Hello, everyone. Welcome to Rockwell Automation's Annual Investor Day. We started the day with our energy transition panel, where you heard from industry leaders who are reshaping the energy landscape and working to meet global climate targets, and there is so much more to come. Rockwell is creating the future of industrial operations, and we're excited to share with you what we do, why we win, and how we accelerate. With that, let me welcome our Chairman and CEO, Blake Moret, to the stage. Blake?
Hi again. I'm really looking forward to the next couple of hours with you as we talk about where we've been, where we're going. We're gonna get into the details of our recent past, some of the things that create such a bright future, both in terms of the needs of the market as well as our ability to serve. You know, to start with, this at-a-glance slide is something that we've used a lot over the last couple of years. I just want to make a couple of points that I think are particularly important from this.
First of all, we've broadened our vertical industry exposure significantly over the last few years. So looking at, you know, 25% of our exposure in discrete, 40% in hybrid, and fully 35% in process, represents a nice balance across the various end markets. One of the most important things about this is we have great market access to all of these areas today. So that's not aspirational. We're very happy with the market access we have in each of these industry segments, as well as the verticals within each of these. If we go back to November of 2019, when we launched our framework for accelerating profitable growth, think about the things that Rockwell was grappling with at the time.
Now, this was November 2019, so, you know, the impact of COVID, its full—the full understanding of the world on the impact of COVID was still, a couple of months away. But it was clear that Rockwell needed to look at growing faster, to accelerating the growth of our core. We had grown as a, multiple of industrial production about 1.8x IP in our served markets over the previous 20 or 30 years, and that's what we were most highly correlated to.
So we knew that through a combination of new disruptive technologies like Independent Cart, a more assertive posture in Europe and Asia, continued development of our capabilities in process, things like that, we needed to move faster, and so we talked about growing at a 10% faster clip than that 1.8x multiple and going to 2x IP just in our core. We also recognized that we needed to strengthen and move faster with our software offering, with our high-value services, and so we put that in a bucket we called Information Solutions and Connected Services, and we said that we were gonna grow double-digit in that area.
At the time, it was only $200 million-$300 million, but we said that compounding was gonna be meaningful for us, and more importantly, it was gonna be something that met some key customer demands to find a landing spot, if you will, for all that data that was being created in our real-time control processes. Then we said we were gonna use our balance sheet. We were gonna make more acquisitions, but we were gonna do it in a disciplined way. We were gonna do it in certain, you know, strategic themes, and we were gonna make sure that we were open about what kind of returns that we expected from those acquisitions. A few months later, we started to understand how big an impact COVID was gonna have. The world made it through that.
We had supply chain shortages right on the heels of it. So there were a few things that we weren't really planning for when we launched this framework, but I'm very happy to say that with the completion of fiscal year 2023, we accomplished those goals. We got to $9 billion, and there's nothing magic about $9 billion, but doing it profitably and at a faster pace than we had done in the past, that was important. It was also the way we got there was not just hitting those top-line headlines, let's say, but in each of the components of this. So we grew at a faster clip in our core.
We continued to grow double digits in information solutions and connected services, and along the way, increased our annual recurring revenue, and I'm very happy with the strategic fit of the acquisitions that we made, and very importantly, looking at the profitability that we expected, the conversion on incremental revenue, the ROIC, the returns from our acquisitions. So we've been happy with that, and we'll take one small moment of satisfaction that those goals, despite the bumps that the market put in our path, have been achieved... We also saw that show up in some of the large numbers in terms of revenue, in terms of EPS doubling over the last seven years. We've grown dividends every year, and we continue to be mindful of our commitment and our responsibility to give you attractive returns on your investment. So what next?
So here are some prominent features of the next leg of our journey. First of all, what's the market gonna do? When you look at the automation market, it's growing faster, and we touched on a few of the reasons this morning. Workforce, workforce shortages, people needing to be given superpowers with the technology. Certain vertical specific spending, EV, semiconductor, energy transition. People tend to wanna live longer, healthier lives, and so I think life sciences is going to continue to be important. Food and beverage, people want to eat, they want to have choices as they move closer to the middle class, and those packaging varieties, the different foods, that's our biggest vertical. So those things we think are gonna spur faster growth in the market itself. We're gonna continue to take share and to grow our expanded market.
So when we look at share gains, we've talked before about our Independent Cart Technology. When we look at what we just did with Clearpath Robotics and adding the autonomous mobile robot market, fast-growing, we talked about that, and we'll talk about it more in a little bit, to our served market, some of the things we've done in software, we think there's the opportunity to continue to add meaningful growth year over year through that combination of share gains and expanding, and expanding our market. Reshoring, that plays into it, because while that increases the overall market, we have opportunities as the clear share leader in the U.S. and North America to get an outsized benefit from that, and we'll give some, some thoughts of the dimension of that a little bit later on. Annual recurring revenue. So do the math.
Over 8% of our total revenue growing at double digits, that yields in the neighborhood of 1 point of growth a year, and we expect that to continue. We're very happy with the results of our ARR growth over the last year. We expect that to continue good double digits going forward. And going forward, we're gonna be talking more about ARR than, than information solutions and connected services, but we'll continue to give detail of what makes up that ARR and how it's doing. And then acquisitions, and with the successful address of some of the past priorities, the priorities that we're looking at at this point are acquisitions that contribute to our annual recurring revenue, continued market expansion in Europe and in Asia, and then application-specific technology for our target verticals.
So that's kind of an eclectic bunch, but looking at the things that we can do to add additional value for some of those target verticals, be they hardware or software or services. You know, one of the examples of where this benefits us, this, this more expansive strategy, is you think of a customer like P&G. P&G is a long-time, very demanding customer, and we certainly see good business from them in terms of our traditional value, closing a real-time control loop, but they're also seeing the benefits of our new value across their operations in terms of our new technologies, as well as our new capabilities and high-value services.
So it really is about the hardware and the software and the services and our ecosystem all working together to simplify the complex challenges that our customers have and produce outcomes across all of those industries: discrete, hybrid, and process. And I should mention, we already have great market access to all of those industries today. Now we're gonna go deeper into what we do, why we win against both the global competitors as well as the niche players, and how we accelerate the journey to unlocking the full potential of automation and digital transformation at our customers. And to begin that, I'd like to introduce Cyril Perducat, our CTO, and Matheus Bulho, who runs our production automation business, which is the business that includes Logix and HMI, as well as our networking. So please welcome them to the stage.
Thank you, Blake.
Yeah.
Good morning, everyone. With Matheus, we are going to spend a bit of time to share our vision and our priorities around the future of production, design, and control. But before doing that, Blake mentioned that over the years, Rockwell has built an extensive portfolio, and software is a very important part of our portfolio, and it covers the automation system designs that we are going to speak about today, the operation management, all the softwares that is used to actually run and improve operation, and all the suite of softwares that are necessary for maintenance. And what we have also done over the years is to extend traditionally on-prem capabilities by cloud capabilities.
So all design suite being augmented with a FactoryTalk Design Hub, and we are going to speak about it, and the same thing across all the rest of the software portfolio. So let's look at control, and let's start to speak about control. But what we have—Sorry, a mistake with the slide. So what we have shared in previous Automation Fair is the importance of the idea of a software-defined architecture, and this was also a term that was used by one of the panelists this morning.
This idea of software-defined architecture, which is pervasive in many industries, we have seen this in the telco with software-defined networking, is very applicable and extremely interesting in the context of the life cycle of an automation system because we are able to reduce a certain number of constraints for customers, both when the system is designed, by reducing the dependency from the hardware, by creating better optionality for customers to be able to modify an application independently of the underlying hardware. Also think about other perspective like security and the evolution of security threats and security needs across the life cycle of the installation, the ability to permanently being able to to evolve the software in that direction.
This allows not only optionality for customers, but this also create optionality for Rockwell Automation, optionality in term of business models, the ability to adapt our business model, adapt the way we deliver capabilities, and adapt the way we monetize those capabilities. We can now, with a software-defined approach, not just only transact a piece of software together with the hardware, but we can do this independently. We can have some features that are added as a pure piece of software later in the life cycle of the installation, or we can have some specific features or capabilities that are subscribed by customers, creating annual recurring revenues for Rockwell Automation. So if we look about all those trends and all those evolution of the software-defined architecture, then I know that a lot of people are asking themselves: "So what about the PLC in that story?
You know, what does the PLC become? The PLC was invented in the seventies. It was initially invented to replace cable logic, but it has been through multiple reinvention over the years. So, Matheus, tell us a little bit, is this another reinvention that we are doing of the PLC with the Software-Defined Architecture, or is it the beginning of the end of the PLC, maybe? Or, what's your perspective?
Yeah. No, of course. So, you know, our customers, they, they love our hardware. You know, they love the resiliency, they love the robustness, the safety integrity, the real-time control capabilities, the fact that we support it literally for multiple decades. And when most people think about a PLC, they associate with hardware. But in reality, you know, the PLC is first and foremost industrial software. You know, the PLC is the industrial software runtime. It's what executes the customer application, you know. It's where the logic is solved, it's where the motion is computed, where the safety is monitored, where the robot geometry is managed, and, and much, much more. And here at Rockwell, this industrial software runtime is Logix. You know, Logix has been powering manufacturing for decades. It's running millions of production systems today.
I think the best way for you to think about Logix is it's the operating system of manufacturing.
Mm-hmm.
While we're gonna continue to enhance and add even more value to our hardware, we know that our customers need flexibility in how they consume this runtime. You know, and just like we've done with our own visualization offering, FactoryTalk Optix, where you can consume the visualization runtime with our hardware or, frankly, any hardware, with Logix is no different.
Mm.
Here at the show floor today, you will be seeing Logix Edge. Logix Edge is the very beginning of this journey for how we intend to continue to make Logix more deployable and consumable in many different forms.
Which at the end creates access to new market, new opportunities, new possibilities.
That's right
... beyond what we traditionally do with the PLC. But as you said, the idea that we have embedded in the PLC in a certain form factor, multiple disciplines, the quality of the integration, the quality of the safety associated, I think is something that has and will continue to have a lot of value for customers, and we will bring more flexibility to this with a software-defined approach, and multiple targeted hardware. Maybe give us an idea of an application, for example-
Yeah, sure
... where Logix and those additional flexible options-
Yeah, so-
creates new value for customers.
Think about the life sciences industry, you know, where time to market is a significant business driver. You know, customers have an interest in having a common platform all the way from the drug discovery process that's typically in a lab-constrained environment, all the way to mass production. So with a flexible approach to how that runtime is deployed, customers can seamlessly move the application from discovery to production and shorten their time to market.
... So we, we've spoken about how control evolve with software-defined. Another area that I think is a ground for a lot of innovations that we are working on is AI and how-
Yeah
... AI intersect with control. We like to present it in the way that it's about giving superpowers to people. It's about augmenting the capabilities of the workers, of the maintenance teams, of the engineers that are in production with additional capabilities. And when I think about some of the scenarios that were discussed in the panel, for example, this morning, there are many complex optimization scenarios that need to be done. Now, we have customers that not only want to be able to produce what the type of goods that they are producing, but they want to do this in a way that is also less energy intensive, that optimize or even capture in process the carbon that is emitted.
So those all different kind of optimization scenario are very good ground for innovation around AI. So, so tell us a little bit more about how that-
Sure
... applies specifically to control.
