levels as comps begin to get more difficult over the next few months? In C&RS, it's held up obviously very well despite a bit of moderating. Maybe more color into what you expect there. No, I think the environment. I'll start, Andy, with automation. The strength. I see the strength in the process automation business to continue throughout the year. Very honestly, we're in an environment where $100 oil is not uncertain right now, and we're seeing some restraint in the U.S. shale and discipline at OPEC and things of that sort. That's gonna free up significant capacity, particularly at NOCs and some of the larger integrated companies to move forward on a lot of the programs that will drive the decarbonization initiatives. We've seen that already with many flaring type of projects in the United States. And we'll continue to see that with carbon capture and others accelerating. I'm highly optimistic about that. On the LNG side, there are two significant programs that we're pursuing, which will be awarded likely, Andy, towards the second half of the year. One is the Baltic LNG investment and, of course, the Qatar's North Field expansion being the two largest. Those are very significant in terms of capacity additions and investment in automation for us, so both in pursuit. Turning to Commercial & Residential, yes, I see the residential air conditioning market moderating as we go through the year, but upheld by the commercial strength in the marketplace, which obviously for us is very relevant. I do see a bit of a mix, more of a mix, a mixed bag in the Commercial & Residential business driven by that moderation in residential AC. Well, that's helpful. Obviously one of the main concerns that we've heard from investors post the announcement of your deal is that Emerson, instead of diversifying, actually doubled down on oil and gas. I'm sure you anticipated that concern, so maybe you could address it head on, Lal. Ultimately, I know you think industrial software is a different market. You just said that in your prepared remarks. Is the view that you believe AspenTech gives you the best chance also of hitting or exceeding those long-term guides you gave us earlier in the year? I do. You know, I obviously think that the solutions that AspenTech brings to the table are incredibly broad in terms of particularly the sustainability journey. What we're seeing is that the importance of the software particularly in terms of design and optimization of assets will be incredibly relevant as these customers embark on these new projects. I regard the energy position as important, but I regard it more importantly from the transition and the share wallet spend that they'll undertake in the energy segment. Having said that, the platform for investment and diversification, which has been a core component of the Aspen board for a long time, will continue to be important here as we go forward. The opportunity, whether it's for M&A and for growth in T&D and other segments is a core part of the synergy value. Thanks, Lal. Thanks, Andy. The next question is from John Walsh with Credit Suisse. Please go ahead. Hi, good morning, everyone. Good morning. Good morning, John. Just wanted to talk a little bit more about kind of the margin bridge here through the year. I think in your prepared remarks, you remained confident in the 30% underlying leverage. Your guide for Q1 implies we're certainly starting, I think, below that. Is it all just price-cost timing driven, or is there something else there that we should be aware of for our models about the Q1 margin performance? Yeah. Good morning, John. This is Frank. Yeah, it is primarily price-cost driven. We will be below the 30% assumption for the first half of the year. Then as the price rolls through, which we have firm plans for that to happen, the margins will, the leverage will increase as we go through the year. That's how we will get there, but we're very confident that we will in fact get there. Obviously, Automation Solutions, the leverage is good as we go throughout the year. Then, it's in commercial residential where we have the ramp as the price-cost normalizes and then turns positive in the second half of the year. Great. Maybe a question, Lal, around earlier in the call you talked about, you know, still some portfolio pruning around some of the upstream oil and gas assets, disconnected assets within the portfolio. Could you size that for us? Just kind of what is the revenue size, you know, that you're talking about for that bucket? No, John, I'm not gonna do that, but I'll tell you that the activities or the divestitures will be done over time. As I have noted earlier, they'll be done very carefully, at times timed with incoming assets as well. Obviously, we have a large impending transaction on the horizon here. That's what I'll tell you. I am a firm believer that