Good morning, everyone, and welcome to the Strategic Announcement of Q4 and Full Year 2024 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note, today's event is being recorded. At this time, I'd like to turn the conference call over to our host, Colleen Mettler, Vice President of Investor Relations at Emerson. Please go ahead.

Good morning, and thank you for joining us for Emerson's strategic announcement and fourth quarter and full year 2024 earnings conference call. This morning, I am joined by President and Chief Executive Officer, Lal Karsanbhai; Chief Financial Officer, Mike Baughman; and Chief Operating Officer, Ram Krishnan. As always, I encourage everyone to follow along with both slide presentation we have prepared this morning, which are 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 GAAP measures. Please turn to Slide 3. Today, we have two presentations that we will discuss. We will first go through our strategic announcements presentation and then we will go through our 2024 financial results and guide for fiscal '25. I will now pass the call over to Emerson's President and CEO, Lal Karsanbhai, to discuss the strategic actions we announced to complete our portfolio transformation.

Thank you, Colleen. Good morning, everyone. Please turn to Slide 4. 2024 is an exciting year where we closed our National Instruments acquisition, did excellent work driving synergies and integration and celebrated 80 years as a company listed on the New York Stock Exchange. Operationally, we performed at a high level and we'll go through our results in a few minutes. 2025 is a milestone year for Emerson as we commemorate our 135th year as a company. This longevity is only possible due to the talent, dedication and innovative spirit of our Emerson employees through the decades and I'm grateful for their continued contributions. Emerson has undergone many transformations during this storied history, and I'm excited to announce our final steps to complete our portfolio transformation, which started 3.5 years ago. Our intent has been unwavering in the execution of our vision to create a cohesive industrial technology portfolio. Transformation and evolution have been hallmarks of past Emerson generations. [indiscernible] Chuck Knight and David Farr all had visions and reinvented this great company. And now this is a trademark of this management team that I have the privilege to lead. Please turn to Slide 5. First, Emerson has made a proposal to acquire the remaining shares of AspenTech for $240 per share in cash, which values AspenTech at an EBITDA multiple consistent to our original transaction. Given our position as a 57% shareholder of AspenTech, our proposal must be made public and filed under our 13-D reporting obligations as and when delivered to AspenTech. We were prohibited from engaging in any take private discussions with AspenTech ahead of such public disclosure. Now that our proposal has been made public, we look forward to engaging privately with a special committee of AspenTech's Board to reach a definitive agreement that will benefit…

Thanks, Lal, and good morning, everyone. We will now go to the next presentation, shifting the call to the earnings press release and discuss our 2024 financial results and 2025 guidance. We will also share with you what we are seeing in our funnel and end markets. Please join me on Slide 16. We continue to deliver on our value creation framework. As you can see in this chart, 2024 was another excellent year that met or exceeded guidance. Underlying sales grew 6% and operating leverage was 47%, both in line with August guidance. Adjusted EPS was $5.49 at the high end of August guidance and free cash flow was $2.9 billion, which exceeded our guidance. Quarterly underlying orders growth exited the year at 2% and our full year growth is also 2%. This order's growth was led by our process and hybrid businesses, which were up mid-single digits for the year. Discrete Automation orders were down mid-single digits for the year, but turned positive in Q4 as we expected. Though not included in the underlying for 2024, Test & Measurement orders in the quarter were down 7% but improved 2-point sequentially, and we remain optimistic about a recovery in this business in 2025. Additionally, we executed approximately $435 million of share repurchase above the August guidance as we saw an opportunity to buy our 2025 dilution in advance at an attractive valuation. Our 2024 performance was another year of strong operating results and demonstrates the work of our transformed higher-growth, higher-margin portfolio. Please turn to Slide 17, where I will provide additional color on our 2024 performance. Underlying sales growth of 6% was led by our process and hybrid businesses, which were up high single digits for the year. Intelligent Devices grew 5%, while software and control grew 8%…

Thank you, Mike. As we turned to Q&A, I will ask that you please limit your questions to one, so we can get to as many folks as possible. Please also limit your questions to those related to the quarter and outlook with respect to Emerson. I'd like to remind you of Lal's earlier comments, we will not be addressing questions on the portfolio announcements beyond the information we shared today in our slides, prepared remarks, and press release materials. We will update the market as and when appropriate or required with respect to AspenTech's proposal and the Safety & Productivity strategic review. With that, I will now turn it over to the operator to start the Q&A.

Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions] And our first question today comes from Andy Kaplowitz from Citigroup. Please go ahead with your question.

