Rockwell Automation, Inc. reported first quarter fiscal 2022 results.
"Rockwell had an excellent start to fiscal 2022, with first quarter sales up 18.7% and orders up over 40% to a quarterly record of $2.5 billion. All three business segments delivered double-digit sales growth and continued exceptional execution in this challenging supply chain environment," said Blake Moret, Chairman and CEO.
Fiscal 2022 Q1 Financial Results
Fiscal 2022 first quarter sales were $1,857 million, up 18.7% from $1,565 million in the first quarter of fiscal 2021. Organic sales increased 16.8%, currency translation decreased sales by 0.7%, and acquisitions increased sales by 2.6%.
Fiscal 2022 first quarter net income attributable to Rockwell Automation was $242 million or $2.05 per share, compared to $593 million or $5.06 per share in the first quarter of fiscal 2021. The decreases in net income attributable to Rockwell Automation and Diluted EPS were primarily due to lower fair value gains in fiscal 2022 versus fiscal 2021 in connection with our investment in PTC (the "PTC adjustments"). Fiscal 2022 first quarter Adjusted EPS was $2.14, down 10.1% compared to $2.38 in the first quarter of fiscal 2021. First quarter of fiscal 2021 included a non-recurring legal settlement gain of $0.45. Adjusted EPS was up 11% year over year excluding the prior year non-recurring legal settlement gain.
Pre-tax margin was 15.2% in the first quarter of fiscal 2022 compared to 44.8% in the same period last year. The decrease in pre-tax margin was primarily due to the PTC adjustments.
Total segment operating earnings were $355 million in the first quarter of fiscal 2022, up 14.8% from $309 million in the same period of fiscal 2021. Total segment operating margin was 19.1% compared to 19.8% a year ago. The decrease in margin was primarily driven by higher planned spend and negative price/cost, partially offset by higher sales.
Cash flow generated by operating activities in the first quarter of fiscal 2022 was $(12) million, compared to $347 million in the first quarter of fiscal 2021. Free cash flow in the first quarter of fiscal 2022 was $(49) million, compared to $319 million in the same period last year. Decreases in cash flow from operating activities and free cash flow were due to the payout of the fiscal 2021 bonus in fiscal 2022, higher working capital and timing of income tax payments.
Fiscal Year 2022 Outlook
The table below provides guidance for sales growth and earnings per share for fiscal 2022. Our guidance reflects strong demand as well as record backlog. Supply chain challenges remain dynamic, and our projections assume gradual improvement over the course of the year.
|
Guidance |
Prior Guidance |
||
|
Reported sales growth |
16% - 19% |
16% - 19% |
|
|
Organic sales growth |
14% - 17% |
14% - 17% |
|
|
Inorganic sales growth |
~2% |
~2% |
|
|
Currency translation |
~0% |
~0% |
|
|
Diluted EPS1 |
$10.01 - $10.61 |
$9.91 - $10.51 |
|
|
Adjusted EPS |
$10.50 - $11.10 |
$10.50 - $11.10 |
|
1Updated to include changes in purchase accounting amortization and the Q1 impact of the change in fair value of our investments, primarily PTC. |
"We expect very strong growth this year, with total sales up 17.5% at the midpoint of our guidance range despite significant supply chain constraints. I'm proud of how our teams are not only mitigating these challenges, but also taking our profitable growth to a whole new level," Moret continued.
Following is a discussion of first quarter results for our business segments.
Intelligent Devices
Intelligent Devices first quarter fiscal 2022 sales were $900 million, an increase of 24.7% compared to $722 million in the same period last year. Organic sales increased 25.6% and currency translation decreased sales by 0.9%. Segment operating earnings were $213 million compared to $140 million in the same period last year. Segment operating margin increased to 23.7% from 19.4% a year ago, primarily due to higher sales, partially offset by negative price/cost.
Software & Control
Software & Control first quarter fiscal 2022 sales were $514 million, an increase of 16.5% compared to $441 million in the same period last year. Organic sales increased 8.4%, currency translation decreased sales by 0.7%, and acquisitions increased sales by 8.8%. Segment operating earnings were $118 million compared to $133 million in the same period last year. Segment operating margin decreased to 22.9% from 30.2% a year ago, driven by higher planned spend, the impact of acquisition integration costs, and negative price/cost, partially offset by higher sales.
Lifecycle Services
Lifecycle Services first quarter fiscal 2022 sales were $443 million, an increase of 10.1% compared to $403 million in the same period last year. Organic sales increased 10.3%, currency translation decreased sales by 0.6%, and an acquisition increased sales by 0.4%. Segment operating earnings were $24.5 million compared to $36.0 million in the same period last year. Segment operating margin decreased to 5.5% from 8.9% a year ago, primarily related to higher planned spend, unfavorable project mix, and higher input costs, partially offset by higher sales.
Supplemental Information
Corporate and Other - Fiscal 2022 first quarter corporate and other expense was $29.4 million compared to $28.0 million in the first quarter of fiscal 2021.
Purchase Accounting Depreciation and Amortization - Fiscal 2022 first quarter purchase accounting depreciation and amortization expense was $26.1 million, up $14.4 million from the first quarter of fiscal 2021.
Tax - On a GAAP basis, the effective tax rate in the first quarter of fiscal 2022 was 15.4% compared to 15.8% in the first quarter of fiscal 2021. The Adjusted Effective Tax Rate for the first quarter of fiscal 2022 was 15.3% compared to 15.4% in the prior year.
Share Repurchases - During the first quarter of fiscal 2022, the Company repurchased approximately 0.2 million shares of its common stock at a cost of $49.4 million. At December 31, 2021, $503 million remained available under our existing share repurchase authorization.
ROIC - Return on invested capital was 20.6%.
Non-GAAP Measures - Organic sales, total segment operating earnings, total segment operating margin, Adjusted Income, Adjusted EPS, Adjusted Effective Tax Rate, free cash flow, free cash flow conversion, and return on invested capital are non-GAAP measures that are reconciled to GAAP measures in the attachments to this release.
Organic ARR - Annual recurring revenue (ARR) is a key metric that enables measurement of progress in growing our recurring revenue business. It represents the annual contract value of all active recurring revenue contracts at any point in time. Recurring revenue is defined as a revenue stream that is contractual, typically for a period of 12 months or more, and has a high probability of renewal. The Probability of renewal is based on historical renewal experience of the individual revenue streams, or management best estimates if historical renewal experience is not available. Organic ARR growth is calculated as the dollar change in ARR, adjusted to exclude the effects of currency translation and acquisitions, divided by ARR as of the prior period. The effects of currency translation are excluded by calculating Organic ARR on a constant currency basis. When we acquire businesses, we exclude the effect of ARR in current period for which there was no comparable ARR in the prior period. Organic ARR growth is also used as a financial measure of performance for our annual incentive compensation. Because ARR is based on annual contract value, it does not represent revenue recognized during a particular reporting period or revenue to be recognized in future reporting periods and is not intended to be a substitute for revenue, contract liabilities, or backlog.
Conference Call
A conference call to discuss the quarterly results will be held at 8:30 a.m. Eastern Time on January 27, 2022. The call will be an audio webcast and accessible on the Rockwell Automation website. Presentation materials will also be available on the website prior to the call.
Interested parties can access the conference call by dialing the following numbers: (888) 330-2022 in the U.S. and Canada; (646) 960-0690 for other countries. Use the following passcode: 5499533. Please dial in 10 minutes prior to the start of the call.
Both the presentation materials and a replay of the call will be available on the Investor Relations section of the Rockwell Automation website through February 27, 2022.
