Emerson Reports Third Quarter 2023 Results; Updates 2023 Outlook
ST. LOUIS, Aug. 2, 2023 /PRNewswire/ -- Emerson (NYSE: EMR) today reported results for its third quarter ended June 30, 2023 and updated its full year outlook for fiscal 2023, which are presented on a continuing operations basis. Emerson also declared a quarterly cash dividend of $0.52 per share of common stock payable September 11, 2023 to stockholders of record August 11, 2023.
(dollars in millions, except per share) | 2022 Q3 | 2023 Q3 | Change |
Underlying Orders1 | 3 % | ||
Net Sales | $3,465 | $3,946 | 14 % |
Underlying Sales2 | 14 % | ||
Pretax Earnings | $378 | $761 | |
Margin | 10.9 % | 19.3 % | 840 bps |
Adjusted Segment EBITA3 | $806 | $1,060 | |
Margin | 23.2 % | 26.9 % | 370 bps |
GAAP Earnings Per Share | $0.38 | $1.03 | 171 % |
Adjusted Earnings Per Share4 | $0.92 | $1.29 | 40 % |
Operating Cash Flow | $479 | $842 | 76 % |
Free Cash Flow | $420 | $769 | 83 % |
Management Commentary
"Emerson delivered another exceptional quarter of underlying sales growth and solid financial and operational results, driven by our highly differentiated portfolio of capabilities and offerings," said Emerson President and Chief Executive Officer Lal Karsanbhai. "We continue to advance our growth and profitability as a leading automation company, underpinned by the Emerson Management System and the world-class execution of our talented global team."
Karsanbhai continued, "Our performance over the last nine months demonstrates the strength of our technology and the strategic benefits of our exposure to attractive end-markets. As we close out 2023 and look ahead to 2024, Emerson is uniquely positioned, based on the breadth and depth of our capabilities and long-standing customer relationships, to capture our customers' investments in energy security and affordability, sustainability and decarbonization, digital transformation, and nearshoring. We look forward to delivering continued shareholder value as we build on our momentum across our business."
2023 Outlook
The following tables summarize the fiscal year 2023 guidance framework for continuing operations which was increased from prior guidance. The 2023 outlook includes $2 billion returned to shareholders through share repurchases completed in the first quarter and approximately $1.2 billion of dividend payments. Guidance figures are approximate.
2023 | |
Net Sales Growth | ~10.5% |
Underlying Sales Growth | ~10% |
Earnings Per Share | $3.54 - $3.59 |
Amortization of Intangibles | ~$0.61 |
Restructuring / Related Costs | ~$0.16 |
Russia Exit Costs | $0.08 |
AspenTech Micromine Purchase Price Hedge | ($0.02) |
Acquisition / Divestiture Fees | ~$0.10 |
NI Investment Gain | ~($0.07) |
Interest Income on Undeployed Proceeds | ~($0.19) |
Copeland Equity Loss | ~$0.19 |
Adjusted Earnings Per Share | $4.40 - $4.45 |
Operating Cash Flow | $2.5B - $2.6B |
Free Cash Flow | $2.2B - $2.3B |
1 Underlying orders does not include AspenTech. |
2 Underlying sales excludes the impact of currency translation, and acquisitions and divestitures. Heritage AspenTech and Emerson's businesses contributed to AspenTech will be included in underlying sales beginning in 2023 Q4. |
3 Adjusted segment EBITA represents segment earnings less restructuring and intangibles amortization expense. |
4 Adjusted EPS excludes restructuring and related costs, NI investment gains, acquisition/divestiture costs, write-offs associated with Emerson's Russia exit, an AspenTech Micromine purchase price hedge, the income/loss of Emerson's 40% share of Copeland, interest income on undeployed proceeds and intangibles amortization expense. Post-Copeland transaction close, adjusted EPS now includes the interest on the Copeland note receivable valued at $0.02 and approximately $0.06 for the third quarter and fiscal year 2023, respectively. |
Conference Call
Today, beginning at 8:00 a.m. Central Time / 9:00 a.m. Eastern Time, Emerson management will discuss the third quarter results during an investor conference call. Participants can access a live webcast available at www.emerson.com/investors at the time of the call. A replay of the call will be available for 90 days. Conference call slides will be posted in advance of the call on the company website.
About Emerson
Emerson (NYSE:EMR) is a global technology and software company providing innovative solutions for the world's essential industries. Through its leading automation portfolio, including its majority stake in AspenTech, Emerson helps hybrid, process and discrete manufacturers optimize operations, protect personnel, reduce emissions and achieve their sustainability goals. For more information, visit Emerson.com.