share of wallet in the energy segment will continue to move to the zeros and ones and away from a hardware structure. Hence we're gonna continue to drive down that path. In terms of sizing that entire budget for you, I apologize, John. I'm not gonna do that. Nope. Worth a shot. Thank you very much. Appreciate you taking the questions. Thanks, John. The next question is from Andrew Obin with Bank of America. Please go ahead. Yes, good morning, guys. Good morning, Andrew. One question we got, and particularly looking at the results from one of your peers yesterday in Automation Solutions. How do you guys reconcile 20% year-over-year orders growth, 16% year-over-year backlog growth, and then 6%-8% FY 2022 organic revenue guidance? What's incorporated into the FY 2022 revenue guidance? I know you gave us some color, but just the disconnect. Yeah. Obviously, as we finished, as we went into September and into the first quarter, we have some comps that are still favorable in the business, so that's one element of it. Then I think normalizing as we go into what it will be, I think, still a very strong environment, and how I felt was important for us to guide in that business, Andrew. I think that the opportunities across the three served segments of the market are very strong. I think the underlying demand is very strong. In terms of guiding with certain some uncertainties remaining in the supply chain environment, I wanted to be somewhat cautious as well. Having said that, the demand picture is very optimistic. Nope. Makes perfect sense. Another question we sort of get a lot and big debate with investors, just sort of sense of inventories in the channel and your customers, right? Because, you know, one big theme this earning season is a lot of companies bringing up, even companies with very short cycle businesses bringing up these very strong backlogs, even for companies that don't have backlogs usually. I think investors are just worried that this may not end well sometime mid-year next year. What's your sense of inventories in the channel, and your customers? How do you think that plays out throughout, you know, your fiscal 2022 or calendar 2022? However you wanna discuss, because, you know, your team has seen many a cycle, and this one seems to be a little bit different that way. Thank you. Yeah, I'll start. I'll turn it to Ram for a couple of comments as well. Look, on the automation side, I really don't see that as a concern. Most of a high part of the business, obviously 59% in the year was book-to-ship KOB 3, and it went directly into, not into inventories, but into predominantly application, end user application. As you turn into the climate business, Ram, perhaps a few comments from you. Yeah, I would say, you know, across both our OEMs and in the wholesale community, Andrew, I would say inventories are slightly elevated to where they would be in normal times as people anticipate supply chain challenges and have been bringing in more material. With that said, you know, I think the inventory is getting out into the end customer base through the wholesale channel and through our OEM. So I would say it's not a big issue per se, and it may be at the slight elevated levels, but it's not something that is unreasonable or unseasonal. I really appreciate your answer. Thanks a lot. Thanks, Andrew. The next question is from Tommy Moll with Stephens. Please go ahead. Morning, and thanks for taking my questions. Thanks, Tommy. I wanted to start on your outlook for Automation Solutions. I think you called for 6%-8% underlying in the 2022 outlook. I'm curious what your visibility and assumptions are there for oil and gas customers. You're planning your fiscal year here several months in advance of when a lot of them will. I'm just looking at $80 crude and wondering potentially when those budgets are rolled out at year-end or early next year, if there's some substantial upside potential. You know, it's a great question. Obviously, we are three months ahead or four months ahead of seeing those budgets, capital budgets. What we are seeing and have assumed, Tommy, is a continued strength in the operating budget spend, which is, as you know, where a significant amount of the KOB 3 and some KOB 2 falls into. That strength picked up in the second half of fiscal 2021, and we assume and believe it'll continue to accelerate as we go through 2022. In terms of the capital environments beyond the two LNG jobs that are obviously funded and moving through bidding phases, we'll see what else comes out of the capital plans. I would expect, Tommy, that there would be sustainable type of investments. Again, the methane emissions is a big deal. I think we saw something from the U.S. around those standards. Of course, carbon capture, of which I think will be more and more significant as we go through the year. We'll see. You're