Yeah, you know, you heard from the panelists earlier today, so AI has been in use in industrial production for quite a while, and it's been adding value in the traditional dimensions of productivity, optimization, but perhaps, you know, most importantly, I think we see an opportunity for AI to expand what's possible with automation. You know, essentially automate what's been traditionally impossible or impractical to be automated. And then the way I think, the easiest way to relate to this notion is think about the transformation that's happening with autonomous driving. You know, a car has a controller that controls the driving function, just like a piece of manufacturing equipment has a controller, like our PLCs controlling the process.
You know, it's impossible for the automaker to predetermine and predefine the business logic that's involved with all the different scenarios that the car is going to encounter-
Mm-hmm
... when it's performing the driving function. The same exact pattern is in use today in manufacturing. Now, here at Rockwell, we've had AI apply to a very large set of our portfolio. It's embedded in our Logix AI and how it optimizes the control of a process. It's built into Fiix and how it predicts the needs of maintenance in industrial operations. It's also built into Plex and how it plans for production schedule, and more recently, it's in our autonomous mobile robot-
Mm-hmm
... portfolio from Clearpath Robotics.
Exactly. So maybe give us an example of application with AI?
Yeah, sure. So if you think about high-speed production lines, take, for example, high-speed packaging, which just by the virtue of having the product move fairly rapidly through the line, it's very difficult for you to engineer a solution that inspect all aspects that are required for to ensure production quality. So what we often see is people literally stopping production lines to collect manual samples of what's being produced and verify that it meets production standards. And with the advancements in sensing technology and machine learning, we have the opportunity to automate that process and reduce significant costs involved with costly, you know, downtime.
Yeah, and this is where the parallel with autonomous driving is very accurate. You know, when you drive a car-
Exactly
... fundamentally, you have three parameters: You have the wheel, the brake, and the accelerator, and nothing else.
Yeah.
You would drive the car with all this. In a production process, that's exactly the same thing. When we have identified what are the key variables that impact the process, then we can train a model to be able to optimize continuously those parameters. So not optimize one time based on the large sample of data, but permanently train and retrain the models that run with the controller or in the context of a controller or at the edge, so that production can be permanently optimized, based on also the input of operators, and-
Precisely
... what those best production looks like in the case that you mentioned. Thank you, and to continue, we have spoken a lot about AI in operations and in the production environment, but I would like to invite on stage Judson Althoff from our partner Microsoft to talk a little bit about what we are doing at the design stage and how we are using generative AI capabilities from our partner, Microsoft, to build a very innovative and different type of engineering environment.
Hi, Matheus.
Hey, Judson .
Hi, Judson , how are you?
Very well. So welcome, and,
Hi, thank you.
... thanks for taking the time to be with us, so-
Sure
... we have been working over the past months with Microsoft on the continuity of our collaboration. So I was mentioning in the introduction a little bit earlier, FactoryTalk Design Studio-
Yep
... which is our cloud-native engineering environment, and this has been the result of multiple years of collaboration with Microsoft using your cloud technology. Now we are working on the next level, which is: How do we create an engineering environment that will give those superpower to developers and...
... Microsoft has spoken a lot recently about the Copilot approach. So can you tell us a little bit more about what is the approach of Microsoft on Copilot?
Sure.
And then we will move to speak about how we apply this.
Absolutely.
in the context of Rockwell.
Thanks for giving me a few minutes to chat with you all today. Look, maybe what I'll do is set quick context in terms of what Microsoft's doing, and then how it parlays into our partnership. So at Microsoft, we're working pretty hard to infuse generative AI into all facets of our cloud services, and across the board, from, you know, how people look at productivity scenarios, to how people looking at running business operations and customer engagement scenarios, through to how people look at innovation.
We've chosen this Copilot metaphor because we believe that there's just a tremendous amount of low-hanging fruit around empowering people to be more productive in the work they do, enriching the work they do, through the use of Generative AI, and actually keeping the human in the loop, so that the model teaches the people, and the people teach the model recursively. That's most notable in our Microsoft 365 Copilot products, where people can use Copilots to create a first draft of a presentation or create a summary of a document, or work in a team scenario to summarize a meeting and hand out action items, through to how people actually create assets. One of the most common uses of Copilots today is in our developer tools, in GitHub Copilot.
In fact, GitHub Copilot's responsible for developing 30% of the code in our other Copilots, so huge gains in productivity that, that we're seeing. The second thing we're doing is opening up that Copilot ecosystem to our strategic partners, like Rockwell, and we're really pleased to see that you all have taken that innovation as fast as you have, and implemented it in FactoryTalk Design Studio, which I'll talk more about in a moment. Then the third thing we're doing is co-innovating with our strategic customers, like Procter & Gamble, for example, like Blake had mentioned, where we're on-site at the face of the client, digitizing their factory environment and enabling AI to drive real productivity gains and efficiency gains in the overall processes there.
So the way you can think about these Copilots is they chiefly do three things, and the FactoryTalk Design Studio Copilot is aimed at all three of these things simultaneously. The first thing is they democratize the experience. In other words, if you think about getting more people engaged in innovation and getting more people engaged in automation, one of the biggest barriers is the learning curve, the time to getting people up to speed, engaging frontline workers. So by having a Copilot in the loop, you can democratize what it means to actually understand all of the syntax to program these layers. Rather than getting into the weeds of the syntax itself, you simply use a prompt and natural language to say, "Hey, this is what I'm trying to do.
Please build me this," and the Copilot is off and running and getting the syntax you need to drive the automation. The second thing, then, is the obvious productivity gains that come from that, and frankly, the job skilling benefits that come from it as well. If you think about it, we—like, we see these Copilot skills being added to resumes, and people saying, "Hey, listen, I know how to work productively in a Copilot environment. I have that skill," as being a marketable skill, and then the reverse actually happening, companies that have these assets being more attractive for people to come in, because let's face it, who wants to write a first draft ever again? You know, who wants to have to worry about summarizing the work?
And then in the FactoryTalk Design Studio context, who wants to worry about going off and learning esoteric syntax-
Mm-hmm.
when you can simply ask the Copilot to do it for you? And the third area, which is perhaps the most powerful, is this notion of inclusive collaboration. So you could invite the Copilot in FactoryTalk Design Studio to a meeting, and we could, the three of us, have a design review on a project and actually interact with the Copilot, and get feedback, frankly, from each of our bodies of work from the Copilot. So it's less about me maybe accusing Matheus's, you know, project of maybe not being on track or him doing the same for me, and more of us coming together on projects.
And so just from an investor standpoint, we see that as a huge competitive differentiator for Rockwell, because if you can democratize the experience, get more people using the capability faster, drive productivity gains, and then drive a more inclusive engagement, more—in other words, more users working across the system, the whole business moves forward. So, tremendous amount of deep partnership over the last couple of quarters to get this capability to market, at the speed and pace that we have. And I really think it's game-changing for Rockwell.
Well, that's great. You know, I think that certainly the three of us would be much better than me by myself on the-
Wouldn't it be?
Maybe if you could talk a little bit about how do you see solutions such as the FactoryTalk Design Studio, cloud-native solutions, disproportionately benefiting from this type of capability?
Yeah. And it's interesting because you can see even in you talked about AI being infused into Fiix and Plex, and it's no coincidence that AI infused into cloud-native capabilities is a faster time to market and quicker yield in terms of value realization. And the reason behind that is. Look, I'm bullish on all of the capabilities of that AI will bring to market, but there's one rule that it won't change, and that is that no system can be any more intelligent than the data over which it reasons. And you can invest as much as you want in your AI, but if it's reasoning over bad data, all you're gonna do is make mistakes with greater confidence than ever before.
And so for me, this notion of getting the data aggregated in a useful way in the cloud so that you can reason over it holistically. It gives cloud-native applications a huge advantage in the market. And it's another area, quite frankly, where... Look, at Microsoft, we see a lot of innovation happening across the industry. We have to applaud Rockwell for being so fast in getting to cloud native, infusing AI, getting it into real-world, pragmatic scenarios of innovation where people can get value out of it.
That's great.
So huge, huge leap forward in our view.
... Thank you, Judson. And what you are seeing on the screen behind us is the actual product, FactoryTalk Design Studio, with Generative AI, where we are able to use Generative AI both to produce automatically code based on a prompt, but also to have code reviews and have questions, answers, based on some criteria. And on this idea of empowering people, that you mentioned, it's giving the best practice of the best developers to every other developers that work. There is a sense of amplifying collaboration-
Correct.
and amplifying the community that is very important for Rockwell, and we believe that adding this technology to our development environment will continue to make a significant difference on the market and continue to build our competitive advantage.
Yeah. Super.
So-
Well, thanks for the partnership, and thanks for having me.
Thank you.
I appreciate it. Thank you.
Now I would like to welcome on stage, Tessa Myers, to speak about production logistics. Thank you.
Good morning, everyone. It's great to be here with you, and a great conversation earlier. So I'm gonna switch gears for us, and I'm gonna talk with you about production logistics. And I think it's important first to set the backdrop of, you know, what's happening in the market in manufacturing, and why we think now is the time for autonomous production logistics. All around the world, labor shortages, along with an aging population, will continue to constrain the world's workforce over the next decade, and major shortages are expected in the manufacturing sector. The National Association of Manufacturers in the U.S. estimate that more than 2 million manufacturing jobs could go unfilled between now and 2030.
And at the same time, companies need to be able to respond to rapidly changing customer preferences for product—different products, different packaging types and sizes, along with an increased need for output. Today, most materials in a manufacturing plant are delivered to a production line, and finished goods that are moved away are a highly manual process. It's very people-intensive. So there is a massive productivity opportunity to reimagine how product moves through a manufacturing plant, what we call production logistics, to handle the ever-increasing variety of products in those plants, and do so with the least amount of labor required. The accelerated adoption of autonomous material handling is inevitable to overcome the long-term labor shortage challenges that companies face in delivering greater efficiency, agility, and safety, and allowing very hard-to-find workers to focus on more impactful and more meaningful work.
This is an area where our customers are seeking solutions today. A large global discrete manufacturer will increase its advanced automation budgets nearly 100% in 2024, with autonomous production logistics as the key investment theme that they're focused on. Another large global hybrid manufacturer plans to automate material movement workflows throughout their global plant network, saving them hundreds of millions of dollars annually in redeploying that scarce and valuable workforce to operate and maintain their production lines. You've all seen the announcement of our acquisition of Clearpath Robotics and their OTTO Motors division. The inclusion of autonomous mobile robots gives Rockwell a complete portfolio of material movement smart devices.
With our Logix control, our drives and servo portfolios, our intelligent conveyors with our Independent Cart Technology, the work that we've done to integrate robotics into Logix, and the partnerships that we've built with robot companies, really bring together an end-to-end solution for control of autonomous production logistics and material movement through a plant. And one of the biggest barriers to the adoption of autonomous mobile robots in a plant is the integration to the control system, and that's what we do really well. We acquired Clearpath and its OTTO Motors division because of the differentiated intellectual property of fleet management and navigation software, the breadth of the AMR portfolio that they offer today, and the significant domain expertise that they've built in robotics, autonomous control, and material handling.
