Okay, great. We've got Aijana Zellner and Christian Rothe from Rockwell. Guys, thanks so much for being with us today. We usually just like to do a bit of a intro and State of the Union as a start. If you'd like to kick it off with any kind of comments on what you guys have been talking about in the last few weeks and what you're seeing out there, we can just start there, and then we'll go into it.
Sure, I can do that. Thanks, thanks, Steve. Happy to, happy to be here. And, thanks for, thanks for having us. Yeah, we reported Q1 earnings. For us, we're on a fiscal year. The first quarter for us was a good quarter. We performed better than our own expectations on the bottom line, kind of in line with expectations on the top line. The book- to- bill was a little bit better than what we would have expected. We got over $2 billion in orders for the first time in, what, I think, seven quarters. That was really strong performance, and it was pretty broad-based. We certainly had a lot of discussion on the conference call and days afterwards around, hey, is there any pre-order, pre-buy going on?
I'm sure you're gonna ask us some more of those questions as well. The discussion on our conference call, though, was around the fact that, it really felt like it was pretty broad-based and it was, and it was all aspects of our business and on top of that around the globe. And so, you know, in areas that you probably, if you were going to see a pre-buy, you wouldn't be seeing it there. That part was good. You know, it's one quarter. We got a full year ahead of us. I'm sure you're also gonna talk, Steve, about some of the ramp that we have, as the year goes on. We want to make sure that we continue to grow incrementally, and gradually during the course of the year, both on the sales side as well as the margin side. We're focused on executing against that.
Great. Let's just kind of like jump into, what's been happening here, first of all, on the demand side. Most of the companies here have not, you know, CapEx remains, you know, solid and kind of stable, sluggish, but it hasn't, you know, really softened. The ISM print I thought was pretty weak. Aijana, you've been around for a little while. Some of the companies we cover have decoupled from the ISM. Is the ISM still something you guys look at as an indicator, and how does that kind of inform your views, going forward?
Sure. I would start, Steve, as you know, we look at a lot of different indicators when we do forecasting. Historically, you know, we've correlated the most with industrial production, over longer periods of time. We do, of course, look at a lot of different things, you know, PMI, ISM, IP. It is one factor. We talked about PMI getting above 50 was a good indicator.
We do look at our customers as well. What's going on with their pipeline? What's going with our win rates? What are we hearing from individual industries that we serve? Certainly, a lot of things factor into it are surveys about distributors and machine builders. We take it all in as we look at how do we forecast our orders and sales and run our business. It's not a particular one, factor like ISM or PMI.
Got it. Is it, you know, the step down to 48 new orders? I mean, is that something that when that happens, you kind of like go out and canvas your customers and try and figure out if there's a change or that's not really that material of enough of a change to start to react?
Yeah. So we have a pretty normal cadence for us, and so we're doing periodic surveys of the OEMs and machine builder side of the business, and we're also in constant conversations with our distributor partners. So really there was nothing that we react to around that. Let's be honest, right? We are a short- cycle business. So we are just as interested as anything else to see what the orders were yesterday.
So are we. Any comments on that?
No, no comments.
Okay. 3M was here yesterday and they talked about orders holding up okay, but they actually, you know, took their sales down by a moderate amount, 2%- 1.5%. I don't know if that's, you know, the channel basically just being a little more cautious about when they want to take the product. Is that what you guys kind of saw in orders, that the channel's just a little more cautious about wanting to have the product? Or was that more of just a, like a timing, like, hey, this is when I really need it. So, you know, I'd, like, like maybe just explain that disconnect a bit between the orders and the timing of the shipments.
Yeah. Just to make sure we're level setting on that. This is really going back to, again, our first one.
Yeah, the first one.
