Document

EX-99 2 q1fy25ex99.htm EX-99 Document

Exhibit 99

1201 S. Second Street

Milwaukee, WI 53204

USA

News Release

Contact

Ed Moreland
Media Relations
Rockwell Automation
571.296.0391

Aijana Zellner
Investor Relations
Rockwell Automation
414.382.8510

Rockwell Automation Reports First Quarter 2025 Results

•Orders up ~10% year over year; up mid single digits sequentially

•Reported sales down (8.4)%; organic sales down (7.6)% year over year

◦Currency translation decreased sales by (0.9) pts

•Total ARR up 11% year over year

•Diluted EPS of $1.61 and adjusted EPS $1.83; down (13)% and (10)% year over year, respectively

•Updates fiscal 2025 reported sales growth range to (5.5)% - 0.5% due to ~(1.5)% FX impact to sales; reaffirms organic sales growth range of (4)% - 2%

•Reaffirms fiscal 2025 diluted EPS guidance range of $7.65 - $8.85; reaffirms adjusted EPS guidance range of $8.60 - $9.80

MILWAUKEE (February 10, 2025) — Rockwell Automation, Inc. (NYSE: ROK) today reported first quarter fiscal 2025 results.

"Q1 margins and EPS came in well above our expectations this quarter, reflecting some early benefits of Rockwell’s renewed focus on operational excellence and cost discipline. We continue to deliver on our cost reduction and margin expansion projects we outlined last year. From a demand perspective, we are encouraged by better-than-expected order performance in the quarter with sequential growth across all regions and business segments. While there is still some macroeconomic and policy uncertainty weighing on customers’ capex plans, Rockwell won multi-million dollar strategic orders across key industries, especially in the U.S., our home market," said Blake Moret, Chairman and CEO.

Page 1

Fiscal Q1 2025 Financial Results

Fiscal 2025 first quarter reported sales were $1,881 million, down (8.4)% from $2,052 million in the first quarter of fiscal 2024. Organic sales decreased (7.6)% and currency translation decreased sales by (0.9) pts.

Fiscal 2025 first quarter Net income attributable to Rockwell Automation was $184 million or $1.61 per share, compared to $215 million or $1.86 per share in the first quarter of fiscal 2024. The decreases in Net income attributable to Rockwell Automation and diluted EPS were primarily due to lower sales volume. Fiscal 2025 first quarter adjusted EPS was $1.83, down (10)% compared to $2.04 in the first quarter of fiscal 2024 primarily due to lower sales volume.

Pre-tax margin was 11.3% in the first quarter of fiscal 2025 compared to 12.7% in the same period last year. The decrease in pre-tax margin was primarily due to lower sales volume partially offset by the benefits from cost reduction and margin expansion actions.

Total segment operating earnings were $321 million in the first quarter of fiscal 2025, down (10)% from $356 million in the same period of fiscal 2024. Total segment operating margin was 17.1% compared to 17.3% a year ago. The decrease in segment operating margin was primarily due to lower sales volume partially offset by the benefits from cost reduction and margin expansion actions.

Cash flow generated by operating activities in the first quarter of fiscal 2025 was $364 million, compared to $33 million in the first quarter of fiscal 2024. Free cash flow in the first quarter of fiscal 2025 was $293 million, compared to an outflow of $35 million in the same period last year. Increases in cash flow provided by operating activities and free cash flow were primarily due to no payout of incentive compensation in the first quarter of fiscal 2025 related to fiscal 2024 performance.

Page 2

Fiscal Year 2025 Outlook

The table below provides updated guidance for sales growth and earnings per share for fiscal 2025.


