Good afternoon, everyone, and Welcome to Day Three of Oppenheimer's 19th Annual Industrial Growth Conference. I'm Noah Kaye, Managing Director in Oppenheimer's Sustainable Growth and Resource Optimization Research Practice. Very happy to welcome back the management team at Rockwell Automation for a timely chat following yesterday's earnings. And we have with us Matt Fordenwalt, who's the Senior VP of Lifecycle Services. Matt, thanks so much for being here. I believe we're going to get Aijana on as well in a little bit. But we've got a lot of questions related to Lifecycle Services, specifically given the strong performance you saw yesterday. For those listening on the webcast, you can submit questions either via email to me at noah.kaye@opco.com or via the Q&A function on the webcast. So with that, Matt, welcome, and looking forward to the discussion. Thanks for having me, Noah. I look forward to it as well. So you have very strong, you know, first half in general of the year for Lifecycle Services. It was the strongest segment in terms of trends. You know, another quarter of Book to Bill above one here in this fiscal second quarter. Can you maybe just start by giving us a more granular look at the mix of business pockets of strength you're seeing within the business and where you're really focused for growth? Well, thanks. Yeah, the business orders were strong, as you mentioned, another quarter of above one for Book to Bill. We saw a strength across the portfolio. Our projects business, which we tend to call solutions, was strong. We saw Sensia, again, in oil and gas doing extremely well. And then our service contracts business. So it was across the board that we saw good orders performance. And then that translated, you know, via execution, especially on some of the project schedules that we did extremely well on execution. If I dig under the hood in terms of the types of things that we're seeing, it's a mix of capital projects. So we are seeing sort of that projects business continuing to book orders. But we also saw a nice uptick in some of our MRO offerings, you know, that field labor expert resource in the field who's helping with some migrations and modernizations across our customer base. In addition to that, I would say our cybersecurity and our high-value service contracts business continues to grow rapidly. Yeah. And we'll get into some of those different pockets shortly. I want to ask about margins for this segment. I think the company established a long-term margin target of 13%-15%. But, you know, you hit nearly 17% in 2Q, and I think it was guided flattish for 3Q. And Blake even said on the call, you know, there's more to do in terms of improving the performance of the segment. You know, how do we think about the new baseline for LCS margins? Where could they go from here? Well, as a reminder to everyone, last quarter we had a very strong quarter in terms of the volume that we were able to execute on. But we also had a tailwind from about 200 basis points from, you know, our incentive compensation. So when I think about those things, we've really been focused over the last several quarters on being as efficient as we can. I do believe that that 13%-15% range is the right range that we're in right now. We'd have to continue to operate extremely well. We're going to focus on our input costs, i.e., materials and things like that as we go forward. But, you know, that'll be part of a broader company-wide initiative in terms of what we do for productivity. But in terms of my segment, you know, sort of where we're at today, you know, we've worked really, really hard to improve quarter-over-quarter. When I think about the benefits of the tailwinds we've had this year, last year we did do some restructuring to get our cost structure in line. And you're seeing the benefits that sort of flow through this year. Maybe you can unpack that a little bit more. The restructuring versus just operating leverage versus Sensia improvement. Maybe help us understand a little bit better the relative importance in those drivers of margin improvement to date and how you think about drivers of expansion in the next stage. I think we're getting really good operating leverage right now. I think that Sensia, their core improvement in profitability, has been material. And then restructuring sort of in that sequence. Longer term, I also see the mix of business shifting. As those high-value services continue to grow at double digits, that will continue to give us that tailwind year after year. Be less capital intensive, more of an annual recurring revenue for us. So that will sort of level it out. It will become less lumpy over time. Yeah. So, you know, the company had outlined kind of a 15% ARR growth opportunity from Greenfield projects. I mean, how much of the ARR opportunity is located under Lifecycle Services umbrella? And how much visibility do you have to sustaining that kind of recurring growth based off of the backlog that you see throughout the business? Yeah. I look at the ARR opportunity. It's pretty balanced between software and services. I would say, given the nature of my business, right, we have line of sight to projects that we deliver directly, right? We have pretty good line of sight both from a backlog in terms of how we're incrementing the installed base, as well as the pursuits in our front log in terms of what's going out there. When I think about