That's right. Where we talked about the fact that book- to- bill was greater than one, and that really the delta around that had to do with the delivery dates on some of the projects. It was more related to the project activity and the demand date of those customers. You know, if there was anything we were going to see when it comes to distributors not wanting to take the stock, right, a hesitation around that, you would see them put in some different delivery dates on the standard product portion of the business. We didn't see that at all. They were taking it at the lead times that we were offering. There was no real manipulation around that that we saw. Generally, felt fine with it.
Probably just to confirm that we are not actually giving interim updates on our view right now. Understand that maybe 3M did that yesterday, but for us, we're not feeling like this is a moment for us to do that.
Yep. And that's standard practice for you guys. Totally understand.
It is. Yeah.
Yeah. We still have to ask and kind of get it, get it.
Absolutely.
Yeah. Have to give it a try. Maybe just to, expanding the lens a little bit from a demand perspective, and you guys have guided, for, you have provided forecasts for the verticals. Maybe, what informed those forecasts? Let's just kind of like walk through some of them here and what you're seeing. You know, I'll start with food and bev because that's, you know, people don't talk about it a lot, but that's your biggest, single end market. I'm sure some of that comes through European machine builders, but maybe what informed your forecast on food and bev? How does, how does that decouple from their CapEx budgets? Maybe just an update on the vertical there.
Sure. First of all, let's talk about what happened in Q1 for us, fiscal Q1. Food and beverage and broadly hybrid, industry segment that has food and beverage, home and personal care, life sciences, tire did better than we expected. Food and beverage, not seeing a lot of greenfields there. Now we are winning some of them here and there, but the majority of spend is really customers' investments in their productivity, efficiency, resilience, cybersecurity. We are seeing spend there. What we see with machine builders, especially packaging machine builders who serve predominantly or in a big way food and beverage and home and personal care, kind of the broader consumer packaged goods sector, we are seeing some green shoots there. It is encouraging, and you might notice, Steve, that especially HPC, those machine builders are viewed as a leading indicator on the recovery side.
Now it's only one quarter. That was a kind of an early, green shoot, but that was one of the things that gave us confidence. We haven't changed our expectations for the full year for food and beverage, but certainly it's a great data point. We talked about European machine builders. As you know, this is where we had a lot of our excess inventory last year, especially with our largest controllers. We are seeing that destocking coming to an end. That's great. We see a stabilization, especially with Italian machine builders. Overall, food and beverage and HPC came in better than we expected.
Yeah. Maybe I'll add to that just to say that we do obviously have sales teams that are focused on verticals, and part of their process is to actually go engage with those end- user customers and talk to 'em about their CapEx and OpEx budgets. You know, the view that they got from those customers around the projects they had planned for this year, it supported our overall view for what we thought our performance was going to be for fiscal 2025.
I'll just add, Steve, we are expecting a gradual sequential improvement. When you look at our forecast for the full year, whether it's by industry or for the company, it's one view from a year-over-year standpoint. Remember, the first half of last year, we still had some product backlog.
Yeah.
It is really more of a quarter-over-quarter story. We do expect a gradual improvement, and food and beverage certainly is one of them.
Did you-- I would assume that a lot of those guys, you said Italian, you know, the European OEMs, do they talk at all about kind of cross-border risks and, you know, reciprocal tariffs or anything like that? You know, your customers coming, not necessarily you guys coming cross-border, but the customers coming into the U.S.? Have they talked about that at all? I mean, I'm sure it's pretty fluid.
Yeah, I think it's pretty fluid. Obviously, when they're talking to us, they're asking us questions around what does it mean for them from a pricing perspective, 'cause of course, they want to have predictability in their business. There is, it's happening on the other side for them too, which is, okay, what's the potential impact on their business, and how exactly are they gonna be in a position to recover if there are additional costs? As we all know, it's a fairly dynamic environment, and there's some difficulty to have predictability around it right now.
I think the key for us at least, and with our discussions with all of our customers, whether they be OEMs or our distributors, is that we are putting in place a process to say, hey, look, if we're going to actually incur a cost, that our intention is to recover that, and here's our process for doing it.