	Updated Guidance	Prior Guidance
Reported sales midpoint	~$8.1B	~$8.2B
Organic sales growth (1)	(4)% - 2%	(4)% - 2%
Inorganic sales growth	~ 0%	~ 0%
Currency translation	~ (1.5)%	~ 0%
Reported sales growth	(5.5)% - 0.5%	(4)% - 2%
Diluted EPS	$7.65 - $8.85	$7.65 - $8.85
Adjusted EPS (1)	$8.60 - $9.80	$8.60- $9.80

(1) Organic sales growth and Adjusted EPS are non-GAAP measures. See Adjusted Income, Adjusted EPS, and Adjusted Effective Tax Rate Reconciliation for more information on these non-GAAP measures.

"We continue to expect gradual sequential improvement in our sales and margins as we move through this fiscal year, including potential impacts from tariffs. I’m pleased with the progress our teams are making toward our long-term productivity and margin expansion targets, and I’m confident we are making the right investments to drive sustained growth and profitability. Nobody is better positioned than Rockwell to help American manufacturers create the future of industrial operations,” Moret continued.

Page 3

Following is a discussion of first quarter results for our business segments.

Intelligent Devices

Intelligent Devices first quarter fiscal 2025 sales were $806 million, a decrease of (13)% compared to $927 million in the same period last year. Organic sales decreased (12)% and currency translation decreased sales by less than (1) pt. Segment operating earnings were $120 million compared to $150 million in the same period last year. Segment operating margin decreased to 14.9% from 16.2% a year ago. The decrease from prior year was driven by lower sales volume, partially offset by the benefits from cost reduction and margin expansion actions.

Software & Control

Software & Control first quarter fiscal 2025 sales were $529 million, a decrease of (12)% compared to $604 million in the same period last year. Organic sales decreased (12)% and currency translation decreased sales by less than (1) pt. Segment operating earnings were $133 million compared to $151 million in the same period last year. Segment operating margin increased to 25.1% from 25.0% a year ago. The benefits from cost reduction and margin expansion actions, and positive price/cost in the quarter were mostly offset by lower sales volume.

Lifecycle Services

Lifecycle Services first quarter fiscal 2025 sales were $546 million, an increase of 5% compared to $521 million in the same period last year. Organic sales increased 5% and currency translation decreased sales by less than (1) pt. Segment operating earnings were $68 million compared to $55 million in the same period last year. Segment operating margin was 12.5% compared to 10.6% a year ago driven by the benefits from cost reduction and margin expansion actions and higher sales volume.

Page 4

Supplemental Information

ARR - Total ARR grew 11% compared to the end of the first quarter of fiscal 2024.

Corporate and other - Fiscal 2025 first quarter Corporate and other expense was $38 million compared to $40 million in the first quarter of fiscal 2024.

Purchase accounting depreciation and amortization - Fiscal 2025 first quarter Purchase accounting depreciation and amortization expense was $35 million, down $1 million from the first quarter of fiscal 2024.

Tax - On a GAAP basis, the effective tax rate in the first quarter of fiscal 2025 was 16.4% compared to 18.1% in the first quarter of fiscal 2024. The adjusted effective tax rate for the first quarter of fiscal 2025 was 17.5% compared to 17.9% in the prior year. These decreases were primarily due to a favorable geographic mix of pre-tax income and higher discrete benefits recognized in the current year.

Share repurchases - During the first quarter of fiscal 2025, the Company repurchased approximately 0.4 million shares of its common stock at a cost of $99 million. At December 31, 2024, approximately $1.2 billion remained available under our existing share repurchase authorizations.

Return on Invested Capital (ROIC) - ROIC was 14.5% for the twelve months ended December 31, 2024, compared to 18.5% for the twelve months ended December 31, 2023. The decrease is primarily driven by lower pre-tax net income.

Page 5

Definitions

Non-GAAP Measures - Organic sales, total segment operating earnings, total segment operating margin, adjusted income, adjusted EPS, adjusted effective tax rate, free cash flow, free cash flow conversion, and ROIC are non-GAAP measures that are reconciled to GAAP measures in the attachments to this release.