Forward-Looking and Cautionary Statements
Statements in this press release that are not strictly historical may be "forward-looking" statements, which involve risks and uncertainties, and Emerson undertakes no obligation to update any such statements to reflect later developments. These risks and uncertainties include the Company's ability to successfully complete on the terms and conditions contemplated, and the financial impact of, the proposed National Instruments transaction, the scope, duration and ultimate impacts of the COVID-19 pandemic and the Russia-Ukraine conflict, as well as economic and currency conditions, market demand, including related to the pandemic and oil and gas price declines and volatility, pricing, protection of intellectual property, cybersecurity, tariffs, competitive and technological factors, inflation, among others, as set forth in the Company's most recent Annual Report on Form 10-K and subsequent reports filed with the SEC. The outlook contained herein represents the Company's expectation for its consolidated results, other than as noted herein.
(tables attached)
Table 1 | |||||||
EMERSON AND SUBSIDIARIES | |||||||
CONSOLIDATED OPERATING RESULTS | |||||||
(AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED) | |||||||
Quarter Ended June 30 | Nine Months Ended June 30 | ||||||
2022 | 2023 | 2022 | 2023 | ||||
Net sales | $3,465 | $3,946 | $9,912 | $11,075 | |||
Cost of sales | 1,879 | 1,952 | 5,435 | 5,660 | |||
SG&A expenses | 894 | 1,042 | 2,631 | 3,072 | |||
Gain on subordinated interest | — | — | (453) | — | |||
Other deductions, net | 264 | 191 | 330 | 420 | |||
Interest expense, net | 50 | 10 | 140 | 111 | |||
Interest income from related party1 | — | (10) | — | (10) | |||
Earnings from continuing operations before income taxes | 378 | 761 | 1,829 | 1,822 | |||
Income taxes | 123 | 158 | 399 | 390 | |||
Earnings from continuing operations | 255 | 603 | 1,430 | 1,432 | |||
Discontinued operations, net of tax | 697 | 8,763 | 1,092 | 11,030 | |||
Net earnings | 952 | 9,366 | 2,522 | 12,462 | |||
Less: Noncontrolling interests in subsidiaries | 31 | 14 | 31 | (13) | |||
Net earnings common stockholders | $921 | $9,352 | $2,491 | $12,475 | |||
Earnings common stockholders | |||||||
Earnings from continuing operations | $226 | $592 | $1,400 | $1,451 | |||
Discontinued operations | 695 | 8,760 | 1,091 | 11,024 | |||
Net earnings common stockholders | $921 | $9,352 | $2,491 | $12,475 | |||
Diluted avg. shares outstanding | 596.2 | 574.0 | 596.9 | 578.1 | |||
Diluted earnings per share common stockholders | |||||||
Earnings from continuing operations | $0.38 | $1.03 | $2.34 | $2.51 | |||
Discontinued operations | 1.16 | 15.25 | 1.83 | 19.05 | |||
Diluted earnings per common share | $1.54 | $16.28 | $4.17 | $21.56 | |||
Quarter Ended June 30 | Nine Months Ended June 30 | ||||||
2022 | 2023 | 2022 | 2023 | ||||
Other deductions, net | |||||||
Amortization of intangibles | $93 | $120 | $207 | $357 | |||
Restructuring costs | 29 | 12 | 44 | 41 | |||
Other | 142 | 59 | 79 | 22 | |||
Total | $264 | $191 | $330 | $420 | |||
1 Represents interest on the Copeland note receivable. | |||||||
Table 2 | |||
EMERSON AND SUBSIDIARIES | |||
CONSOLIDATED BALANCE SHEETS | |||
(DOLLARS IN MILLIONS, UNAUDITED) | |||
Quarter Ended June 30 | |||
2022 | 2023 | ||
Assets | |||
Cash and equivalents | $2,529 | $9,957 | |
Receivables, net | 2,135 | 2,491 | |
Inventories | 1,830 | 2,085 | |
Other current assets | 1,357 | 1,227 | |
Current assets held-for-sale | 1,524 | — | |
Total current assets | 9,375 | 15,760 | |
Property, plant & equipment, net | 2,276 | 2,268 | |
Goodwill | 14,028 | 14,131 | |
Other intangible assets | 6,772 | 6,147 | |
Copeland note receivable and equity investment | — | 3,359 | |
Other | 2,353 | 2,508 | |
Noncurrent assets held-for-sale | 2,238 | — | |
Total assets | $37,042 | $44,173 | |
Liabilities and equity | |||
Short-term borrowings and current | |||