And on these OEMs, you talked about that being the biggest aspect of destocking. Basically, you're saying that like the growth there is actually for them is not that great, but you guys are now kind of like recoupling to that trend line, and that's kind of a gradual thing.
I think a good word is stabilization.
Yeah. Where are you when it comes to that? Will we be more normal and in line by kind of year-end with those guys or do you still have a ways to go?
I think the most important part is for the whole company. We're talking about really end demand is starting to be represented in our sales. Right? As we go through the year, this is why we are not really going to talk too much about orders going forward because if we are back to that normal environment pre-pandemic where orders and sales are kind of sitting on top of each other. T hat's a, I guess, a good way to just explain where we are with that stuff.
Yeah, that's been my view as well. Obviously everybody, you know, likes orders. That's kind of the food and bev. Any signs of longer term, food and bev? What is the, what's kind of the natural growth rate you see in that industry?
We haven't shared that just for that particular industry, but there are a lot of areas within the food and beverage segment. 'Cause it's, you know, there are a lot of areas there. There's agricultural processing, there's protein, there's.
You know, confectionery and all those things. We are working with the leaders in all of the different segments on their next- gen platforms. Production logistics, what we're doing with autonomous mobile robots is a source of a lot of conversations and pipeline there. They're investing in software. I know we can, we might talk about it later, but a lot of what we're doing with AI and how for them, really it's more if you, if they're not building out capacity right now, it's how do they increase their production volume and yield and improve their quality. We're doing that a lot more with our advanced technology, with our AI, with our software offerings. It's an attractive market. Food and beverage has never been the fastest growing, but it also has been very resilient through the years.
We expect, and it's 20% of our total revenue. It is our single largest vertical within that. This is why it is one of our focus industries. We see a lot of areas, sub-markets that are slated to grow faster than the average.
Right. Lastly, on the hybrid side, life sciences, you know, seems like it's a bit of a, there's some waves here, there's a big wave, and then it settles in, and now it seems like there's a bit of a pickup there as well.
Yeah.
On the life sciences side, maybe just the same conversation.
We had a, yeah, we actually increased our forecast for the full year in life sciences. We see a lot of good activity, similar to food and beverage and HPC. A lot of customers are investing in their resilience and overall kind of efficiency, production efficiency. However, we do see some greenfields there, especially on the GLP-1 side, and we have good presence there. As you might know, we have a very strong software offering, especially in MES and digital, a lot that helps us a lot with life sciences companies. We had a pretty large win with a European life sciences company just last quarter we talked about. It is a combination of our core automation and some of our newer software offerings, but well- positioned. We expect that to do better than we thought coming into the year.
When it comes to that five- eight, the long-term growth rate, I'm sure life sciences is at the high end of that when you think about it longer term.
When we introduced that 5%-8% longer term framework, target, growth target, we talked about five focus industries. Life sciences was one of them. We talked about it for a reason.
Okay. Turning to discrete and auto, just talk about what's going on underneath the surface there. There's obviously, the EV stuff, not the biggest market for you guys, but still important and growing. Obviously some concerns there around the future of that capacity. Just talk about the difference between EVs and the traditional OEMs.
Automotive is about 10%, a little bit less than 10% of our total revenue, of which EV is about a third. In our Q1, automotive actually came in as expected. Yes, it's challenged. We continue, we expect it to be challenged. Especially if you look at automotive brand owners, they're not--, they're kind of delaying their CapEx plans right now. They're still spending on their OEE and productivity. This is where, again, our auto AMR business is doing well, because these customers are trying to complement their scarce labor with technology, with autonomous mobile robots. There's growth. If you look at historically, automotive for us has been driven by both model changeovers and MRO. These model changeovers are not going anywhere. Customers, these automotive companies will need to continue to innovate to get more models out there, which drives business for us.
