All right, great. We're going to move along here with Emerson, CFO Mike Baughman. What's your title now?
COO.
COO. I mean, you've done so much at this company. But COO, Ram Krishnan, and from Investor Relations, Colleen Mettler of Emerson, all of you, thank you so much for being here. Really excited to have you. Let's just start with the usual intro question, which is, how's business? And any updates that you guys wanted to give from a fundamental perspective here relative to the last time we talked?
Yeah. So consistent with what we said in our earnings call, I think we feel pretty good about where we sit. I'll comment on orders. I think orders we exited Q1 with 4% underlying orders. We're going to do low single digits in the first half, strengthen process hybrid, strong funnel, offset by weakness and discrete, which as it recovers into the second half, we'll get into mid-single digit to orders growth and exit the year around mid-single digits. So that's from an orders perspective. From an underlying sales perspective, 10% in Q1, some liquidation of backlog as we go through the year, but our backlogs overall remain at very, very good levels at about $7.6 billion. We built about $500 million of backlog in the core business and added another $500 million with NI.
The pace of business is we look very closely at the project funnel, which is a very healthy funnel at $10.4 billion. We built about $200 million into the funnel in terms of size. We're yielding about $400-$500 million from the funnel every quarter, which fuels our project business. KOB3 remains strong at about 65%. So we feel very good. The underlying trends, the secular tailwinds around reshoring, energy security and affordability, the software trend in our customers as they digitize their operations, and certainly the spend around sustainability and decarbonization remains very positive. We believe the discrete cycle will certainly turn. We've had four quarters of down orders. This quarter will be another quarter of down orders, and then we'll turn positive into the second half and into 2025, and that should fuel some good momentum on the order side.
But the process hybrid capital cycle has been very disciplined, and with the tailwinds I described, we expect consistent growth in the process hybrid side of the business.
As you've moved through the current quarter, everything seems on track, but is there anything moving around, anything a little bit better, a little bit worse from an end market perspective?
No, I think consistent with how we laid out the year. I mean, if you look at our businesses, the businesses exposed to process and hybrid, our Final Control business, our Measurement Solutions business, and our systems business continue to operate with the high single-digit orders growth. Now, some of the businesses like Measurement Solutions, which had a 28% sales growth in Q1, driven by improving supply chains and liquidating some of the backlog. So strength there. Certainly, the pace of recovery in the discrete business is consistent with how we laid it out, but we really need to get through Q2 and into the second half before we really see that recovery come through. From a world area perspective, our Middle East, India business is growing at double-digits, strong double-digits. Surprisingly, we're seeing good performance in Western Europe.
Western Europe printed a 10% underlying sales growth in Q1, and our Latin America business has been strong. China printed a 9% Q1 growth, sales growth, and we expect mid-single digit growth in China. Majority of our China business is exposed to power and chemical, two industries that continue to spend, so we feel pretty good about China. North America has been low single digit growth. I mean, we're watching the moratorium on LNG very carefully. It doesn't impact our business this year or next, but it's something we hope will turn around because it's a big part of our funnel and an important part of our funnel.
Just digging a little bit deeper into that, China now is roughly 10%-11% for you guys?
11%, correct.
And then how big are Middle East and India kind of combined?
So $1.5 billion in Middle East and India, China at $1.9 billion. So I think that's the region we will see. And frankly, I was telling the group just before this meeting, that's really what makes us feel good is we see another robust region with a capital cycle rival China in size, and we expect that investment profile in Saudi, Qatar, and certainly India to continue ADNOC in the UAE to continue at a pace that can rival China. So China will still grow for us, but it's grown at a high single-digit in the last 10 years. It'll slow to mid-single digits, but we expect double-digit growth in a $1.5 billion region to somewhat balance out a slowing China.
Can we just dig into discrete a little bit? What are you people say recovery and discrete? Everybody says recovery and discrete, but I think there's dramatic differences between what recovery means between different companies. So when you guys say you're expecting it to recover in the second half, sequentially, what does that really mean? Because there are some companies out there that are strong double-digit. And if you are counting on a meaningful pickup there sequentially, what are the verticals within discrete that you're kind of counting on and that we need to watch?
Yeah. So we have two businesses with which so we have our Discrete Automation business, and then we have NI, test and measurement.
Yeah. Putting NI aside.