Congrats on the announcements today. Well, so $7.2 billion of total backlog at the end of Q4 was down a little bit, as you said it would be, but your pipeline of new awards were up. So, can you talk about how you're thinking about Emerson's overall book-to-bill for '25? Do you think you could grow backlog? Could you elaborate on when end markets continue to drive process and hybrid markets to support your mid-single-digit growth expectations in '25?

Yes, Andy. Look, certainly, the backlog come down from Q3 is part of our seasonality as we see these higher volumes being shipped in Q4. We believe the $7.2 billion is a very healthy level and supportive of the guide for next year. So, my expectation is I think about the order environment that we expressed today and the sales environment is a book-to-bill have gone into 2025. So, really no meaningful change there and really well positioned.

And then process and hybrid, Lal, like it seems like you actually had more new -- well, you had more new wins in Q4 than Q3. Did you see reacceleration, just stability? Like what are you seeing in those markets?

Yes. No. Look, I think the projects continue to move in the right direction. As you know, LNG took a little bit of a pause on new awards in North America, but continue to expand globally in Africa and the Middle East predominantly, which was critical for us. But we continue to see very strong sustainability decarbonization activity in Europe, life science activity globally and power generation, particularly in the United States and Europe to support the data center requirements that are out there. So, feel very optimistic that we closed the year in the mid-single digits from process hybrid and that we have a strong outlook going into next year.

Our next question comes from Deane Dray from RBC Capital Markets. Please go ahead with your question.

Add my congratulations. There's a lot of moving parts, but the slides were really helpful in the commentary. Look, it's -- this little bit of the dog that didn't bark, but you didn't talk about any sort of customer delays, push-outs, any hesitancy about committing on the approval process for projects. Did you see any of that? And then just separately, what's going into the assumptions about the second half recovery in China? Are you seeing any green shoots? Any specifics other than like an easier comp?

Ram here. Yes, we did not see any delays from customers. Certainly, nothing in the Middle East or North America or Europe. All of the project shipments that we had baked into our Q4 plan shift. So, we are not sensing any of that. And the capital cycle remains to be strong for us in energy, energy transition, power, LNG. So, the pace of business and process and hybrid continues. Obviously, the discrete recovery is what we're watching. Orders turning positive for our Discrete Automation business in Q4 is certainly a positive for us. And we're confident that Test & Measurement will see continued momentum going into 2025. And then what was your second piece of your question?

China. Yes, China.

In terms of China, obviously, the power segment in China is pretty good for us. It's really discrete and chemical recovery. Our hope is, obviously, there's a lot of stimulus. There's certainly some green shoots we're seeing in the chemical space we expect to manifest in the first half. it will come down, the pace of discrete recovery, which we're anticipating to happen in the second half of 2025. So, that kind of shapes up our China plan low to mid-single-digit growth for next year.

Our next question comes from Nigel Coe from Wolfe Research. Please go ahead with your question.

Lots to unpack here. That's for sure. So just on that last part, the DA kind of trends in the first half of next year. Do you think that -- are you confident that we're going to be sort of narrowing the declines in the first half of fiscal '25 from the exit rate from '24? And this is not a question on the transaction, but just maybe just clarify, when you talk about EPS neutrality, is that pro forma total synergies, i.e., not captured in FY '25, but those would be what was actually typically captured in FY '25?

Lal here. So, I'll take the first part and hand it over to Baughman on the second question. So, on discrete, certainly, we saw discrete turn positive in the fourth quarter, which is encouraging to see that bottom out and set for recovery as we go through '25. The elements of discrete in Test & Measurement sequentially were up as well quarter-over-quarter, down 7% orders in the last quarter, but that's a significant improvement. So, we continue to believe that we're seeing the early shoots, the green shoots of that market recovery, which gives us the confidence in the forecast that we put for the second half of 2025. Ram, any color?

Yes. And to add on the Test & Measurement, we're equally balanced across four markets: Semiconductors, ADG, transportation and our portfolio business, which addresses a broad spectrum of markets. Three out of the four, we see good momentum that supports the recovery plan that we've laid out to drive growth in the second half of 2025 -- orders in the first half of '25. The transportation piece, which is about 20% of our sales in Test & Measurement, which is exposed to the EV markets is one we're watching. That's where we haven't seen the turn, but three out of the four markets have turned. And if you saw some of the results are order pace reported by some of the players in Test & Measurement, the -- space, you can see that market has turned. So, it's supportive of a broad recovery in the industry.

And Nigel, on your second question, just to be clear, you were asking about the comment with respect to AspenTech being neutral to '25?

Yes.

Yes, neutral.