For sure, we have a great readiness to serve the EV market. We've talked about it, but regardless of the powertrain, whether it's ICE, hybrid, in a battery, we are well prepared to serve these customers. Longer- term, we think it's going to be good. EV growth is going to be there. It's more subdued. It's less than we all expected a few years ago, but it's still growing. We think longer term we're well positioned, but, you know, it certainly is being impacted by some of the trade and policy uncertainty this year as well.
I guess on those mega projects that you guys had highlighted two years ago, semis, we could also throw in there, from a discrete perspective. Are you seeing any signs of life in those projects that have been delayed, that may be coming back on, or what's kind of the timeline, the reset timeline of some of those?
We do see projects. In fact, when we talk about projects or mega projects, semiconductor is one of the verticals there that has a lot of those projects in the pipeline. This year we expect to be challenged. If you look at the excess inventory, especially in the industrial and EV markets, you look at the trade and policy uncertainty similar to automotive, that's certainly weighing on these customers' plans.
Right. So there's not a lot of visibility in those things, you know, reaccelerating.
Not in fiscal 2025 in a big way, but like I said, quarter over quarter, we do expect kind of a gradual improvement for a world company.
One last one on discrete, warehouse automation was very strong. What is driving that organically?
E-commerce and warehouse automation. We kind of combine both the e-commerce, but also a more broader warehouse automation application space, continues to be strong. It's a combination of new fulfillment centers on the e-commerce side, and we serve the whole ecosystem. The end user, the SIs, the machine builders that serve that Customer segment. That's going strong. We have a great combination of our core automation, but also some of the newer offerings, including our Emulate3D, our digital twin software to help us there. On top of that, just really broadly, if you look at the infrastructure for warehouses today, it's not sufficient to meet today's and tomorrow's needs. That is driving a lot of modernization of existing warehouses for other customers.
We're talking about global logistics companies, parcel companies, traditional retailers who want to have the competitive advantage, and they wanna use this opportunity to upgrade. It is both. One more thing, we did talk about our data center business. It is also grouped in that as well. All three are doing well. That's right.
The Cubic business that you report, the data center stuff like that.
That's right.
Yeah. That's very strong, obviously. Just lastly, on process, that's a market that has been coming back, but pretty slow. Any comments there on how that's going to trend?
Sure. We haven't changed our outlook for process. We think, if you look at within that, energy is about 15% of our total revenue. And it's a combination of course, traditional oil and gas, but also what we're doing with the carbon capture, decarbonization, renewables. Q1 was a tough year- over- year comp. That kind of informs what happened there. Overall, well- positioned. There's still customer investment in oil and gas.
Where we play is really getting more out of the existing wells, is using software and automation to expand that a lot more on upstream. We are also working with direct air capture, CCUS broadly, renewables. We think it's a good business. For us, we have been investing in our process architecture, process technology, and expertise. That's been paying off. Process is our largest industry segment. If you look at our revenue breakdown.
For a lot of these end markets, I mean, can you significantly decouple from customer CapEx budgets? I mean, are there any where you see an opportunity to really like outperform customer CapEx budgets?
You mean broadly industry within process?
Broadly. In any of these industries you'd highlight, hey, the CapEx budgets are here, but like we have something that's really going to , drive a plus 3%-4% growth relative to CapEx budgets, kind of outgrowth.
Yeah. I mean, if you look at what's going on right now, whether it's food and bev, whether it's automotive, whether it's life sciences, the customers are optimizing their offerings right now. They're not, they're reluctant to make any large capital outlays right now, but they're investing, whether it's AMR, whether it's software, could be MES, it could be our digital twin. It's really cybersecurity and the recurring revenue we have through that, in addition to other managed services, not to say completely decoupled. CapEx still drives a big part of our business. We have been investing in diversifying our revenue streams to give us more access to some other things that are more resilient.