maturities of long-term debt | $3,227 | $667 | |
Accounts payable | 1,228 | 1,218 | |
Accrued expenses | 3,013 | 4,729 | |
Current liabilities held-for-sale | 1,344 | — | |
Total current liabilities | 8,812 | 6,614 | |
Long-term debt | 8,367 | 7,642 | |
Other liabilities | 3,385 | 3,504 | |
Noncurrent liabilities held-for-sale | 191 | — | |
Equity | |||
Common stockholders' equity | 10,315 | 20,464 | |
Noncontrolling interests in subsidiaries | 5,972 | 5,949 | |
Total equity | 16,287 | 26,413 | |
Total liabilities and equity | $37,042 | $44,173 | |
Table 3 | ||||
EMERSON AND SUBSIDIARIES | ||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
(DOLLARS IN MILLIONS, UNAUDITED) | ||||
Nine Months Ended June 30 | ||||
2022 | 2023 | |||
Operating activities | ||||
Net earnings | $2,522 | $12,462 | ||
Earnings from discontinued operations, net of tax | (1,092) | (11,030) | ||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||
Depreciation and amortization | 571 | 780 | ||
Stock compensation | 91 | 198 | ||
Changes in operating working capital | (361) | (369) | ||
Gain on subordinated interest | (453) | — | ||
Other, net | (43) | (322) | ||
Cash from continuing operations | 1,235 | 1,719 | ||
Cash from discontinued operations | 470 | (439) | ||
Cash provided by operating activities | 1,705 | 1,280 | ||
Investing activities | ||||
Capital expenditures | (199) | (194) | ||
Purchases of businesses, net of cash and equivalents acquired | (5,615) | — | ||
Proceeds from subordinated interest | 438 | 15 | ||
Proceeds from related party note receivable | — | 918 | ||
Other, net | (38) | (124) | ||
Cash from continuing operations | (5,414) | 615 | ||
Cash from discontinued operations | 439 | 12,485 | ||
Cash provided by (used in) investing activities | (4,975) | 13,100 | ||
Financing activities | ||||
Net increase (decrease) in short-term borrowings | 1,633 | (1,476) | ||
Proceeds from short-term borrowings greater than three months | 1,162 | 395 | ||
Payments of short-term borrowings greater than three months | (445) | (400) | ||
Proceeds from long-term debt | 2,975 | — | ||
Payments of long-term debt | (512) | (744) | ||
Dividends paid | (918) | (900) | ||
Purchases of common stock | (418) | (2,000) | ||
AspenTech purchases of common stock | — | (100) | ||
Payment of related party note payable | — | (918) | ||
Other, net | 80 | (159) | ||
Cash provided by (used in) financing activities | 3,557 | (6,302) | ||
Effect of exchange rate changes on cash and equivalents | (112) | 75 | ||
Increase in cash and equivalents | 175 | 8,153 | ||
Beginning cash and equivalents | 2,354 | 1,804 | ||
Ending cash and equivalents | $2,529 | $9,957 | ||
Table 4 | ||||||||
EMERSON AND SUBSIDIARIES | ||||||||
SEGMENT SALES AND EARNINGS | ||||||||
(AMOUNTS IN MILLIONS, UNAUDITED) | ||||||||
The following tables show results for the Company's segments on an adjusted segment EBITA basis and are intended to supplement the Company's results of operations, including its segment earnings which are defined as earnings before interest and taxes. The Company defines adjusted segment and total segment EBITA as segment earnings excluding intangibles amortization expense, and restructuring and related expense. Adjusted segment and total segment EBITA, and adjusted segment and total segment EBITA margin are measures used by management and may be useful for investors to evaluate the Company's segments' operational performance. | ||||||||
Quarter Ended June 30 | ||||||||
2022 | 2023 | Reported | Underlying | |||||
Sales | ||||||||
Final Control | $905 | $1,035 | 14 % | 16 % | ||||
Measurement & Analytical | 788 | 913 | 16 % | 20 % | ||||
Discrete Automation | 633 | 668 | 6 % | 6 % | ||||
Safety & Productivity | 360 | 363 | 1 % | — % | ||||
Intelligent Devices | $2,686 | $2,979 | 11 % | 13 % | ||||
Control Systems & Software | 568 | 663 | 17 % | 19 % | ||||
AspenTech | 239 | 320 | 34 % | — % | ||||
Software and Control | $807 | $983 | 22 % | 19 % | ||||