Total ARR - Annual recurring revenue (ARR) is a key metric that enables measurement of progress in growing our recurring revenue business. It represents the annual contract value of all active recurring revenue contracts at any point in time. Recurring revenue is defined as a revenue stream that is contractual, typically for a period of 12 months or more, and has a high probability of renewal. The probability of renewal is based on historical renewal experience of the individual revenue streams, or management's best estimates if historical renewal experience is not available. Total ARR growth is calculated as the dollar change in ARR, adjusted to exclude the effects of currency, divided by ARR as of the prior period. The effects of currency translation are excluded by calculating Total ARR on a constant currency basis. Total ARR includes acquisitions even if there was no comparable ARR in the prior period. We believe that Total ARR provides useful information to investors because it reflects our recurring revenue performance period over period including the effect of acquisitions. Our measure of ARR may be different from measures used by other companies. Because ARR is based on annual contract value, it does not represent revenue recognized during a particular reporting period or revenue to be recognized in future reporting periods and is not intended to be a substitute for revenue, contract liabilities, or backlog.

Page 6

Conference Call

A conference call to discuss the quarterly results will be held at 8:30 a.m. Eastern Time on February 10, 2025. The call will be an audio webcast and accessible on the Rockwell Automation website (www.rockwellautomation.com/en-us/investors.html). Presentation materials will also be available on the website prior to the call.

Interested parties can access the conference call by using the following numbers: (888) 330-2022 in U.S.; (365) 977-0051 in Canada; +1 (646) 960-0690 for other countries. Use the following passcode: 5499533. Please call 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 March 10, 2025.

Page 7

This news release contains statements (including certain projections 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:

•macroeconomic factors, including inflation, global and regional business conditions (including adverse impacts in certain markets, such as Oil & Gas), commodity prices, currency exchange rates, the cyclical nature of our customers’ capital spending, and sovereign debt concerns;

•laws, regulations, and governmental policies affecting our activities in the countries where we do business, including those related to tariffs, taxation, trade controls, cybersecurity, and climate change;

•our profitability and market competitiveness may be adversely impacted by changes in trade policies, including tariffs or other factors;

•the severity and duration of disruptions to our business due to natural disasters (including those as a result of climate change), pandemics, acts of war, strikes, terrorism, social unrest, or other causes;

•the availability and price of components and materials;

•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 execution of our cost productivity and margin expansion initiatives;

•our ability to attract, develop, and retain qualified employees;

•the successful integration and management of strategic transactions and achievement of the expected benefits of these transactions;

•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, pricing pressures, and our ability to provide high quality products, solutions, and services;

•the availability and cost of capital;

•disruptions to our distribution channels or the failure of distributors to develop and maintain capabilities to sell our products;

•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;

•the uncertainties of litigation, including liabilities related to the safety and security of the hardware and software products, solutions, and services we sell;

•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 27,000 problem solvers dedicated to our customers in more than 100 countries as of fiscal year end 2024. To learn more about how we are bringing The Connected Enterprise(R) to life across industrial enterprises, visit www.rockwellautomation.com.

Page 8

ROCKWELL AUTOMATION, INC.

CONDENSED STATEMENT OF OPERATIONS INFORMATION

(in millions, except percentages)


	Three Months Ended December 31,
	2024			2023
Sales (a)	$	1,881		$	2,052
Cost of sales	(1,159)			(1,257)
Gross profit (b)	722			795
Selling, general and administrative expenses (c)	(476)			(514)
Change in fair value of investments	—			3
Other income	6			9
Interest expense	(39)			(33)
Income before income taxes	213			260
Income tax provision	(35)			(47)



Net income	178			213
Net loss attributable to noncontrolling interests	(6)			(2)
Net income attributable to Rockwell Automation, Inc.	$	184		$	215


Gross profit as percent of sales (b/a)	38.4		%	38.7		%
SG&A as percent of sales (c/a)	25.3		%	25.0		%

Page 9

ROCKWELL AUTOMATION, INC.