One last question on demand, more higher level. I think in November, when all this happened, new administration, I'm sure that there were some customers that saw the writing on the wall and wanted to get ahead of things. Did you have any conversations or have you had any conversations, where people are kind of like proactively looking at reshoring and bringing it back to the U.S.? Have you seen an uptick in those conversations, the translation from tariffs and all the noise out there into the actual kind of on the ground, bringing stuff back to the U.S.?
Yeah, I don't know if I would necessarily, specifically index it to an administration or the election or anything like that, but it's been an ongoing conversation for sure around folks that are looking for bringing their production closer to their end user customers, taking out some of the issues that they may have seen during the supply chain crisis. You know, labor, efficiency, labor availability continue to be issues. I mean, that's where Rockwell lives. That's where, that's where we can help them.
A bit more evolutionary than, you know, kind of a, an inflection.
Right.
Okay. Just moving away from demand and to the margin side, you know, this is a topic that's near and dear to your heart, I'm sure.
Yeah.
How is that progress coming along? I know you've only been here for a relatively short period of time, but some big expectations out there. What are maybe some of the things that have surprised you early on here? Any challenges, opportunities?
Yeah, I think, just to go back in time a little bit. I've been with the organization for seven months. B efore I joined, there was a cost out program that was underway. That started in the second half of fiscal 2024. The first wave of that was really more focused on SG&A and bringing more efficiency into our organization. That was primarily headcount- related, and that was mostly done in the second half of fiscal 2024. If you go from kind of one year ago or a little bit more than a year ago to today, we're down, I think, 12% in headcount in that timeframe. Part of it from reductions, and then part of it through normal attrition and just being conservative on our add backs.
That is, really we're seeing the kind of the annualization of that through the first half of this year. The second wave is underway right now. That wave is really more focused on the COGS area. Looking at our direct material spend, our indirect materials, our logistics spend, trying to bring more efficiency into our operations, our SKU count, and rationalizing that, which is really where I've dug in a lot more. I like the program a lot. I think it was, it's a great opportunity. It's not to say that the Rockwell team had been doing anything wrong.
It was really more the fact that, over the last three, four years, and the supply chain crisis, it was all hands on deck and working really hard to get the materials in the door, to get them converted and get the out the door as fast as possible. When you're doing that, right, you're spending a bunch of extra money on the logistics side, doing things via air freight instead of ocean freight. You're spending money on overtime. You're probably not being super efficient in your operations. We weren't doing a lot of productivity projects in our factories during that timeframe. This is a really good opportunity to have that reset. That should yield us about $250 million of savings in fiscal 2025. Of course, we're going to get the annualized benefit of that in fiscal 2026.
On top of that, if volume does continue to grow, then we are going to get that benefit just because it's a really hard program to implement when you're talking about a low to no volume growth environment. When you actually do get some volume growth, then you really yield the benefits of these kind of programs.
The 30%-35% incremental margins you guys have talked about, I think that's still the number.
35%.
35% incremental margins you guys have talked about. Is that still the number, or should you expect if we get a little bit of volume, you should be above that, you know, early in that cycle? I s there an upside bias to that number?
Yeah, I mean, we are generally, we're holding that 35% just because at least the way I look at it, first of all, from quarter- to- quarter, it's probably you know, it's not going to be as simple and easy as that. And that overall through that cycle, we should be looking at a 35% number. Now, theoretically, if we continue to execute this really well, you continue to expand your gross margins, then you should be in a position to build off of that. Not quite ready to sign up for that one.
Got it. Is there a wave two of this perhaps on the COGS side next year, a more, you know, and what I mean by that is a more kind of official plan, as opposed to just, getting the volume leverage, or is this, are we kind of like done with the whole kind of?
No, I appreciate you asking the question 'cause it's really important. You know, I'll go back even to before I started at Rockwell. One of the first discussions I had with Blake in the interview process was around, okay, this is great. I understand it's a really good initiative. What's the organization doing to make sure that a framework is put in place to turn this into something that's not event- driven, but is really more of a way of life? It was already in process and there was work being done on it, but that's how we ended up on the Rockwell Operating Model .