right. We'll watch that very carefully as we go into January. Thank you for that. That's helpful. I wanted to pivot to OSI. Can you refresh us on what the top line contribution was in 2021? What your plan is for 2022? I think it's likely gonna be fair to say you've realized some revenue synergies since acquiring the asset, and any anecdotes you could share on how you were able to drive those in such a short timeframe would be helpful. Thanks. Yeah. A phenomenal first year for the company. Approximately $190 million in revenue in 2021, growing to approximately $220 million in 2022. Well ahead of synergy board plans. Great execution globally. We won our first transmission/ distribution project in Europe, with a very large customer in the Netherlands and Northern Germany. We won our first transmission/ distribution project in Australia and Tasmania, again, planting critical flags. We're significantly engaged with the large power producers and transmission companies in the U.S. Realizing the synergies and great growth and profitability. Feel really good about the acquisition. As it goes into AspenTech, it goes in with lots of momentum into the business. I appreciate it, and I'll turn it back. Thanks. Thank you. The next question is from Josh Pokrzywinski with Morgan Stanley. Please go ahead. Hi. Good morning, guys. Good morning. Good morning, Josh. Well, just wondering on the Automation Solutions side, you know, maybe hoping to shore up some of the kind of growth differential you guys are looking at, versus Rockwell yesterday. Any observation on kind of the mechanical or, say, balancing controls type business versus, you know, more of the software and automation side? Like, is there a wider spread in that outlook for 2022 than usual? Well, you know, not really. Not really. Obviously, our systems and software business has outgrown our device business. Our digital transformation initiatives, which are both software and device-based, have outgrown the remainder of the business. Having said that, I really wouldn't note a significant difference as we go through. A lot of the KOB3 business is device layer type of business where you'd see perhaps a little bit of a bifurcation, to be honest, if you look at the KOB 1 heavy dependent businesses, some of those in final control. Beyond that, I'd suggest I think we'll see broad portfolio alignment as we go through, and it's really a delta of a point or so between them. Got it. That's helpful. Just shifting over to C&RS. You know, I guess first, and I apologize if I missed it, what's the price embedded in that outlook? You know, you mentioned steel is coming down, you know, maybe prospectively based on futures. I know some of that is sort of contractually set. Like as that comes down, does that, you know, go into the calculation for how prices, you know, is kind of derived with the OEM relationships there? Thanks. Yeah, go ahead. Yeah. Yeah, this is Ram Krishnan. I'll answer the steel question first. Obviously, as if steel were to come down in the second half, we've modeled it as a moderate decline in the second half, but any significant delta to that really doesn't impact 2022 but will translate into our pricing dynamics for 2023. It's not necessarily a concern for us in 2022, and we'll watch that carefully. Obviously, we'd like it to come down, which will impact the second half or help us in the second half. That's on the steel piece. On the pricing piece, I think, whatever the inflation is, I don't think we're gonna give out an exact price number, but obviously the inflationary dynamics of 2021 will translate and convert into material price plus pass-through price that we will realize in 2022. Got it. Helpful color. Best of luck guys. Thank you. The next question is from Deane Dray with RBC Capital Markets. Please go ahead. Thank you. Good morning, everyone. Good morning. Good morning, Deane. Hey, a quick question for Frank, if I could. Free cash flow was well below your 4Q average. I know you called out working capital pressures. Maybe some color there would be helpful. Thanks. Yeah. I mean, just the nature of the sales ramp and the comparison versus prior year when we were taking cash off the balance sheet. I think we have a little bit of a dislocation there in the fourth quarter, Deane, that will normalize. I mean, the year was very, very strong, but the cash flow was kind of lumpy just given the way the year played out, in particular in the commercial and residential. Got it. For Lal, on the expectation focusing on M&A on industrial software, since it is a new structure for us with Aspen Technology, when you say an industrial software acquisition, is that Emerson-driven? Is it Aspen? Would it be folded into Aspen? Does Aspen have, you know, are they part of the review process and so forth? Thank you. Yeah, sure, Andy. No, Industrial Software M&A will