Today, OTTO robots are used around the world to safely, efficiently, and autonomously deliver the right part to the right place at the right time, every time. The value proposition for autonomous mobile robots alone is compelling, the opportunity to overcome labor challenges, to significantly reduce costs. But when combined with our production design software offerings, our operations management and manufacturing execution, and our asset management and maintenance software as a service suite of solutions, Rockwell is poised to offer a game-changing, unified solution for manufacturing, enabling the end-to-end orchestration, execution, and optimization of manufacturing operations. We can help empower manufacturers to orchestrate the end-to-end operations, from production planning to scheduling, execution of that schedule on the manufacturing floor, the equipment and fleet management and maintenance, and enhance their insights and their decision-making with embedded AI-assisted insights...
We can leverage a full digital twin capability to help companies emulate and simulate the production environment and the flow of materials through their processes to speed up their time to market for new product introduction and optimize their production routing. All of this built on a single control architecture Logix, which helps to ease the time and minimize the risk of integrating plant floor systems, and ultimately reducing costs to maintain and operate their production. All of this is enhanced by our logistics and supply chain Lifecycle Services that we have through our Kalypso team, to really help customers in the consultation, the advice, the design, and implementation of these production logistics systems, and the ability to help them maintain them. Customers are seeing real, tangible results from the use of this technology.
One example, a consumer packaged goods company has increased their throughput 600% by enabling operational efficiency and alleviating labor shortages. A large automotive end user brand owner has selected OTTO Motors to scale across their global operations to help them mitigate and overcome labor shortages and drive substantial productivity and cost efficiency in their plants. So hopefully you see this as a significant opportunity that we're very excited about. So now I'm going to introduce to the stage Brian Shepherd, Senior Vice President of Software and Control, to talk to you about how we're driving bringing all of that data from the plant floor, from autonomous mobile robots, and bringing that into the edge and into the cloud with our solutions. Brian?
Thank you, Tessa. Smart factories like those that Tessa was talking about, are full of automation systems, smart devices, and applications that are creating oceans of data. Much of that data is born in Rockwell devices and applications, and customers intuitively know that there's value to be had by exploiting that data more fully. Rockwell, over the last few years, has been executing a comprehensive strategy to transform, aggregate, and leverage contextualized data. Our goal is to create value for our customers from that data at scale, not just in individual pilot projects, but really across their entire set of operations. Let's take a look at each level in this stack above the devices. Last year, at Automation Fair, we introduced FactoryTalk Optix, our next generation Edge platform.
The first and best example of an Edge application built on FactoryTalk Optix is our HMI, our visualization capabilities, that allow our customers to create applications for monitoring and adjusting machines and production processes. We've had great early success with FactoryTalk Optix. Michelin has selected Optix as their next generation standard for supervision and visualization. But that's really just the start. Optix provides the ability to write and run applications perfectly suited for the Edge, ingesting large volumes of data from any maker, not just from Rockwell devices, to transform that data and make it locally and immediately actionable. When split seconds matter in production control, all of those decisions have to be made at the Edge. Logix AI is a good example of that, providing an AutoML application, providing closed loop control optimization at the Edge.
The ability of FactoryTalk Optix to consolidate and concentrate that large volume of OT data at the edge makes it a perfect gateway to the cloud. Let's take a look at the next level up. Trusted and comprehensive and actionable data is critical to achieving value at scale. Many AI projects fail to advance beyond that pilot phase because they depend on the expertise of hard-to-find and expensive experts. We're addressing that need for a trusted industrial data hub with our FactoryTalk DataMosaix offering. DataMosaix aggregates production data of all types, OT data for sure, but also IT application data, engineering design data like process and instrumentation diagrams, assembling all of this fragmented data, contextualizing that data into a coherent and single source of truth for the production system.
DataMosaix can be used as a next generation historian, really providing a flight data recorder experience for what's been happening on the factory floor. But the data in DataMosaix can be used for so much more. We're building industrial apps on top of DataMosaix. FactoryTalk Energy Manager aggregates and contextualizes energy data from many sources. It's a critical need for our customers today to roll up their energy utilization, to simply monitor, analyze, and compare energy usage, the costs of that energy, the emissions and carbon footprint of that energy usage across their production operations. But importantly, it's not just a roll-up of energy meter data across the factory. That energy data is contextualized to the product being made, kind of the watts per widget, and that's critical information as customers try to optimize their usage of energy and their reporting of energy usage in manufacturing.
We've implemented FactoryTalk Energy Manager as part of our own sustainability efforts at Rockwell. We implemented this solution in our Twinsburg manufacturing facility with just a few hours of configuration work, highlighting the very fast time to value that's inherent in pure SaaS solutions. Next quarter, we'll deliver FactoryTalk Batch Analytics, a solution for hybrid industries. Think about food and beverage companies that are using batch production processes. This solution gathers data from all sensors, all OT, all manufacturing execution system information, all quality management applications, bringing that all together into a single view of the quality, the performance of that batch. You get advanced analytics describing the quality of that batch, the efficiency of creating that batch, and comparing those factors against your golden standard for that batch. It provides immediately actionable information for the operators of the facility to fine-tune the production process.
We see a long runway of industrial applications being built on top of DataMosaix. We will build some, but also our partners and our customers will build them, too. So later in 2024, we'll release an app-building environment on top of DataMosaix, making access to that trusted source of data very straightforward and easy. As customers use more and more data and more and more applications in DataMosaix, they move to higher level tiers of our offering, and that provides more ARR to Rockwell, part of our strategy of growth for recurring revenue that Blake mentioned earlier. DataMosaix, the applications we're building on DataMosaix, and all of our SaaS offerings are accessible through FactoryTalk Hub, essentially fthub.com. It's a one-stop shop for our SaaS applications across design, operate, and maintain of the production system.
You heard a bit earlier from Cyril and Matheus about some of the improvements that we've been making in our design offerings in FactoryTalk Hub, like FactoryTalk Design Studio or Optix Studio or Twin Studio. I'll highlight a few more that we're making across operate and maintain. Rockwell was pleased to be recognized again by Gartner in the most recent MES Magic Quadrant, in the Leaders quadrant, kind of reinforcing the idea of industry leadership in manufacturing execution systems. Plex remains the only pure cloud SaaS solution operating at scale in industry today, and we've seen strong mid-teens ARR growth, including early wins in some new geographies where Plex has not previously been present around the world. Those are kind of beachhead wins and allow us to have a vehicle for further growth on a global basis.
In Plex, we're adding industry-specific features, such as weigh scale integration for the food and bev industry, or in the automotive industry, support for industry-specific quality standards. All of those features are yielding better productivity and more efficiency for our Plex customers. That growth in Plex for MES builds on a historical strength in MES, and MES in the form of PharmaSuite for life sciences. In 2023, we added new functionality for our big pharma customers, helping them to scale fast in the face of the overwhelming demand that they're seeing for many of their new products. As we move from operations into maintain, we see that customers are focused on maintaining their production systems at peak productivity levels. We've enabled that with our Fiix SaaS offering, and in 2023, we added over 500 new Fiix customers.
That's tremendous growth, and it shows the ability of our high-velocity sales motion to scale up our annual recurring revenue. Increasingly, though, maintenance is not done on-site with a wrench. It needs to be done in the remote fashion that we heard from some of the panelists on energy transition earlier. So we've been delivering solutions like FactoryTalk Remote Access, and FactoryTalk Edge Manager, which provide that IT-like experience to manage devices and workloads at the edge. So software-enabled maintenance. I think it's an important productivity driver for our customers. It really brings IT workflows to the OT environment. I think you've seen over these last few minutes here, the dramatic evolution and expansion of our portfolio from data, from the edge, to the industrial data hub, to the cloud and applications taking advantage of that data. We're really helping our customers become more productive, resilient, and sustainable.
Thank you. Let me now, welcome Matt Fordenwalt on the stage to talk a little bit about manufacturing lifecycle management.
Thank you, Brian. As you've seen, our differentiated technology portfolio, a unique combination of cloud-native SaaS, on-premise intelligent devices, including AMRs, form the technology backbone that is the future of industrial operations. Through rich, contextualized data from the source to the edge to the cloud, the opportunity now across all industries is how do we best standardize and simplify the workflows to define the outcomes, harnessing the power of this technology and the rich data it creates? Manufacturing lifecycle management is really about simplifying the digital thread, creating operational resilience and productivity. However, the manufacturing lifecycle crosses multiple different personas, from innovation, design, operate, maintain. The enterprise has historically been locked into its own organizational data silos: R&D, engineering, manufacturing, logistics.
The industry has made strides at bridging the gap between IT and OT technologies, but few have successfully addressed the convergence at the core of their business, where real economic value is created, where we focus is on engineering and manufacturing. How do products come to life from conceptual idea to industrial production at scale? Rockwell's approach is that of a trusted advisor, going along the journey of the entire manufacturing lifecycle, combining our deep domain expertise from over 120 years of plant floor experience, and our consultative approach to meet our customers where they're at in their journey, to standardize and simplify these workflows, which will unlock tremendous value, harnessing the power of that data that drives real productivity and resiliency into the organization.
This structure approach allows Rockwell Automation to engage a customer much earlier in its journey and much higher in the organization than ever before. Here's an example, as every industry is going through these transformational changes. I have an example here from life sciences. Life science companies face increasing complexity of their product, ever-growing need to get to market faster, and highly distributed value chains. This need for manufacturing lifecycle management is only accelerating. We've created an integrated portfolio of technology and expertise that helps accelerate the digital journey, from early-stage development of new drugs through full-scale manufacturing. This portfolio works across the value chain, weaving an interconnected, simplified digital thread that enables customers to unlock the data and information trapped across their organization, speeding time to market while maintaining the data integrity and delivering product quality.
Early on in this journey, up in preclinical research, our digital twin and simulation software, our recipe consulting capabilities, set the foundation for the simplified digital twin, where we leverage all that data downstream, accelerating into product development. Because we know that not all companies will start with a digital recipe to begin with, we're committing to meeting our customers where they're at in their journey. We've developed a digital tech transfer solution that uses AI to convert existing paper recipes for easy to consume, easy consumption by downstream full-scale manufacturing systems. This digital tech transfer solution also disperses critical data across that distributed value chain while safeguarding intellectual property. In full-scale manufacturing, our automation and manufacturing execution systems scale to meet the production needs. Doing that emulation early on upstream allows us to scale much more rapidly across a vast manufacturing network.
Combining and conceptualizing the data from early-stage product development allows us, on a single data platform, to provide that foundation to drive digital transformation at scale across the enterprise. While all this is happening across the value chain, we also are augmenting the workforce. Combining our remote technical support with AI through a recurring contractual service, we're able to address skill and knowledge gaps across the workforce, making work more efficient and workers more effective. This combination is powerful as the workflows are standardized to connect the worker with the technology in a seamless stream of activity that simplifies how work is distributed across this broad value chain. At Rockwell Automation, we're partnered with life science companies to implement these digital technologies that connect and integrate data across their manufacturing lifecycle like never before, to bring life-saving therapies to those who need the most.
With this, I'd like to welcome Dean Kamen, Executive Director and Chairman of ARMI, to the stage. Hi, Dean.
Greetings.
Dean, I'd like to ask you a couple of questions. Why is Rockwell important to bringing life-saving treatments at scale to the market?
