Rockwell Automation Reports Third Quarter Fiscal 2020 Results and Announces New Operating Segments Beginning in Fiscal 2021

• Reported sales down 16.3 percent year over year; organic sales down 17.6 percent
• Inorganic investments contributed 3 percent to reported sales
• Diluted EPS of $2.73; Adjusted EPS of $1.27
• Liquidity position further enhanced by strong cash flow generation
• Updating fiscal 2020 Diluted EPS guidance to $8.06 – $8.26 and Adjusted EPS guidance to $7.40 – $7.60
• New operating segments effective Q1 fiscal 2021 to drive simplification and accelerate profitable growth

MILWAUKEE–(BUSINESS WIRE)–Rockwell Automation, Inc. (NYSE: ROK) today reported third quarter fiscal 2020 results.

Commenting on the third quarter results and current business conditions, Blake Moret, Chairman and CEO, said “We continue to build resiliency for ourselves and for our customers. Year-over-year results are down, and conditions remain difficult, but our employees have responded extraordinarily well, and we remain focused on keeping them safe. Our earnings were higher than expected for the quarter, primarily driven by better organic sales.”

Moret also announced, “We are taking the next step in accelerating profitable growth by organizing our business in a way that better aligns us with the evolving needs of our customers. Beginning next fiscal year, we will operate with three operating segments – Intelligent Devices, Software & Control, and Lifecycle Services. These new segments will simplify our structure around essential offerings, leverage our sharpened industry focus, and add software talent, which will play a larger role in our future value.”

Moret continued, “We are confident that this model will enable us to provide even more value. Nobody is better positioned to bring Information Technology (IT) and industrial Operational Technology (OT) together than Rockwell and our partners.”

“This change builds on our success and accelerates our progress to bring the Connected Enterprise to life. It’s the right time to make these changes, as we strengthen the resilience of our business model. Our growth framework remains gaining share in our core, growing double digits in information solutions and connected services, and adding a point or more of growth through inorganic investments.”

Fiscal 2020 Q3 Financial Results

Fiscal 2020 third quarter sales were $1,394.0 million, down 16.3 percent from $1,665.1 million in the third quarter of fiscal 2019. Organic sales declined 17.6 percent, currency translation decreased sales by 1.9 percentage points, and acquisitions increased sales by 3.2 percent.

Fiscal 2020 third quarter net income attributable to Rockwell Automation was $317.8 million or $2.73 per share, compared to $261.4 million or $2.20 per share in the third quarter of fiscal 2019. The increases in net income attributable to Rockwell Automation and EPS were primarily due to fair-value adjustments recognized in the third quarter of fiscal 2020 and 2019 in connection with our investment in PTC (the “PTC adjustments”), partially offset by lower sales. Fiscal 2020 third quarter Adjusted EPS was $1.27, down 47 percent compared to $2.40 in the third quarter of fiscal 2019, primarily due to lower sales. These results include restructuring charges of approximately $15 million, which are offset by a one-time gain from the sale of an asset.

Pre-tax margin was 24.0 percent in the third quarter of fiscal 2020 compared to 19.3 percent in the same period last year. The increase in pre-tax margin was primarily due to the PTC adjustments partially offset by lower sales volume leverage.

Total segment operating margin was 16.5 percent compared to 23.8 percent a year ago. The decrease in total segment operating margin was primarily due to lower sales. Total segment operating earnings were $229.4 million in the third quarter of fiscal 2020, down 42.1 percent from $395.9 million in the same period of fiscal 2019.

Cash flow provided by operating activities in the third quarter of fiscal 2020 was $346.2 million, compared to $351.2 million in the third quarter of fiscal 2019. Free cash flow was $310.9 million, compared to $323.4 million in the third quarter of fiscal 2019.

Outlook

The COVID-19 pandemic and global efforts to respond to it are rapidly evolving. Our projections assume that a gradual recovery continues, with no increase in pandemic-related facility closures or disruptions to the supply chain.

Based on the information available to us at the time of this release, the following table provides guidance for projected sales growth and earnings per share for fiscal 2020:

¹Estimate for incremental sales resulting from the formation of the Sensia joint venture and sales from other acquired businesses in fiscal year 2020.

“While we, as a company, are managing well in this environment, we are highly sensitive to the toll this is taking on our employees during this time. Beyond the fear of a loved one getting sick, racial injustice is on our minds as we develop actions as a company and as individuals that will help put a permanent end to the denial of fundamental human rights. Additionally, thousands of employees continue to work under very difficult conditions, including the temporary pay cuts we implemented in May. These actions were necessary to better align our costs to current business conditions while preserving jobs, and we intend to reverse them by the end of December, hopefully sooner. Additionally, we are making another recognition payment to our manufacturing associates worldwide, who are on the front lines of maintaining our essential operations,” Moret concluded.

