Good morning. Welcome to Day Two of the Global Industrial Conference. To kick things off today, I'm Andrew Obin, Bank of America, U.S. multi-industrial analyst. To kick things off, we have Christian Rothe, Senior Vice President and Chief Financial Officer of Rockwell, and we have Ajana Zellner, Vice President of Investor Relations and Market Strategy. I think Christian is going to kick it off with a presentation. Then we're going to go to Fireside Chat. Thanks so much for being here.
Thanks, Andrew. Appreciate that. Figured we were going to take a few minutes and just give a quick overview of Rockwell for those of you that aren't familiar with the story. Of course, we have our Safe Harbor statement. Rockwell Automation, based in Milwaukee, Wisconsin, we are a global industrial automation company. That's our focus. We are a pure play. I'll talk about that here in the next slide. We are a diversified industrial in the sense that we have really good diversification across geographies. We also have a really good diversification on the end markets that we serve. When you think about Rockwell, you should be thinking about an organization that serves a lot of verticals across a lot of the industrial universe. 40% of our sales in the process space, 25% in discrete, and 35% in hybrid markets. We have three reportable segments.
You can see our split in the upper right-hand corner there, $3.8 billion in the Intelligent Devices segment. Lifecycle Services is $2.3 billion and $2.2 billion in Software and Control. We are the world's largest pure-play industrial automation company. Again, a lot of different verticals that we serve. Some examples of those are in the lower part of this slide. Importantly for us, we serve those customers in three different ways. We have hardware, we have software, and then we also have solutions. All of those come together for a really nice, broad offering for our customer base. About a year and a half ago, in November of 2023, we gave the world our view of what we think the strategic growth framework for our organization is going to be over the long term.
When you think about this, think about it from a mid-cycle to mid-cycle, and this would be the CAGR. So about 5%-8% organic growth is our target, with another one point coming from acquisitions. That 5%-8% organic is broken into kind of three different areas. The first one is, is that just the addressable markets that we have, we believe are going to give faster secular growth. That's because not only are those others, are those markets growing, but we also believe those markets are going to continue to adopt a higher and higher level of automation. On top of that, we continue to expand the markets that we serve. We do that through new product development. We do that through adding to our software portfolio via acquisitions that are going to give us a higher level of growth.
Of course, we do that just from continued innovation and driving more and more through the markets that we have and the sales organization that we have. Lastly, again, on the organic side, ARR, software and services. Annual recurring revenue for us is about 10% of sales. That's growing at a nice clip. It's been growing at double digits for the last several years. We expect that to continue. Again, acquisitions, although we're taking a pause on acquisitions today, we expect acquisitions in that growth framework are going to add about one point again on that CAGR. On the right-hand side, you can see some of the key metrics that we look at when we think about that financial framework. On the left-hand side, it's really about top line. On the right-hand side, it's about the other metrics.
Core earnings conversion of about 35%. That's the flow-through profitability. EPS growth and getting leverage on the P&L off of that sales growth. Free cash flow conversion better than 100%. ROIC greater than 20%. Those are targets. Two times leverage. North America is our home market. North America is where we have the highest market share. We have the largest installed base, in the competitive world for our products. We have the deepest relationships and really strong channel partners. As we talk about, and I'm sure we're going to have a discussion this morning about shoring opportunities and what's going on in North America, for sure, it's nice to be in our home market for that. Lastly, we're in the midst of a self-help story.
Last year, around this time, we announced that we were going down the path of a margin expansion and productivity process. That was the second half of last year. That was mostly headcount related. As we turned the corner and went into 2025, our fiscal 2025, we're focusing more on the margin expansion aspect of that. We've got a lot of product cost reductions that are underway. We're working on indirect and supply chain optimization. We're also looking at our portfolio. Last year, in fiscal 2024, we had about $110 million of cost out savings. This year, we're expecting an incremental $250 million of cost outs. I'm sure we'll get into that in some more detail here in a moment. With that, Andrew, I think we're ready for it.
Excellent. Thanks.
The grilling, right?
Yeah.
Day.
Thanks so much, Christian. You know, I know that you have provided guidance, but maybe, you know, a big topic for investors here. You know, could you just give us a view on demand environment, and, you know, maybe both near term, what are you seeing? Because obviously at top of everybody's mind, but also obviously what's your longer term view? How much visibility do you have on, you know, this potential CapEx resurgence in the U.S.?