SALES AND EARNINGS INFORMATION

(in millions, except per share amounts and percentages)


	Three Months Ended December 31,
	2024			2023
Sales
Intelligent Devices (a)	$	806		$	927
Software & Control (b)	529			604
Lifecycle Services (c)	546			521
Total sales (d)	$	1,881		$	2,052
Segment operating earnings
Intelligent Devices (e)	$	120		$	150
Software & Control (f)	133			151
Lifecycle Services (g)	68			55
Total segment operating earnings (1) (h)	321			356
Purchase accounting depreciation and amortization	(35)			(36)
Corporate and other	(38)			(40)
Non-operating pension and postretirement benefit credit	—			5
Change in fair value of investments	—			3

Interest expense, net	(35)			(28)
Income before income taxes (i)	213			260
Income tax provision	(35)			(47)
Net income	178			213
Net loss attributable to noncontrolling interests	(6)			(2)
Net income attributable to Rockwell Automation, Inc.	$	184		$	215

Diluted EPS	$	1.61		$	1.86




Adjusted EPS (2)	$	1.83		$	2.04

Diluted weighted average outstanding shares	113.5			115.2

Pre-tax margin (i/d)	11.3		%	12.7		%

Intelligent Devices segment operating margin (e/a)	14.9		%	16.2		%
Software & Control segment operating margin (f/b)	25.1		%	25.0		%
Lifecycle Services segment operating margin (g/c)	12.5		%	10.6		%
Total segment operating margin (1) (h/d)	17.1		%	17.3		%

(1) Total segment operating earnings and total segment operating margin are non-GAAP financial measures. We exclude purchase accounting depreciation and amortization, corporate and other, non-operating pension and postretirement benefit credit, change in fair value of investments, interest expense, net, and income tax provision because we do not consider these items 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.

(2) Adjusted EPS is a non-GAAP earnings measure that excludes purchase accounting depreciation and amortization, non-operating pension and postretirement benefit credit, change in fair value of investments, and net loss attributable to noncontrolling interests, including their respective tax effects. See "Other Supplemental Information - Adjusted Income, Adjusted EPS, and Adjusted Effective Tax Rate" for more information regarding non-operating pension and postretirement benefit credit, and a reconciliation to GAAP measures.

Page 10

ROCKWELL AUTOMATION, INC.

CONDENSED BALANCE SHEET INFORMATION

(in millions)


	December 31, 2024		September 30, 2024
Assets
Cash and cash equivalents	$	471	$	471

Receivables	1,675		1,802
Inventories	1,234		1,293
Property, net	763		777
Operating lease right-of-use assets	388		423
Goodwill and intangibles	4,942		5,059

Other assets	1,471		1,407
Total	$	10,944	$	11,232
Liabilities and Shareowners’ Equity
Short-term debt	$	1,049	$	1,078
Accounts payable	789		860
Long-term debt	2,564		2,561
Operating lease liabilities	326		356
Other liabilities	2,660		2,702
Shareowners' equity attributable to Rockwell Automation, Inc.	3,385		3,498
Noncontrolling interests	171		177
Total	$	10,944	$	11,232

Page 11

ROCKWELL AUTOMATION, INC.

CONDENSED CASH FLOW INFORMATION

(in millions)


	Three Months Ended December 31,
	2024		2023

Operating activities:
Net income	$	178	$	213
Depreciation and amortization	78		77
Change in fair value of investments	—		(3)
Retirement benefits expense	10		5

Pension contributions	(3)		(6)
Receivables/inventories/payables	75		52
Contract liabilities	42		14
Compensation and benefits	(12)		(243)
Income taxes	(8)		2
Other operating activities	4		(78)
Cash provided by operating activities	364		33
Investing activities:
Capital expenditures	(71)		(68)
Acquisition of businesses, net of cash acquired	—		(748)



Other investing activities	(12)		(1)
Cash used for investing activities	(83)		(817)
Financing activities:
Net (repayment) issuance of short-term debt	(28)		409



Cash dividends	(149)		(144)
Purchases of treasury stock	(100)		(120)
Proceeds from the exercise of stock options	28		11
Other financing activities	(5)		(22)
Cash (used for) provided by financing activities	(254)		134
Effect of exchange rate changes on cash	(27)		9



Decrease in cash and cash equivalents	$	—	$	(641)

Page 12

ROCKWELL AUTOMATION, INC.

