Rockwell Automation, Inc. (NYSE:ROK) Q3 2023 Earnings Call Transcript

Nick Gangestad: Yes. And Julian, to frame it up a little in the way you asked the question where pre-pandemic backlog closer to 20% of our revenue and more recently this year where we’re around 50% or higher than 50%. I don’t – based on the things Blake was just describing, I don’t think it will go back down to 20%. But something in the 30% or low 30s percent. I think that’s a reasonable estimation right now for us, Julian, of where to think where our backlog is in a more normal state.

Julian Mitchell: That’s very helpful. Thanks. And I appreciate it’s very difficult to call. Thank you for the thoughts. Maybe on the areas or markets where you’re seeing or expecting the most severe orders normalization, do we assume it’s mostly discrete markets globally? I think China, there’s obviously some orders pressure that your peers have talked about, but is it sort of a global phenomenon across various discrete markets? Is that the way to think about it?

Blake Moret: Yes. I think it’s the phenomenon that we described with machine builders, which is not exclusively in discrete. We have a good business with skilled OEMs, process machine builders as well, but they’re buying product. It’s less weighted towards engineered solutions. So I think that’s where you’ve seen that phenomenon as they were placing orders for a year or sometimes more of their machine coverage, and they don’t need to do that anymore. And so they’re looking at opportunities to improve their cash flow, get the existing equipment out as the constrained products from us deliver and then to fill their forward machine needs with smaller orders because they can depend more on the lead times.

Julian Mitchell: Great, thank you.

Blake Moret: Yes, thank you.

Operator: Our next question comes from Jeff Sprague from Vertical Research. Please go ahead. Your line is open.

Jeff Sprague: Thank you. Good morning. Hello, everyone.

Blake Moret: Hi, Jeff.

Nick Gangestad: Good morning, Jeff.

Jeff Sprague: Good morning. Sorry if I missed it. I was on a few minutes late, but a lot of talk about future backlog. But could you just square us up on where the backlog actually ended in the quarter, and also kind of what the price volume complexion was in the actual quarter?

Nick Gangestad: Jeff, I’ll take the second part of your question first. Of our 13% organic growth, 10% of that was volume and 3% of that was price. And it was very much like as we expected. This was the quarter where we are starting to lap ourselves against the more significant price increases that we were realizing in the second half of our fiscal year 2022. In terms of the backlog, we haven’t put out a specific number on it, Jeff. It did come down some in Q3, and we expect it to come down further in Q4 to that $4.5 billion to $5 billion range. But we haven’t put a specific number on that, partly weaning ourselves off of like frequent updates on all of that, but giving you a trend of where that’s going.

Jeff Sprague: Okay. Great. Yes, it’s just helpful to have the anchor if we’re going to talk about the future, right. So we can all relate to that in future conversations, but I get it. And then just on investment spending, is there actually a change in the year outlook on how you’ll – the level of investment spending or just a timing between quarters?

Nick Gangestad: Jeff, investment spend is staying almost exactly where we’ve been expecting, both for the year and by quarter actually. It’s very, very much following our plan.

Jeff Sprague: Okay, great. I’ll leave it there. Thank you, guys. Appreciate it.

Blake Moret: Thanks, Jeff.

Operator: Our next question comes from Andrew Obin from Bank of America. Please go ahead. Your line is open.

Andrew Obin: Hi, guys, good morning. Can you hear me?

Blake Moret: Yes, Andrew.

Nick Gangestad: Hey, Andrew.