occur at AspenTech, and, Deane. It will occur at AspenTech. Having said that, Industrial Software is only one of the three large market segments, Deane, that we'll be acquisitive in. You'll see those as we play those out. Obviously, they'll become public knowledge. No, we've got a great platform there to transact M&A software with what I believe will be a market multiple that will enable the economics to work from a transaction perspective and from a value creation perspective. That's real helpful. Thank you. Thank you. Thanks, Deane. The next question is from Jeff Sprague with Vertical Research. Please go ahead. Hey, thanks. Good morning, everyone. Good morning. Hey, Lal. Good morning. Just back to the portfolio review, you know, the comment about two end states. I would suppose that means you do kind of the addition and subtraction you're talking about, and then continue to march as Emerson is option one, and option two is you do that and then perhaps separate. If there's more that you can share on your thought process there or what might be kind of the triggering mechanisms of one over the other, that would certainly be interesting. Yeah, no, you know, I think we're gonna play this out, as I've mentioned earlier, over time. I think I used the expression when we were in New York for the AspenTech transaction announcement that this is a marathon that we're going to be very deliberate and thoughtful as we go through this. We're gonna be keenly aware of the value proposition to the shareholders and impacts to free cash flow and impacts to value creation as we go through the journey. The end game, of course, is to create a portfolio that's more connected, a portfolio that has an underlying sales potential that is higher, and consequently can deliver through cycles, double-digit EPS. That's the objective here. For that, we need to expose the portfolio to more of those markets and, between the strong balance sheet of the company, the strong balance sheet that AspenTech will have as well, and the divestiture work on this side. I think we get there over a number of years. There were meaningful conversations with our board. There were great debates. Obviously, this was a body of work over a number of months, almost four months, that our partners did alongside management. We have pathways now and optionality, and this is why we have two potential end states here. Great. Just as a follow-up, sort of a bundled question around price cost to margins and the like. The price cost positive of $100 million, does that arithmetic get you to margin neutral on price cost? Kind of separate but I guess related, just the additional restructuring that you're doing, can you elaborate on that a little bit and what sort of, you know, kind of savings tailwind you're expecting in 2022 from both the actions you took in 2021 and the new actions you're talking about here in 2022? Thank you. Yeah. Hey, Jeff, this is Frank. I mean, we're thinking about it in terms of delivering the leverage on the business for the year and, you know, the price cost in isolation. You know, obviously on the way up is not necessarily large and accretive, okay? We're just looking at it holistically in terms of delivering 30%+ operating leverage for the business for the year. You know, the price cost given the way it has rolled and will roll through very lumpy, very distortive within the quarters. We're just very focused on getting to that goal for the year, delivering up margins and for the total enterprise and delivering the operating leverage. Regarding the restructuring, I'll take a quick stab and then either Ram or Lal can come in. Your question was around the continued restructuring spend. You know, as we go through this, we identify additional opportunities in both businesses. Some of it is footprint consolidation. I mean, you know, the cost reduction march is kind of a never-ending march. I know we identified. Mm-hmm. Obviously very significant opportunities that we've executed on for the most part when we talk about driving to previous peak margins. Mm-hmm. There's more to do in a complex business. We're continually trying to improve the cost position, and frankly, much of what we do in terms of CapEx and restructuring over the next couple of years will be around capacity expansion for the growth that we expect to see in both businesses. You know, we may be engaged in some restructuring that's a little bit higher than our historical levels, but it's all around continually improving the cost position and putting in the capacity in the right places. I think you've said it well. Okay. Lal? Next call. Your next question. The next question is from Scott Davis with Melius Research. Please go ahead. Hey, good morning, everybody. Good morning. Morning, Scott. Morning, Scott. Best of luck for 2022. A couple questions here for you guys. First, like