OTHER SUPPLEMENTAL INFORMATION

(in millions, except percentages)

Organic Sales

We translate sales of subsidiaries operating outside of the United States using exchange rates effective during the respective period. Therefore, changes in currency exchange rates affect our reported sales. Sales by acquired businesses also affect our reported sales. We believe that organic sales, defined as sales excluding the effects of acquisitions and changes in currency exchange rates, which is a non-GAAP financial measure, provides useful information to investors because it reflects regional and operating segment performance from the activities of our businesses without the effect of acquisitions and changes in currency exchange rates. We use organic sales as one measure to monitor and evaluate our regional and operating segment performance. When we acquire businesses, we exclude sales in the current period for which there are no comparable sales in the prior period. We determine the effect of changes in currency exchange rates by translating the respective period’s sales using the same currency exchange rates that were in effect during the prior year. When we divest a business, we exclude sales in the prior period for which there are no comparable sales in the current period. Organic sales growth is calculated by comparing organic sales to reported sales in the prior year, excluding divestitures. We attribute sales to the geographic regions based on the country of destination.

The following is a reconciliation of reported sales to organic sales for the three months ended December 31, 2024, compared to sales for the three months ended December 31, 2023:


	Three Months Ended December 31,
	2024						2023
	Reported Sales		Less: Effect of Acquisitions		Effect of Changes in Currency			Organic Sales		Reported Sales
North America	$	1,150	$	2	$	(3)		$	1,151	$	1,247
EMEA	332		—		(1)			333		388
Asia Pacific	251		—		—			251		276
Latin America	148		—		(14)			162		141
Total	$	1,881	$	2	$	(18)		$	1,897	$	2,052

The following is a reconciliation of reported sales to organic sales for our operating segments for the three months ended December 31, 2024, compared to sales for the three months ended December 31, 2023:


	Three Months Ended December 31,
	2024						2023
	Reported Sales		Less: Effect of Acquisitions		Effect of Changes in Currency			Organic Sales		Reported Sales
Intelligent Devices	$	806	$	—	$	(9)		$	815	$	927
Software & Control	529		—		(5)			534		604
Lifecycle Services	546		2		(4)			548		521
Total	$	1,881	$	2	$	(18)		$	1,897	$	2,052

The following is a reconciliation of reported sales growth to organic sales growth for the three months ended December 31, 2024, compared to sales for the three months ended December 31, 2023:


	Three Months Ended December 31, 2024
	Reported Sales Growth		Less: Effect of Acquisitions		Effect of Changes in Currency		Organic Sales Growth
North America	(8)	%	—	%	—	%	(8)	%
EMEA	(14)	%	—	%	—	%	(14)	%
Asia Pacific	(9)	%	—	%	—	%	(9)	%
Latin America	5	%	—	%	(10)	%	15	%
Total	(8)	%	—	%	(1)	%	(8)	%

The following is a reconciliation of reported sales growth to organic sales growth for our operating segments for the three months ended December 31, 2024, compared to sales for the three months ended December 31, 2023:


	Three Months Ended December 31, 2024
	Reported Sales Growth		Less: Effect of Acquisitions		Effect of Changes in Currency		Organic Sales Growth
Intelligent Devices	(13)	%	—	%	(1)	%	(12)	%
Software & Control	(12)	%	—	%	(1)	%	(12)	%
Lifecycle Services	5	%	—	%	(1)	%	5	%
Total	(8)	%	—	%	(1)	%	(8)	%

Page 13

ROCKWELL AUTOMATION, INC.

