Good morning and welcome to the Emerson Second Quarter 2022 Earnings Conference Call. All participants are in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Brian Joe. Please go ahead, sir.

Good morning and thank you for joining us for Emerson's Second Quarter Fiscal 2022 Earnings Conference Call. Today, I am joined by President and Chief Executive Officer, Lal Karsanbhai; Chief Financial Officer, Frank Dellaquila; and Chief Operating Officer, Ram Krishnan. As always, I encourage everyone to follow along with the slide presentation, which is available on our website. Please join me on Slide 2. This presentation may include forward-looking statements, which contain a degree of business risk and uncertainty. Please take time to read the safe harbor statement and note on the non-GAAP measures. Turning to Slide 3. As noted in our press release, Emerson officially announced the date and location of our 2022 investor conference. The conference will be held in person November 29 in New York City. More details will be distributed as we approach the conference later this year. I'll now turn the presentation over to Emerson's President and CEO, Lal Karsanbhai, for his opening remarks.

Thanks, Brian. Good morning, everyone. I would like to begin by thanking the global Emerson team, who again delivered very strong results amid challenging operating conditions. I'd also like to thank and extend my appreciation to Emerson's Board of Directors for their energy and support of management. And lastly, to all our shareholders who believe in our value creation proposition, thank you. A lot has changed since our call three months ago. Operating conditions clearly worsened, the war in Ukraine, COVID lockdowns in China, resulted in a return to inflationary commodity environment, lead time extensions and shortages in electronics and logistics challenges. All this resulted in challenging variances across our businesses. But in spite of this, our business performance was strong, and we delivered differentiated results in our ability to execute. Orders grew 13% on a March ending three-month underlying basis, led by 17% growth in Automation Solutions and 7% growth in commercial, residential. Our underlying sales accelerated to 10% growth with conversion in Automation Solutions improving sequentially to 7%; and commercial, residential, very strong at 14% growth. We have broad world area strength across our business. Price activity was very robust in the quarter, and it is sticking. But it is largely offsetting inflationary impact of materials, labor and freight costs. We delivered incremental profitability of 24% in the quarter and remained committed to our guideline of 30% for the year. Earnings per share on an adjusted basis grew 21% to $1.29, $1.21 excluding an $0.08 impact that came in the quarter. Bottom line, yes, it is challenging, but our operating diligence, our management process enabled this performance. I'm very proud of the team. Going forward, we see a robust industrial environment, led by energy investments in North America and the Middle East. The war in Ukraine and sanctions…

Thank you, Lal, and good morning, everyone. Thanks for joining us. If you would, please turn to Slide 7 and I'll review the quarter. As Lal said, we had a very strong quarter. I want to also extend my thanks to everyone in operations for the execution that they turned in and have faced some very real operational challenges. Demand continues to be robust across most key end markets, driving second quarter underlying growth of 10%, ahead of the guidance that we provided in February. The higher sales were partially driven by price actions and realizations that were implemented to offset continued inflation. I will talk a little bit more about the price inflation dynamic when we address the guidance. For the quarter, we realized four points of price overall, and we did turn positive with respect to net material inflation as we said we would. Adjusted segment EBITDA increased 20 basis points as we more than offset additional material costs and other inflation, which was significant, with increased price and effective cost management. SG&A performance was excellent. We leveraged it. It was essentially flat in dollars in Q2 versus last year and was leveraged two points across the enterprise, reflecting previous restructuring actions and spending restraint in the businesses. Adjusted earnings per share was $1.29, up 21% versus prior year, exceeding the February guide of $1.15 to $1.20. As Lal mentioned, it includes an $0.08 tax benefit in the quarter. That benefit was included in the 22% tax rate guide for the year, but the timing of when we would see it in the year was uncertain. We had it – we actually realized it in the second quarter. Free cash flow was down 50% versus prior year. This is mainly due to higher inventory as a result of…