the 30% incrementals that you referenced, Lal, is that more of a baseline or a goal? Does that include the price, the $100 million price tailwind? If you answered some of that, I apologize, but just a- Yes, sir. A little bit more color around that. No. Yes, sir. No, that is the plan. That's what the fiscal plan rolls up and the commitment we're making. It does include the price. Obviously, it's all in. It's all in of first half headwinds that we described, and second half turning into tailwinds, whether that's price-cost or supply chain. As Frank, I think, said, that will be below in the first half as we want and improve as we get into the second half, obviously. For the year, I feel very, very good about the 30 points of incrementals on the underlying sales. Okay. The comments that you made around carbon capture, methane, LNG, is there a point where you can start to measure what percentage of your orders, th ose particular types of projects represent where we can get a sense of the materiality of the future growth there? Yeah, no, I think that's a great question, Scott, as well. We identified approximately $1 billion of KOB 1 projects. Now, that includes also transmission/ distribution, but also a whole slew of sustainability and renewable jobs, inclusive of hydrogen, including carbon capture, et cetera, biofuels and other things. As we go forward, we continue to look at our funnel and address our funnel and how we communicate the funnel. I think it'll be important for us to break those out and give you some visibility to it. I think that's a fair question. Okay. Well, good luck in 2020. Thank you, sir. Thank you. I'll pass it on. Thank you, Scott. Thank you. The next question is from Julian Mitchell with Barclays. Please go ahead. Hi. Good morning. Just wanted to- Good morning. Good morning. Just wanted to start with the Automation Solutions organic growth guide. You're assuming that that business grows, you know, about 7% this quarter, and then the same over the subsequent three quarters, even as the comps get a lot more difficult. Just wanted to understand, is sort of everything in that segment steady state as you go through the year in terms of hybrid versus process versus discrete or KOB 1, KOB2, and KOB3? Or is there something changing across either of those axes kind of as you move through the year that allows the organic growth rate to hold steady even with tougher comps? Good question, Julian. Good to hear your voice. Yeah. Backlog situation. Normally, if you look at our typical performance in automation Q3, Q4 last year, for example, I believe we reduced backlog by about $400 million. This year, we reduced it by $100 million. A lot of that was reflected in that $125 million miss in the quarter for Automation Solutions. The backlog situation coming into the quarter, obviously, is stronger. Having said that, we do expect KOB 3 to remain strong. I think the data that we're seeing in the commitments our customers are making, particularly around FEL activity, is very, very robust. Secondly, modernization programs and the KOB 1 that I outlined, whether that is sustainability or LNG, I think will come in and support the second half of the year. Obviously, KOB 1, for the most part, will not turn into revenue with the exception of perhaps some of the earlier feed stuff that in our systems business, as you know, Julian, but r obust and we'll pick up as we go through the second half of the year. That's helpful. Thank you. Just switching to C&RS, you know, 50% + of the revenues in that business are residential facing. You do call out the slowdown that you're embedding in resi through the year, but it doesn't sound as if any major cliff is looming as you see it today. Maybe discuss sort of, you know, how you're thinking about the situation at the OEMs in resi, and how confident you are that you can sustain kind of positive growth through the year, in resi, even with tough comps. You know, our perspective is that we've got a couple of looming regulatory changes on the environment, efficiency and obviously refrigerant, Efficiency 2023 and refrigerants in 2025. It's been an interesting cycle to call, where I've spent some time with two of our largest OEM customers this quarter. I went down to Carolina and visited with Trane and went down to Miami and visited with Carrier. We're staying very lockstep in terms of understanding their demand and their projections for demand as we go through the fiscal. We do believe that there's a moderation, not a cliff, as we go through the year. Great. Thank you. Great. Well, Julian, thank you very much. With that, I think we're gonna close the call. I thank you all for your time this morning and appreciate the questions and thank you for your support. The conference call has now concluded. Thank you for attending today's presentation. You may now disconnect.