this ARR strategy, when it relates to the Lifecycle Services segment, I got two ways of winning. The goal is to create Rockwell Automation installed base, either through my direct project-oriented business or our broad ecosystem of OEMs and systems integrators. No matter how that installed base created is, we're doing sales motions to make sure that it's under a support contract long term. And then with our cyber offerings and things, it's agnostic of the automation decision, which allows us to have a conversation with every customer who's out there. So I feel that we have a pretty good line of sight. And as we liquidate the backlog, creates more installed base, I increment up my support contracts, given there's more hardware and software under support. It makes sense. You mentioned the strong cybersecurity demand. Maybe talk a little bit about, first of all, the growth of, you know, the cybersecurity offerings at Rockwell, you know, having completed the acquisition of Verve. And you know, you have appointed Stephen Ford as CISO in March. And you know, you reported 50% orders growth in cybersecurity yesterday. Maybe just sort of benchmark, you know, what's been driving the growth? Have you kind of built up that capability within the organization? Well, I think macro-wise, there's a couple of major drivers to why cyber and the operational technology area is such a hot topic. It's been growing for a decade, right? It's been smoldering, if you will. I think given incidents around the world and now that operational technology is becoming probably more known in terms of potential vulnerabilities, across the board, there's an aging installed base out there. Every CISO, every board of directors is having conversations of how do I best protect? What do I do when there is an issue? It's top of mind of every company and every board. It's a board-level conversation. With us acquiring Verve, we have more first-person content that helps our customers agnostic, again, to that automation decision across the board, be able to identify those assets, the vulnerabilities, and help drive pragmatic actions to mitigate that risk. So it really is, how do I keep my operations resilient? How do I secure that operations? And I have this legacy installed base out there that I, frankly, don't have that many people internal to my operation who know it as intimately as you do, Rockwell Automation. Yeah. And great points. I mean, how do we think about attach rates for cybersecurity compared with other software and services offerings? And how do the sales cycles differ there? Yeah. I would say that it's early in the game, you know, post the Verve acquisition. So I would be a little bit early to say that we've seen a pattern. I would say right now, because the first conversation most people have with my organization is one, we do cybersecurity across everybody's assets. It doesn't matter whether it's an IT server or it's a Rockwell Automation controller or it's a competitor's product. That's the first hurdle, is to understand that. Once we get past that, our differentiation has been our domain expertise, knowing how things operate in this physical world, allowing our customers to apply the best IT-known security solutions to that equation. So the sales cycle is a little bit longer than a traditional, hey, I know I want this product. You're convincing them based upon that we're differentiated because we understand their operations. Where milliseconds matter. And we can make sure that they're not going to have a disruption to their production. So that part of the sales cycle takes a little bit longer. But once we demonstrate value, then it comes down to can we roll this out across the fleet of plants? So we're in the early stages of many customers engaging us in multi-site type rollouts. And this is across industries because this is an industry-wide phenomenon of aging assets. Yeah. I was going to ask, actually, where you tend to see the highest take rates for the cyber offering amongst your different verticals. Maybe you can touch on that. Sure. Listen, there's the regulated ones, which people like to talk about, you know, your chemicals, oil, and gas. But you know, a lot of those customers are probably more mature because of their large assets that they have. I would say consumer packaged goods and food and beverage is probably the highest uptake, if you think about it. They have this heterogeneous quilt of assets that they've built over decades. And they don't have the manpower internal to their organizations to really solve for that. So we tend to know their operations as well as they do and have a really elegant way of helping them resolve that risk. Yeah. I'll just add, guys, can you hear me? Sorry, I know I joined on mute. We can. Always great to have you, Aijana. Uptake in life sciences. So in addition to Food and Beverage, life sciences, we can't mention the logos and the wins, but it's a lot. And also semiconductor as well. So it's really broad between discrete, hybrid, and process. Yeah. I want to go to it. It doesn't feel old to me, but an older acquisition of Fiix, which I believe is about two and a half years in now. Just talk about the growth of Fiix within the portfolio and the offerings since you started to integrate it. I think, you know, you know that I came originally from a family service business. So always very attentive to, you know, kind of keeping the customer