Thank you, Frank. Please turn to slide 10. Clearly, like the last few quarters, the operating environment has remained challenging, as electronic supply, commodity inflation and logistics constraints continue to impact our operations globally. Additionally, geopolitical uncertainty and COVID lockdowns in China introduced new challenges as we exited Q2 and began the third quarter. On the commodities front, the current geopolitical environment has led to rising steel, nonferrous commodities and oil prices, causing incremental inflation on a large portion of our material purchases. This has been a significant reversal in course for some commodities such as steel. Due to the magnitude of the increases, additional material inflation will be incurred as we progress through the second half. Price actions already in place, and the additional ones underway will keep our price less material inflation positive for the second half of the fiscal year, but will constrain margins in our climate business. Higher oil prices have also led to increased logistics costs. This again reiterates the importance of our regionalization strategy, which allows us to leverage our strong regional supply bases and largely avoid expensive intercontinental logistics. On the electronics side, component availability remains a concern, especially within Automation Solutions. While we see stabilization of lead times, the market is expected to remain tight well into 2023 as capacity additions are not able to keep up with demand. Continued purchase price variances are also impacting profitability, although our proactive price increases help ease the impact. Our global teams continue to do outstanding work to qualify additional suppliers and redesign products to utilize available components, and we’re clearly seeing the benefit of this effort come through. Lastly, the China COVID lockdowns continue to be a fluid situation. The impacts to our second quarter were minimal, but these lockdowns are expected to have a bigger impact heading into Q3. The current issues are contained to our plant operations in Shanghai, but we are beginning to see constraints to our plant operations across the country due to supplier shutdowns. We're keeping a close eye on the situation and will adapt as necessary. While we expect to face headwinds in many of these areas for the rest of the year, we're confident, very confident, that our global teams will deliver differentiated operational execution in a challenging environment as evidenced by our strong first half performance. I will now turn the call back over to Frank.

Thank you, Ram. If you would, please turn to slide 11, and we'll go through the outlook for the year. So as Lal mentioned at the top of the call, we continue to see very strong demand across nearly all businesses and world areas that challenges our operational challenges. They are not challenges around the basic demand across the enterprise. Automation Solutions is strengthening across process, hybrid and discrete markets. In process markets, recent events will drive incremental investments across the energy value chain. This strengthening demand will spur growth in transition markets like LNG and emerging markets like clean fuels, battery storage and renewables, as well as in traditional oil and gas markets as Lal discussed. Together with continued robust demand in chemicals, power gen and grid modernization, we are increasing our outlook for the process market growth in 2022 to high single digits. We also expect hybrid demand to remain strong at mid to high single digits, including continued life science investments and high commodity prices, boosting metals and mining CapEx. Discrete markets remain strong in the 10% range with semiconductor, electronics and factory automation investments are all strong. So while we're encouraged by the underlying demand situation, there are constraints, as Ram outlined, remaining -- regarding supply chain, logistics and potentially COVID in China, which is an evolving situation. It's already had somewhat of an impact in the quarter, and there's uncertainty as to how that will unfold. In particular, we expect challenges to continue around electronics availability, and we expect that to continue into 2023. Continued strength in our core markets, our backlog level and orders momentum provide the underpinning for strong second half sales growth, and we will have to deal with those challenges as they evolve. Overall, we have confidence in our fiscal year…

Thank you. We will now begun the question-and-answer session [Operator Instructions] And the first question will come from Joe Ritchie with Goldman Sachs. Please go ahead.

Thanks. Good morning, everyone.

Good morning, Joe.

I want to maybe start off with China today, like I saw that you saw double-digit growth in Automation Solutions. I'm just curious, how did that trend through the quarter? And then what are you kind of factoring in for the lockdowns and the impacts associated with that in your guidance?

Yes. I'll speak to the business activity, Joe, and just focusing on your question around auto sol. Very strong quarter and -- both in sales conversion but also in orders when you look at the destination business, both in the mid-teens, high to mid-teens. So we feel very strong about the activity in infra auto sol. The commercial/residential activity is somewhat more muted, driven by the climate resi cycle. And those orders were softer as we went through the quarter. But when I look at the project activity, when I look at the installed base momentum we have in China, I see the outlook -- I continue to feel very strong about the outlook for the year, Joe, for us. In terms of sales conversion, Ram, if you want to speak to it.

Yes. So Joe, I think, obviously, we've got 20 plants across China, and we have a few around Shanghai, where we have experienced constraints in the last four weeks. Hopefully, as we go into the month of May, we're starting to see those open up. We partially opened up in the Shanghai area this week. Clearly, we have supply chain across China that supplies us that have been impacted. We are expecting that situation to improve as we go through the quarter. April was a tough month for us, but we do believe that as the – we built in improving situations through the quarter, and that's kind of baked into the guidance.