That's easy, because they've demonstrated, in just about every other industry I know, aerospace, semiconductor, food processing, that what they bring to anybody is the ability to get to high volume, high quality, consistent, no-surprise output. They help people manufacture. About in the waning days of the Obama administration, I was, I guess, lucky enough to be called to the White House to discuss their frustration that the science seems to be screaming ahead every day. You know, when you hear more exciting stuff, like, "Why aren't we reducing the cost of health? Why aren't we?" Well, because science isn't gonna create products, it's gonna create knowledge and solutions.
I pointed out to the president that I go to medical schools for 40 years, making stuff with him at Harvard, Stanford, you name it, you can go to every one of these places, and I told him, "There's a Petri dish full of the miracle of life here. They know how to make neurons, they know how to make nephrons, they know how to make beta cells for a pancreas, but those things aren't gonna spontaneously turn themselves into high volume, high quality, FDA approvable processes." Long and short of it, and I'll skip over, I was asked finally to make a proposal to fix this problem by helping to essentially create an industry, and it wasn't gonna be the people at the federal level that fund research.
It was the United States Department of Defense that ended up giving us $80 million to form an organization to create this new industry. As soon as I knew we were gonna get that money, I made three phone calls. I called three people that are very different, that I'll explain, and they had one thing in common. They've all been supporting my FIRST Robotics for a long time. They're all on the board of FIRST Robotics, and I called Martine Rothblatt, who was the founder of United Therapeutics, the only company I knew that was actually trying to make organs and has now succeeded. She's on our board. I called the founder and icon in the world of medical products, John Abele, the founder of Boston Scientific, who can help us figure out how to get industry together once again.
And I called Blake Moret, and I said, "Blake, I know we've asked you to donate time and resource and share the vision of, of creating a pipeline of technology for the future through FIRST, which is now a not-for-profit with 3,700 companies and 80,000..." And he knew it's working, as bold as it seemed. I said, "I got another one for you." And he more or less said, you know, "What's this gonna cost me?" And I said, "No, this one, you're gonna create an industry. We're not gonna create a product. We're not even gonna create a company.
I have the opportunity to take $80 million and use it to bring together all the disparate skill sets from the world of engineering and manufacturing, and deliver to them all these great scientists in the medical world that know how to make small quantities of things in their lab. Yeah, they'll get tenure, and some of them will win the Nobel Prize in medicine, but none of them are ever gonna make an industry out of making cells, tissues, and organs at scale, nor do they have the capacity to figure out how to get it through the FDA, because the FDA doesn't even have a process.
NIST, the National Institute of Standards, that doesn't have a process for this. So I told each of the three of them, "You're gonna join as my founding board members, this not-for-profit, and since it was the DOD that gave us the money, we're gonna call this not-for-profit ARMI, Advanced Regenerative, but not regenerative medicine, Regenerative Manufacturing, Regenerative Manufacturing Industry. We're gonna bring together the scientists and the engineers. We're gonna create a baseline of pre-competitive tools that will allow this country, within the next few years, to start seeing the production at scale of cells, tissues, and organs, which will have two effects. More than 90% of all the money spent in healthcare in the United States is on chronic care. I know that. I used to make all the insulin pumps for kids with diabetes. I'm now making a new one that's solid state.
I make 80% of the world's peritoneal dialysis equipment. Look, it's, I feel very proud that, that we in the whole medical industry spend a lot of time creating chronic care solutions, because without that chronic care, the things we're treating, people would die. On the other hand, I've never met a person that can't wait for their next dialysis treatment. It's so much fun. I never met a kid that would rather have an insulin pump than not have diabetes. If we continue to use our medical system to treat people with chronic conditions, two things are gonna happen: we'll bankrupt the Medicare and Medicaid in the country, and we'll let people live longer and longer in an unhappy state.
If, on the other hand, we make it practical to manufacture cells, tissues, and organs, when we need to replace that, that organ, we'll give people a better quality of life, we'll lower, lower the overall cost, and we'll create a whole new industry. And if you think that automating, you know, semiconductors after, you know, the science was Shockley and, you know, Bell Labs here on the East Coast, they won the Nobel Prize. They didn't create an industry. It took all sorts of people to build Silicon Valley, that whole infrastructure. It took a whole lot of companies to build, 150 years ago in Detroit, the automotive industry. It's gonna take a whole lot of people to create this industry, to make it practical to do this, and the cornerstone is going to be essentially Rockwell and the people that Rockwell is, is working with.
We founded it, like, six years ago. It now. It's a not-for-profit. It now has 200 members.
Mm-hmm.
Almost every major prestigious medical school has got a member is participating, and again, Rockwell is now helping us, and we are making cells, we are making tissues, we are building organs. Rockwell, not just their hardware, but as you've heard other people say it, you know, a PLC is a PLC. Rockwell has given us people that are now resident in our institution at ARMI, and after we got that $80 million and showed that we were organizing people and with Blake on our board a couple of years into the five years that I told him we'll do this, about three years into it, I thought we were going too slow. After they looked at what we were doing, they said, "We're gonna give you another $50 million on top of that and give you another couple of years," because they saw the progress.
Just at the beginning of this year, we got another $44 million to do development of the workforce for this up-and-coming industry, and just a week or two ago, they announced that officially, the White House announced that what I've been calling Regen Valley, the alternative to Silicon Valley, they've dubbed us Regen Valley and said, "We're gonna give you the opportunity to bring on another $70 million basically to grow this industry." And they said, "Regen Valley, the epicenter of a new industry that will manufacture at scale, at quality, at reasonable cost, human organs will be in Manchester, New Hampshire," and its founding board member is Blake, is somewhere around here. I can't thank you enough for being the key that's bringing all this together, so thank you, Blake.
Thank you, Dean. How big can this market get?
How big can the market get? I know everybody thinks this was a big industry. Most of you really weren't alive or were very young when the semiconductor became reality, and yeah, they built Silicon Valley, and it was great. And I'm sorry, but like every other good technology, it has become and is becoming more a commodity. You know, there's a lot of big companies making this stuff now, and they're starting to have to compete on cost. By analogy, the average processor that runs one of these puppies, it's got about 2 billion switches in it, and you can build 1 million of them a week and sell them for a few hundred bucks. There are about 2 billion active cells in a pancreas.
What if we could, what if we could build an organ at scale the same way we think nothing of 2 billion transistors per die? What would you pay for a pancreas if you had a kid or a parent with diabetes?
Hmm.
Most of baby boomers are gonna start to lose their vision. You know, they're gonna start to see... Well, what if you could just make a little replacement retina? There'd be no more macular degeneration, no more blindness, and that's such a tiny organ. Could you make 10,000 of them at a time the way we do on wafers? How big is the industry gonna be? Well, this is about 2%-3% of the GDP of the United States now. You guys make a lot of stuff to support it. Healthcare is about 21%, and it's growing faster than anything. It's unsustainable.
If we create an industry that changes us from chronic treatment, which will put me out of the current businesses I'm in, which I'm looking forward to doing, if we can create an industry that can attack some of the issues by giving people replacement organs when they need them, where they need them, how they need them, that industry, in terms of quality of life, in terms of being able to, by the way, create fantastic jobs and make the U.S. an exporter, unbelievable. If we can do that, I can assure you history is gonna show that this will look like a blip compared to what we're gonna do with ARMI, an advanced regenerative manufacturing. And by the way, every speaker up here was basically talking about how complex it is, and you got lots of variables.
You would talk, "Oh, I, I can do energy management in five second ." The variables to make a chip, even if it's a very complex chip, 10, 15, 20 processes, packaging. Do you know how many processes you go through to go from a single cell to a full organ? And we want that organ to have the same genetics as the patient that's gonna get it, so they'll never need to wait two years on a, on a list of, you know, sadly, 20% of the people die on, on waiting lists now for kidneys, livers, 400,000 people on... And when they do get an organ, they spend the rest of their life taking immunosuppressants so that they don't reject the organ, but they're subject to everything else.
If we can manage all the processes so you can actually make an individual organ with the specific genetics of the intended user in every case and keep track of all of that data in real time, it's a massively more sophisticated process than anybody's ever used in manufacturing before, which is why we need Rockwell as a cornerstone of almost every project we're doing. But once you make a baseline of the capability to do that across all these things, you've created the pre-competitive tools to create an industry so that all the different members, these guys will make kidneys, those guys will make livers, these guys will make lungs, but they'll all share the competitive, now highly reliable systems, pre-competitive systems, to make this industry viable.
What I'm hoping is, among our other key members, building out that system, validating that system, building the quality for that system, is in almost every case, tied in some way to Rockwell.
Dean, thank you. Appreciate it.
Thank you.
Great partnership. So as Dean mentioned, you know, our work in life sciences and beyond to all industries, that digital transformation, creating the workflows that allow the unscalable to scale, is part of what we're trying to do with lifecycle manufacturing lifecycle management. At the cornerstone of that, and what's key, is cybersecurity. You have to secure everything you're building, and industry has got millions of heterogeneous assets across thousands of plants, and people are struggling to prioritize the risk and actions to create resiliency. Our cyber capabilities go well beyond Rockwell hardware and software, as our industrial OT cyber expertise and best-in-class IT partnerships, cyber partnerships, like Claroty, Dragos, allow us to engage customers no matter what their control preference or installed base is.
I would encourage everyone to visit our Cybersecurity Operations Center demo on the show floor and see firsthand how we blend our expertise and partnership together to create unique value. Now, with our acquisition of Verve, we're able, in a single pane of glass, to speak natively with OT assets and integrate commercial IT off-the-shelf security tools from our partners into a single platform that provides real-time asset inventory, vulnerability management, and risk remediation. This is a foundational element to mitigating cyber risk across industrial control systems by having this real-time context risk visibility into all the hardware and software in the network. At the center of the platform is an asset inventory system that collects all OT assets, regardless of manufacturer. Verve's proprietary approach communicates directly with these assets, gathering critical information without impacting the network performance or interrupting production.
It aggregates those sources, including Rockwell's technology partners, into this platform as a single pane of glass that provides that actionable insights to both OT and IT partners, and our customers to quickly address their highest-risk assets. Together, Rockwell and Verve, our latest acquisition, will enable customers to further build resiliency and continuously improve the security, safety, and availability of their operations. Customers will benefit from this combination of best-in-class IT solutions, Rockwell Automation domain expertise, and now Verve Security Operations Center. Hopefully, as you can see, standardizing and simplifying the workflows across the manufacturing lifecycle unlocks tremendous value by delivering the outcomes that matter most to industries, real productivity and resiliency. Thank you. I would like to welcome back to the stage Blake Moret.
Thanks. So we've spent some time talking about what it is that we do, and I hope that some of why we win is becoming self-evident from the discussion. Let's go a little bit deeper into some of the areas that I'm particularly proud of and think that these are, you know, at the top of the list in terms of differentiators. So when we talk about what internally contributes to that success and that differentiation, again, simplification has been a common theme, and it really fits very well with the idea of being a pure play.
Having a single set of customers as the focus of the enterprise, to have that ambient understanding of who it is that we're serving and their needs, it allows us to functionalize certain areas and not recreate them across multiple disparate businesses that really don't share common technologies or missions or what have you. It allows us to have a single sales force across the world, understanding those customers, organized to a high degree by the specific verticals so that they can go deeper and be somewhat of experts in those areas, and to be able to more tightly integrate all of the pieces. You know, we've done a lot, and we've moved fast over the last few years. We've made acquisitions.