happy, engaged throughout that life cycle and using the best data we can. What has Fiix actually brought to the portfolio? And what have the growth rates been for Fiix? I'll say Fiix actually fits within our Software & Control segment. But commenting on its growth, it's rapidly growing. It basically, in terms of from a customer standpoint, it's really allowing us to have a SaaS-based, AI-centric solution for maintenance management. So we're seeing really rapid adoption across small, medium, and large customers across various industries. And from my standpoint, more from a life cycle standpoint, having access to that data and that information makes us a much stronger value proposition as a service provider. Knowing that a customer, you know, has a maintenance issue or challenge, I can dispatch labor to them faster. I can also have parts on the ready prior to when they need it. So it's less of an emergency. It's all more planful as we go forward. You know, a SaaS-based maintenance solution that, you know, natively allows us more access into a customer, but also more importantly, to help them with their time of need and something that's been manual for them in the past has been a game changer. This is one of the interesting things about, you know, how the business is set up, right? You have these reported segments, but there is just a ton of, you know, natural synergy and collaboration that happens between the segments. And I think we just hit on it in an example. Can you talk a little bit more about, you know, how Lifecycle Services is truly synergistic with the rest of Rockwell when it comes to the sales cycle and really the whole life of, you know, the customer relationship? Yeah. You know, from a Rockwell Automation standpoint, you know, we really run an integrated business model. So ITD with Tessa in our hardware portfolio, Matheus in our software control, and myself. Depending upon the pursuit, we can bring the domain expertise or the services to the table that helps differentiate us in terms of the long-term relationship with a customer to ensure the value that they get out of their automation investment is both protected and accelerated. So when I think about large capital pursuits, we can provide those services as well as the day-to-day support and beyond to ensure that long-term value proposition to them. Or we can, we're very partner-centric as well. So if there's a systems integrator who needs to do that work, I'm more than happy to have that installed base created by part of our ecosystem. Because, end of the day, creating the installed base allows us to then wrap a support contract around it. So there's a lot of synergies across allows us to play to the strengths of what the customer needs. But it can be a hardware-only sale. And we're comfortable with that. But it's important that they understand the synergy and the value of the combination of our hardware, software, and services together, I think, is pretty unique. I can give a couple of examples by industry. For example, in process industries, Lifecycle Services is clearly more over-indexed to that, right? So you have a turnkey solution where you provide the full solution. You use our Intelligent Devices, the drives, right, the components. You use controllers, visualization, and of course, everything else on the service side afterwards, you know, in terms of maintenance and recurring revenue. Even in the discrete, like we gave a very good example of a big EV mega project that I invested in. There, yes, it's more of a product sale in terms of that nature of the business. However, Matt's business starts in before the projects have been announced externally. Digital consulting, working with EPCs, you know, and SIs, making sure we're expecting, doing the design and simulation and digital services. That's early on. And then once we start the production, we have a lot of our core automation, our software. Then after that is how do we get that recurring revenue through cybersecurity, MES, you know, software and industrial kind of operations management. That's all there with Matt's business as well. I think that's very helpful examples. Thank you both. You know, one more question specifically on LCS before moving to the broader business. You know, obviously, M&A has been, you know, a great tool for the company over the past several years to really expand, you know, the toolkit and the portfolio offerings. You know, Matt, where anywhere do you see, you know, opportunities or gaps in your portfolio now? Where are you focused in terms of, you know, potentially adding in organically? Yeah. I think that my segment's been very acquisitive over the last, you know, five-seven years. We've done a lot of things to digest what we've had and bring it together. We do think that, you know, our cyber, our digital, our MES capabilities that are software-centric, more global delivery model oriented. We've really scaled out well there. And it's really helping us pay dividends. You know, in the areas that we're going to continue to look at would be either geographic or industry-oriented domain expertise that would help us penetrate in some of those markets. But at this point, we feel very comfortable with the portfolio we got, the capabilities we got. You know, my segment's organization is, you know, north of 7,000 people. We have a very great diversity of talent and skills across the globe that we're trying to make