OTHER SUPPLEMENTAL INFORMATION

(in millions, except per share amounts and percentages)

Adjusted Income, Adjusted EPS, and Adjusted Effective Tax Rate

Adjusted Income, Adjusted EPS, and Adjusted Effective Tax Rate are non-GAAP earnings measures that exclude non-operating pension and postretirement benefit credit, purchase accounting depreciation and amortization attributable to Rockwell Automation, change in fair value of investments, and Net loss attributable to noncontrolling interests, including their respective tax effects.

We believe that Adjusted Income, Adjusted EPS, and Adjusted Effective Tax rate provide useful information to our investors about our operating performance and allow management and investors to compare our operating performance period over period. Adjusted EPS is also used as a financial measure of performance for our annual incentive compensation. Our measures of Adjusted Income, Adjusted EPS, and Adjusted Effective Tax Rate may be different from measures used by other companies. These non-GAAP measures should not be considered a substitute for Net Income attributable to Rockwell Automation, diluted EPS, and effective tax rate.

The following are the components of operating and non-operating pension and postretirement benefit cost (credit):


	Three Months Ended December 31,
	2024		2023
Service cost	$	10	$	10
Operating pension and postretirement benefit cost	10		10

Interest cost	34		37
Expected return on plan assets	(41)		(42)

Amortization of net actuarial loss	7		—

Non-operating pension and postretirement benefit credit	—		(5)

Net periodic pension and postretirement benefit cost	$	10	$	5

The components of net periodic pension and postretirement benefit cost other than the service cost component are included in Other income in the Condensed Statement of Operations.

The following are reconciliations of Net income attributable to Rockwell Automation, diluted EPS, and effective tax rate to adjusted income, adjusted EPS, and adjusted effective tax rate, respectively:


	Three Months Ended December 31,
	2024			2023
Net income attributable to Rockwell Automation	$	184		$	215
Non-operating pension and postretirement benefit credit	—			(5)
Tax effect of non-operating pension and postretirement benefit credit	—			1
Purchase accounting depreciation and amortization attributable to Rockwell Automation	33			33
Tax effect of purchase accounting depreciation and amortization attributable to Rockwell Automation	(8)			(6)
Change in fair value of investments	—			(3)
Tax effect of change in fair value of investments	—			1


Adjusted income	$	209		$	236

Diluted EPS	$	1.61		$	1.86
Non-operating pension and postretirement benefit credit	—			(0.04)
Tax effect of non-operating pension and postretirement benefit credit	—			0.01
Purchase accounting depreciation and amortization attributable to Rockwell Automation	0.29			0.28
Tax effect of purchase accounting depreciation and amortization attributable to Rockwell Automation	(0.07)			(0.05)
Change in fair value of investments	—			(0.03)
Tax effect of change in fair value of investments	—			0.01


Adjusted EPS	$	1.83		$	2.04

Effective tax rate	16.4		%	18.1		%
Tax effect of non-operating pension and postretirement benefit credit	—		%	(0.1)		%
Tax effect of purchase accounting depreciation and amortization attributable to Rockwell Automation	1.1		%	(0.1)		%
Tax effect of change in fair value of investments	—		%	—		%

Adjusted effective tax rate	17.5		%	17.9		%


						Fiscal 2025 Guidance

Diluted EPS (1)						$7.65 - $8.85
Non-operating pension and postretirement benefit credit						—
Tax effect of non-operating pension and postretirement benefit credit						—
Purchase accounting depreciation and amortization attributable to Rockwell Automation						1.15
Tax effect of purchase accounting depreciation and amortization attributable to Rockwell Automation						(0.20)
Change in fair value of investments (2)						—
Tax effect of change in fair value of investments (2)						—


Adjusted EPS (1)						$8.60 - $9.80

Effective tax rate						~ 17%
Tax effect of non-operating pension and postretirement benefit credit						~ —%
Tax effect of purchase accounting depreciation and amortization attributable to Rockwell Automation						~ —%
Tax effect of change in fair value of investments (2)						~ —%

Adjusted effective tax rate						~ 17%

(1) Fiscal 2025 guidance based on adjusted income attributable to Rockwell, which includes an adjustment for SLB's non-controlling interest in Sensia.