Putting NI aside. So in the Discrete Automation business, I mean, we have baked in very modest sequential recovery and pace of orders in the second half, but that'll translate to orders growth because we had a dip in the second half of last year, and that's really how we've modeled it. So modest sequential gain, which is obviously driven by automotive, semiconductors, some of the industrial and commercial accounts we have exposure to. And so we feel pretty confident about that. We haven't built in huge recovery in China. So we have a very cautious model laid out, but that'll lead to orders recovery and growth into 2025.
You guys are really good at the macro work around the funnel and the projects that are out there. Lots of valid concern around the EV buildout here in the U.S. as far as the factories. There has been some pushouts of semiconductor plants, which in my mind is that's like when you say U.S. manufacturing reshoring, that's the bulk of it. So how are you seeing those projects move at all, or are they still pretty rock solid from what you can see?
So I'll take semis first. Our semiconductor business with NI now is about a $550 million business. NI brings the big element of about $350-$400 million in semis. It's important to understand where we play in semis is RF and mixed signal. We're not big into memory and logic. And so the modernized chips that were the reshoring and the investments around 3 nanometers and the modern chips, that's not where our exposure is. Our exposure is in the likes of TI and ADI, building chips for companies like Emerson on the industrial side who consume them in industrial sensors and PLCs and DCS. So that, we believe, is going to that capacity continues to be added at a very reasonable pace. There's reshoring happening. TI, for example, has a huge capital budget, and they're betting big on being the analog company of choice.
So we feel pretty good about the pace of recovery. Now, it'll come later than when memory and logic recovers. And capacity, whether it's in Sherman or certainly in Oregon, that's being added for the RF and mixed signal pace, the investments Qualcomm is making, we feel pretty comfortable about that. On the EV side, EVs are about a $175 million business for us. So it is an important business, but not of the scale of a semi or a life sciences or metals and mining. There, we do a lot of the work on battery validation. It's not contingent on a plant being invested in. It would be good if that's a follow-through. But a lot of the companies like GM and Tesla are working with us on the battery validation side, which is where NI plays, and we expect that is a temporary pause.
We'll expect that business to come back, and we feel pretty good about it.
So then in the core discrete business, what are you counting on? Is that some of the machine builders in Europe? What is this modest sequential uptick? It doesn't sound like it's semis or EVs. What are you counting on for that sequential uptick?
Primarily machine builders. So Germany, it's the machine builders.
It's the German machine builders. So what are you seeing there? What are you? I think that business was very strong. It went down. It's kind of stable. Any signs of life from those guys at all?
Yeah. Pace of orders in Q2 are marginally better than Q1, still down year-over-year. When we talk to our customers in Germany, which is a big piece of our market, they're bullish about the second half. Now, we haven't baked that into our plans because we want to see it come through. I mean, these are OEMs, obviously, and they provide us forecasts, so that's what we're watching cautiously. Now, the part of their business that they build to serve Europe we feel very comfortable with. A part of their business that is built in Europe, exported into China, is what we're watching cautiously on what impact the Chinese economy will have on the German machine building industry.
Got it. On the funnel, how do we expect that to kind of play out over the next couple of quarters? And then, I guess, translated into backlog, where do you see kind of funnel and backlog ending the year?
Yeah. So I think the funnel at $10.4 billion, we feel pretty good about. I mean, we'll continue to add to the funnel at a marginal rate, $200 million. I mean, we'll have obviously, we had about $400 million of project wins this quarter. We had about $500 million the prior quarter. 4%-5% yield on that funnel is what we expect, and new projects will continue to fuel it. It is a very diversified funnel with about $5 billion around energy transition, $3 billion on sustainability and decarbonization. So it is pretty balanced, and we see that continue to slowly move up at that level. Backlog levels, currently, we sit at a very good level at $7.1 billion in the core Emerson, $500 million from NI, so at $7.6 billion. We expect that to remain at high levels through Q3.
We typically liquidate about $200 million of that as we go into Q4. That's kind of the plan we have. We'll see how orders manifest in the second half. But irrespective of that, it'll still be a very good level of backlog as we go into next year.
Within that funnel and backlog, I mean, you mentioned LNG. Maybe talk about how big that business is currently as a percentage of revenues and what your view is. I know there's a lot more going on than just the administration and dealing with projects here. It's a global business. So maybe just help us put the LNG issue into proper context.