Eliminations | (28) | (16) | ||||||
Total | $3,465 | $3,946 | 14 % | 14 % | ||||
Sales Growth by Geography | |||||||
Quarter Ended | |||||||
Americas | 11 % | ||||||
Europe | 13 % | ||||||
Asia, Middle East & Africa | 20 % | ||||||
Table 4 cont. | |||||||
Nine Months Ended June 30 | |||||||
2022 | 2023 | Reported | Underlying | ||||
Sales | |||||||
Final Control | $2,606 | $2,889 | 11 % | 15 % | |||
Measurement & Analytical | 2,294 | 2,550 | 11 % | 16 % | |||
Discrete Automation | 1,894 | 1,969 | 4 % | 7 % | |||
Safety & Productivity | 1,066 | 1,034 | (3) % | (2) % | |||
Intelligent Devices | $7,860 | $8,442 | 7 % | 11 % | |||
Control Systems & Software | 1,711 | 1,892 | 11 % | 15 % | |||
AspenTech | 405 | 793 | 96 % | — % | |||
Software and Control | $2,116 | $2,685 | 27 % | 15 % | |||
Eliminations | (64) | (52) | |||||
Total | $9,912 | $11,075 | 12 % | 12 % | |||
Sales Growth by Geography | |||||||
Nine Months | |||||||
Americas | 13 % | ||||||
Europe | 10 % | ||||||
Asia, Middle East & Africa | 11 % | ||||||
Table 4 cont. | |||||||
Quarter Ended June 30 | Quarter Ended June 30 | ||||||
2022 | 2023 | ||||||
As | Adjusted | As | Adjusted | ||||
Earnings | |||||||
Final Control | $150 | $191 | $245 | $266 | |||
Margins | 16.6 % | 21.2 % | 23.7 % | 25.7 % | |||
Measurement & Analytical | 189 | 197 | 257 | 263 | |||
Margins | 23.9 % | 25.1 % | 28.1 % | 28.7 % | |||
Discrete Automation | 115 | 124 | 124 | 144 | |||
Margins | 18.2 % | 19.6 % | 18.5 % | 21.4 % | |||
Safety & Productivity | 69 | 75 | 82 | 88 | |||
Margins | 19.3 % | 20.6 % | 22.7 % | 24.3 % | |||
Intelligent Devices | $523 | $587 | $708 | $761 | |||
Margins | 19.5 % | 21.9 % | 23.7 % | 25.5 % | |||
Control Systems & Software | 77 | 90 | 144 | 151 | |||
Margins | 13.5 % | 15.7 % | 21.8 % | 22.8 % | |||
AspenTech | 57 | 129 | 27 | 148 | |||
Margins | 23.7 % | 53.8 % | 8.2 % | 46.1 % | |||
Software and Control | $134 | $219 | $171 | $299 | |||
Margins | 16.5 % | 27.0 % | 17.4 % | 30.4 % | |||
Corporate items and interest expense, net: | |||||||
Stock compensation | (15) | (15) | (56) | (56) | |||
Unallocated pension and postretirement costs | 25 | 25 | 42 | 42 | |||
Corporate and other | (239) | (15) | (43) | (19) | |||
Copeland equity method investment loss | — | — | (61) | — | |||
Interest expense, net | (50) | — | (10) | — | |||
Interest income from related party1 | — | — | 10 | — | |||
Pretax Earnings / Adjusted EBITA | $378 | $801 | $761 | $1,027 | |||
Margins | 10.9 % | 23.1 % | 19.3 % | 26.0 % | |||
Supplemental Total Segment Earnings: | |||||||
Adjusted Total Segment EBITA | $806 | $1,060 | |||||
Margins | 23.2 % | 26.9 % | |||||
1 Represents interest on the Copeland note receivable. | |||||||
Table 4 cont. | |||||||
Quarter Ended June 30 | Quarter Ended June 30 | ||||||
2022 | 2023 | ||||||
Amortization of Intangibles1 | Restructuring and Related Costs2 | Amortization of Intangibles1 | Restructuring and Related Costs2 | ||||
Final Control | $23 | $18 | $22 | $(1) | |||
Measurement & Analytical | 4 | 4 | 5 | 1 | |||
Discrete Automation | 8 | 1 | 8 | 12 | |||
Safety & Productivity | 7 | (1) | 7 | (1) | |||
Intelligent Devices | $42 | $22 | $42 | $11 | |||
Control Systems & Software | 6 | 7 | 6 | 1 | |||
AspenTech | 71 | 1 | 121 | — | |||
Software and Control | $77 | $8 | $127 | $1 | |||
Corporate | — | 10 | — | 1 | |||
Total | $119 | $40 | $169 | $13 | |||
1 Amortization of intangibles includes $31 and $49 reported in cost of sales for the three months ended June 30, 2022 and 2023, respectively. | |||||||
2 Restructuring and related costs includes $11 and $1 reported in cost of sales and selling, general and administrative expenses for the three months ended June 30, 2022 and 2023, respectively. | |||||||
Quarter Ended June 30 | |||
2022 | 2023 | ||
Depreciation and Amortization | |||
Final Control | $53 | $39 | |
Measurement & Analytical | 27 | 26 | |
Discrete Automation | 22 | 20 | |