the most of right now. Terrific. So moving to the company on a broader level, I wanted to discuss orders. And I think a lot of the narrative over the last several quarters is focused on the company's ability to forecast order volumes, you know, particularly as we see, you know, order patterns and backlog returning to more normalized levels. So maybe can you talk through the efforts you've made to improve visibility, maybe a couple of the changes that you're making in forecasting over the last, you know, six plus months and what you see as focus areas around that going forward? Sure. Sure. I can take that. Well, as you know, predicting the deep stock levels in the channel is not easy. It's not something Rockwell had to do before this whole supply chain crisis and the ensuing kind of surge. What are we doing now that's better than six or 12 months ago? Well, we're getting even closer to understanding our machine builder inventory. You know, we always had very good visibility into distributor inventory. A lot of them are on this program called DMI, Distributor Managed Inventory. In North America, we do have that. We actually manage their set point, you know, with their trigger points. We know their inventory levels. Outside of North America is not as precise, but we do have better visibility into that. Now, the reason we actually reduced our guide yesterday, right, for the full year was really we underestimated that just the amount of inventory, excess inventory sitting at our machine builders. Some of them we sell to directly and a lot of them buy through distribution. So it's not as easy to get that view of that inventory level, right? And so we work with our largest machine builders in North America and Europe. We assess, we help them also assess Rockwell inventory at all of their plants and all of their locations. And, you know, analyzing the burn rates, the inventory burn rates, what are their incoming orders from end users? And what are their expectations in terms of reaching that equilibrium? That's where we're getting better and better. It's not perfect yet. You know, we're improving it. It's something we'll continue focusing on. So that's why, in the near term, the timing of that—when does distributor channel and machine builders, when do they get to the equilibrium—is going to determine exactly where we end up for this fiscal year. In general, we feel pretty good that we're making really good progress in assessing it better. The follow-up to that, thanks, Aijana, is, you know, just trying to understand to what extent the fiscal fourth quarter orders guide, right, which is basically up, you know, very nicely sequentially, double digits, to what extent does that capture your view of underlying demand? Yeah. No, it's a good question. So and by the way, so when you look at Q3 to Q4, you know, inflection or step in orders, the majority of it is driven by what I just talked about. It's the clearing of excess inventory at machine builders, largely, right? So that's the biggest driver. Some of it also is actually Matt's business, Lifecycle Services, has this normal seasonality where Q3 to Q4, you have a step up. So that's there and also some increasing impact of mega projects. So but the majority of it is really clearing. We're not embedding some kind of an underlying end market, you know, change or improvement by verticals. It's really just the timing of that excess inventory being worked off. And that's what's really embedded in that Q4 number. Okay. And, you know, as we transition back towards, you know, that more typical, you know, book and ship business that Rockwell historically was before we got into elongated supply chains, how do we think about the impact of the transition back towards more normal dynamics around pricing power? Because you spend a lot of time, you know, amidst the supply chain crunch trying to flex pricing muscles and changing some of your pricing programs. Where do we sit today around pricing? We're very confident with our pricing ability and also our systems, as you mentioned, are much more robust now. We became much more resilient in the way we price and how quickly we can realize price and pass it on to our end users and our customers. And so, as you know, before the pandemic, we averaged about a point of price every year, give or take. That's net. And then the last few years, that was much higher given that input costs were up significantly. So we increased our prices accordingly. Now we're in an environment where we're back to about a point of price. So for fiscal 2024, we're still on track to get over a point of price. And, you know, we don't see that changing for the foreseeable future. What has changed, as you mentioned, is we've really changed our pricing methodology. So now if and when we need to increase prices really quickly to respond to something like, you know, cost inflation, we can do that right away and get the benefit right away. So it's a lot more resilient. Are there any indicators of, you know, accelerating cost inflation or, you know, perking its head up? No. I mean, as of now, as of Q2, you know, both input costs and price are very much in line with what we guided to the beginning of the year. So it's pretty stable. And, you know, we continue going with our usual price increases. And so, of course, there'll be some negotiation, as there always is. But we're confident in a point of price. Great. You