Yeah. So LNG, obviously, is a very, very global business. Just to quantify it, off the $10.4 billion, 17% of that funnel is LNG. So it's a pretty healthy funnel. This wave, which is the third wave we've had, if you go back in the history of LNG, LNG started its journey in 2000. 2000 to 2010 was the wave in the Middle East, primarily Qatar. 2010 to 2020 was the U.S., both Canada and the U.S., Russia, and Australia. Shell Gorgon was a big capacity addition. This wave is primarily Canada, Texas, Louisiana, Mexico, East Africa, and Qatar. That's a 250 MTPA wave, 150-170 MTPA if that is already in flight. There's another 100 MTPA, which will depend on future approvals and future capacity being added. So we feel pretty good.
On an annual basis, it's about a $300 million-$400 million business, primarily driven by projects and then the annuity stream around KOB3. I think the US moratorium impacts three or four projects for us, Venture Global Calcasieu Pass or a couple of Sempra projects. It's not a big piece of the funnel, and we're winning a lot in Qatar and East Africa. But we're pretty confident that come November and going into 2025, LNG is going to come back in a big way.
One thing that is very clear is that we are likely to need more baseload capacity, power gen capacity here in the U.S. if we want to realize these AI dreams. Maybe talk about your exposure to the utility sector with Ovation. And are there at all discussions being dusted off on any of that as of yet?
Yeah. I mean, so obviously, as you know, Ovation, 50% of the power generated in the U.S., the control system is Ovation. We have great relationships with all of the power generation companies. It is a business that's growing low single digits in the U.S., is most of it driven by modernizations and KOB3. At this point, it's a great question. I would say it hasn't manifested into a huge power capacity expansion in the U.S. yet, but at some point, that's going to come to light. And if that happens and when that happens, we're going to be well positioned with Ovation. Where we are seeing the investment, obviously, is in the buildout of the grid in terms of the transmission and distribution network, which will manifest itself on the $200 million OSI DGM business that sits in Aspen and consolidates into us.
That's really where we are seeing utilities of today fuel their capital dollars. But the point you make is a good one in terms of if electrification has to manifest, the power infrastructure or capacity in this country has to get built out. If it does, Ovation is well positioned with the relationships we have to capitalize on it.
Okay. Moving to NATI, the business has obviously been through a bit of a downturn here. Maybe talk about the end markets. The orders are down, I think.
17%.
17%, but up quarter-over-quarter. What's kind of the trend? And then maybe just talk about the different end markets there, what's growing and what's not, and what the visibility is to more of a bottoming and an easing of the comps there.
Yeah. So just NI, from an industry mixed perspective, 31% of NI's business is what we call the portfolio business that is sold to universities and research and academia and life sciences and energy. And it's a broad spectrum, 35,000 customers, sold predominantly through distribution. 23% is exposed to semicon, RF and mixed signal, 19% to aerospace and or 19% to transportation, which is fundamentally EVs and ADAS systems into the automotive companies like GM, Tesla, Ford, and then 23% to aerospace and defense companies, fundamentally defense but commercialization of space and new applications around space technology. So that's the makeup. So diversified. Q1, ADG, which is the 23% of the sales, makes us up 12%. And that is going to have a nice run through this year and the foreseeable future. The other three parts of the business are down 20+%.
We expect semicon to certainly be the first to recover, easier comparisons plus investments into RF and mixed signal by the likes of TI and ADI, TBU, which is the transportation business, next, and then eventually easier comparisons and GDP-driven dynamics, PPI-driven dynamics around the portfolio business. So that'll be the sequence of recovery around the NI businesses. Sequentially, orders will improve in the second half, but even if they do remain flat, we'll see orders growth into the second half. So on a full-year basis, orders will be down low single digits for NI. That's what we're baking in with orders growth into 2025.
And then what about on the revenue side? Because the revenue's obviously lagging. You guys are working off a backlog. How do we think about revenues here for the next couple of quarters?
We guided $1.5-$1.6 in terms of revenues for the full year. We're going to be in that band. We feel pretty comfortable about that. Again, I guess I don't know the math of $1.6. I think we'll be down low single digits. You can do the math on the $1.5 versus prior year. But we feel pretty good of landing the ship there. Then as we see orders recovery, we'll plan out 2025.
How do we differentiate this business when we look at either Keysight or Fortive's Tektronix business? How are you guys differently positioned? Because I know there's always read-across from those companies. How do we?
So tech is pretty much on the upfront R&D side. NI, predominantly, 60+% of the business is design validation. So it's between R&D and production. Keysight is across the board, but a lot more on the production side. Industry mix, Keysight, heavy into telecom. It's not an industry we play in. They got the 5G wave. Tech is more like our portfolio business, broad-based, multiple customers. So NI is a little different from Keysight, but probably closer to Keysight than tech.