Safety & Productivity | 15 | 15 | |
Intelligent Devices | 117 | 100 | |
Control Systems & Software | 24 | 22 | |
AspenTech | 72 | 123 | |
Software and Control | 96 | 145 | |
Corporate | 9 | 12 | |
Total | $222 | $257 | |
Table 5 | |||||||
EMERSON AND SUBSIDIARIES | |||||||
ADJUSTED CORPORATE AND OTHER SUPPLEMENTAL | |||||||
(AMOUNTS IN MILLIONS, UNAUDITED) | |||||||
The following table shows the Company's corporate and other expenses on an adjusted basis. The Company's definition of adjusted corporate and other excludes corporate restructuring and related costs, first year purchase accounting related items and transaction fees, and certain gains, losses or impairments. This metric is useful for reconciling from total adjusted segment EBITA to the Company's consolidated adjusted EBITA. | |||||||
Quarter Ended June 30 | |||||||
Corporate and Other | 2022 | 2023 | |||||
Corporate and other (GAAP) | $(239) | $(43) | |||||
Corporate restructuring and related costs | 1 | 1 | |||||
National Instruments investment gain | — | (12) | |||||
Acquisition / divestiture costs | 61 | 38 | |||||
Russia business exit | 162 | 1 | — | ||||
AspenTech Micromine purchase price hedge | — | (3) | |||||
Adjusted corporate and other (Non-GAAP) | $(15) | $(19) | |||||
1 The Russia business exit charge includes $9 of restructuring costs. | |||||||
Table 6 | |||
EMERSON AND SUBSIDIARIES | |||
ADJUSTED EBITA & EPS SUPPLEMENTAL | |||
(AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED) | |||
The following tables, which show results on an adjusted EBITA basis and diluted earnings per share on an adjusted basis, are intended to supplement the Company's discussion of its results of operations herein. The Company defines adjusted EBITA as earnings excluding interest expense, net, income taxes, intangibles amortization expense, restructuring expense, first year purchase accounting related items and transaction fees, gains or losses on the Copeland equity method investment, and certain gains, losses or impairments. Adjusted earnings per share excludes intangibles amortization expense, restructuring expense, first year purchase accounting related items and transaction fees, interest income on undeployed proceeds, gains or losses on the Copeland equity method investment, and certain gains, losses or impairments. Adjusted EBITA, adjusted EBITA margin, and adjusted earnings per share are measures used by management and may be useful for investors to evaluate the Company's operational performance. | |||
Quarter Ended June 30 | |||
2022 | 2023 | ||
Pretax earnings | $378 | $761 | |
Percent of sales | 10.9 % | 19.3 % | |
Interest expense, net | 50 | 10 | |
Interest income from related party1 | — | (10) | |
Amortization of intangibles | 119 | 169 | |
Restructuring and related costs | 31 | 13 | |
Acquisition/divestiture costs | 61 | 38 | |
National Instruments investment gain | — | (12) | |
Copeland equity method investment loss | — | 61 | |
Russia business exit | 162 | — | |
AspenTech Micromine purchase price hedge | — | (3) | |
Adjusted EBITA | $801 | $1,027 | |
Percent of sales | 23.1 % | 26.0 % | |
Quarter Ended June 30 | |||
2022 | 2023 | ||
GAAP earnings from continuing operations per share | $0.38 | $1.03 | |
Amortization of intangibles | 0.12 | 0.15 | |
Restructuring and related costs | 0.04 | 0.02 | |
Acquisition/divestiture costs and pre-acquisition interest on AspenTech debt | 0.09 | 0.07 | |
National Instruments investment gain | — | (0.02) | |
Interest income on undeployed proceeds from Copeland transaction | — | (0.05) | |
Copeland equity method investment loss | — | 0.09 | |
Russia business exit | 0.29 | — | |
Adjusted earnings from continuing operations per share | $0.92 | $1.29 | |
Less: AspenTech contribution to adjusted earnings per share | (0.11) | ||
Adjusted earnings per share excluding AspenTech contribution | $1.18 | ||
1 Represents interest on the Copeland note receivable | |||
Table 6 cont. | |||||||||||
