Blake Moret: Yes. I think that would contemplate push outs that turn into cancellations quite frankly, whereas if a project is pushed by a couple of months, it’s not going to have a big impact in the year. But if some of those projects or a larger amount of those projects rolled over into deferrals or cancellations, if people said [indiscernible] just kidding about EV, we don’t need to build out the semiconductor industry process, which is 35% of our business, if people aren’t looking to increase energy, both hydrocarbon and renewable energy forms in the U.S. If we saw a significant reduction of those projects, I think that would contribute to that minus — that downside part of the range.
Andrew Obin: Got you. And just to follow up, ARR of 16%, which is pretty decent for an industrial software company, nice exit rate. So what kind of software growth is embedded? What kind of ARR assumptions are in your ’24 forecast? Thank you.
Blake Moret: Yes, we’re looking at 15% ARR. And we’re very proud of that ARR number, because it’s broad based. It’s not just the newer acquisitions like Plex and Fiix, but it’s our traditional offerings as well, some of the on-prem software. And as we go through the year, based on overall Rockwell, we do expect ARR to increase to above 9% of our total sales in the year. It’s a combination, both of the software as well as the high value recurring services. We made some organizational changes to supercharge that area. And that along with some of the new developments and offerings that we have, make us very optimistic about the contribution that ARR is going to have to our overall growth. And obviously, we like the resiliency that it gives our results by not starting each year at zero with respect to software sales.
Andrew Obin: Thanks so much.
Blake Moret: Thanks, Andrew.
Operator: We will take our next question from Julian Mitchell with Barclays. Your line is open.
Julian Mitchell: Thanks very much. Maybe I just wanted to follow up first off on Nick your comments on the first quarter. So is the right assumption sort of low single digit organic growth in Q1, as you said? And then margins for the year are guided flattish for the total company. Are we assuming kind of Q1 is similar to that year-on-year just given the acquisition headwinds and so forth? So you have sort of sales up and little bit margins flat and then earnings up a little bit year-on-year then.
Nick Gangestad: Julian, thanks for asking that question. Q1 organic growth year-on-year we think will be low single digits. On the margin question, Q1 of last year, we had a margin of 20%. We expect that to be lower year-on-year in fiscal year ’24. And there’s three things that are going to be mainly contributing to it being lower. One is our Clearpath acquisition and the impact that will have. The second is mix that we see a less favorable mix in the first quarter of the products that we will be selling. And we think we’ll be having lower utilization in our factories as we’re adjusting our production to these lower orders. And we think those three things in combination are going to be resulting in lower margin year-on-year.
Julian Mitchell: That’s very helpful. Thank you. And then I just wanted to come back to the revenue outlook. So one question maybe, we look at North America. I think the guide implies maybe sales are up mid single digits there or something this year. And in ’23, North America was the lowest growth region globally. And so we’re sort of seven years on from U.S.-China tariffs, two years on from the IIJA. Is it just the pace of these onshore and stimulus projects is so much slower than perhaps people often hope or assume? And just wanted to check that for the year, are you assuming — it looks like the book to bill will be about 0.9x. Is that correct and what’s embedded in the orders and sales color? Thank you.
Blake Moret: Let me start with the Americas discussion and then Nick can follow up with a little bit on the book to bill. So the Americas actually outpaced the rest of the world with respect to orders. And we expect that to continue in fiscal year ’24. We’ve talked about for a few quarters now based on shipping from backlog, in some case fairly aged backlog, that our distribution of growth by region and by industry segment is more a factor of the backlog than the current underlying demand. And you’re correct that we do expect the highest growth region to be the Americas going forward. With respect to the impact of stimulus, we’re still in the early innings there. The business that we’re winning there is really just ramping up. We saw some good development in the second half of last year. But by far, there’s more business to come based on the projects that we’re tracking.
Nick Gangestad: And, Julian, the question on the book to bill, yes, your math is right. Approximately 90% book to bill for the full year below that in the first half of the year and above that in the second half of the year.
Julian Mitchell: Great. Thank you.
Blake Moret: Thanks, Julian.
Operator: And we will take our next question from Nigel Coe with Wolfe Research. Your line is open.
Nigel Coe: Thanks. Good morning, everyone.
Blake Moret: Hi, Nigel.
Nigel Coe: So we got about thousands questions on backlog, so why not have one more? So the 0.9x book to bill for the full year seems to suggest that we’re going to be down sort of the low $3 billion for the year — by the end of ’24. I’m wondering, do we go below that level first half once distributors’ kind of stop cutting inventories and then rebuild? Just wondering where you see the backlog stabilizing?
Nick Gangestad: Yes, we see the backlog stabilizing, I think I said this on the last quarter earnings call as well, that at 30% to 35% of annualized revenue is what we think is the normalized backlog level we will be at given the mix of our businesses that we have.
Blake Moret: So that would indicate an exit of the fiscal year at above $3 billion.
Nick Gangestad: Correct.
Nigel Coe: Okay. And that is consistent with what you’ve said as well. And then just on sort of the — and Nick, we’re talking about $1.4 billion of orders in the fourth quarter fiscal, if you can just kind of verify that, that’d be helpful. And then on the FY ’24 bridge, a couple of things. FX, you’re assuming 1.5 points of a tailwind. The math we’re getting is probably more like a minus one for the full year. So just wondering where are we wrong there? And then on the Lifecycle Services margin expansion, I think it makes sense if based on history, but just wondering what drove improving margins there in ’24?
Nick Gangestad: Yes, I’ll try to do those in reverse order. In terms of the things drawing down the margin in the fourth quarter, the two main things were our restructuring actions that had an outsized impact on the Lifecycle Services as well as the increased bonus expense that we were facing. Now as we flipped into ’24, the bonus expense will be a tailwind to all businesses and Lifecycle Services margin will benefit from that. But also from the actions that we took in 2023, we think those will also be a propellant of Lifecycle Services margin expansion into ’24. On the currency side, given our mix of businesses and what we’re projecting, many of the currencies were just using what the current spot rate is going forward. In some currencies, such as the euro, what we will use is a group of banks and what they’re expecting for a particular currency in the coming year.