Got it. Then you also have a decent-sized software business here as well. I mean, I assume is that do those attachment rates kind of move with the equipment, or is that business holding up and pretty stable?
It has been pretty stable. In some ways, it is a business where they are moving it from PERP to subscriptions. We are in the midst of that, so there's some choppiness around revenue associated with that. But net-net, that's going to be that's about a $250 million business, high margins. And we want to build out a subscription-based model. They have great capability around test software that is test sequencing, test orchestration, certainly LabVIEW, which is more the design piece of it. It's the graphical programming environment. And then they have an analytics capability with an acquisition they did in Israel called Optimal Plus that takes test data from validation or end-of-line testing, analyzes it, and then drives actionable insights to improve product designs or up production yields, mostly in semicon.
So we want to build all that out into an integrated test software that does the graphical programming design that LabVIEW has for designing test systems, but also a linked software offering that can then provide higher-level capabilities around orchestration or data analytics.
So revenue-wise, you'll be exiting on a year-over-year basis for this business, up on revenues in the fourth quarter?
Yeah. Fourth quarter revenues, yes. Oh, absolutely. Yes.
Okay. And then on the cost side, maybe go into the synergies. You recently raised the synergies. How are we? What's the visibility there? And things clearly seem to be going better than expected.
Yeah. Very good. You saw that in the margin numbers. We upped the synergy to $185 million by year three. We're holding on to our 31% adjusted EBITDA margins by year five. So it's a logical question on you raised the pull forward, the synergies held on the 31%. It's a fifth-year number. We want to execute on the synergies and then look for opportunities to invest in the business to up the growth rates. That's kind of the thesis. But we'll relay that out as we execute on the synergy actions. $80 million will be recognized in year one. We feel good about that. Corporate cost out, optimizing the go-to-market model, prioritizing R&D investments, and obviously a set of actions associated with that, opportunities in direct materials, which is semiconductor ICs, interconnects, IT purchases, logistics. So we're looking at the entire air freight is another opportunity.
We see great momentum, great team, good leadership. We infuse some Emerson talent in there, a culture which is customer-centric, focused on innovation, very collaborative. But most importantly, they've bought into the Emerson Value Creation Playbook in our management system, which is great. That was an unknown coming in. We feel very good. The team is executing at high levels. As the orders turn, I think we'll get the business position to continue to perform at a very high level going into 2025.
So you're missing the sales target this year, but you upped your accretion target for NATI. How does that reflect on the incrementals on the way up? Is there any reason to believe that as volumes improve and revenue improves, that you're not going to leverage this in the first couple of years? Are there going to be costs you have to add, or is there anything that'll be a drag on those margins as the revenues come back?
No. I think we'll make prudent investments. But at the end of the day, if you do the math, GP is at 75%, synergy is coming through, business in the low-20s% EBITDA margins today. By 2026, if you just do the math, we'll be in the high-20s%. That's the number you look for, and then the 31% by year five. So the leverage will be pretty good.
Yeah. I mean, 100% incrementals type of thing.
Yeah. Colleen will do the math for me. But yeah, pretty good numbers.
Just to clarify too, we're holding our target for sales at $1.5-$1.6. You said we were taking it down.
We're lower than that, but we have actually, I think, better accretion because I think you guys are sandbagging on the synergies. On the price-cost side, what level of pricing are you expecting this year, and what's your latest view on inflation?
2% price, 1% of favorable NMI, three points of spread. Last year was 4% price, one point of unfavorable NMI, three points of spread. So it's a changing dynamic. Less price, favorable NMI, three points of price cost, green, very confident.
The incremental margin that you're getting off of that, I mean, that kind of spread would suggest that you maybe should be a little bit better on the incremental margin performance. Is there anything in there, like investments or anything like that, that's offsetting? I know Forex can have a bit of an impact. You guys are conservative on your Forex forecast. Anything you can think of that offsets?
The foreign exchange was a big delta as we came out of first quarter, that $150-ish million. So that certainly is a headwind, as you say.
And down discrete. So I mean, this year, the dynamic last year.
Mix. So mix.
Mix.
Mike. Yeah. Yeah. Okay. And as far as pricing going forward, is 2% now the right sustainable level, or are we back to more of a 0%-1%, which is, I think, is what it's been historically?
I mean, again, we'll see how the markets behave in 2025, but I think 2% is a good number for us. I think given the quality of the businesses, the technology, I mean, certainly the pricing power and final control and measurement solutions, we lead in each of these markets, so we will be a price leader. Yeah, I see 2% as a good number.