Sure. You had a lot in there, but we'll go ahead and try to unpack that. The first part is that we are not giving an interim update since what we talked about at our Q1 conference call. That was in early February of this year, where we discussed the fact that we were having a pretty good uptick in our demand environment. That is, in the first quarter, we had orders that exceeded $2 billion. That was the first time in the last seven quarters that we had been over $2 billion. We exceeded our own expectations, frankly, on that order intake, because we were expecting more flattish orders from Q4- Q1. We actually were up mid-single digits sequentially.
As we go through the remainder of this year, we're expecting that we're going to get a gradual increase in order intake and continue growth on the sales line. That part's good. Yes, I fully need to acknowledge that, you know, there are a number of dynamics that are in the market right now, right? The tariff environment, which I'm sure we'll talk about more here in a minute, and there's some difficulties for our customers for thinking about the future. At the same time, we still believe very strongly that the dynamics that lead towards a really good, robust, industrial automation world, things like labor availability, the cost of labor, are going to continue to drive good demand for industrial automation from long term.
Excellent. Maybe, yeah, you brought up the tariffs. Maybe we'll jump to the tariffs, get that out of the way. To what extent have you guys embedded the impact of tariffs in your FY2025 guide and maybe remind us of your manufacturing and sourcing footprint in affected regions? How much capacity do you have to flex in the U.S.?
Sure.
You know, how much of your Mexican capacity is subject to USMCA? So it would be exempt from tariffs.
Yeah, absolutely. Our manufacturing footprint, you know, currently what we import into the United States of finished goods from Mexico is about $350 million. That's both from our own manufacturing facilities as well as from other suppliers. In from Canada, it's about $100 million. And from China, it's about $100 million. We are in a position, with the current tariff environment and the way that it's been enacted, our expectation is that if we're incurring the cost, we're going to recover it. When it's enacted immediately, which is what we've seen in a lot of cases, then our expectation is that really the only lever we have to pull is do it via price.
We have been running through price changes to reflect whatever the changes have been on tariffs, including rolling them back in cases where it was put on and taken off again. We now have a little bit different cadence where we are doing it in a more gradual way, at least taking it kind of almost every week where we are taking a look at what has happened with the tariff environment. Longer term, right? Because that was the other portion of your question, which is, what are we doing to mitigate it? And what opportunities do we have to bring that back into the United States or to change the production location? We do have some of those opportunities.
You know, coming out of the supply chain crisis, I think Rockwell is not any different from a lot of our customers, which is we put in place a number of initiatives around resiliency to try to make sure that we were in a position to manufacture the same product in multiple locations, in some cases closer to our customers and other cases trying to just ensure that we have a really strong backup in place. That resiliency is allowing us to, we're going to take advantage of that and continue to ramp up in areas where it makes financial sense, of course, to bring some production back into the United States.
Right now, at the moment, it's really probably more about leveraging the existing lines that we have and putting in third shifts for those, you know, for some of those products where we're, again, we're making it a couple different locations. We're allowing, we're using that resiliency to do that in the United States now.
Just to go back to what you have embedded in FY25. The idea is April 2nd, tariffs go and you hit a button and it flows through the system. Would you be caught up by the end of the quarter effectively? Or how long would it take? It sounds like you expect that net net, you're going to be whole for the year.
Yep.
How long would it take you to catch up, you know, from April 2nd?
Yeah, net net, we do expect to be whole, for sure. There is nothing embedded in our guide.
Right.
Around tariffs because our expectation is that we're going to be able to recover and we should be able to recover fairly quickly. That is, those price list changes are happening relatively fast right now.
Right.
In addition to that, we do expect in cases where we're talking about larger projects and systems that we're going to be able to reprice the backlog.
Okay. Okay. You will, okay, gotcha.
Yep.
Okay. That's good. Okay. Maybe, oh, you know, why don't we do that right now? You know, let's do sort of the market share because that has sort of come up. What's your perspective on market share in discrete, in recent quarters, right? You have a large competitor that's, I guess, green, bluish green. You know, what's, well, you know, what is the market dynamic in the whole market, North American market?
You want to take that one?