know, you mentioned not really embedding some kind of underlying demand improvement, you know, in the back half. Maybe can you help us better understand the end market dynamics around, you know, some of the weakness you called out in semi and EV and the different hybrid markets? How do we or how do you think about the setup for demand improvement maybe moving past this year into 2025? Sure. Before that, let me just clarify what I meant about Q4. So it's really the demand on our machine builders is healthy. The demand on us is suppressed because of that extra excess inventory. As that inventory gets burned through Q3 and parts of Q4, you know, at most of our machine builders, not all of them, we'll see more of that come through to us. So I would say Q4 is much closer to reflecting that underlying demand because there's less and less excess inventory in between, right, kind of distorting the numbers. We're not fully there yet because there's still some excess inventory, I think, even at the end of Q4. But the majority will be kind of worked through. So we're close to kind of orders representing what's really happening at the end user, not quite. And then it being passed on to our sales just because we don't have those component issues or supply chain issues anymore, right? So in Q4, we're going to get closer to that, not quite there. But my point was, you know, on our call yesterday, on our earnings call, we talked about, you know, broadly, you know, demand is good. But there are some pockets of softness and delay we've been hearing about, right? So there's parts of CPG, especially in Europe, where there is some softness from an end user kind of CapEx standpoint. And we talked about automotive. You know, while nothing is being canceled on the EV side, you know, some start of production dates have been pushed out. My point was in Q4, our inflection in orders than sales, accordingly, does not reflect some kind of a heroic improvement in those two end markets. That was my point. Now, if you look at going forward, we are very confident in our positioning across a lot of those end markets. You know, Blake talked about it yesterday. We're getting these multimillion-dollar wins in this pipeline across many end markets. And it's not necessarily tied to the stimulus. That also will help as well. But a lot of these mega projects or big spend is really about labor shortage, higher labor costs. People really want to be much more just optimize their operations, have more visibility. And that's going to help across automotive, food and beverage, life sciences, semiconductor warehouse. We actually saw a lot of wins with logistics and shipping customers in the quarter. So it's really broad-based in terms of that spend. Now, the timing of the CapEx, for example, semiconductor, right, in terms of what's happening with the timing of when it's going to happen, we'll talk about it as we get to the end of this fiscal year. I guess I would add one thing. You know, my business does do a lot of direct business. So we have a good gauge on end market demands through our project business, as well as then my MRO side, right, servicing that. I would say Lifecycle Services is seeing a continued, robust, healthy funnel and front log of opportunity across a lot of industries, across all the industries we serve. So we have a good pulse on there is steady demand and growing demand. We've seen, as Aijana said, some push-outs of some mega projects like EV, obviously notable. Some of the semicon has been delayed in terms of like breaking ground. So we have line of sight to those as well. So I think the combination of what was said yesterday in terms of excess inventory of machine builders, that there is pretty steady demand out there across the board. I have, you know, my business would be sort of the bellwether internal in terms of, hey, is there something happening that we're seeing a fluctuation or is there a dip in demand? And it's quite healthy at this point. Right. A follow-up to that is for both of you, but Matt certainly would like your perspective here. We've seen a number of CHIPS projects awarded funding, right, in the last quarter. And, you know, this has been a strength historically for the company, semi, right? So talk to us about the sales cycle and the timing cycle from funding announcements to orders and orders to revenue, you know, how you think about that timing and how you think about the revenue opportunity. I think it's a good example of mega projects that are actually moving, right? So. Yeah, they're definitely moving. You know, in general, our opportunity is bigger than it has before because you have more content, right? Between our traditional facilities, quality management systems, now with what we're doing with our iTRAK type solutions to move wafers around. And now our digital and cyber offerings, we're engaging earlier in that sales cycle. If you think about it, like you'd have to get permits. You'd have to acquire the ground. You got to build a facility. You got to get power to that facility, which are all long lead items these days, before you even get to your automation decision. So we're engaged much earlier in that sales cycle. I think we're gaining a share of wallet because we are helping them digitally emulate what that factory is going to look like, make their decisions maybe before they spend the money, like we were saying earlier on the digital upfront