Taking all the learnings, all this good work that the organization has done, using this opportunity for a reset, and then taking that and building off of it and turning it into a really strong continuous improvement and operational excellence program, which we talked about at our Investor Day in November. It is not necessarily another wave to come behind this. It is really more of a, how do we institutionalize it, have it so that it continues to evolve regardless of who the leaders are at the organization or any individuals, and make it so that it is really part of our way of living.
The way we'll see that is not necessarily like, hey, on, October 1 or whatever, we've got another $50 million plan that's going toi result in this much in savings. It's just more like, hey, we're guiding to 35%+ incremental margins. You know, that's the way we would, it'd be much more just organic and part of the business as opposed to another item of the bridge.
Yeah, I think it probably will be more just part of the business and not really part of the bridge. You may see us take some of that yield off of those and use it to reinvest in the business.
Yeah. That makes a ton of sense. Turning to tariffs, maybe just remind us,
Actually, can I pause you for a second?
Sure.
Can we, I want to take a moment and just talk about investment in the business.
A hundred percent. If we can.
'Cause, you've had an underweight rating on Rockwell for quite some time. You know, you've been fairly critical of our investment spending, during the last half a dozen years or so. And so, I, we should take the opportunity, right? It's your conference. We should talk about it.
Sure.
We should talk about the investments that Rockwell's making in our business, in particular new product development. And so, just to give the facts out there. About 6% of our sales are plowed back in new product development every year. That's NPI specifically. We feel comfortable with that number. That number is heavily from the Software & Control side, software is a much bigger investment number, right? That's in the low teens for us. For Intelligent Devices , that's a kind of mid-teens percentage. And intelligent.
Mid-single digits.
Oh, sorry. Mid-single digits. Pardon me. It's a mid-single- digits number. And that is a business that has a heavier configured order portion of the business, which is not something that needs R&D spend.
Yeah. Labor s pecifically.
Yes, exactly. It's labor, and so for the product portion of that business, it's also getting an outsized spend. And Lifecycle Services , again, is more of a project- type business, which doesn't need that kind of investment. You know, I've read your reports. I've seen the questioning around our investment level for sure. At the same time, ultimately, especially when you're talking over a half a decade or longer timeframe, this should ultimately manifest in an answer in things like market share.
A hundred percent.
You know, from our data points and what we look at, and, you know, our data points are pretty broad based around, we look at industry data points, we look at what's happening with our win rates, we look at what's going on with the competitive environment and our peers and what we can see from the detail around that. We feel like, during that kind of half a dozen years that we've held on or gained share in most of our product categories. We feel like our investment level is pretty good. At the same time, again, your conference, your floor.
Sure.
We talk about it.
A hundred percent. What I've seen in the numbers and the bridges you guys have given, there was a $2 billion investment account. You guys would talk about how much that was either going up or down year over year, and you could see whether that was tracking with sales or not, i.e. falling in the margin or not. In times where you guys were seeing volume declines, that number was being toggled back and effectively being used to defend margins, which is, you know, your strategy and your prerogative. In addition, if you then translate that and go to the field, and the field work we do, we go to conventions, we visit with your competitors and look at the different booths and the offerings.
You go to the other company's booths and they are certainly a lot more fancy than what you guys are presenting from a, whatever it is, software perspective. In addition, going to Pack Expo, visiting with several of your machine builder partners that you've introduced us to over the last 15 years, Chris A. introduced us, a while ago. The feedback from some of those customers is that you guys are losing sockets on some of those products. I have never said in my reports that I can see in the revenue numbers that you guys are losing market share. I have always talked about it as a risk 'cause I can't see it. I agree with that. I have never said that Siemens is substantially outgrowing you guys, but that's the mosaic that I see.