You know, basically maybe what you can expand, because what we've been picking up is that, you know, because the U.S. is adding greenfield capacity, it seems that because of, you know, the ecosystem in the U.S. runs on red stuff. You know, if you're actually really going to make stuff for the U.S. in larger quantities, is there an opportunity for European machine builders to, you know, sort of move towards Rockwell brand?
Sure. I can start with the first one.
Yeah.
The market share, the topic has come up quite a bit lately.
Yeah.
If you look at it, it will track market share in many ways. You have to look at it over longer periods of time.
Yeah.
Industrial automation market share gains and losses move at very slow.
Yeah.
At a very slow speed. With that said, we've seen we've been pretty stable, if not slightly up in our overall market share. If you look at PLCs, our controllers, we actually have been gaining share.
Yeah.
including in the U.S. where we have by far the highest market share. I want to address one topic. You mentioned one of our competitors that we get to compare to quite a bit, Siemens. If you take everything we sell and everything they sell into this addressable automation market together, we make up less than 25% of the total addressable market.
Yeah.
It's an important point. It's not a zero-sum game. There are lots of players there. There are regional players, niche players, that we're competing against, and we don't have to take.
That's a global 25% is the global market.
That's right. We don't have to take share from our biggest competitor, our nearest competitor to grow. I think it's an important topic. In general, like I said, if you look at whether it's global market share data, if you look at product-specific offerings, if you look at just comparing us versus the automation business of our competitors, right? Not other software areas, not other areas that are not in our sandbox. We've been outperforming our competitors for the last six or seven quarters. There are many ways we look at it. We feel good about our share. We're not complacent.
Yeah.
U.S. is where a lot of new investments are happening, and it's our stronghold, and we are very much focused on getting more than our fair share there.
Yeah. You asked about the machine builder market and.
Yeah.
We do have a really strong position with a number of European machine builders, in particular in areas like Italy, where they have a stronger food and beverage and life sciences base. Those relationships have helped us to continue to grow in Europe, but also in Europe with those machine builders, because they have a really strong interest in building a relationship with Rockwell because they want access to the U.S. market.
Correct.
They know if they're going to be in the U.S. market that they need to work with Rockwell, or at least they're in a good position to work with Rockwell because we have a lot of those relationships with those customers. Just to build off of what Aijana said and one of the slides that I hit on, it is our home market. We do have the largest installed base, that does allow for an opportunity for us to build off of relationships that have been there for a long time. That's not just, you know, for in market, for market, but as you said, and as we talked about, the European machine builders and machine builders from, frankly, around the globe are highly interested in working with Rockwell because of the access we have.
Maybe we can talk, just expand on it, just generally talk about competitive dynamic because, you know, what our numbers show is that what's going to be different about the U.S. market is that I think it's been marketed for 20 years. That was dominated by replacement, capacity, right? And probably for the first time in 20 years, you have real sort of greenfield capacity coming online. How do you think about competitive dynamic in this higher CapEx environment? Can you just explain how does the software, you know, because it's not just, you know, people always think about the hardware part, but there is also the software ecosystem related, you know, how you actually code, you know, the library, the sub, you know, that engineers use. Can you just maybe expand on that?
Maybe I'll just add, my understanding there are also incentives in the U.S. for machine builders to use domestically sourced, you know, just it's sort of not quite CHIPS Act.
Yeah.
There is also even an industry like food and bev. There are incentives in place for domestically manufactured equipment, in the U.S. Maybe you can talk a little bit about that if that's correct. Thank you.
Yeah.
I start.
Go ahead.
I probably talk about it for half an hour.
That's right. From a competitive dynamic and the technology portfolio, what Christian said earlier is right. Us having the biggest install base, the ecosystem, the largest market share certainly is a big advantage. In addition to that, we have a leading technology portfolio. Customers really want both technical capabilities and that access and support and install base. All of that works together. What we've done over the last several years is significantly enhanced our portfolio, both software and hardware and services. The way we talk about it, there are three or four main areas. If you look at, you mentioned programming and, and we look at production design and control.
Right.
First of all, this is what Rockwell is focused on.
Right.