Architecture & Software

Architecture & Software quarterly sales were $621.4 million, a decrease of 16.9 percent compared to $747.9 million in the same period last year. Organic sales decreased 15.9 percent, currency translation decreased sales by 1.8 percentage points, and an acquisition increased sales by 0.8 percentage points. Segment operating earnings were $147.8 million compared to $222.9 million in the same period last year. Segment operating margin decreased to 23.8 percent from 29.8 percent a year ago.

Control Products & Solutions

Control Products & Solutions quarterly sales were $772.6 million, a decrease of 15.8 percent compared to $917.2 million in the same period last year. Organic sales decreased 18.9 percent, currency translation decreased sales by 2.0 percent, and inorganic investments increased sales by 5.1 percent. Segment operating earnings were $81.6 million compared to $173.0 million in the same period last year. Segment operating margin decreased to 10.6 percent from 18.9 percent a year ago.

Supplemental Information

General Corporate Net – Fiscal 2020 third quarter general corporate-net expense was $26.4 million compared to $23.8 million in the third quarter of fiscal 2019. The increase was primarily due to benefit-related adjustments.

Purchase Accounting Depreciation and Amortization – Fiscal 2020 third quarter purchase accounting depreciation and amortization expense was $10.6 million, up $6.5 million from the third quarter of fiscal 2019, resulting in a year-over-year decrease in Adjusted EPS of $0.03.

Tax – On a GAAP basis, the effective tax rate in the third quarter of fiscal 2020 was 6.1 percent compared to 18.7 percent in the third quarter of fiscal 2019. The lower effective tax rate in the third quarter of fiscal 2020 was primarily due to the PTC adjustments. The Adjusted Effective Tax Rate for the third quarter of fiscal 2020 was 13.6 percent compared to 17.3 percent in the prior year. The lower Adjusted Effective Tax Rate in 2020 is primarily due to discrete items.

Share Repurchases – During the third quarter of fiscal 2020, the Company repurchased 0.3 million shares of its common stock at a cost of $48.5 million. At June 30, 2020, $853.7 million remained available under our existing share repurchase authorization.

ROIC – Return on invested capital was 27.9 percent.

Non-GAAP Measures – Organic sales, total segment operating earnings, total segment operating margin, Adjusted Income, Adjusted EPS, Adjusted Effective Tax Rate, free cash flow, and return on invested capital are non-GAAP measures that are reconciled to GAAP measures in the attachments to this release.

New Operating Segments

Beginning in fiscal year 2021, the company will report revenue and operating earnings based on three operating segments: Intelligent Devices, Software & Control, and Lifecycle Services. This change simplifies our structure around essential offerings, leverages our sharpened industry focus, and recognizes the growing importance of software in delivering value to our customers.

The Intelligent Devices segment will be led by Fran Wlodarczyk, currently the Senior Vice President of our Architecture & Software segment, and will include drives, motion, safety, sensing, industrial components, and configured-to-order products.

The Software and Control segment will be led on an interim basis by Chris Nardecchia, currently Senior Vice President of Information Technology and Chief Information Officer, while an external search is conducted for a new Senior Vice President for this segment. This segment will include control and visualization software and hardware, information software, and network and security infrastructure.

The Lifecycle Services segment will be led by Frank Kulaszewicz, currently Senior Vice President of our Control Products & Solutions segment, and will include consulting, professional services, connected services, and maintenance services, as well as the Sensia joint venture with Schlumberger.

In addition, to accelerate the evolution of our culture, Becky House has taken the role of Chief Administrative and Legal Officer, which includes leadership of our talent, legal, ethics and compliance, and environmental, health and safety teams.

Rockwell will begin to operate under the new segment structure effective Q1 fiscal 2021. Rockwell expects to announce its financial results for the fiscal first quarter in late January 2021 and will report financial performance based on these three operating segments. To aid investors with the transition, revenue and segment operating earnings for fiscal 2019-2020 will be provided by our fiscal Q4 2020 earnings call.

Conference Call

A conference call to discuss the quarterly results will be held at 8:30 a.m. Eastern Time on Tuesday, July 28, 2020. The call will be an audio webcast and accessible on the Rockwell Automation website (https://www.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: (833) 714-0916 in the U.S. and Canada; +1 778-560-2692 for other countries. Use the following passcode: 9504159. 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 August 29, 2020.