As a smaller company with a much smaller R&D budget, Siemens has obviously invested, I don't know, $5 billion-$10 billion in software to come over the top. Clearly a more, they were early on that. They were much more focused in that strategy versus you guys where it's been definitely more fragmented. That's the mosaic I see.
Sure, Steve, if I may.
That's where I am.
Two things. One really quickly, and the old version of investment spend, there was a big base, as you know, had SG&A and R&D in it. That is what we used to report. We went away from it because it was really obscuring the true NPI spend. You can look at our R&D spend through the years and it matches what Christian said, about 6% of sales. Within investment, when you do have some years, you have to drive productivity. We always drive productivity in the functions.
That functional spend was not that $2 billion spend. It was not really true new product development that you were looking at. Going forward, we are going to talk only about R&D so then you can see what we are doing. That is more of, I guess, reporting, structure, or categorization. On the share part, especially you mentioned Siemens or fancier industry booth. Listen, at the end of the day, it is what we are doing for our customers in our production automation space.
Yes, Siemens is spending a lot of money in the production design, in the product design and product automation space. The recent acquisitions, the R&D, we are focusing, we've carved out production space. In that space, we've made significant investments organically and inorganically over the last several years, as you know. We think we have a leading portfolio actually. I'll be happy to talk about whether on the software front, on a devices front, but there's a big difference. There's PLM, there's CAD, there's EDA, and then there's actual production. Those are very different areas.
They also have a virtual PLC that they're pretty excited about. And it's, you know, like for like versus your virtual PLC, it just, it's hard to, I'm not a technical expert, but, you know, at face value, it's kind of hard to.
I'm glad you brought it up actually. You were our investor in our Automation Fair.
Yeah.
When you look at virtual controller, by the way, we do have our version that.
This is like 0.0001% of.
Right. No, the most important part is really it's software- defined automation and virtual controller is only one part of it. What we are doing is so much broader than that, which is really how do you take and define and design application content and then you can just be hardware agnostic. It's not just a PLC, it's visualization, it's I/O, it's how you deliver all the content. What we have with our cloud native platform, we're better positioned than anyone else to do that. We can talk about virtual PLCs, we can talk about software, we can talk simulation all day long. We did not mean to kind of ambush you here, but I think it's an important conversation to have because R&D is there and we are, you know, developing leading technologies in our field.
Totally. And to be clear about this, I'm not sure like bullet one, two, and three of my thesis has been about market share. Just factually, you know, the street had like $14 a share of earnings as their forward estimates, and you guys are doing nine. I think like that has nothing to do with market share. That has more to do with almost like 75% to do with how the cycle played out and where people's expectations were at that time. You know, I don't want the message to be that like, I'm underweight Rockwell because you guys are like losing share left and right. You know, if things picked up tomorrow, and the cycle changes, I don't think you guys are going to sit there and not participate.
Understood.
Just to be clear.
I'm glad we cleared up the R&D part.
Well.
The R&D and investments, I think.
Sure.
Yeah. Maybe, one other data point just to make sure we're, that we all are on the same page around this, that new product development investment amount, that 6% number, that actually excludes any of our sustaining R&D. Sustaining spend for engineering is about another two points to three points that we're spending. Our total engineering spend is upwards of high single digits. We are spending a fair bit. Again, really overweight as a percentage on the software side of the business.
Yeah. To be clear, if the economy picks up and CapEx picks up and we start building a bunch of plants in the U.S., I do not think you guys are going to sit that out. Obviously, share in this industry changes very slowly over time because you are leveraging installed base and nobody really rips and replaces unless something is wrong.
That installed base is a great powerful tool for us.
It is for sure. I really appreciate this conversation. This is actually a ton of fun.
Yeah. Me too.
I love it.
All right.
Yeah.
Thank you.
That's it. That's all we got time for.
All right. Great.
Thank you.