Yes. Great. Let me do a couple of things to think about there, and we're obviously not going to talk specifics. But looking at models that have been out there, there are a couple of things to highlight for everybody. First is, synergies. As Lal mentioned, we are expecting synergies to come with this transaction. The second thing would be the seasonality of the AspenTech business. This is a process we've begun that will be one that takes months, not weeks to complete. And obviously, as AspenTech talked about on their call yesterday, and as their seasonality has traditionally been, it's weighted toward the back half of the year. And then the third thing that I would point out is that our modeling shows a closing balance sheet with increased debt, obviously, well within the metrics of the A2A ratings, but we do expect a significant portion of that increased debt to be short-term debt. And interest rates, while being persistently high at the long end of the curve, we do expect some decreases in the short end of the curve that we've modeled in.

Our next question comes from Steve Tusa from JPMorgan. Please go ahead with your question.

Just a quick one on the details. The backlog, you said that was up $150 million sequentially for the core, ex-T&M, or was that sequential? Or was that year-over-year?

That's year-over-year, Steve. That's year-over-year.

Okay. Okay. Got it. And then -- sorry, just can you just walk us to that like neutral impact from Aspen for this year?

I'll take that one, Steve. No, I'm not going to go into the details of outline categories of synergies in my previous comments, but I'm not going to walk through the details of the math there.

Okay. But it is just the core Aspen performance. It's not like dependent on like these other transactions and what you do with the balance sheet. It's really just like core Aspen, what you're losing and then -- or what you're gaining, and then the synergies associated with that.

Correct. Yes, that's correct.

Okay. So just where did the T&M backlog end?

$400 million.

$400 million?

$400 million.

Our next question comes from Andrew Obin from Bank of America. Please go ahead with your question.

You guys highlighted power as a growth vector in '25. I think it's been a while since you've been excited about this. Can you just give us more detail as to what are you seeing in your traditional power business? Maybe update us what the mix is? And then as a follow-up, lots to talk on nuclear upgrades, bringing back mothball capacity, SMRs. What exactly is your nuclear exposure? Do you have N certification on your valves? And what are you seeing into '25 on that business?

Yes, Andrew, Lal here. So yes, we did highlight that about two quarters ago in terms of the acceleration that we're seeing in power generation, transmission and distribution investments, particularly in that case, in North America, driven by data center investment and the requirements for power. It's been manifested in three ways, predominantly in the marketplace. Extension of life of existing facilities, the bringing back of certain nuclear facilities, which were mothballed years ago, and then the build-out of new combined cycle generating facilities. Alongside, of course, a very broad investment in the grid, which now needs to manage disparate sources of generation that impact what is a very aging infrastructure. Power generation represents approximately 9% of revenue in the Company today. It's -- we have seen order acceleration in that business into the mid- to high single digits over the year. That is a very differentiated performance for our ovation business, which today serves just about every segment of the power generation market from traditional power generation sources to hydro, solar and wind. And we expect that to continue as we go forward here in 2025. Lastly, on AspenTech, certainly, the GGM business has seen accelerated growth driven by the investments in the grid, and we're pretty excited about that. Let's say, low teens ACV growth that they've talked about and experienced. So together, that's a very significant portfolio of capabilities that we bring into a market that is reinvesting at a relatively high rate.

How big is nuclear as a percent of power?

Nuclear is about 20% of our overall power business, the 9% that Lal referenced. We have a broad scope of capabilities for the nuclear business, obviously, instrumentation, valves, our control system through a particular channel, and then our solenoid valve category as well. And we have a leading position, particularly in our final control elements and instrumentation. And we have a very, very good presence across all of the nuclear facilities on a global basis. We participate in every region of the world.

Congratulations on getting a lot done.

Thanks, Andrew.

Our next question comes from Jeff Sprague from Vertical Research. Please go ahead with your question.

You guys have been busy. Just back one more on Aspen. It might have been Nigel's original question. But I just want to clarify, obviously, you're not going to own it for the full fiscal year. A month that's already passed. Does the neutral comment assumes kind of midyear closing? Or is it a pro forma for the full year? Can you just clarify that?

We're not going to get into specifics around timing, Jeff, but the comment was intended to be for the year. And as I mentioned, there's obviously a seasonality element to that business that is helpful to the back half of the year. So not going to get into specific timing.

And then Lal, it was interesting your choice of words on Safety & Productivity, I think exploring an exit, including a cash sale sort of makes it sound like that's the least attractive option. I assume there would be a fair amount of leakage on a sale, given how long you've owned these assets. Can you give us some context to that? And have you had an opportunity to maybe explore more creative options, spin, RMT, things like that, that wouldn't come with tax leakage?

No. Look, everything's on the table at this point. I just want to be fully inclusive of all the opportunities that we're considering. And beyond that, until such time that we deem appropriate, I'm not going to comment any further on the structure there.