Production automation, production environment. If you look at what we've done there with design, whether it's simulation and digital twin with our Emulate3D offering. In fact, we just recently announced an expanded partnership with NVIDIA where we are expanding it to factory test. Simulating and virtually commissioning the entire factories for our customers, that's a huge advantage. We can get in earlier in the decision making of, you know, for our customers. We are continuing to innovate and lead there. How you look at programming, what we've done with our FactoryTalk Design Suite, cloud native, programming environment is significantly, simplifies the process for customers. PLC programming is very difficult. What we've done is, by making it cloud native so people can collaborate.
What we've done with Copilot, what we've developed from our own development is making it easier using natural language models for these engineers to be able to quickly program and configure things and get lines up and running. Quicker time to value, and that's been a differentiator. That's on the design side. The control side, we've been innovating. We're a leader in controllers, as we mentioned in the U.S., Logix. Everyone knows Logix. We are not resting on our laurels. We are developing that next generation, which we talk about, software-defined automation. It's broader than just Logix, but Logix is a big piece of it. That also separates us from our competition and helps us win at these larger comps. If you look at production logistics, that's a combination of hardware and software. AMRs, autonomous mobile robots.
What we're doing there is different from our competition. It's a combination of these mobile robots, but also how it plugs into the rest of the fixed automation we have, how it plugs into our FactoryTalk software platform, how it interacts with Plex and Fiix cloud native software. No one else has that. We see our customers across automotive, food and beverage, life sciences, investing in these AMRs because it certainly helps them with safety, optimization, and costs, especially with scarce labor. Finally, I would say SaaS. A lot of these edge and cloud solutions that we've developed organically and bought, like Plex and Fiix, are helping us. They're compelling for us because they help us with our annual recurring revenue. It's a resilient revenue stream because SaaS is a subscription, it's a service. Importantly, it's a great benefit for our customers.
It means lower cost of ownership, a quicker time to do, quicker to deploy, easier to maintain. Customers don't have to employ huge IT staff to have all that on-prem. That is kind of the modern way of doing business and what our customers are expecting. We are leading in that portfolio as well.
I just understand in terms of PLC programming and, sort of the software-defined architecture because, you know, I think there's a handful of these standards, you know, open standards, but it's fair to understand that, you know, your ecosystem, right, the proprietary environment that Rockwell provides is sort of compatible. You know, if you were trained, it sort of evolves great. I sort of think about Excel for Windows. I, you know, the way I sort of think about it, you know, yes, you have Excel for Windows and you have Excel for Mac, and they're very similar. If you understand Excel for Windows, you can certainly use Excel for Mac. You know, if you really know how to sort of do macros with keystrokes in Excel for Windows, not that easy.
That's sort of the analogy I sort of think of Rockwell versus competition. It's the same, but it's not. Is that a fair way of sort of thinking about it, or are there nuances there?
There are nuances, and we can talk about it for a long time. Basically, Rockwell has been, has been pushing for an open architecture.
Right.
For as long as.
Right.
I know. We can interoperate and we can work with a lot of different vendors because that's how industrial customers operate. They work with a lot of different players at different levels of the technology stack. However, you get premier integration when you use our offerings together.
Yeah.
That is what we continue driving for our customers. At the same time, we want to make sure our customers can be agnostic in different levels because it is more practical for them.
Yeah. We're just thinking more in terms of, you know, your support network is just how many people are familiar with your environment versus how many people are familiar with other environments. I think that's what I was sort of.
Yeah. In the U.S., by far, if you look at the engineering maintenance staff at many of our customers and system integrators, machine builders, they're very familiar with our.
Right. That's what I was.
Exactly.
That's what I was about.
As Aijana said, the AI environment and the Copilot capabilities we're continuing to add just makes it more of a natural language model that allows that to level the playing field and let new entrants in our space, that is, you know, people that are in like the European machine builder market, be able to work with Rockwell technology and, you know, not necessarily need all that legacy knowledge.
Let's sort of shift to operations. What is the framework? And, you know, Christian, I know that's at the top of your mind, but what's the framework to reach the 21.5% long-term margin targets from, you know, the 2025 guide for 19%? What do you need to do to your operations to get there?
Sure. Just to, not to correct you, but I guess I will. So 23.5.
23.5.
Yeah. $23.5 is where we're looking to go, in our long-term framework.
Framework.