consulting standpoint, work with them the cyber decisions before we even get into the contents of that factory. But what we're seeing is there's been delays in many, one, funding being released from governments, three, permitting, and then the what I'll call the craft skills shortage in a lot of industries to actually build the facilities and then build up the industries around these facilities. We definitely have seen somewhat delays happen up in there, but very confident in terms of where we're positioned in those pursuits, being able to engage higher and earlier than ever before. Yeah. And power availability too, right, starting to become a little bit of a gating factor. I'd be curious to know how you position Rock to help, you know, solve that thorny challenge, but it's coming across with all of these big mega projects and certainly things like data centers. So would love your perspective on that issue. I think that is a gating factor currently in a lot of greenfields today: power. Some of the early decision-making capital that's spent there is, you know, when you have lead times that are north of a year for some of that content, it's delaying a lot of things downstream of it. But we've seen that across the board. I actually have a friend in the real estate industry who contacted me because of that very problem. They're seeing it across multiple issues, not just industrial. It's a good time to be in the switchgear business. All right. So I want to talk a little bit about, you know, cost actions because I see you announced a suite of accelerating cost actions yesterday. Could we just take another pass through the levers of cost reduction and understand what is really driving structural cost savings, you know, carrying on into next year? Yeah, sure. So yesterday, we talked about $100 million of cost reduction actions or benefits that are going to help us in the second half of this fiscal year. A lot of that is structural. So we talked about reduction in force. And a lot of it is in SG&A. So Blake talked about some examples in, you know, sales and marketing, you know, really focusing on prioritizing areas of highest growth, right? And so whether it's regions or particular products, there's some also on the operation side, just, you know, kind of aligning with where we are for this year and flexing to that. But a lot of that spend is, you know, a lot of those benefits are going to help us next year. So incrementally, we talked about another $120 million of savings in fiscal 2025 from these actions we, you know, we're taking here in the second half. And that's just before we talk about something broader in terms of the bigger productivity initiative we're working on and we'll talk about it next quarter. So $100 million, by the way, that's the same thing that's the investment spend bucket that we talk about that's reducing now by $100 million. Those are aligned. And so a lot of those actions we accelerated just given we're, you know, the lower outlook on orders for this year. But it's something we were already planning and contemplating as part of our longer-term margin expansion target. You know, we talked about it at Investor Day. Remember, we kind of outlined margin targets by business segment. A big part of it was, in addition to growth, productivity, execution, right, and focus on that. So that's all part of it, but we did kind of pull it in sooner given the environment and our lower outlook. I would say a big part of that $100 million that we are going to have realized in second half is going to be here for quite some time. It's structural. You know, and you mentioned you're going to give more details next quarter, but just help us understand what kind of opportunities you're focused on with respect to things like, you know, flexibility between SKUs, leaning inventory, capacity planning, the overall sort of, you know, manufacturing footprint of the company and how that can be leaned out from here. And I ask in the spirit of this is a company whose offerings, you know, are largely geared towards driving efficient manufacturing. So I know you've had a lot of time to think about this. And it seems like this is the moment to be implementing more action. So any details you can give us would be helpful. Yeah. I mean, we've alluded to some of the examples. So for example, in Intelligent Devices, we have so many thousands of SKUs, right? So can we have more of a simplified SKU initiative or, you know, SKU rationalization? Can we look at how we approach direct spend? How do we approach sourcing and opportunities to reduce spend there? Continue to look at manufacturing and where there's opportunity to leverage some technology and synergies. So it's really broad. You know, it's something, again, we'll talk about it next quarter. So I don't want to talk too much about it, but there's a lot of opportunity to optimize our cost structure. It's not us just reacting to a near-term decline in orders because of the destocking. It's truly there's an opportunity to make us much more, you know, productive and agile and prepared for what's next. Well, we look forward to more of that. I believe we're at time, but I do want to thank you both for the thoughtful discussion. We look forward to more meetings with investors throughout the day. For those of you who have joined us, thank you for your time. We hope you have a great conference. Take care, everyone. Thank you. Thank you.