Okay. Great. That's helpful. If I could ask a follow-on question, and apologies if I missed it earlier. But in C&RS, I know that, there was an original assumption that we could potentially see flat to slightly up margins in 2022. Just help us understand how that – how you expect the margins in that business to expand in the second half of the year. And then any commentary on price/cost in C&RS would be helpful.

Yeah. Joe, good morning, this is Frank. So the margins will improve sequentially in the second half as we've expected all along based on the price/cost, the incremental price, that will come through. The price is back-end loaded for the year in Climate Tech. Year-over-year we are struggling to get to a push because of the incremental inflation in the business. So the business will deliver EBIT dollars, strong increase in EBIT dollars year-over-year and consistent with what we thought we would do at the beginning of the year, but the incremental inflation and the price that the business is going out to cover dilutes margins.

That makes sense, Frank. Yeah. Thank you. I’ll get back in queue.

Thanks, Joe.

The next question will come from Steve Tusa with JPMorgan. Please go ahead.

Hey, guys. Good morning.

Hey, Steve.

Good morning, Steve.

Sorry, I was on the speaker there. Just on the orders, you noted some signs of moderation in residential on the C&RS side. Any other part of the order trends where there was a bit of a standout in terms of either slowing or accelerating? Any real kind of standouts on the order front on kind of a sequential monthly basis?

Yeah, Steve. No, good question. No, beyond the – we're watching the resi very carefully, obviously, not just the climate side but on the home tools side and watching for traffic through our big-box partners there. But beyond that, look, the strength in automation continues. I think we're energized by seeing the capital project funnel grow and the opportunities there. KOB 3 continues to be very strong, 60% in the quarter for Automation Solutions. That's been the engine in that business. But now with a KOB 1 and 2 wave coming at us, feel very robust about the outlook there. Beyond that, nothing else to comment. Ram?

No. And Steve, I think the European heat pump business remains strong, very, very strong. And actually, our North American HVAC residential business also remains strong.

Okay. So it's more in kind of the resi side of tools, if you will?

Correct.

Yeah. Okay. Great. Thanks a lot guys. Appreciate it.

Thanks, Steve.

The next question will come from Scott Davis with Melius Research. Please go ahead.

Good morning, everyone.

Good morning, Scott.

A couple of things. I mean, just if we want to go back to chip availability, I mean, you guys were a little bit more confident, I think, last quarter in supply and demand matching up perhaps by the back half of the year. Has this just shifted to the right? And I guess another way to ask it is, are you less confident today than you were three months ago?

I will let Ram give its perspective, but my perspective is, its gotten tougher. We have to for quarter, get more creative, qualify different suppliers, go into the open market which all of that creates variability, variances in the P&L and challenges. But -- so that's versus where we were essentially three months ago. But having said that, we'll have to watch China carefully as we go through here, through the month of April and May and watch how – what happens in the supply chain there. But that's how I feel about it. It certainly didn't get better between the China COVID lockdowns and obviously the war in Ukraine. Ram?

Yes. And particularly on the electronics or the chip shortages, lead times have stabilized, but they are running at 3x of pre-COVID levels. And so, we're managing in that environment. The piece that we thought would improve was component shortages, but the – but we continue to fight shortages on a weekly basis that are impacting our businesses. And hopefully, we'll start to see that improve over the next several weeks. But at this point, we had hoped to see improvement in the shortages, and we haven't.

That's super helpful. And then other SKUs, are -- is it a different list of stuff this quarter? Is it the same list of stuff that's hard to get or a different list? Is it changing, or is there more stability there across the board?

I would say it's similar, I mean, similar type of components that we use primarily in our Automation Solutions business and some parts of our commercial and residential business. So, I wouldn't say it's changing. But I would say, I think the shortages are not improving.

Okay. Thank you. I will pass it on.

The next question will come from Andrew Obin with Bank of America. Please go ahead.

Hi, guys how are you?

Hey Andrew.

Just based on the relative increase in revenue and EPS, it seems like – and this is our math, I apologize. This is like 2/3 additional price that just offsets high inflation. But there seems to be a 1/3 of the increase, which is real volume growth with normal incrementals. So first is that characterization, right? And second, where was the stronger volume?

So Andrew, I don't know if it's exactly 2/3 or 1/3. I think generally, the characterization is right, that most of the increase in the revenue forecast is price, with pressures margins. But there is some underlying volume increase as well. It comes through a very strong underlying leverage actually when you factor out the inflation items.

But what end markets specifically?

Automation.