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

• the severity and duration of disruptions to our business due to pandemics, including the COVID-19 pandemic, natural disasters, acts of war, strikes, terrorism, social unrest or other causes, including the impacts of the COVID-19 pandemic and efforts to manage it on the global economy, liquidity and financial markets, demand for our hardware and software products, solutions and services, our supply chain, our work force, our liquidity and the value of the assets we own;
• macroeconomic factors, including global and regional business conditions (including adverse impacts in certain markets, such as Oil & Gas), the availability and cost of capital, commodity prices, the cyclical nature of our customers’ capital spending, sovereign debt concerns and currency exchange rates;
• laws, regulations and governmental policies affecting our activities in the countries where we do business, including those related to tariffs, taxation, and trade controls;
• the availability and price of components and materials;
• the successful execution of our cost productivity initiatives;
• the availability, effectiveness and security of our information technology systems;
• our ability to manage and mitigate the risk related to security vulnerabilities and breaches of our hardware and software products, solutions and services;
• the successful development of advanced technologies and demand for and market acceptance of new and existing hardware and software products;
• our ability to manage and mitigate the risks associated with our solutions and services businesses;
• competitive hardware and software products, solutions and services and pricing pressures, and our ability to provide high quality products, solutions and services;
• disruptions to our distribution channels or the failure of distributors to develop and maintain capabilities to sell our products;
• the successful integration and management of strategic transactions and achievement of the expected benefits of these transactions;
• intellectual property infringement claims by others and the ability to protect our intellectual property;
• the uncertainty of claims by taxing authorities in the various jurisdictions where we do business;
• our ability to attract, develop, and retain qualified personnel;
• the uncertainties of litigation, including liabilities related to the safety and security of the hardware and software products, solutions and services we sell;
• risks associated with our investment in common stock of PTC Inc., including the potential for volatility in our reported quarterly earnings associated with changes in the market value of such stock;
• our ability to manage costs related to employee retirement and health care benefits; and
• other risks and uncertainties, including but not limited to those detailed from time to time in our Securities and Exchange Commission (SEC) filings.

Rockwell Automation, Inc. (NYSE: ROK), is a global leader in industrial automation and digital transformation. We connect the imaginations of people with the potential of technology to expand what is humanly possible, making the world more productive and more sustainable. Headquartered in Milwaukee, Wisconsin, Rockwell Automation employs approximately 23,000 problem solvers dedicated to our customers in more than 100 countries. To learn more about how we are bringing The Connected Enterprise to life across industrial enterprises, visit www.rockwellautomation.com.

¹Total segment operating earnings and total segment operating margin are non-GAAP financial measures. We exclude purchase accounting depreciation and amortization, general corporate – net, non-operating pension and postretirement benefit (cost) credit, gains and losses on investments, valuation adjustments related to the registration of PTC Shares, interest (expense) income – net and income tax provision because we do not consider these costs to be directly related to the operating performance of our segments. We believe total segment operating earnings and total segment operating margin are useful to investors as measures of operating performance. We use these measures to monitor and evaluate the profitability of our operating segments. Our measures of total segment operating earnings and total segment operating margin may be different from measures used by other companies.

²Adjusted EPS is a non-GAAP earnings measure that excludes non-operating pension and postretirement benefit (cost) credit, net income (loss) attributable to noncontrolling interests, gains and losses on investments, and valuation adjustments related to the registration of PTC Shares, including their respective tax effects. See “Other Supplemental Information – Adjusted Income, Adjusted EPS and Adjusted Effective Tax Rate” section for more information regarding non-operating pension and postretirement benefit (cost) credit and a reconciliation to GAAP measures.

¹ In the three months ended June 30, 2020, Selling, general and administrative expenses included approximately $30 million associated with restructuring charges and the impact of acquisitions made in fiscal 2020. In the nine months ended June 30, 2019, Selling, general and administrative expenses included approximately $60 million associated with restructuring charges and the impact of acquisitions made in fiscal 2020.

²In the three and nine months ended June 30, 2020, Change in fair value of investments included a $175.5 million gain and a $101.7 million gain, respectively, due to the change in value of our investment in PTC. In the three months ended June 30, 2019, Change in fair value of investments included a $25.6 million loss due to the change in value of our investment in PTC, and in the nine months ended June 30, 2019, Change in fair value of investments included a $173.8 million loss due to the change in value of our investment in PTC and a $33.7 million gain due to the valuation adjustments related to the registration of PTC Shares.

³In the nine months ended June 30, 2019, income tax provision included the tax effects on the PTC adjustments.

¹In the nine months ended June 30, 2020, Change in fair value of investments included a $101.7 million gain due to the change in value of our investment in PTC. In the nine months ended June 30, 2019, Change in fair value of investments included a $173.8 million loss due to the change in value of our investment in PTC and a $33.

Contacts

Kolve Byrd

Media Relations

Rockwell Automation

414.382.5465

Jessica Kourakos

Investor Relations

Rockwell Automation

414.382.8510

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