We have a lot of new people, and a big part of the effort over the next couple of years is gonna be to take these pieces, the great foundation that we have, and weave it together even more seamlessly. And that's from a commercial standpoint, that's from an internal organizational standpoint, and that's from a technology standpoint as well. If we look at how that shows up for the customer, it's really about unified technology, and Logix, with its multi-discipline control, for a long time has driven a lot of that value and, quite frankly, margin as well, because having a single platform to maintain is less expensive than having four or five disparate platforms for process, separate from discrete, separate from safety, and so on. And so this brings some financial benefits as well, and certainly ease of use.
It's no coincidence that hybrid is our single biggest vertical with 40% of our business, because the wet end of the process, the front end of the process, the mixing and the batching and so on, looks a lot like process, and at the other end, it's packaging, and so it looks a lot more like a discrete operation. Having one technology platform for a single set of maintenance people to be able to work on throughout the enterprise brings very tangible benefits, and we talked about it for years and years, and it's still valid today, and it's important. It's also about standardizing functions across a customer's operations. And so as Cyril works on his digital platform to be able to do high-frequency use cases more repeatably and with standard code, we've done that for a long time with communications and configuring devices.
But expanding that to the software side of things, and to be able to do that repeatably with open APIs and so on, is something that's going to be important for customers as well, as well as a common look and feel. It's an open, AI-enabled architecture that we're describing here. And in each step of the way that we've talked about for the last little bit, production design, tools like Emulate3D, standalone. FactoryTalk Design Studio, the first production control configuration tool that runs in a multi-tenant cloud, with all the benefits and the jumping board for additional innovation. Control with Logix, which remains best in class. Logistics, that Tessa talked about, with Independent Cart Technology that continues to grow fast, that continues to disrupt the market, and now with autonomous mobile robots.
With the edge and cloud solutions that Brian Shepherd talked about, having that SaaS portfolio, that again, because those technologies are all cloud-native, it gives us some capabilities to more quickly integrate those pieces together because they come from roughly the same epoch in terms of their development and their, and their tech stack. And then with what we're building internally in the way of FactoryTalk Design Studio that we talked about with Judson. The other piece, beyond the technology, beyond the internal organization, is our culture. And we talk a lot about culture, and I think you recognize that particularly in the face of big disruptions like COVID and the kind of supply chain shortages we've seen with the number of new people, culture is the flywheel that sets an expectation for existing and new employees as to how they're expected to behave.
As we grow and as we continue to add new people to the organization, and we renew ourselves, again, that concept of a flywheel is all the more important. We talk about four principles of our culture. It's continuing to strengthen a culture of integrity, of diversity and inclusion. Those are things that we've always stood for, and we continue to strengthen that. It's willing to compare ourselves against the very best choices that our stakeholders have. And while we talk often about that in the context of customers as the stakeholder, it can be applied to employees. They all have choices to make, and they can make those, and we want to be that choice. And because people are working so much more remotely now and so on, we don't have a captive audience in just Milwaukee or Cleveland.
Our workforce is worldwide, and they can work for other companies, so we have to be a destination employer. Obviously, investors, you have a choice to make, and we're mindful of that as well. And so we try to take that cold-eyed, outside-in view of all the choices that those stakeholders have, and that's an important part of the culture. It's not just incremental growth on improvement on what Rockwell is already doing. It's about increasing the speed of decision-making, and in many cases, that means driving that decision-making capability and authorization further down in the organization. That also helps as further down in the organization moves to the top of the organization, they have experience with making decisions, and they haven't just become good at deferring the tough, the tough stuff.
And then it's about a steady stream of new ideas, unlocking the voice of people who've been in the company a long time but didn't think their voice mattered, and about the new entrants to the organization, and for us to truly listen. It's important, and it sets us apart. With that, we'll talk a little bit more about how we accelerate all of this, and I'd like to welcome Scott Genereux, who's our Chief Revenue Officer, to the stage.
Good morning. You know, over the past several years, Rockwell and our sellers have delivered great results during a very challenging time. You know, we've built strength in our consultative selling capabilities, we've strengthened our focus on industries, and we've increased our intimacy with our customers through deep domain expertise. We've extended our market access through our partner ecosystem and acquisition investments. You know, we are positioned well to win in the year ahead and leveraging investments made and strategies in place. Today, we're going to provide some additional insight into a few key areas. I'm going to ask Barry Elliott and Gina Claxton to join me on stage. No?
We're not done yet.
Not yet?
Not yet.
Barry is going to share with you some content around our approach in critical focus industries, and Gina's going to talk about the evolution of our partner ecosystem with a focus on the Americas. Then we'll take a little more time and look closely at key opportunities of how to win in EMEA and in Asia. With that, Barry?... You're on.
I can have it now?
You got it now.
Thanks, Scott. Good morning, everyone. So I'm gonna talk a little bit about some key focus industries where we are seeing some extraordinary growth coming from investments. Sorry, I don't know why I'm driving on the slides here. We're seeing extraordinary growth in some of these industries, so you've heard mention of a number of them earlier today. We spoke about energy transition in the earlier panel, and a lot of this growth is driven by significant underlying momentum. That's driven by mega trends, changing consumer demands, changing industrial demands, and that's attracting substantial private investment, a lot of that into greenfield, and that's also being underpinned and also supported by either government initiatives or government incentives. A couple of examples that I'll cover on there.
Aspects like operational resiliency, workforce challenges, and we've spoken a lot about that, you know, earlier on the remarks today. It's not just the outgoing and aging workforce, but it's also the incoming workforce and what they are seeking from the job market that they're entering into. And then also cybersecurity themes that Matt touched on quite heavily. All of those are kind of across all industries, but when you think about significant greenfield investment, those challenges become substantially more acute to need to be solved. Aspects like climate change, net zero commitments and sustainability are driving investments in electric vehicles, but they are also driving investments in energy transition.
We heard a lot about that earlier today, and again, this is not just driven by macro aspects like the need to address climate change, but also we heard about return on investments on these investments being pretty significant. So it's not just about a macro factor. Semiconductor, predominant trend there is around shoring or reshoring, particularly as a primary resiliency play, and that's also being underpinned by a lot of government investment in that space. And then within food and beverage, which is our largest industry, we continue to see a lot of growth in that space around areas of changing consumer demand, changing packaging. Tessa mentioned some of that earlier. But also areas like protein processing, which have been traditionally very manual, and a lot of automation being invested in the spaces like that today.
Now if we touch on a little bit how Rockwell is solving the challenges that customers have in these industries and also finding new ways for us to win. Our industry segmented approach, that we've always had, our deep domain expertise in these industries, the partner ecosystem that supports us, and we in turn support into the industries, and then the strength and market reputation of our core portfolio, is really what underpins our ability to find new ways to win and new ways to deliver additional value for our customers. I'll just touch on a few topics over here. There are a lot of, lot of areas to cover, but aspects around cloud native, you heard a lot about that today.
In order to be able to scale and do so at speed, whether that's in the EV market or whether that is in energy transition or semiconductor or life sciences, as Dean was talking to earlier, that speed and scale requirement is only really achieved by software offerings that are cloud native. And so elements or offerings like we have with Plex, with our ERP there, our MES, Fiix maintenance management, are areas where we are able to solve those challenges. As I already mentioned, there's a lot of greenfield investment taking place in these industries, so we're seeing extraordinary growth potential in there. So we're gonna get a little more specific now and kinda look at the timeline of a typical greenfield investment. And the example we've chosen here is an EV battery investment.
What you would have seen, first takeaway you should note there, is that the timeline is typically pretty long. From project announcement to start of production, this was typically four to six years. But you also heard earlier today, and that was stated on the panel, that we're looking... Our customers are looking to shrink and compress that time. And so how are we helping them to enable to do that? The other part is there, across that timeline, there are a lot of technology decisions that are made over at various time frames across the overall timeline. If you have on the slides next to me here, that's what we were able to offer just a few short years ago.
So we've always been able to offer technologies and capabilities from project inception all the way through to managing lifecycle. But today, we have a substantially broader portfolio through our innovations, our investments, both organically and inorganically, that have enabled us to serve a much broader set of capabilities across that entire lifecycle. And a few takeaways I want to leave you with over here is, one, we're able to engage much earlier in the project cycle through Kalypso and more recently with our acquisition of Knowledge Lens. And as a result of being able to engage earlier in that project lifecycle, one, we're able to deliver value earlier.
Number two, we're able to influence specification much earlier in the project cycle and influence more specification because we now have expanded capabilities, and many of those, or most of those, were covered by our presenters before, and you'll see a lot of the names and logos that you've seen in earlier presentations. So what that results in for us is that we have access to a significantly larger potential of project revenue. And as an ultimate outcome of that, in this example that I'm highlighting here today, as an EV battery greenfield, we're able to potentially have access to three times more revenue potential on an example like this, versus an equivalent investment in an internal combustion engine greenfield. In addition to that, there's 15% of that initial revenue opportunity for us that's available over the life of that project as annual recurring revenue.
And then as a final point, our partner ecosystem, which I touched on a little bit before, continues to be critical for our success, whether that's the EPC market, customers that we serve, our system integrators, our machine builders, and I'm gonna hand to Gina to talk a little bit more about that. Thank you.
Thank you, Barry. So I'll take a few minutes to expand on this once-in-a-generation opportunity that's entering the Western Hemisphere, but specifically North America, is where we'll focus our time, and why we're uniquely positioned to capture more of our fair share. We have talked about the drivers for this investment. Obviously, geopolitical situations, the diversification, de-risking of the global supply chain, and then, of course, infusion of government funds are all creating this moment in time, and it's affecting the industries that we call focused industries. But it's also affecting all the kind of adjacent upstream and downstream industries as well, that serve these industries, harvesting natural resources, such as lithium or water, for example. And so we're seeing really almost a universal opportunity across all industries.
And for the last two years, we've been tracking this, very closely, and we've actually tracked over 1,800 public announcements that have been made, announcing new capacity and investment in this space, and that represents over $1 trillion of announced investments. So what do our customers need as they're making these unprecedented investments? Well, they need speed to value, increase the time to market, get that production online faster, and de-risk it in the process. They're also seeking to leapfrog their current capabilities in terms of digital innovation, we heard that from the panel today, and create what they're calling the factories or the operations of the future. And we truly believe we have advantages in actually serving these needs and helping them achieve these outcomes. So we've made targeted investments in how we're going to market to address this opportunity and capture more share.
We've talked, of course, about the breadth of our offerings and portfolio, and that's what we've spent most of the morning on, but really it's about that scalable and flexible architecture, so that when we show up to these large projects, we can solve multiple challenges along the entire life cycle of the project. For our customers, that's simplified process, a simplified experience, bringing more thought leadership and obviously, ultimately increasing that speed. And then, of course, North America being our home turf, with being that market leader position that we hold right now, that incumbency is a huge advantage. Not just because of, obviously, the strength of the relationships, but that distribution network that we have out there in the territory with those local relationships, really, that customer intimacy that already exists. We talk about no opportunity left behind because we're already so embedded.
We've spent a lot of time and energy evolving that partner ecosystem so that we can show up to these projects as an entire ecosystem. We've invested in EPC partnerships with new programs and offerings that are more attractive to EPCs so that we can access these projects sooner. We have over 100 people supporting our machine builders and helping them go to these projects with a point of view that's integrated with the rest of our capabilities and, of course, our digital relationships and our systems integrators. All of this creates more speed and a simplified experience for our end users as we bring the pieces together and show up at our customers to deliver that value. Then the experts. The depth of our local talent and expertise is a huge competitive advantage for us.