65% MRO will stay above 60%, we believe, and that gives us good pricing pressure.
Yeah. You guys tend to get a decent amount of price on that. One last one on the businesses, and I have to ask it just to get it out there, but I think if you pull up a very rudimentary analysis in a chart, it looks like process markets follow discrete markets. We get this question a lot. Just reinforce why this cycle may be a little bit different than the chart would suggest on that front.
I think capital discipline. I think it goes down and Mike and I were talking about it in the plane. Over the last 20 years, if you looked at our automation business, you take out the two Black Swan events of the financial crisis and COVID, there's only been one decline in 2015 and 2016, and that followed a capital surge in 2010 to 2014, shale, Gulf of Mexico, North Sea, tar sands. We haven't seen that. We've seen very, very disciplined capital behavior by our customers. And then all of the secular tailwinds, reshoring, energy security and the role of gas in shoring up economies, investments in software, and then the prudent investments in sustainability and decarbonization. So we don't see it. The capital budgets of all of our customers, weighted average, low single digits to mid-single digits this year. Saudi Aramco just put out a 7% number.
So again, I think it's a different environment in terms of there hasn't been a surge in capital for a correction. And so I think that's why we believe that I think momentum will continue in the process markets.
Yeah. I mean, I go back to 2015 and 2016 when all these commodity markets corrected and discrete bumped along because it was at a relatively low level as well. So I think sometimes the people pick and choose what data they want to live by. But on the free cash flow front, it's been tough to tease out conversion of the core. I mean, you're consolidating AspenTech, yet you don't really have access to the cash. So then you bring in NATI. There's some restructuring in there. What are some of the hurdles to getting the core business, including or excluding NATI, the core business to conversion?
Yeah. The only big headwind there is tax-related. So part of TCJA included this capitalization of R&D, which is costing us about $100-$125 million a year. That's a headwind. As you pointed out, we had the headwinds this year of the $250 million around NI costs, cost to achieve, and then the $50 million for CapEx. What we're looking at to kind of gauge how the business cash flows, particularly relative to peer, is free cash flow margin. And we've said we'll be in that 15%-18% range. If you look at peer, a group of companies in that 16% range, not many over. We believe we'll get over that 16%, over 16%, be in the 17%-18% range pretty quickly, which would be a better indication, really, of our cash flow generation. And I like it better because it's all GAAP numbers.
It's not an adjusted concept. Everyone has a different adjusted concept for earnings. So that's the way we are thinking about it. But yes, the headwind I would call out would be this, the tax headwind.
Then as far as NI is concerned, I think there were working capital opportunities there. Have we seen the fruits of that labor, or is that out in front of us, the core NI cash opportunity?
Out in front of us. Early days.
Early days.
Early days. But that's an important element of how we're going to have to drive value here.
But if I wanted to stick with conversion, it's really that tax number is probably the biggest one that's out there?
That's the biggest single headwind. Yeah.
Yeah. It makes sense. I mean, it's kind of hard to control that one. Okay. Any questions out there? I mean, this whole last two days was literally one question for these companies. I don't know how that reflects on anybody, maybe me. On Aspen, maybe talk about the strategy there and the decision to bring it in fully to the portfolio, or you like it the way it is. Maybe just give us an update on your guys' strategic mindset around Aspen.
Yeah. I'll give you my perspective. I mean, obviously, I sit on the board, and then I'm part of the Emerson team. I mean, we like the structure. We like where we sit. I mean, there are three very important levers we're pulling. One is growth through the commercial agreement. Two is the unlock of the value as we transform the business model at OSI or DGM and SSC. And then most importantly, the technology collaboration as we look at ways in which Aspen and the DeltaV business or the Ovation business can transform into a software-defined automation architecture, which can fundamentally move the industry to a different tier of automation. The commercial agreements working well, Aspen, double-digit ACV growth, 40% EBITDA margins, rule of 50 companies. So the performance is good. I mean, would we want to grow better at a faster pace? Yes.
But at this point, we like where we sit on how that's manifesting, both on Greenfield as well as the white space opportunities. The unlocking of value got off to a tougher start in DGM. Now they're through that. So we feel pretty good about where SSC and DGM are as it relates to subscriptions and tokenizations and getting customers in the utility space to buy into that. Where we're making a lot of investment and will be a longer-term play is to integrate Aspen and the Emerson suite into a software-defined architecture at the enterprise level where you can design, process design, design the operations, run, control, optimization, supply chain, asset optimization as well as an integrated software offering and a data lake that can collect, visualize, contextualize, democratize the data, and drive actionable insights.
