Thank you for holding, and welcome to Rockwell Automation Quarterly Conference Call. I need to remind everyone that today's conference call is being recorded. Later in the call, we will open up the lines for questions. At this time, I would like to turn the call over to Jessica Kourakas, Head of Investor Relations. Ms.
Kourakas, please go ahead.
Thank you, Sonya. Good morning and thank you for joining us for Rockwell Automation's Q2 fiscal 2021 earnings release conference call. Speak with today to Blake Moret, our Chairman and CEO Nick Gangsad, our CFO and Steve Etzel, our Senior Vice President of Finance. Our results were released earlier this morning and the press release and charts have been posted to our website. Both the press release and charts include and our call today will reference replay for the next 30 days.
For your convenience, a transcript of our prepared remarks will also be available on our website at the conclusion of today's call. Supplemental information related to our new business segments can be found
in the
Investor Relations section of our corporate website. Starting, I need to remind you that our comments will include statements related to the expected future results of our company's performance and performance of the company. Actual results may differ materially from our projections due to a wide range of risks and uncertainties that are described in our earnings release and detailed in all our SEC review the filings. So with that, I'll hand the call over to Blake.
Thanks, Jessica, and good morning, everyone. Thank you for joining us on the call today. Accelerated and broadened cross verticals in fiscal Q2 surpassed $2,000,000,000 which As you may recall, COVID did not significantly impact our business until the June quarter of last year. Total reported sales grew 6%, Organic sales grew a little over 1% versus prior year, despite significant supply chain constraints. Manufacturing supply chain continues to be stressed by sharply increased demand, along with various well now comment on our top line performance by business segment.
Intelligent Devices organic Sales increased 6% led by strong broad based demand for our automation products. Our motion control offering continues to to shine top double digits. CPG companies continue to add packaging flexibility. Software and Control organic sales also grew 6% by strong demand across this segment. We saw growth in logics control, visualization hardware and software, network and security infrastructure across the balance of our factory software portfolio.
Sales growth was 12% for the segment Orders for the Intelligent Devices and Software and Control Business segments, both Strong double digits year over year and sequentially. Turning to Lifecycle Services, unit sales declined 11% Revenue and orders through mid single digits. We expect continued sequential sales improvement in this segment throughout the year. Information Solutions and Connected Services had another strong quarter, organic sales and orders Double digits contribution across a variety of end markets. This quarter's orders also included a number Meaningful Software and Infrastructure as a Service multiyear wins with some of the world's largest food and beverage manufacturers.
This included Kraft Heinz, where we actively monitor their industrial network and cybersecurity environments. These wins also contribute to ARR, which grew double digits year over year. Total backlog grew strong double digits on an organic basis, both year over year and sequentially. Turning to profitability, segment operating margin of 22% and adjusted EPS of $2.41 We're above expectations and overcame headwinds from the reinstatement of the bonus and higher costs related to supply chain constraints. Stronger volume, favorable business mix, timing and spending all contributed to our strong profit performance in the quarter.
We continue to increase our business resiliency. Let's now turn to Slide 4, provide a few highlights of our Q2 end market performance. Figures are for organic sales. We had a
very good growth
in our discrete industry segment, high single digit sales growth significantly above our take a look at our expectations. Within this industry segment, automotive sales were in line with expectations, mid single digits versus a strong prior year period when auto grew by over 20%. We continue to estimate 10% organic sales growth for the year in this vertical as MRO continues to grow As an increasing number of capital projects are expected to launch in the second half of the year, despite chip shortages Impacting automotive production, we are not seeing related delays in capital or operational spending for our products. The semiconductor vertical significantly outperformed our expectations this quarter, Growing about 15%. We believe strong secular tailwinds, increasing Capital spend, broadening share of wallet with customers are all driving our growth and share gains in this vertical.
As a result, we are raising our semiconductor growth outlook
approximately 15% for the year,
Discrete with our performance in e commerce, the sales growing over 70% versus prior year. Once again, our differentiated offering featuring our independent card technology is enabling e commerce has become a bigger growth driver for our overall discrete industry segment. Turning now to our hybrid industry segment, Our strong product portfolio enables these customers to efficiently add SKUs as they seek to differentiate their offering maximize their growth. We saw increased capital spending by food and beverage customers in the quarter. Not surprisingly, packaging OEMs are also very busy.