We have over 300 industry and technology domain experts that are focused on this area, helping our customers in the day-to-day, solve these problems with agility and speed. So all of this value is very powerful, except that we have to be able to show up together in a consistent way, with a consistent experience. And so we, we have also expanded this singular kind of coordination function that allows us to drive these large projects with a singular process, with an industry-specific voice, program management, et cetera, because execution is key to all of this. Again, back to that speed and that time to value and that risk.
An example would be a recent win that we had, that was introduced to us by a large EPC, an EPC that we'd worked with in the past, but we didn't have this level of relationship that we've now developed. And so they introduced us into a greenfield opportunity. The customer selected Rockwell for the controls and automation foundation, placed those orders, and then subsequently, a couple of months later, we've recently won the digital consulting, work to kind of lay out that digital foundation, and they've recently just purchased, our MES platform. So it's an example of revenue that we wouldn't have had before if we hadn't made these investments in these types of partnerships.
Now we're bringing all of Rockwell to the table to make sure that we're not just capitalizing on this moment of capital investment, but setting those seeds for the future. We're looking forward to winning the controls and automation foundation in these projects, that data architecture, and then surrounding them with the ARR contracts that'll build that sustainable growth for the future. With that, I'll turn it back to Scott.
Thank you, Gina.
You're welcome.
... So I want to spend a couple minutes on Europe, or EMEA, and Asia. So our business in EMEA has grown from about $1.3 billion to $1.9 billion business over the last four years. In Europe, one of our primary initiatives in driving growth is through the machine builder market. Machine builders represent more than 30% of Rockwell's total business, and in Europe, it's even a larger percentage. So it's important to note also that the machine builders in Europe serve both the European market, but they also export across the globe for reach beyond the region. We drive growth with this audience through a focused industry approach. We will continue to focus on growing market share across our process and hybrid industries with our PlantPAx platform.
You know, our largest market share in Europe is in packaging, which is attached to our ecosystem approach, and once again, a traditionally strong segment of food and beverage. This is an area where Independent Cart is a differentiator in the market. We'll continue to double down on packaging while seeing growth and opportunities in material management and manufacturing, assembly, and process. You know, as you heard from Barry, our strength in key markets like life science, food and beverage, oil and gas, as well as our investments in energy transition, warehousing, materials management, position us advantageously to win. In fiscal year 2023, we did grow faster than the market in these focus industries, which demonstrates a strength in our strategy and approach.
As we've expanded our initiatives, energy transition and sustainable solutions, as we heard earlier, will continue to be high on customers' agendas, and the EU leads the way in ESG policies. We had large wins leveraging decarbonization solutions with Sensia, as you heard earlier today, and energy management and optimization solutions with our customers. We also drive growth by leveraging scale, access, and expansion offers through our acquisitions. Our recent acquisitions of CUBIC, ASEM, Avnet, they're expanding our market reach and regional footprint across Europe. But all of our acquisitions, including Plex, Fiix, Clearpath, they expand our conversations with our customers and around incremental new solutions and capabilities. This includes adding value with our edge and cloud-native software offerings, including FactoryTalk Optix, Plex MES, that you heard earlier from Brian.
While our EMEA market specifically, and Germany specifically, have strong competitive bases, but as you've heard between our machine builder focus, our strong portfolio, focus industries, and acquisitions, we are very confident in our ability to break through and take share in EMEA. So let's pivot to Asia. You know, overall, Asia represents one of the largest opportunities and an opportunity to scale as the smart manufacturing leader. We see our offensive strategy as a continuation and an evolution of what we've been executing over the past several years, largely because we truly believe that our strategy is working. Over the past three years, we have grown this marketplace by 46%. So our strategy to do this is grounded in a differentiated approach that leads with a consultative solution mindset, targeting key focus areas and industries.
Our competitors have largely built models designed for mass, you know, market production sales through distribution. And, you know, to be frank, this results in transactional-type relationships. Our approach is to build customer intimacy while leveraging our channel for scale. We have the relationships and the deep industry, you know, expertise that allows us to directly advise on solutions to address our customers' biggest challenges, and then to partner to provide the technology and deliver and to achieve results. We support this in a proof of concept, execution, and then we scale quickly with technology delivered across the whole portfolio. So in Asia, you know, we have a strong presence across all key markets. However, we do see two unique scale play markets that we're prioritizing our efforts around, China and India.
In China, we believe our differentiation can be demonstrated b industry-focused solution, a consultative approach that I mentioned earlier. We have leading technology platforms that provide the backbone solutions needed to solve tough manufacturing challenges and unique differentiation for specific manufacturing use cases. You know, examples of this include the appetite that we've talked about and what we're seeing with Independent Cart Technology, and as a flexible manufacturing enabler for auto and continued strength in MES, PharmaSuite, and life sciences. We also see great opportunities to accelerate the modular motor control center offering of CUBIC in China, where they have a significant local manufacturing presence already in place. In China, we must also be balanced. Many companies are rebalancing their Asia footprints right now.
We have a smaller presence in China, and we do see an opportunity to grow our business by serving local and global customer needs, and we're continuing to invest to strengthen our local capabilities to serve the unique requirements of the Chinese market. So now let's switch real quickly over to India. In India, the competitive race is heating up. Manufacturing output is set to double in the next 10 years, so it's a big opportunity. And our portfolio of solutions and strategic industry focus is well-matched for the country's demands. Our key industries in India include auto tire, CPG, life sciences, chemical, and oil and gas, and we're seeing EV emerge quickly in India, and we've been very successful in assembly infrastructure. We're also investing in India with a strategy to increase our local R&D presence.
In fact, we have more than 4,000 employees in India today, which is double the number of employees we had just 4 years ago, and it's actually the largest employee population outside of the U.S. at Rockwell. So this includes a strong focus on software engineers, including those joining Rockwell from the Knowledge Lens acquisition. So with the complement of Knowledge Lens and Kalypso, we are expanding our digital consulting practice to achieve scale, which is what we need in this region. We've also increased our manufacturing footprint in India with the acquisition of CUBIC, which has a facility in the country, and we're continuing to look at ways of expansion in this space as well. So in addition to China and India, we are seeing a strong growth trajectory across the region.
In Korea, EV battery remains a highlight, but we're also expanding solutions in mining, both upstream and downstream, utilizing PlantPAx and lithium recycling. This allows us to win across the value chain. So we have confidence in this market. We continue to see double-digit growth consistently across the entire region, and with continued focus on China and India strategies, Asia will be a strong accelerant in the year ahead. So as you can see from all the presentations, we believe in the focus industry strategies that you heard from Barry, the strong partner ecosystem and the onshoring opportunities presented by Gina, and the consultative selling approach, our differentiated technology, and our market access gains from acquisitions that will allow us to win in the year ahead and for the long term. So now I'd like to welcome our Chief Financial Officer, Nick Gangestad, to the stage.
Thank you, Scott, and good morning, everyone. I'm excited to have the opportunity here to share how this new strategic growth framework, what it's going to mean to us financially, and what is it going to do to our long-term financial framework. On the left is what you saw Blake share earlier this morning about our new growth framework and the ways we're going to win in the market. On the right-hand side, I've added what does this do to our long-term financial framework. And on first blush, I'd say it's not going to change a lot. We're going to continue to have earnings per share growing faster than our revenue growth. We're gonna continue to expect free cash flow conversion to average approximately 100%.
One point I would make out in light of this growth, we are expecting core conversion at 35%. Previously, I've talked about that in the 30%-35% range. We now see ourselves in the 35%, expectation for core earnings conversion. In terms of this growth framework and what it means to our margin, in the coming years, as I look at our long-term expectations for margin for each of our segments, in the coming years, there are some things that we do in Rockwell that are gonna drive margin improvement across the entire company. So... And those are listed on the bottom there.
Our pursuit of productivity across all parts of our company, supply chain improvement that we've been investing in in the past and are going to continue to invest in, as well as this accelerated top-line growth. We see that as enhancing margin in all of our segments. Now, if I go to each of our segments, in first in Intelligent Devices, we're targeting a operating margin of 22%-24%. We're excited by the growth opportunities that we're seeing from autonomous production logistics that you heard Tessa talk about earlier this morning, that taking what we've had in the past of a control system, our Independent Cart Technology, and mapping that up with Clearpath, and what that can do to change the future of production automation, and logistics on the factory floor.
We're also investing in designing cost out of our products. We're working on cost optimization through redesign and innovation. Within Software and Control, we are targeting 31%-34% operating margin. In fiscal year 2023, our Logix portion of our business grew 30%, and that drove margins to record high levels in Software and Control. As we look to the future, and as we grow volume and market share in control, we expect that to be a strong contributor to Software and Control's margin. We also expect to drive further synergies from some of our recent acquisitions within Software and Control. And then finally, the mix in Software and Control. As software becomes a bigger part of this business of this segment, we expect that also to enhance margin in the coming years. And then finally, Lifecycle Services.
We target a margin in the coming years of 13%-15%, and that margin expansion is going to come from several things. First, you heard Matt talk about our focus on high-growth, recurring services that are margin accretive to that segment. We took actions in fiscal year 2023 to streamline the organization. We expect that that is going to expand margins in fiscal year 2024 and beyond. And then, our Sensia joint venture, that profitable double-digit growth that we expect out of Sensia, that will also be an important part of the margin expansion that we see in Lifecycle Services. Beyond our organic growth driving profitability, we're also accelerating profitable growth inorganically.
This is a version of a slide I shared a year ago, and at that time, I had in the title that we expect $150 million of EBITDA from companies we had acquired from fiscal year 2016 to 2023. We exceeded that number in fiscal year 2023, and we're now targeting $200 million of EBITDA from these same companies in fiscal year 2024. One of the bars below shows what we have historically shown of our inorganic priorities. But on the bottom, I'm now showing what Blake shared earlier of our new inorganic priorities, annual recurring revenue, and what we're investing there in software, and services, and our priority in that space to expand our annual recurring revenue.
We continue to have market access in Europe and Asia as a priority inorganically. Then a new one, application-specific technology in focus industries. You've heard several times today as we talk about our increased focus on industry solutions, and we continue. We are looking from an inorganic perspective, how specific technologies to applications in particular industries can enhance what we're doing organically. Besides what this is doing to our earnings, to our profit, we, in Rockwell, we believe we have developed a strong M&A muscle that goes beyond just generating earnings, but also generates accelerated growth for the company. When you take what we have, what I'm showing here, and Blake shared earlier today, that these added on average 1.4% growth inorganically.
But once they have become part of our company, they have averaged, on an annual basis, greater than 15% organic growth, helping propel total organic growth within Rockwell. That's a historic performance marker that we've been exceeding. It's also an expectation that we expect to continue going forward with, with the transactions I'm showing, showing on this slide. As we talked this morning about our new investment, New Horizon investments, Blake highlighted, what, what are the customer needs that are behind these components of growth, and what, what is Rockwell's differentiation? I want to take a moment to talk about what are some of the things Rockwell is going to be investing in in the coming years around these different components of, of growth. First, from the faster secular growth, one of the areas I'll just point out is, cybersecurity.