And I'm sorry, just one quick one. The second half timing of kind of discrete recovery, does that apply equally in your view in terms of both legacy Emerson discrete and T&M? Or do you see them on a little bit different schedules?

No. Legacy discrete turned positive in the last quarter on orders, and we expect that to be in the cycle and recovering alongside T&M.

Our next question comes from Joe O'Dea from Wells Fargo. Please go ahead with your question. Joe O’Dea: Congrats on the news this morning. Can you talk about this evolution toward more software-defined automation and the time line that you envision for that and how that gets implemented across MRO versus brownfield, greenfield? I'm not sure in terms of the challenges in sort of transitioning an operating system towards software-enabled the way you're talking about as opposed to starting fresh. So, how we should think about the time line towards this evolution?

Well, it's a journey. What I outlined there, Joe, is a three-phase approach starting at the foundational level at the site. And that's really what we're seeing today in terms of addressing the market needs that exist at a customer level, whether that's digital transformation, this conversion that we've been talking about for a number of years now of IT and OT, the democratization of data that needs to be available and accessible across apartments, asset optimization, which is incredibly important to drive reliability and safety and ultimately remote or autonomous operations as well. The second level as you go through that foundation is to drive it at a site level. And against some of those technology implications, you can probably think about this as a -- each of these steps as a three- to five-year potential journey really depends on the rate of adoption. We're going to be very intentional in how we engage customers, be some that cross that chasm before others and are going to innovate with the technology. And then lastly, on the third phase, that's an enterprise-level opportunity. That's really the proof point operating at the site and those customers that see an opportunity to really drive the same -- those levels of efficiency across the entire fleet of their assets. Ram?

Yes. And just to add to that, our technology road map will have a scalable enterprise operations platform solution that can be applied certainly in brownfield-type environments as well as greenfield. So, we won't limit the applicability of the solution to just greenfield. It's very important to understand that there's significant number of facilities that will require a digital transformation road map and the applicability of the solution to brownfield is an important element of how we're going to design the architecture. Joe O’Dea: And then just quickly on megaprojects. We've heard a little bit more discussion of that this quarter. You talked about the pipeline. One of the markets you didn't talk about as much was chemicals in terms of accelerating. What we track is there could be an acceleration in those starts as well. Like Aspen's been still talking about some challenges there. But just overall, in terms of any acceleration on large project starts next year and then specifically within chemicals.

Yes. We've seen our chemical activity in the Middle East, for example, be particularly strong. We do expect chemical and petrochemical in North America post elections, obviously, going into next year, to return. We're watching China cautiously. It did slow in China, but we do expect with the stimulation of the economy that has happened that we will see chemical activity there as well as Southeast Asia. We haven't baked in a huge amount of chemical recovery, to be honest, in the plan. Our plan is really contingent more on energy, energy transition, LNG, sustainability, decarbonization, power, life sciences and metals and mining. If we have a strong presence in chemical, if chemical does surprise us to the positive, particularly in Europe, that's certainly promising to our three to five guide and then certainly China.

And our next question comes from Julian Mitchell from Barclays. Please go ahead with your question.

Just wanted to follow up on the organic sales guidance for Test & Measurement because I think the total for the year is sort of up 3% to 5%. It sounds like processing hybrid's up mid-single and discrete is up, I think, mid-single as well. So just wanted to sort of check that and what's embedded for Test & Measurement and how we think about sort of any first half versus second half T&M dynamics, please?

So, you are correct, mid-single for process, hybrid. Mid-single for discrete into the 3% to 5% plan. Test & Measurement sales is also mid-single, but high single-digit orders. We consumed backlog this year. So, our plan is to get orders growing at faster rate sales, but sales guide for Test & Measurement is mid-single digits for 2025 and ramping in the second half.

And then just my second one around, synergies. I guess sort of two pieces of that. One is Test & Measurement. There's $100 million of synergies to go over two years. Do we just assume a slight majority of that in 2025 to sort of $60 million or so? And really just clarifying from the prior series of questions. Is it fair to say at this point, you're not going to provide that kind of synergy run rate assumption for Aspen? Just wanted to make sure I didn't miss it from earlier.

Yes, Julian. Yes, thank you. So yes, your assumptions on Test & Measurement is fair. And in terms of Aspen, we will provide that color once we have a definitive agreement, and we'll lay the details out for you. But until that time, no comment on the timing or the scale.

And ladies and gentlemen, with that, we'll be ending today's question-and-answer session as well as today's presentation. We do thank you for joining. Please have a nice day. You may now disconnect your lines.