Yes. Automation.

Yes. Automation Solutions, yes. And residential, it's, I would say, almost entirely price-driven at this point.

Got you. And a follow-up, just going back to chip availability. There's a lot of talk about capacity -- trailing-edge capacity coming on in the US maybe in six months at places like Texas Instruments, Intel. What kind of conversations are you having with those guys? And when do you think you're actually able -- instead of going through brokers and redesign and sort of struggling with the supply chain, how long do you think it takes for real incremental sort of lower capacity to become available in North America from core manufacturers? Is it six months, or is it more like 18 months to two years? Thank you.

Yes. So Andrew, great question. First off, to answer the first part, we are in really good dialogue with suppliers like Texas Instruments, which are very important -- NXP, TI are important suppliers to us on this exact same discussion. We believe that, particularly for our types of chips that go into our Automation Solutions product offering, it's nine to 12 months is the time line for when we expect the capacity to come online or at least that's really when the discussions we've been having with the likes of TI. So that's really what's being planned. We expect the constraints to last at least until then. But hopefully, in nine to 12 months, we'll see that capacity impact lead times.

So early calendar '23?

Yes.

Thank you so much.

Thank you.

Thank you, Andrew.

The next question will come from Andy Kaplowitz with Citigroup. Please go ahead.

Good morning everyone.

Good morning.

Good morning.

Maybe can you talk about how your Automation Solution customers are thinking about large projects at this point? Obviously, commodity prices are more supportive. You talked about energy independence and LNG, but there's also higher inflation, higher rates. So how do you think the CapEx cycle plays out here? And what are your customers saying about moving forward with these bigger KOB1 investments?

Yes. Good question, Andy. So, twofold. One, there continues to be strong support both inside the Boardroom and in actual spend around sustainability investments. Those continue to be funded. There's a lot of creativity in terms of what they are and how they're being implemented. And that's reflected in our funnel itself growing now to about a semblance of the total KOB funnel. So very relevant there. And I feel confident and how those continue to move forward. On other CapEx, what we've seen and the biggest change we've seen as we went through the quarter was gas. And the conversation around gas really we're 71 days into the war, and that's only accelerated. And the opportunities in -- particularly in three places: in Qatar, in Louisiana and in Texas. We had a significant amount of work, engineering work that was done pre-pandemic around investments in LNG in Louisiana, in Texas. A lot of those were shelved. The good news is a lot of that engineering has been completed, and we're seeing a number of those coming back into play now with FID activities across a lot of those. So that would be the biggest change in acceleration in the funnel, and I think that plays very well. Obviously, gas for us is a very significant opportunity as we go forward. Ram, anything to add?

Yes. I would just add, we are seeing more ethylene, methanol projects being talked through. And frankly, globally, some refining capacity coming online entering our $7 billion project funnel. So I think good activity across the board.

Thanks. And maybe just following up on LNG then. You mentioned 150 MTPA is already underway, and there could be 100 more. But how much of the work is actually in your backlog at this point or burning through your revenue right now? How long -- how do you think the cycle will play out? And when do you think will be the peak impact on Emerson's businesses?

Yeah. Look, the opportunity, let's say, size it at about $1 billion if you size it in total, and you can divide that over five years, I think it's fair to say into Emerson revenue, Andy. As you know, the cycle on construction is four to five years for each of these jobs. So take the $1 billion automation number that I essentially laid out for the 100 and divide it by five. Now what that doesn't include, in my opinion, is the regasification opportunities, which we'll see in Europe, in Germany, in places like Italy and Poland and the tankers and freighters. So that's in addition to this. But about fair. If you just did the math at $80 million per five MTPAs, that's how we'd size that.

Appreicate it guys.

Thank you.

Thanks.

The next question will come from Josh Pokrzywinski with Morgan Stanley. Please go ahead.

Hi. Good morning guys.

Hi Josh.

Hi Josh.

So just to follow-up on Andy's question there. Just, kind of, wondering with this new project upcycle and a lot has changed in the industry and your business and the way the customers are approaching these things, a lot more digital, is there less of anything as you guys think about the bill of materials on the project? Is there something where maybe like a digital asset is replacing a physical one? Because it seems like the opportunity or the build material should be higher. I'm just wondering like if there's anything that gets smaller as we enter this like KOB 1/2 upcycle.

