Rockwell Automation, Inc. reported first quarter fiscal 2023 results.
“Our strong execution and continued focus on supply chain resiliency helped Rockwell exceed our expectations in the quarter, with earnings growing double digits year over year. In addition to a gradually improving supply chain environment, we are encouraged by the continued strength of our customers’ demand across all business segments and regions,” said Blake Moret, Chairman and CEO.
Fiscal Q1 2023 Financial Results
Fiscal 2023 first quarter sales were $1,981 million, up 6.7% from $1,857 million in the first quarter of fiscal 2022. Organic sales increased 9.9%, currency translation decreased sales by 4.0%, and acquisitions increased sales by 0.8%.
Fiscal 2023 first quarter Net income attributable to Rockwell Automation was $384 million or $3.31 per share, compared to $242 million or $2.05 per share in the first quarter of fiscal 2022. The increases in Net income attributable to Rockwell Automation and diluted EPS are primarily due to fair value adjustments recognized in fiscal 2023 and fiscal 2022 in connection with our investment in PTC (the "PTC adjustments"). Fiscal 2023 first quarter adjusted EPS was $2.46, up 15% compared to $2.14 in the first quarter of fiscal 2022 primarily due to higher sales, partially offset by higher input costs.
Pre-tax margin was 23.6% in the first quarter of fiscal 2023 compared to 15.2% in the same period last year. The increase in pre-tax margin was primarily due to the PTC adjustments.
Total segment operating earnings were $401 million in the first quarter of fiscal 2023, up 12.9% from $355 million in the same period of fiscal 2022. Total segment operating margin was 20.2% compared to 19.1% a year ago primarily due to positive price/cost and higher sales volume partially offset by higher investment spend.
Cash flow generated by operating activities in the first quarter of fiscal 2023 was $66.3 million, compared to $(12.0) million in the first quarter of fiscal 2022. Free cash flow in the first quarter of fiscal 2023 was $42.1 million, compared to $(49.1) million in the same period last year. Increases in cash flow provided by operating activities and free cash flow were primarily driven by higher pre-tax income.
Fiscal Year 2023 Outlook
The table below provides guidance for sales growth and earnings per share for fiscal 2023. Our updated guidance reflects first quarter performance and record backlog. It also assumes a gradually improving supply chain environment.
|
Updated Guidance |
Prior Guidance |
||
|
Reported sales growth |
10.0% - 14.0% |
7.5% - 11.5% |
|
|
Organic sales growth |
11.0% - 15.0% |
9.0% - 13.0% |
|
|
Inorganic sales growth |
~1.0% |
~1.0% |
|
|
Currency translation |
~(2.0)% |
~(2.5)% |
|
|
Diluted EPS |
$10.99 - $11.79 |
$9.54 - $10.34 |
|
|
Adjusted EPS |
$10.70 - $11.50 |
$10.20 - $11.00 |
"Automation has never been more important in solving our customers’ greatest challenges, and Rockwell is front and center as a trusted partner in these dynamic times. We look forward to another year of delivering strong growth and new customer value," Moret continued.
Following is a discussion of first quarter results for our business segments.
Intelligent Devices
Intelligent Devices first quarter fiscal 2023 sales were $936 million, an increase of 4.0% compared to $900 million in the same period last year. Organic sales increased 6.6%, currency translation decreased sales by 4.1%, and the acquisition of CUBIC increased sales by 1.5%. Segment operating earnings were $209 million compared to $213 million in the same period last year. Segment operating margin decreased to 22.4% from 23.7% a year ago. The decrease from prior year includes higher investment spend, and an unfavorable currency impact, partially offset by the positive impact from higher price/cost.
Software & Control
Software & Control first quarter fiscal 2023 sales were $573 million, an increase of 11.6% compared to $514 million in the same period last year. Organic sales increased 15.5% and currency translation decreased sales by 3.9%. Segment operating earnings were $167 million compared to $118 million in the same period last year. Segment operating margin increased to 29.2% from 22.9% a year ago, driven by positive price/cost, the favorable year-over-year impact of Plex, and higher sales.
Lifecycle Services
Lifecycle Services first quarter fiscal 2023 sales were $472 million, an increase of 6.4% compared to $443 million in the same period last year. Organic sales increased 10.2%, currency translation decreased sales by 4.2%, and acquisitions increased sales by 0.4%. Segment operating earnings were $24.3 million compared to $24.5 million in the same period last year. Segment operating margin decreased to 5.2% from 5.5% a year ago.
Supplemental Information
ARR - Organic ARR grew 14% compared to the end of the first quarter of fiscal 2022.
Corporate and other - Fiscal 2023 first quarter Corporate and other expense was $27.3 million compared to $29.4 million in the first quarter of fiscal 2022.
Purchase accounting depreciation and amortization - Fiscal 2023 first quarter Purchase accounting depreciation and amortization expense was $26.0 million, down $0.1 million from the first quarter of fiscal 2022.
Tax - On a GAAP basis, the effective tax rate in the first quarter of fiscal 2023 was 19.1% compared to 15.4% in the first quarter of fiscal 2022. The adjusted effective tax rate for the first quarter of fiscal 2023 was 17.1% compared to 15.3% in the prior year.
Share repurchases - During the first quarter of fiscal 2023, the Company repurchased approximately 0.6 million shares of its common stock at a cost of $156 million. At December 31, 2022, $1.1 billion remained available under our existing share repurchase authorization.
Return on Invested Capital (ROIC) - ROIC was 16.8% for the twelve months ended December 31, 2022 compared to 20.6% for the twelve months ended December 31, 2021. The decrease is driven by higher invested capital and discrete one-time tax benefits in the prior year partially offset by higher pre-tax income.
Conference Call
A conference call to discuss the quarterly results will be held at 8:30 a.m. Eastern Time on January 26, 2023. The call will be an audio webcast and accessible on the Rockwell Automation website (https://ir.rockwellautomation.com/investors/). 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 26, 2023.