It's becoming a part of many of our engagements with our customers. They have older devices that still aren't hardened. Verve, which Matt talked about earlier, allows earlier engagement with customers. We're also investing in motor control. This is something that is a key part of how energy is managed with our customers. We have some good technologies there. We're going to continue to invest in that capability. When it comes to growing share in expanded markets, and you heard Tessa talk about autonomous production logistics. And as Tessa said, man, most of our customers typically rely on manual labor for moving the raw materials and those subassemblies to and from the production line. And it's a key need for our customers for increased efficiency and for safety.
That's one of the examples where we're, we expect to be growing share and expanding markets in the coming years. Annual recurring revenue, we expect that to be adding a point of growth to total Rockwell growth in each year. We're gonna be investing, continuing to invest in our cloud, cloud-native software offerings, as well as continued investments in our acquisitions like Fiix and Plex. And then finally, acquisitions. I've shared with you the three priorities of what we're investing in. We're looking at things that can complement what we are doing organically, to increase the value and the comprehensiveness of our portfolio, to drive even more value for our customers. That's over the long term. If I look just at the current year, fiscal year 2024, what are we investing in in 2024?
First of all, our total investment spend from fiscal year 2023 to fiscal year 2024 is going up 6%. Three percent of that is coming from organic growth in our investments, and then another 3% coming from our acquisitions of Clearpath and Verve to bring us to the total of 6%.... On the organic side, what are we investing in? We're investing in research and development, new product introductions that you've been hearing about throughout the morning. We're also investing in digital infrastructure to support this annual recurring business that is an important part of our growth strategy going forward. And as you heard Scott and Barry, and Gina talk about just before, before me, we're investing in areas where we expect we can capture additional market share.
So example, increasing our software and industry-focused sales force, and then, as Gina talked about, we're expanding our North America teams, supporting the pursuit of government-supported spending from acts like IRA and the CHIPS Act. Business resilience is important to us. It's important to our customers, and it's an important area of focus to us in Rockwell, of how do we make sure that our business model is resilient? And on the left-hand side is growth. What are we doing to make our business more resilient from a growth perspective? One example is annual recurring revenue. Annual recurring revenue, it's now greater than 8% of our revenue in fiscal 2023, and we expect it to be greater than 9% of our total revenue in fiscal year 2024. Part of that recurring revenue comes from our differentiated cybersecurity offerings.
On the right-hand side are things that we're doing to increase our resiliency from an operations perspective, things that we are doing to ensure that we can grow profitably in a variety of scenarios. We've been investing in our supply chain to make our supply chain more agile. We have a scalable workforce that can flex up and down, depending on what the production levels are. In the last year and a half, we changed our pricing model to make ourselves more agile from a pricing perspective. Our pay-for-performance philosophy and approach in Rockwell allows us to, in times of lower growth, scale down the amount of compensation, and in times when we are exceeding our expectations, share that with our employees.
All of these things are examples that we see as giving us more resilience in our operations. Our capital deployment framework, I'm showing it here, it is unchanged, but I wanna keep it on the record of here's what our priorities are around deploying capital and what we're expecting for capital deployment across different categories. Then in terms of capital structure, fiscal year 2023 was a year where we had a lot of focus on bringing down our debt. We put capital towards bringing down our debt, and we ended with our debt to EBITDA less than our target of 2.0. That gave us the flexibility and the agility to be without adding any long-term debt, funding our Clearpath and Verve acquisition early in fiscal year 2024.
It's also part of our story of how we can bring down interest expense in fiscal year 2024 from what, what we had for interest expense in fiscal year 2023. And then in terms of our the last slide I'm gonna share, in terms of our fiscal year 2024 guidance, I'm just gonna start by fiscal year 2023 was a year in which we overperformed. We grew our top line 17%. We grew earnings per share by 28%. We grew annual recurring revenue by 16%.
As we look to fiscal year 2024, as we're seeing normalization of orders, as machine builders and distributors are clearing some of their extra inventory, that operational resilience that I talked about a couple of minutes ago, that's allowing us to forecast earnings per share growth even in a year of 1% organic growth at the midpoint of our growth guidance. So that's our view for 2024. Thanks for your attention on this, and now I'm gonna welcome Blake Moret back on the stage.
Thank you, Nick. So I hope you found the last couple of hours interesting and exciting as we build on the strong secular tailwinds for automation with Rockwell's differentiation. We took a moment to pause in satisfaction of having delivered on commitments that we made four years ago. It seems like much longer in the past than that. We have every intention and a commitment to accelerate that profitable growth and to continue to grow above market growth rates. And we firmly believe that nobody is better positioned through the combination of our offering, through investment trends, through our culture. There's nobody in a better spot. I wouldn't trade places with anybody. And so with that, we're going to bring out my management team and spend some time answering your questions. Thank you.
So we, I think, have runners in the audience that are gonna answer your questions. Since the lights are down, I'm not gonna pick the people with their hands up. I'll field the question and then, and then relay the tough ones to, to my team. So, that's how this will work. Okay?
All right. It's over here. It's Scott. Like, the Clearpath deal was a little bit of a different move for you guys from the past. Robotics was not something that you really ever looked at, that I'm aware of, and there are no real fully scaled robotics players in the U.S. Is there a bigger vision beyond Clearpath that you see for that business?
Let me make a couple of comments, and then I'm gonna pass it to Tessa. Obviously, robots and programmable logic controllers, PLCs, have existed side by side on the factory floor for a very long time. And so given our focus on production and everything that's around production, we've been knowledgeable about the different intersect points with robots for a long time. And a few years ago, we looked at, so what is that strategy? What's the long-term end game, you know, for where we're best positioned there? And with the fixed robots, so articulated arms, things like that, we focused really on simplification of the programming tools there. We don't think we necessarily need to own the arms there. You know, in certain industries, like automotive, pretty crowded space.
We've got some strong partners who are already there, and I'm not sure our efforts would be best spent trying to compete, you know, from a standing start against them. But being able to have common programming, in some cases, like with Comau, to be able to have the Logix controller, not only controlling the infeeds and the material handling and the line control, but controlling the robot itself, creating the robot libraries, with that code package to be able to pull it off the shelf. You know, that seems like a pretty good path with the, the fixed robot arms, as well as, some investments we've made in, places like Ready Robotics, which abstract the specific robot provider, and to be able to, you know, genericize the way that we interact with that individual third-party robot.
AMRs are a little bit different, and when we talk about the mobile robots that Clearpath provides, specifically looking at in the factory floor space. So while those robots might venture into the warehouse, we're not looking to compete with some pretty well-established vendors in the warehouse space. So there's a lot to do on the production floor. We've got customers telling us, and Tessa alluded to this, you know, in CPG and automotive, that being able to bring the material to and from the line when it's needed to be able to supply those operators or those assemblers on that line, is their single biggest opportunity for additional efficiency. And so we have a lot of room to run by bringing this together with the line control.
The idea of having that same programmable controller platform responsible for the motion and the safety of those AMRs, as with the PLC, is a huge opportunity, and nobody has that today. Being able to bring that information up to Plex, so think of a module doing the fleet management in Plex, along with the other scheduling and orchestration activities, those are huge opportunities. We wouldn't have done this if it was just, you know, one AMR unit against unit, but it's the idea to bring this all together that is something really special.
Yeah, Blake, I, 100%-
Mm-hmm.
On everything that you said, and I, I think it is about... It's less about a technology and robotics. It's about the end use of moving material efficiently through a plant, driving cost and optimization for manufacturing in a lot of different industries. And so we've, we've been really driven by: How do we make this streamlined, end-to-end, well-orchestrated, and efficient production flow? And if you think about it, AMRs now are, they're like the circulation system of a manufacturing plant. And so with that, you can see the movement through the production environment. You can understand better the bottlenecks that you're experiencing in that end-to-end process. And so I think we're really driven, how do we optimize that?
We learned a lot with Independent Cart and how fast that is growing and the efficiency that customers are gaining from that, and I think this was just a natural next step to extend that production logistics capability.
Yeah. Great.
Okay, if I could switch gears a little bit, the 10-K came out last night, and it looks like your headcount went up about 12% last year. Now I know most of that is India and Latin America, but still, walking into kind of a flattish growth environment with higher headcount. How do you think about your headcount going forward, and what do you really expect out of it? I mean, it seems like kind of a pretty big headcount jump, so perhaps just a little color on why and what we can think about going forward.
Yeah. So we've made some acquisitions over the last 12 months. And I will also say that some of the positioning for the coming year and the increased conversion, you know, on low top-line growth is based on taking some cost out of the system, which does impact reduction in force across the organization. And you know, we continue to maintain a focus on key projects, you know, many of which that we talked about today. But we are continuing to look at headcount and making sure that it's, one, the right amount and that we're managing, you know, the headcount relative to our growth, but also making sure that that headcount is constantly being rebalanced to focus on the highest level of return.
So things that we've done in the past that may have slowed down in terms of, you know, fit with the strategy or contributing growth and performance, you know, they can't hide behind a run rate. And we constantly look at that, and we went through that pretty assertively in the fourth quarter, with the restructuring charges that we looked at. But not all of those people that are affected have left the organization at this point, so.
Thank you.
Yeah.
Thank you, Jay. I'm Nathan from Daiwa. So, I just wanted to dig a little deeper into auto and EVs and batteries. You talked about 40% of your auto coming from EVs and batteries. If I kind of compare and contrast the products that are touching the segment between ICEs and EVs or within the segments, are there differences on the products that you're supplying to the industry and the segment breakdown?
Yeah.
How different is those between ICE and EV power battery?
Yeah, I think, I think the content, as Barry went through the slide, the content builds on some of the things that we've long supplied to the production of internal combustion engines. So you still have, you know, the basic stamping operations, the body and white operations, you know, paint, assembly, trim, chassis, final test. I mean, all of these things you still have in an EV plant, but on top of that, you have the battery production, and the front end of the battery production process is more process control. So it's Logix, but it's still, it's in a different use, because you don't have as much process control in other parts of the traditional automotive plant.
You have Independent Cart Technology that, while it has some applications in traditional drivetrain, in battery assembly, Independent Cart, and specifically Rockwell's Independent Cart, you know, has been seen as the absolute industry standard for that. So it adds to that and replaces some of the applications in traditional subtractive manufacturing, you know, the boring of cylinders, the finishing of metal surfaces, that were primarily done by CNC, which we don't make. And so if you're a CNC provider, you're very concerned about the cannibalization of those processes. We didn't have that much to lose. We did that through partnerships with FANUC and people, and people like that. And then I would say the other piece is the software, which contributes to that ongoing ARR opportunity. While not specific to EV, because those plants are newer, you know, we didn't have EV plants, you know, 10, 15 years ago.
People are looking at the MES, the scheduling function, as a have to have, rather than, you know, a nice to have type of thing. And we have a very good MES package for, for EV. And so I'd say it's addition to, and that's why we talked about the overall, you know, share of wallet as growing, in, in these newer, in these newer facilities. And that's not to even mention the services piece, you know, that, that Matt talked about, the creation of digital twins, the use of Emulate3D, and we see a lot of the big brand owners using Emulate3D to simulate the throughput on these lines. So some of it is just a function that they're newer plants that are being built, and so there's more of an opportunity to take care of...
Take advantage of recent technology. Anything, anything to add? Okay.
Thank you.
All right. Sounds good. Yep.