Yeah. No, it's a great question. I'll let Ram give his thoughts as well. But look, what we do see is an increase in use of analytics and software on top of the stack. And if you think about the capabilities that an asset optimization software capability like AspenTech brings to the table, that's increasingly more relevant as far as the bill of materials for these customers. So that would be the biggest change. You still got to use farm control elements. You still have to sense what goes through pipes. You're talking about very strenuous conditions of pressure and temperature. And ultimately, you still have to control the recipe with a control system. But the analytics layer and optimizing the performance of the process, I think, is where we see increasing more spend. Ram?

You're spot on. I think, obviously, the LNG wave is just going to be, from a content perspective, just as attractive as the prior waves for us with additional software that Lal mentioned. And then if you look at the sustainability wave around biofuels, hydrogen, et cetera, the content there is just as rich as what you would get in a chemical facility. So net-net, we don't see anywhere the content getting smaller. In general, it will just get augmented with more software data and analytics in addition to the mechanical and the instrumentation content that we typically have.

Got it. That's helpful. And then just a quick follow-up. Because these projects are longer cycle, do you guys have anything in terms of price escalators or indexing that you're putting in the contracts to protect yourself on the inflation side? Thanks.

Yeah. No. Look, these are very detailed commercial agreements that we ultimately enter, and most do have some kind of inflation protection elements there on material. But keep in mind, obviously, on elements like control and software, there's very little material to speak of. So it'd be more on the final control side that we really work those very, very hard.

Perfect. Thanks.

Thanks.

The next question will come from Deane Dray with RBC Capital Markets. Please, go ahead.

Thank you. Good morning, everyone.

Good morning, Deane.

Good morning, Deane.

Hey. I know Aspen close is coming up soon. What are the plans right out of the gate? Do you have any like 100-day goals that you could share?

Yes. So Deane, this is Ram here. Yes, great question. Obviously, we've been planning -- we've had plenty of time to plan for day one, particularly as it relates to integration and channel plans that have been thought through in great detail. So a lot of it, day one will really focus on getting the sales organization going on the sales synergies, which on a global basis is a significant part of the pieces. So, yes, the answer is, yes. Secondly, I mean, obviously, there's lots of opportunities on the technology front and a lot of dialogue underway there as well on the technology collaboration, which will be longer term, as it plays out. But certainly on the sales integration front, we're ready day one to get going.

That's great to hear. And then, any comments on April? Anything specific that you could share?

No. Look, I think the trends we talked about that impacted us in March, the COVID lockdowns in China, we continue to work through those. But beyond that, we're positive on the demand side of the equation through April, very positive.

Great. Thank you.

Your next question will come from Nigel Coe with Wolfe Research. Please, go ahead.

Thanks. Good morning, everyone.

Hey, good morning, Nigel.

Hi, Nigel.

Hi, Nigel.

Can you hear me?

Yes.

Yes.

Yes. Yes, yes.

Yes. Okay. Great. Thank you. So look, AS margin -- incremental margin is extremely strong, I think 57%, if my calculations are correct and came in better than you expected. I think you were pointing towards maybe some sequential moderation from 1Q. So just curious, what's driving the upside and the strength in the incremental margins? And how do you see that over the balance of the year?

Yes. So, hi, Nigel, this is Frank. What we're seeing here is, all the hard -- coming to fruition all the hard work that was done in this business over two or three years. We don't talk about peak margin anymore, but I mean, this is the result of that effort. So despite incremental -- other kinds of inflation, despite even some NMI, which is unusual in the business to this extent, they're printing very, very strong incrementals, because the basic cost structure of that business has been reset. So the incrementals were extremely strong in Q1, and again, as you say, mid-50s in Q2, and we expect they'll continue to be strong in the balance of the year.

And then, obviously, the dollar is moving around a fair bit here. And sometimes, we have seen some FX impact moving around the AS margins. Is that a factor at all here?

No. Not really. No, not significantly. Not a material impact.

And then, my follow-on for Lal on the portfolio. Obviously, you've been very vocal about diversifying away from upstream oil and gas. Do you feel the change in tone around engine security? The US administration stands towards NG CapEx, natural gas, et cetera. Do you feel that you have more headroom and maybe some more time to design the portfolio diversification moves?