Quarter Ended June 30, 2023 | |||||||||||
Pretax | Income | Earnings from | Non-Controlling | Net | Diluted | ||||||
As reported (GAAP) | $761 | $158 | $603 | $11 | $592 | $1.03 | |||||
Amortization of intangibles | 169 | 1 | 39 | 130 | 42 | 88 | 0.15 | ||||
Restructuring and related costs | 13 | 2 | 3 | 10 | — | 10 | 0.02 | ||||
Acquisition/divestiture costs | 38 | 2 | 36 | — | 36 | 0.07 | |||||
National Instruments investment gain | (12) | (3) | (9) | — | (9) | (0.02) | |||||
Interest income on undeployed proceeds | (35) | (8) | (27) | — | (27) | (0.05) | |||||
Copeland equity method investment loss | 61 | 10 | 51 | — | 51 | 0.09 | |||||
AspenTech Micromine purchase price hedge | (3) | (1) | (2) | (1) | (1) | 0.00 | |||||
Adjusted (Non-GAAP) | $992 | $200 | $792 | $52 | $740 | $1.29 | |||||
Interest expense, net (excluding interest income on undeployed proceeds) | 45 | ||||||||||
Interest income from related party4 | (10) | ||||||||||
Adjusted EBITA (Non-GAAP) | $1,027 | ||||||||||
1 Amortization of intangibles includes $49 reported in cost of sales. | |||||||||||
2 Restructuring and related costs includes $1 reported in cost of sales. | |||||||||||
3 Represents the non-controlling interest in AspenTech applied to AspenTech's share of each adjustment presented herein and eliminated from Emerson's consolidated results. | |||||||||||
4 Represents interest on the Copeland note receivable. | |||||||||||
Table 7 | |||||||||||
EMERSON AND SUBSIDIARIES | |||||||||||
ASPENTECH CONTRIBUTION TO EMERSON RESULTS SUPPLEMENTAL | |||||||||||
(AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED) | |||||||||||
The following tables reconcile the financial results of AspenTech reported to its shareholders with the amounts included in Emerson's consolidated financial results. Emerson currently owns approximately 56 percent of the common shares outstanding of AspenTech, a separately traded public company (NASDAQ: AZPN), and consolidates AspenTech in its financial results. The 44 percent non-controlling interest in AspenTech is removed from Emerson's net earnings common stockholders through the non-controlling interest line item. AspenTech is also one of Emerson's segments and its GAAP segment earnings is reconciled below to its consolidated impact to clarify that certain items are reported outside of its segment earnings within Emerson corporate, including interest income, stock compensation and the Micromine purchase price hedge. | |||||||||||
Quarter Ended June 30, 2023 | |||||||||||
Pretax | Income | Earnings from | Non-Controlling | Net | Diluted | ||||||
Standalone reporting (GAAP) | $23 | 1 | $(4) | $27 | |||||||
Interim tax reporting/Other | (1) | 2 | 2 | (3) | |||||||
Reported in Emerson consolidation (GAAP) | 22 | (2) | 24 | 10 | 14 | $0.02 | |||||
Adjustments: | |||||||||||
Amortization of intangibles | 121 | 3 | 26 | 95 | 42 | 53 | 0.09 | ||||
AspenTech Micromine purchase price hedge | (3) | 4 | (1) | (2) | (1) | (1) | 0.00 | ||||
Adjusted (Non-GAAP) | $140 | $23 | $117 | $51 | $66 | $0.11 | |||||
Interest income | (13) | 4 | |||||||||
Stock compensation | 21 | 4 | |||||||||
Adjusted Segment EBITA (Non-GAAP) | $148 | ||||||||||
Reconciliation to Segment EBIT | |||||||||||
Pre-tax earnings | $22 | ||||||||||
Interest income | (13) | 4 | |||||||||
Stock compensation | 21 | 4 | |||||||||
Micromine purchase price hedge | (3) | 4 | |||||||||
Segment EBIT (GAAP) | $27 | ||||||||||
Amortization of intangibles | 121 | 3 | |||||||||
Adjusted Segment EBITA (Non-GAAP) | $148 | ||||||||||
1 Amount reflects AspenTech's pretax earnings for the three months ended June 30, 2023 as reported in its quarterly earnings release 8-K. | |||||||||||
2 GAAP income taxes reported by AspenTech differ from the amount reflected in Emerson's consolidated financial statements due to the application of the ASC 740 tax rules at the AspenTech entity level in their stand-alone publicly reported financial statements as compared to the amount computed at the Emerson consolidated level. | |||||||||||