Great. Just want to congratulate Scott on staying up late and reading the 10-K. Upside surprise. Just on the big project, mega project list, what, what is your, like, content number on that? Is it, you know, these are big numbers, obviously, construction costs and things like that, but how should we think about that? And then how much do you think you've already seen out of that kind of $700 billion number, just so we can help calibrate timing?
Yeah. So, I'm gonna make a couple comments, and I am gonna give it to Scott as well. But neither of us are gonna give you some percentage that you can turn the crank on, you know, to yield a revenue figure, because it's more variable than that. These aren't just greenfields, right? These can be CapEx of existing facilities, and the percentage of automation content is gonna vary significantly by the facility. So when you talk about a $10 billion semi fab, that's gonna look a lot different than an EV line, than a, you know, a life sciences, you know, API process. And the content in those are gonna be different.
So we've stayed away from saying, you know, multiply by X%, and then, you know, multiply by our share, and that's gonna give you the incremental revenue, you know, over a period of time. We dimension that, and it's big, and it's meaningful, as we look at it, particularly because so much of that investment is gonna be in the U.S., where we have the largest share, the best channel, the biggest installed base, the deepest relationships. So we're happy about that. It's gonna be meaningful. We have already seen business that's resulted from that, but we're still in the early innings. There's still much more to come than we have seen, and it's a multiyear process. Scott?
Yeah, I agree, it's still early. One of the things that I think we mentioned earlier, but we do have a dedicated team that literally wakes up every day and focuses in on this area, working with the broader, the greater team inside of North America. And there's a lot of activity going on in that space. We're growing pipeline, we're engaging with a lot of opportunities, but as Blake mentioned, I think it's still early to say, and we are getting some revenue, but not enough to, you know, talk about, you know, dramatically. But the opportunity that we're seeing is big.
I mean, it's a great opportunity for us, and once again, depending on the industry and where we're at, some of these opportunities are in industries or companies that we already do business with, and some of them, obviously, are completely new opportunities that companies are building.
One of the other things, if I can add to that, is some of this is based on the lead times of some of the equipment as well. So when you hear the discussions about switchgear, for instance, being ordered for some of these projects, we're still looking at, you know, the industry is still looking at two plus years' lead time for some of that switchgear, the big transformers, things like that. We don't have anything with two year lead times, and so customers, even though we may be a part of those projects, they have the ability to wait for some period of time before placing the actual order. So there's a bit of that dynamic. We talk about supply chain issues being largely behind us at this point. That's not the case when you're talking about gear and other, you know, utility equipment there.
Then, Nick, just on the margin targets, when's the timing on that? Is that, like, a 3, kind of three to five year type of thing, or just for the margins that you gave?
Yeah, I haven't put a specific year on it, but in the next few years. It's not, like, 10 years out, it's not next year, but it's in the next few years that we're expecting that.
Great. Thanks.
I wanna put just a fine point on the margin thing, 'cause we get asked this sometimes, you know, is this framework going forward based, you know, solely on top line, and, you know, the margin will do what the margin will do? That's not the case. We showed those to make sure that you understand that we are intent on expanding those margins, and while we've seen margins in different of those businesses at various points touch those levels, we don't plan for that to be a passive activity. We plan to continue to take the actions to drive those margins, along with that top-line growth. Okay?
Thanks a lot. Julian here from Barclays. Maybe just on, on the margin point, I'm trying to drill into that a little bit. You know, Software and Control, there might be the case that margins should expand a lot more, as there's a lot more momentum now behind the, the software portion of the business. And there might have been a case for a more aggressive, margin goal in that context, just given where the Software and Control margins, you know, already sat the last 12 months. Then within Lifecycle Services, any sense of how much of that doubling of the margin is tied to Sensia versus the base business?
Yeah, I'll take both of those, Julian. So on the first part... Well, I'll take the second part first. In terms of Lifecycle Services and the expansion of the margin there, moving to the 13%-15% range, Sensia is probably one or two points of that over the course of several years. It's not all of it or even half of it, but it's one to two points of that total. In terms of Software and Control, I'd just also point out the pretty amazing progression we had on Software and Control margin in fiscal year 2023. We in 2022, Software and Control margin was approximately 28%.
With that strong growth we had in fiscal year 2023, in particular, the 30% growth in our Logix business, that helped move that whole segment's margin up to about 33%. Now we're targeting 31%-34% for Software and Control. We're expecting that in fiscal year 2024, that will be a reduction from- We, we expect that margin to come down from where it was in fiscal year 2023, based on the growth expectations of the different components we have within Software and Control. The last piece I'd add to this, in thinking about these longer-term margin expectations, in particular, Software and Control, that is also the segment that attracts a significant portion of our incremental growth investments.
And as we're looking at different places we're investing, it's that margin long-term target we shared, also gives us that room and expectation for incremental investments in that segment.
Thanks a lot, Nick. Just a quick follow-up on the growth profile of services. You know, I think pure services is maybe 10% or so of the company now. You know, do you expect that portion to outgrow the balance of the company in the coming years? And just wondered, sort of, you know, as we think about the ratio or tying of ARR to services, kind of help us understand from the outside, the relationship.
Sure. So, you know, this is obviously, it's an equation that balances multiple things. And I don't think that we're gonna see outgrowth of Lifecycle Services beyond what we see from the company average. We have certain parts of Lifecycle Services, you know, that are stars, right? We talk about cybersecurity, we talk about some of our digital services that are profitable and growing fast, but we've got stars in all of the segments, and that was part of the idea behind it, is that we would have three segments, each contributing, you know, good value, both to customers as well as financially. From time to time over the years, even going back to the CP&S days, we've modeled out.
So, you know, what if, quote, "the worst thing happened," and, you know, services ran away, you know, with that lower margin profile? And, I don't think, you know, in any situation, we should be looking at that because we would manage it, quite frankly, right? I mean, the commitments we have to profitable growth and those margins, and margin expansion for the company overall, is something that we have under our control as we go forward there. We recognize that, a big part of our, you know, strong valuation is based on our intellectual property, you know, and it's the products, and it's the software.
While having that services capability helps knit it together in the way that that Matt described well a few minutes ago, it's a combination of all these things that that makes us special.
Yeah, the only thing I would, I would add from the ARR portion is, yeah, our, our contractual services aspect will grow in line with company expectations. I think that was one aspect of your question that I just wanna make sure we highlighted.
Yeah, it's gonna, it's gonna be a mix. ARR is a mix of software and often related services there, and we're gonna continue to manage that mix so that ARR, in addition to giving us that, you know, consistent base to grow from, that it contributes positively to the margin and profitability profile as well. We're not gonna fill up ARR with hollow calories, if that's the concern.
Hey, guys, it's Andy from Citi. Nick, I think you had talked about 1% pricing for 2024, if I remember correctly. Blake, you talked about sort of dynamic pricing and sort of, you know, improving that model. You're selling a lot more high technology applications, as we, you know, talked about today. But let's say, versus five years ago, how good is Rockwell's pricing muscle now, and how much more room is there to improve it?
I would say the pricing model in our agility is strong right now, in terms of our ability to react if needed, if we need to be adjusting price either up, when we're facing cost pressures, or to adjust price to address competitive pressures. So the ability that we have with our technology that we've invested in the last few years, to be seeing what's happening with price and to optimize where our pricing is, I would call—I'll call that strong. The 1%, I think I actually said last week, a little over 1% price in fiscal year 2024.
That's largely coming from some of the price increases we've put in in the past, also as we work through our backlog, and it's against a backdrop in which we expect virtually no inflation in our input costs. So that's the dynamics we have and why I'd say we—I feel we're in a strong position right now.
Yeah, if I just add, you know, I think we're more... That muscle's more limber. You know, some of the things that we were taught during COVID and then the early days of the supply chain shortages, to be able to get, you know, price into the system and to realize it quicker, you know, things like the fixed discount that we put into place allows us to realize price much quicker, and as Nick said, more surgically, with the better telemetry that we're getting from what's happening out in the field.
And then Blake, just a quick follow-up. Like, how would you think about Rockwell in a bigger slowdown? Like, you know, in the past, Rockwell's been more cyclical, but now you've created a, you know, much more diverse, dynamic company. So I noticed you talked about 5%-8% through the cycle growth, but how does, how's the company positioned if we were to slow down more than, you know, you think?
Yeah. 6%-9% with the impact of inorganic. And so you know, I think we got an early view with the pandemic, and in terms of our financials, we fared much better, you know, and each one of these things is different. But the revenue decline and the, you know, attendant impact on profitability showed bare evidence that our resilience efforts are helping, and I think the things that Nick talked about with respect to our resilience, an increasing ARR, you know, the management of our worldwide footprint. And I should add, you know, that with a lot of work from Bob's team, we increased that capacity to get to that, you know, 10 billion level, without adding, you know, big new rooftops.
So that's a measure of efficiency and resilience because we're not a capital-heavy organization. Increased exposure across the vertical industries. Process, 35%, you know, a lot of things that we're talking about that are in that long tail of five-ish% of our business that we never talked about in the past, and I think that helps hedge against the traditional, you know, industries that Rockwell was known for, you know, 20 years ago. So I think we're in a lot better spot, but the work continues on that, both commercially and internally as well, so that we can react to shocks to the system, but also have a base that dampens the downside of these economic cycles. I think we have time for one more question. Maybe not. Is there? Oh, here's a runner.
Thanks. It's Joe O'Dea, Wells Fargo. Just wanted to ask, when you think about the most recent quarter, and you've got revenue up solid double digits, and orders are going down double digits, it kind of leaves a lot to the imagination. So, you know, what have you done over the course of the last several months to get out there and really kick the tires on what's going on in underlying demand trends? If you can talk about what you're hearing from distributors, what you're hearing from end users, what you're hearing from machine builders to build confidence around your view of what's actually happening there in end markets.
Sure. So we went out, and this was a lot of work from Scott's team, but throughout the organization, also, within Bob's supply chain organization, to look at the very good detail we have of distributor inventory as well. But first, on Scott's team, we went out, and we looked at our top revenue-making customers, so those users out there, dozens and dozens of users, you know, that are our biggest customers, and talked to them individually about their CapEx and OpEx expectations of the coming year. We did that with machine builders as well, looking at those big machine builders with that repeat business. You know, what are they expecting in terms of the impact on Rockwell as they clear their inventory? What's their incoming book of business looking like?
The uniform picture was that their demand that they saw over the coming year was, you know, still positive and still—and stronger, I would say, than the midpoint of our guidance, but it's dampened to us by the distributor inventories, and we understand quite well, distributor to distributor, how much more inventory do they have on the shelf than they would normally have. Now, we do expect that that inventory will reset to a level that it was—that is higher than it was a couple of years ago, and as we talked about, we expect that equilibrium to occur in Q2, following the return of all of our products to pre-pandemic lead times.
And so that's what went into the equation that gave us the confidence to say that we have hit the trough in orders and that we expect them to begin to go up in Q1, but then with a more pronounced ramp in Q2. It was based on that feedback directly from customers, including users and machine builders, on analysis of our distributor inventory, getting distributor feedback on what their growth expectations are for the Rockwell portion of their offering over the coming year. So with that, I wanna thank you all, and I think Aijana's got some comments for us.
No, yeah, thank you, everyone. This concludes our prepared remarks and Q&A. We will break for lunch, which is in the back, and then we'll resume at 1:30 P.M. for our show floor tour.
Yeah.
Thank you.
Thank you very much.