We have that broken out by segment. You can certainly see that in our slides and from our investor day back in November of this past year. To get there, it really starts with the cost out programs that I talked about, and that allows us to get a reset, which is good, and to put our operations at the right size for the business that we are in right now. We do need some revenue growth to happen, right? We are coming off of a period of, in 2024, we were down on sales this year. We are guiding to organic at negative 1%. There is a lot of destock that has happened, which was really the drag on our results. We do need revenue growth to help us out a little bit.
I think the self-help story is a big driver of that. Again, you know, we're at 19% today. Expectation is to get to 23.5%. That's going to be both on the gross margin line.
Yeah.
Which you get, expansion on the gross margin line, as well as from getting leverage on our SG&A.
Okay. Maybe from that perspective, sort of the cost out, you had $250 million on your slides. How much of it is structural versus what's tied to sort of the current slowdown in growth? I guess what I'm getting at, the spirit of the question is, do you need to add cost back when you return to growth?
Yeah. That entire program is built on making sure that we're doing structural activities to get those costs out and to keep them out. There will be some direct labor, obviously. We have to add back, as we, as volume returns. Obviously that's built into our standards. That should be just fine. We should be able to get some better efficiency out of our factories based on some of the activities that we put in place today. That, from an add back of cost perspective, you know, we're looking at, you know, R&D that's in the 6% range, as a percentage of sales. That percentage is probably going to stay the same. There will be some additional spend, but it should not have an impact on the leverage side of it.
You had a slide that sort of listed various, you know, sort of cost saving initiatives.
Yep.
I guess the same slide. What inning are you in terms of addressing the cost savings? Maybe, you know, what investors I think are looking for, what programs have you initiated that are benefiting margins this quarter and this year? What sort of down the line 2026 and beyond from the list that you've provided?
Yeah.
How should we think about it?
I like your inning analogy. I'm going to build off of that a little bit.
Yeah, of course.
I honestly, I feel like we're in preseason. That is, you know, we're still in a position where we're preparing and getting ready for going into the regular season, getting into the game. That is, we are, you know, we're getting the fitness level to the right spot. We're getting the organization to a position where we're working really strongly as a team. We're going to be ready to start that regular season. You know, and the reason why I say that is that I do feel like what we're doing and what we've done in those programs is more about getting a reset for the organization and giving us a chance to build off, build off of that. You know, the second half of last year, it was really more focused on headcount.
That, that's what gave us $110 million a yield, which of course we'll annualize this year, give us about $120 million of benefit in fiscal 2025. The remainder of that $250 million is going to come from more cost of goods sold and indirect spending. Those, to get into some more detail because I think you, that was part of your question, which was, okay, what do we have really going on there? Direct material spend is a big portion of that. That is renegotiation with suppliers, changing out suppliers, doing a better job buying. That has a lot to do with the fact that during the supply chain crisis, we were in a position where we were just trying to get product in the door, convert it, and get it back out the door as quickly as possible.
In a lot of cases, we had to buy components at prices that we were not necessarily happy with, but again, we needed to get it done to get our customers served. Now we're in a position where we're going back and we're taking another look at those costs and that spend and taking actions to either resource or to renegotiate. Things like logistics, again, when we're trying to get things in the door and out the door as quickly as possible, we did a lot of things via air freight. Now we're transitioning that more either to closer suppliers or we're trying to take it via ocean. That is pretty well along for us right now.
Indirect spend, going back and looking at our indirect spend overall and do we need everything that we're spending our money on? Those are being taken care of. That's built into that $250 million for the year. All those items are really, they're just the start. What's important is to take this reset and not miss the opportunity to really build off of it for the long term for the organization. What we're doing in the background underneath all those initiatives is we're putting in the Rockwell operating model. We've had lean and continuous improvement models in place for Rockwell for quite some time. During the supply chain crisis, productivity was not necessarily our number one objective. We need to find a way to get back to that.
The Rockwell operating model is going to help us with that, via an operational excellence program, bringing in a lot of different tools for the organization to try to turn this into a flywheel. Right. Building off the really strong culture we have, building off the learnings from this cost out, and continuing to drive that margin expansion over the long term.
You know, just to think about the, there's a, you know, an incremental margin question. Historically, in an upcycle, you have delivered very high incremental margins, particularly in software.