3 Amortization of intangibles includes $47 reported in cost of sales. | |||||||||||
4 Reported in Emerson corporate line items. | |||||||||||
5 Represents the non-controlling interest in AspenTech applied to each adjustment presented herein and eliminated from Emerson's consolidated results. | |||||||||||
Reconciliations of Non-GAAP Financial Measures & Other | Table 8 | ||||||||
Reconciliations of Non-GAAP measures with the most directly comparable GAAP measure (dollars in millions, except per share amounts). See tables 4 through 7 for additional non-GAAP reconciliations. | |||||||||
Q3 FY23 Underlying Sales Change | Final Control | Measurement | Discrete Automation | Safety & Productivity | Intelligent Devices | ||||
Reported (GAAP) | 14 % | 16 % | 6 % | 1 % | 11 % | ||||
(Favorable) / Unfavorable FX | 1 % | 1 % | — % | (1) % | 1 % | ||||
(Acquisitions) | — % | — % | — % | — % | — % | ||||
Divestitures | 1 % | 3 % | — % | — % | 1 % | ||||
Underlying (Non-GAAP) | 16 % | 20 % | 6 % | — % | 13 % | ||||
Q3 FY23 Underlying Sales Change | Control Systems & Software | AspenTech | Software | Emerson | |||||
Reported (GAAP) | 17 % | 34 % | 22 % | 14 % | |||||
(Favorable) / Unfavorable FX | 1 % | — % | — % | 1 % | |||||
(Acquisitions) | — % | (34) % | (4) % | (2) % | |||||
Divestitures | 1 % | 1 % | 1 % | ||||||
Underlying (Non-GAAP) | 19 % | — % | 19 % | 14 % | |||||
Nine Months Ended June 30, 2023 Underlying Sales Change | Final Control | Measurement | Discrete Automation | Safety & Productivity | Intelligent Devices | ||||
Reported (GAAP) | 11 % | 11 % | 4 % | (3) % | 7 % | ||||
(Favorable) / Unfavorable FX | 3 % | 3 % | 3 % | 1 % | 3 % | ||||
(Acquisitions) | — % | — % | — % | — % | — % | ||||
Divestitures | 1 % | 2 % | — % | — % | 1 % | ||||
Underlying (Non-GAAP) | 15 % | 16 % | 7 % | (2) % | 11 % | ||||
Nine Months Ended June 30, 2023 Underlying Sales Change | Control Systems & Software | AspenTech | Software | Emerson | |||||
Reported (GAAP) | 11 % | 96 % | 27 % | 12 % | |||||
(Favorable) / Unfavorable FX | 3 % | — % | 3 % | 3 % | |||||
(Acquisitions) | — % | (96) % | (16) % | (4) % | |||||
Divestitures | 1 % | — % | 1 % | 1 % | |||||
Underlying (Non-GAAP) | 15 % | — % | 15 % | 12 % | |||||
2023E August Guidance Underlying Sales | FY23E | ||||||||
Reported (GAAP) | ~ 10.5% | ||||||||
(Favorable) / Unfavorable FX | ~ 1.5% | ||||||||
(Acquisitions) | ~ (2.5)% | ||||||||
Divestitures | ~ 0.5% | ||||||||
Underlying (Non-GAAP) | ~ 10% | ||||||||
Final Control Adjusted EBITA | Q3 2022 | Q3 2023 | Q3 2022 | Q3 2023 | |||||
Business Segment EBIT / EBIT margin (GAAP) | $150 | $245 | 16.6 % | 23.7 % | |||||
Amortization of intangibles and restructuring and related costs | 41 | 21 | 4.6 % | 2.0 % | |||||
Adjusted Business Segment EBITA / EBITA margin (Non-GAAP) | $191 | $266 | 21.2 % | 25.7 % | |||||
Measurement & Analytical Adjusted EBITA | Q3 2022 | Q3 2023 | Q3 2022 | Q3 2023 | |||||
Business Segment EBIT / EBIT margin (GAAP) | $189 | $257 | 23.9 % | 28.1 % | |||||
Amortization of intangibles and restructuring and related costs | 8 | 6 | 1.2 % | 0.6 % | |||||
Adjusted Business Segment EBITA / EBITA margin (Non-GAAP) | $197 | $263 | 25.1 % | 28.7 % | |||||
Discrete Automation Adjusted EBITA | Q3 2022 | Q3 2023 | Q3 2022 | Q3 2023 | |||||
Business Segment EBIT / EBIT margin (GAAP) | $115 | $124 | 18.2 % | 18.5 % | |||||
Amortization of intangibles and restructuring and related costs | 9 | 20 | 1.4 % | 2.9 % | |||||
Adjusted Business Segment EBITA / EBITA margin (Non-GAAP) | $124 | $144 | 19.6 % | 21.4 % | |||||
Safety & Productivity Adjusted EBITA | Q3 2022 | Q3 2023 | Q3 2022 | Q3 2023 | |||||
Business Segment EBIT / EBIT margin (GAAP) | $69 | $82 | 19.3 % | 22.7 % | |||||
Amortization of intangibles and restructuring and related costs | 6 | 6 | 1.3 % | 1.6 % | |||||
Adjusted Business Segment EBITA / EBITA margin (Non-GAAP) | $75 | $88 | 20.6 % | 24.3 % | |||||