(2) The actual year-to-date adjustments are used for guidance, as estimates of these adjustments on a forward-looking basis are not available due to variability, complexity, and limited visibility of these items.

Note: Guidance as of February 10, 2025

Page 14

ROCKWELL AUTOMATION, INC.

OTHER SUPPLEMENTAL INFORMATION

(in millions, except percentages)

Free Cash Flow

Our definition of free cash flow, which is a non-GAAP financial measure, takes into consideration capital investments required to maintain the operations of our businesses and execute our strategy. In our opinion, free cash flow provides useful information to investors regarding our ability to generate cash from business operations that is available for acquisitions and other investments, service of debt principal, dividends, and share repurchases. We use free cash flow, as defined, as one measure to monitor and evaluate our performance, including as a financial measure for our annual incentive compensation. Our definition of free cash flow may be different from definitions used by other companies.

The following table summarizes free cash flow by quarter:



	Mar. 31, 2023		Jun. 30, 2023		Sep. 30, 2023		Dec. 31, 2023		Mar. 31, 2024		Jun. 30, 2024		Sep. 30, 2024		Dec. 31, 2024
Cash provided by operating activities	$	187	$	282	$	839	$	33	$	120	$	279	$	432	$	364
Capital expenditures	(31)		(42)		(63)		(68)		(51)		(41)		(65)		(71)
Free cash flow	$	156	$	240	$	776	$	(35)	$	69	$	238	$	367	$	293

Free cash flow conversion (free cash flow as a percentage of adjusted income) is a non-GAAP financial measure, which reflects our ability to generate cash from the operations of our business while considering the capital investments required to maintain operations and execute our strategy as a ratio of our operating performance. We believe free cash flow conversion provides useful information to investors about our ability to convert operating performance into cash generation. Our measure of free cash flow conversion may be different from measures used by other companies.

The table below provides free cash flow conversion for the three months ended December 31, 2024 and 2023:


	Quarter Ended
	Dec. 31, 2024			Dec. 31, 2023
Free cash flow (a)	$	293		$	(35)
Adjusted income (b)	209			236
Free cash flow conversion (a/b)	140		%	(15)		%

Return On Invested Capital

Our press release contains information regarding ROIC, which is a non-GAAP financial measure. We believe that ROIC is useful to investors as a measure of performance and of the effectiveness of the use of capital in our operations. We use ROIC as one measure to monitor and evaluate our performance. Our measure of ROIC may be different from that used by other companies. We define ROIC as the percentage resulting from the following calculation:

(a) Net income, before Interest expense, Income tax provision, and purchase accounting depreciation and amortization, divided by;

(b) average invested capital for the year, calculated as a five quarter rolling average using the sum of Short-term debt, Long-term debt, Shareowners’ equity, and accumulated amortization of goodwill and other intangible assets, minus Cash and cash equivalents, short-term investments, and long-term investments (fixed income securities), multiplied by;

ROIC is calculated as follows (in millions, except percentages):


	Twelve Months Ended
	December 31,
	2024			2023
(a) Return
Net income	$	913		$	1,112
Interest expense	160			135
Income tax provision	139			288
Purchase accounting depreciation and amortization	144			274
Return	$	1,356		$	1,809
(b) Average invested capital
Short-term debt	$	968		$	754
Long-term debt	2,626			2,866
Shareowners’ equity	3,615			3,558
Accumulated amortization of goodwill and intangibles	1,366			1,168
Cash and cash equivalents	(452)			(574)
Short-term and long-term investments	(2)			(3)
Average invested capital	$	8,121		$	7,769
(c) Effective tax rate
Income tax provision	$	139		$	288
Income before income taxes	1,052			1,400
Effective tax rate	13.2		%	20.6		%
(a) / (b) * (1-c) Return On Invested Capital	14.5		%	18.5		%

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