Yep.
and control, right? Given your position and Logix. Do you still think you can deliver, you know, these incrementals north of 50%, in an environment where sales are growing double digits? Or, you know, if you actually, I mean, this goes back to where we started, right?
Yep.
You were in a low growth environment.
Yes.
Does the math change if you go into a structurally high growth environment in North America?
Yeah. I mean, obviously the math does change. For any organization, hopefully the answer is that, you know, when you're in a higher growth environment, you should be able to get some pretty good flow through profitability.
Right.
There's no doubt. What we've signed up for, what we're talking about, you know, as part of our overall message is the conversion, when you think about conversion for Rockwell mid-cycle to mid-cycle, that we're at that 35% rate. I definitely understand and recognize that there are going to be times where, you know, from quarter to quarter, we're going to have some outperform, maybe we're going to have some underperform, but the average we're expecting to be at that 35% rate. You know, hopefully that, when we get to the point where we feel like, okay, it's time to, you know, once we hit that 23.5% segment operating margin, where we go back and revisit it and we could talk about something that could potentially be different. But 35% is what we're signing up for.
I appreciate 35 was what you signed up for.
Yep.
Anything structurally, do you have to put in more costs if the growth accelerates, particularly given that you do have all the costs? I understand what the answer is. The answer is 35 and I appreciate it.
Yep.
I do not expect you to give me a different answer, but I'm also trying to understand, you know, as I said, historically, when things go up, particularly early on, incrementals can be 50-60%. You know, perhaps in this environment, you have to sort of commit more cost to meet higher volumes. At the same time, it seems the company is a lot more serious about cost takeout.
Yep.
you know, should I be considering these things together?
Yeah. I do think that the organization is serious about trying to make sure our costs are kept in check. Obviously it depends on the mix of what's happening, where that growth is occurring. We do have some capacity that's available for a number of our product lines, again, based on that resiliency that we've been putting in place. There has been spend and that spend has been mostly built into our base already. We're in a pretty good spot. I will tell you though that, you know, philosophically, I do believe there are opportunities for us to do even more when we think about things like vertical integration, continuing to invest in our own facilities, bringing more Rockwell technology for our own automation into our own facilities. I think there's a pretty good runway around that.
Do I see us potentially continuing to invest or even investing more? Yeah, it'll probably look more like CapEx though, as opposed to OpEx. The end result should be additional margin expansion, because that should have really strong ROI for us.
Gotcha. And maybe orders, you know, as you pointed out, I think orders came in above expectations in Q1. How should we think, you know, over $2 billion and up 10% year over year, how should we think about the cadence of the orders through the rest of the year given the first quarter outperformance and specifically not asking you for.
Yep.
Update on macro, but was there a pull forward in orders for the, in the quarter?
Yeah. One of, so let's talk about the pull forward first.
Yeah.
The lack of pull forward is.
Yeah.
Is probably the better way to put it. When we looked at the outperform on orders in Q1, certainly that was top of mind for us. Is there any pull forward, and how do we think about that? When we looked at the outperform, it was actually pretty broad-based. When I say broad-based, it was broad-based across product categories. It was broad-based across geographies and customer segments. That broad-based, you know, to think about it a different way, you know, when you think about software, well, there's probably not going to be a pre-buy on software. When you think about, you know, an outperform in EMEA and Asia Pacific, those are not the natural customers you would be thinking about as far as those that would try to get ahead of some sort of pricing change due to tariffs.
When you think about the, the solution side of it, these are projects that have been in place for quite a long time that we've been working on. Those really did not feel like there was a pre-buy around them. I think generally we felt like, no, this was truly a broad-based demand environment, slight, but uptick. You know, looking at the remainder of the year, our expectation, to be quite frank, right? We are talking about a negative 1% on the top line.
Yes.
It's a tale of, kind of two different halves of the year. When we look at our comparables, in the prior year, you know, in 2024, we were shipping out of backlog for the first half. The demand environment weakened in the second half. We did see it kind of enhance again as we went into Q1, but we're against some pretty tough comps.
Yep.
You know, as we get into the second half of this year, some of those comps are going to get a little bit easier, from that perspective. We are really just sequentially looking for a gradual, sequential kind of quarter over quarter increase, both in the demand environment as well as in our shipments.