Intelligent Devices Adjusted EBITA | Q3 2022 | Q3 2023 | Q3 2022 | Q3 2023 | |||||
Business Segment EBIT / EBIT margin (GAAP) | $523 | $708 | 19.5 % | 23.7 % | |||||
Amortization of intangibles and restructuring and related costs | 64 | 53 | 2.4 % | 1.8 % | |||||
Adjusted Business Segment EBITA / EBITA margin (Non-GAAP) | $587 | $761 | 21.9 % | 25.5 % | |||||
Control Systems & Software Adjusted EBITA | Q3 2022 | Q3 2023 | Q3 2022 | Q3 2023 | |||||
Business Segment EBIT / EBIT margin (GAAP) | $77 | $144 | 13.5 % | 21.8 % | |||||
Amortization of intangibles and restructuring and related costs | 13 | 7 | 2.2 % | 1.0 % | |||||
Adjusted Business Segment EBITA / EBITA margin (Non-GAAP) | $90 | $151 | 15.7 % | 22.8 % | |||||
AspenTech Adjusted EBITA | Q3 2022 | Q3 2023 | Q3 2022 | Q3 2023 | |||||
Business Segment EBIT / EBIT margin (GAAP) | $57 | $27 | 23.7 % | 8.2 % | |||||
Amortization of intangibles and restructuring and related costs | 72 | 121 | 30.1 % | 37.9 % | |||||
Adjusted Business Segment EBITA / EBITA margin (Non-GAAP) | $129 | $148 | 53.8 % | 46.1 % | |||||
Software and Control Adjusted EBITA | Q3 2022 | Q3 2023 | Q3 2022 | Q3 2023 | |||||
Business Segment EBIT / EBIT margin (GAAP) | $134 | $171 | 16.5 % | 17.4 % | |||||
Amortization of intangibles and restructuring and related costs | 85 | 128 | 10.5 % | 13.0 % | |||||
Adjusted Business Segment EBITA / EBITA margin (Non-GAAP) | $219 | $299 | 27.0 % | 30.4 % | |||||
Total Business Segment Adjusted EBITA Margin | Q3 2022 | Q3 2023 | Q3 2022 | Q3 2023 | Change | ||||
Pretax earnings / margin (GAAP) | $378 | $761 | 10.9 % | 19.3 % | 840 bps | ||||
Corporate items and interest expense, net | 279 | 118 | 8.1 % | 3.0 % | (510)bps | ||||
Total Business Segment EBIT / margin | $657 | $879 | 19.0 % | 22.3 % | 330 bps | ||||
Amortization of intangibles and restructuring and related costs | $149 | $181 | 4.2 % | 4.6 % | 40 bps | ||||
Adjusted Total Business Segment EBITA / margin (Non-GAAP) | $806 | $1,060 | 23.2 % | 26.9 % | 370 bps | ||||
Q3 Earnings Per Share | Q3 FY22 | Q3 FY23 | Change | ||||||
Earnings per share (GAAP) | $ 0.38 | $ 1.03 | 171 % | ||||||
Amortization of intangibles | 0.12 | 0.15 | |||||||
Restructuring and related costs | 0.04 | 0.02 | |||||||
Acquisition/divestiture costs | 0.09 | 0.07 | |||||||
National Instruments investment gain | — | (0.02) | |||||||
Interest income on undeployed proceeds | — | (0.05) | |||||||
Copeland equity method investment loss | — | 0.09 | |||||||
Russia business exit | 0.29 | — | |||||||
Adjusted earnings per share (Non-GAAP) | $ 0.92 | $ 1.29 | 40 % | ||||||
2023E August Guidance Earnings Per Share | FY23E | ||||||||
Earnings per share (GAAP) | $3.54 - $3.59 | ||||||||
Amortization of intangibles | ~ 0.61 | ||||||||
Restructuring and related costs | ~ 0.16 | ||||||||
Russia business exit | 0.08 | ||||||||
AspenTech Micromine purchase price hedge | (0.02) | ||||||||
Acquisition/divestiture fees | ~ 0.10 | ||||||||
National Instruments investment gain | ~ (0.07) | ||||||||
Interest income on undeployed proceeds | ~ (0.19) | ||||||||
Copeland equity loss | ~ 0.19 | ||||||||
Adjusted earnings per share (Non-GAAP) | $4.40 - $4.45 | ||||||||
Cash Flow | Q3 FY22 | Q3 FY23 | Change | FY23E ($ in billions) | |||||
Operating cash flow (GAAP) | $ 479 | $ 842 | 76 % | $2.5 - $2.6 | |||||
Capital expenditures | (59) | (73) | 7 % | ~(0.3) | |||||
Free cash flow (Non-GAAP) | $ 420 | $ 769 | 83 % | $2.2 - $2.3 | |||||
Note 1: Underlying sales and orders exclude the impact of acquisitions, divestitures and currency translation. | |||||||||
Note 2: All fiscal year 2023E figures are approximate, except where range is given. | |||||||||
Contacts | |
Investors | Media |
Colleen Mettler | Joseph Sala / Tanner Kaufman / Greg Klassen |
(314) 553-2197 | Joele Frank, Wilkinson Brimmer Katcher |
(212) 355-4449 |
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SOURCE Emerson