That's going to be probably the catalyst to determine whether the current structure is the optimal structure where we can do M&A and can we collaborate around that, or is that a capability we need to have in order to realize the true power of the technology? We're nowhere close to making that decision. I think we're going to continue to execute in the current construct, and at some point, that'll be the debate. But the pace at which the industry can move and the pace at which we can drive the industry there will be the pacing item.
So nowhere close. So that means that you likely won't be buying in the rest of it in 2025 when you say nowhere close?
I'm not going to comment on that. I would say definitely not in 2024. How's that?
Right. Right. Right. Okay. All right.
Because we move fast, so we could you never know.
Yeah. Nowhere close seems like longer than 2025. All the things move pretty quickly. So I have two pretty generic, stupid questions to finish this off. U.S. election, are you guys talking at all in the boardroom about any kind of change in how you're investing if there's a new administration and how that would impact some of your business, whether it's from tariffs or changes in stimulus policies?
I'm going to take a crack at it.
How active is that conversation, if at all? You can say no too.
No. No. I mean, we think about it, but I think for us, I'll give you the logic on why it's net-neutral to slightly positive. I mean, I think three big pieces, you're right. I mean, obviously, there is the Infrastructure Act and the CHIPS Act, which I think there's consensus around both sides. That's going to continue. That's pretty well-defined, and the benefits of that will be there, whoever, whether it's Biden or Trump. The piece that'll get debated is the IRA because it's early, somewhat confusing, and people want to know, "Okay, what happens to that?" because there's investment dollars going in. In the case of a Biden win, that continues as usual, the green initiatives will continue. We'll benefit from it. In the case of a Trump win, if you look at where the IRA money is going, it's in red states.
So we believe that, "Okay, there might be some slowdown, but it's not a significant change." But the positive is the LNG moratorium or the pivot towards traditional energy investments will be a net-favorable dynamic for Emerson. So overall, we feel pretty good that it's worst-case neutral, best-case slightly better than neutral. On the tariff side, the regionalization we've driven, the impact of the tariffs will be de minimis on us. But if we do get tariffs from Mexico or in China, we have enough pricing power to offset it. So we're not concerned. The dynamic around tax.
Taxes you could argue one way or another, but who knows?
Yeah. Yeah. That's a tougher one to call. It's all really tough to call. But lastly, on AI, putting aside your products, which I'm sure some of the process stuff has some AI embedded, but at the corporate level, where are you as far as testing out different use cases from a productivity perspective? I'm sure consultants have been in and shown you a bunch of stuff. Where are we in that process?
So I'll take a crack and then have Mike talk to it. I think it's a broad topic of discussion. We're spending a lot of time thinking about it, and I think we'll catalyze all that in our annual meeting this year as we lay out the roadmap. But fundamental areas where it can have benefit, and most of it inside, will be in collaboration with the software providers we have, whether it's Salesforce or Oracle. What is the AI capability they build in to significantly enhance productivity in our inside sales or customer service? Our finance transformation journey, what elements of finance can completely transform as our finance modules get workflows where AI can generate a lot of our charts and analysis and data? HR is an element where the co-pilots and software modules can generate a lot of productivity.
So we're looking at and the fourth area is supply chain and the connectivity of the supply chain and the optimization of S&OP and MRP. So that's.
I thought we were going to say investor relations for a second, but.
That's true.
We all dabble.
Yeah. Nobody can really. I mean, the AI model tried to model the Colleen. It went into a hallucination. It couldn't.
Job seeking.
Not going to comment on that one.
But the biggest piece, so those are in partnerships with the likes of Oracle and Salesforce and others to say, "What do they build in that we can then deploy?" But the biggest piece where we have the opportunity in-house, which is somewhat consistent with the capabilities we're building into DeltaV Ovation as co-pilots, is we have a large engineering organization that fundamentally gets specs in from customers and configures a DeltaV system for a particular project. There is obviously AI models that can fundamentally take a customer spec and custom engineer the DeltaV without human intervention. So that is probably an engineering productivity opportunity that most companies will look at, but that's the co-pilot capability we'll build into DeltaV for a third party who's looking to configure DeltaV to use. So we are exploring it. It's early, but there are a lot of use cases that apply.
All right. Sounds like things are pretty good.
Yeah.
Did I read that the right way?
That's right.
Okay. All right. Things are good. Thanks, guys.
See you.
Thanks.