No. Look, as I said at the offset, Nigel, I remain committed to diversification in the company. We're working actively on the portfolio management. And obviously, we'll talk at length in our November investor conference about the subject in terms of vision, and hopefully, some very meaningful steps. The commoditized element of oil and gas -- upstream oil and gas assets, we're continuing to work that very aggressively in the market. But in terms of the differentiated technology that is applicable not just in gas, but in life sciences and in many of our other markets, we remain committed to. And we remain committed to the investments around gas because I do believe if you just look at that energy equation that -- as a transitionary fuel over time, that's going to be required for the world to meet its needs.

Okay, great. Thanks.

Thank you, sir.

The next question will come from Tommy Moll with Stephens. Please go ahead.

Good morning and thanks for taking my question.

Good morning Tommy.

Digging on the topic of auto sol incrementals, I wanted to talk about pricing dynamics for your oil and gas business. Potentially, you've been able to pass through some inflationary items. But if we really think about net price, my assumption would be you started the year from a pretty low base just given the severe downturn in the recent past. But as we think through to back half of this year or really even next year, is there not an embedded call option on price here? I mean you've got a commodity environment that's got to be a tailwind. You've got record cash balances, margins, profitability, et cetera, across your customer base. Should we be fairly bullish on that front?

Look, are you speaking specifically about Automation Solutions, Tommy? We continue to -- we have a long history of positive price activity in that market. And that comes from a basis of not just the market structure, but the relevance of our technology in the space and our ability to differentiate and drive price, obviously, is meaningful there. So, look, in some cases, we're up to four price increases across that space. We're working very actively through our selling organizations and with our end users. But I remain confident in that business of ability not just to continue to implement price as needed, but for it also to be realized into the P&L. Frank, anything?

Yes, Tommy, that business captures price year in and year out. It's a very strong business with respect to its ability to capture value through pricing. The commodity situation, with the exception of this unusual electronics situation, it's not nearly as impactful in that business as it is on the other side of the business. So I mean, typically, even with these kinds of broad commodity swings, while yes, they have a P&L impact, it's not determinative. Right now, it's the electronics. That really is the incremental variable that we are dealing with in terms of pricing, but there's no significant embedded price to come as a result of what's going on now. The pricing power in that business is very steady. We're stepping it up this year because we have an unusual situation.

Yes. And just to add to that, commodities as a makeup of the cost structure of that business is not a big element of the cost structure. So -- but as Frank said, we've traditionally been green price/cost, and we'll continue to be green price/cost as we get into the second half of the year.

Thank you. That's helpful. And then shifting gears, I wanted to circle back to the outlook for resi HVAC. You gave some context that the trends may be slowing there and there's certainly been a lot of focus, at least in terms of the North America trends year-to-date and for the back half. So what additional insight could you give us there in terms of what you're seeing in -- on underlying demand?

Yeah. Look, residential as a whole, particularly reflected in our home products business has weakened as we went through the quarter. And we've seen that in just the order run rates. Our climate business has remained strong to date. And as we get into the season, we'll watch how that translates, but feel pretty good about on the climate side still, Tommy.

Thank you. I’ll turn it back.

The next question will come from Brendan Luecke with AllianceBernstein. Please go ahead.

Morning all. Thanks for taking the question.

Good morning, Brendan.

Good morning.

Circling back to the Russia question. Can you offer some color on the size of that business, what the impact is to point out for the guide on the year in Automation Solutions?

Sure. So we have said that that business represented on a full year basis about 1% to 2%, call it, 1.5% of sales. I'd say the average profitability relative to the total company. We had half of a normal year this year until the conflict began, and we've been scaling back the business significantly since, and now we intend to exit it. It will be a slow ramp as we exit it as we figure out exactly what those details are. But I mean -- with that context, I mean, you can determine what the full year contribution of the business is. And we've covered the piece that we expect to be without through the balance of the year within the guide.

Fantastic. And then one quick follow-up on KOB 3 within Automation Solutions. Just struck by the fact that it was again the biggest growth driver here. Can you speak a little bit to, I guess, the dynamics there and how you're driving that improvement? How much of that is price? And how often you find yourself in competitive situations for those revenues?

Yeah. Look, 60% of the revenue in the quarter in Automation Solutions was KOB 3, which is a replacement MRO business. That business is the least price-sensitive -- excuse me -- the least margin-sensitive of all the businesses and the one where we -- where price is the most sticky. So that was reflected in the results of Automation Solutions as we went through the end of March.

Thank you.

Thanks.

Thanks.

This concludes our question-and-answer session as well as our conference call for today. Thank you for attending today's presentation. You may now disconnect.