Great. No, that's a great answer. Maybe just, near term and longer term, what verticals is Rockwell most excited about? As I said, if you can give sort of both near term answer, but also long term, and what are the key market verticals and adjacencies that you are targeting over the next several years?
I'll take that one.
Sure. Before I talk about some of the growth here verticals, I just want to remind people that our technology largely is horizontal, meaning what we, our controllers, our software, our drives, what we do or we provide for automotive.
Yep.
Is the same for life sciences, the same for.
Yep.
Food and beverage and for energy, mining, et cetera. It is an important point because what that means is we are able to focus and toggle between different industries and maybe add more commercial resources and focus or develop some application, software for particular customers. Broadly, it is a very scalable portfolio.
Mm-hmm.
With that said, we talked about four or five areas that are really focused industries for us where we have great share, great technology differentiation, great access, and we think they're going to outgrow the average.
Yeah.
Right now, near term, we talk about e-commerce and warehouse automation as a bucket. Another two items there. There's the e-com market, and you see this, we see this, build out of new fulfillment centers, and we are very well positioned to serve that market and the machine builders and system integrators that serve that space. We are seeing that broader warehouse automation space. It's more of an application.
Yeah.
Because it goes across many industries. A lot of customers in CPG and logistics, they are looking to upgrade, modernize their existing facilities. They need to do that, to offset labor costs, to get ahead of their competition, to catch up with their competition. This is where we see a lot of differentiation. We have seen that actually grow even last year. E-commerce and warehouse automation is the only end market where we will see actually tougher comps as the year progresses.
Yeah.
Yet we still expect to grow high single digits for the full year. We expect this to continue for some time. If you look at longer term, we are still very well positioned in automotive. Longer term model changeovers account for half of our business in automotive. Model changeovers, changeovers and MRO, and it will continue whether it's traditional ICE, whether it's hybrid, whether it's EV, customers will continue to innovate, and we have a very strong presence there. Near term is challenged, of course, trade and policy uncertainty, and general consumer confidence and environment, but longer term, it's still an important market for us. If you look at life sciences, we do think we're well positioned today and longer term. We're bullish on that end market.
We have a very strong portfolio of software and services, and it's a higher content of software and services provided to that end market. Whether it's personalized medicine, cell and gene therapy, GLP-1, you know, obesity drugs, whatever that is, we are working with leading customers in that space, and we're well positioned on the control side given it's a hybrid end market.
Right.
Food and beverage is important. There are parts of food and beverage that are going to be growth, faster growth than others. We're, as Christian mentioned, we're working with leading machine builders who are innovating. We're working together on their next generation machines, next generation platforms. So we see growth there. And energy and mining.
Yeah.
It's something we're very interested in. We are very focused on, and we have the right technology, because it's modular and it's open, especially with a lot of the renewables and decarbonization efforts. This is where you need something modular from an architecture standpoint versus large monolithic DCS control systems that you usually use. Those are some of them, but like I said, we are prepared to serve many industries, just given our portfolio and footprint.
You know, I guess we are in Europe. Folks are excited about Europe. You sort of highlighted the fact that EMEA and Asia Pac waters surprised to the upside. What are your thoughts as to what you are seeing in Europe? You know, also, you know, there is sort of seemingly the snace and recovery in China, and your exposure in China is different, like it's tires, it's aggregates, it's, I get it.
Yep.
Just maybe a commentary on China and Europe as we finish up.
Sure. You know, from a China perspective, as you said, it's less than 5% of our sales today. It hasn't been a huge factor for us, either to the upside or downside in the more recent past. Overall though, we are well positioned with the customers we want to serve there, which is really the higher end portion of the market. We feel like we have a really strong competitive offering.
Yeah.
which allows us to be really well differentiated, and especially with the multinationals that are there, and also with machine builders that are serving the global market. It's a little bit of a similar story when we talk about Europe, right? There are opportunities for growth here, where we think we're strongest. Again, it's more on the machine builder portion of the market. and there's been some really good activity. We're seeing some nice green shoots. you know, I mentioned Italy, you know, with the food and beverage space, life sciences space. you know, we're feeling pretty good about overall positioning in this market. I don't know if you have any.
Okay.
Great.
Right on time.
All right.
Thank you very much.
Perfect.
Pleasure. Yeah.
Andrew, thank you very much.
Yeah, no, thanks a lot.