They contributed another quarter of double digit growth versus the prior year. Life Sciences grew about 15% in Q2, led by strong demand in North America and Asia Pacific, one important NES project we had during the quarter, helping the Dawn AST Dawn AST is expecting production efficiency and quality to improve by going paperless to your choice of Rockwell's pharma suite MES. Based on the broad based increase in life sciences demand, The share gains we are seeing in this market, we are raising our view on life sciences and expect it to grow about 20% in fiscal 2021. Process markets were down approximately 10% and were weaker than expected, led by larger declines in oil and gas. Process verticals typically lag our discrete business by about half a year.
That said, we saw sequential improvement again We saw low single digit growth in the quarter. Turning now to Slide 5 and our Q2 organic regional sales Performance. 1Q Miracle organic sales grew by 2% versus the prior year, primarily due to strong growth in food and beverage, e Commerce and Life Sciences. Media sales declined 7%, driven by oil and gas, metals and auto, 16%, broad based growth led by semiconductor, chemicals and life sciences. Asia Pacific backlog reached another record high in the quarter.
We expect strong sales growth in the region, Welcome to the upcoming quarter and full year. In China, we saw over 30% organic growth, Driven by strong growth in all three industry segments, including particular strength in EV and Semiconductor in Discrete, Tire, Life Sciences and Food and Beverage and Hybrid, and Mining and Chemical in Process. We expect growth in China will exceed the company average for the year as our longer cycle businesses kick in. Let's now turn to Slide 6, highlights for the full year outlook. Orders momentum in the first half The outlook for the year is expected to drive strong sales growth in the balance of the year, especially as we enter a period of easier comps.
Our top line guidance is driven by improvements during the quarter. Our discrete and hybrid industry segments More than offset incremental declines in process. Our new outlook for total reported sales is over 10% year over year We've seen good contribution from both organic and inorganic sources. We also expect double digit ARR growth in fiscal 2021. We expect margins to stay relatively flat with last year, despite the reinstatement of our bonus And the incremental one time investments we spoke about last quarter that will largely impact the second half.
Our new adjusted EPS target, $9.15 at the midpoint of the range, It is found on Slide 7. I won't go into the details on this slide, but as you can see, we continue to expect provide broad based organic sales growth this year with oil and gas lagging. Our diversification across higher growth end markets One aspect of the increasing business resilience that we talked about during Investor Day in November. With that, let me now turn it over to Nick, elaborate on our 2nd quarter performance and updated financial outlook fiscal 2021. Nick?
Thank you, Blake, and good morning, everyone. Slide 8, 2nd to Acquisitions contributed 1.9 points of growth and currency translation increased sales by 2.4 points. Segment operating margin was 22%, flat compared to Q2 of last year. This represents strong underlying improvement considering a $60,000,000 headwind from the year on year change in the bonus. Corporate and other expense of $30,000,000 was $12,000,000 higher than last year, primarily due to mark to market adjustment Related to our deferred adjusted effective tax rate For the Q2 was 16.7%.
Last year's rate benefited from several to provide a quick overview of our 3 operating segments. Intelligent Devices segment had organic sales growth 5.8 percent in the quarter. Segment margin was 23.8%, 80 basis points higher than last year, mainly due Higher sales and lower spend, partially offset by the reinstatement of incentive compensation. As Blake highlighted earlier, Organic sales grew 5.6 percent in the quarter. Acquisitions contributed 4 points to growth.
Margin benefit from higher sales was offset by the reinstatement of incentive compensation. Software and control orders also grew mid teens both year over year and sequentially. Organic sales of the Lifecycle Services segment climbed 11% year over year as the recovery in this segment continues at a The segment declined 310 basis points to 9% versus 12.1% a year ago, primarily due to lower sales and the reinstatement of incentive compensation, partially offset by favorable mix Turning on the left, Q2 product order levels grew year on year As well as equally, we're at an all time high, particularly strong areas were in ocean, update the guidance. We are increasing our organic sales growth outlook by 1 point across the The new range is 5.5% to 8.5% with a midpoint of 7%. We expect currency translation to now contribute about 2% to growth.
We still expect acquisitions to contribute 1.5%. In total, the midpoint of our recorded sales Guidance range is 10.5 percent or about $7,000,000,000 We've also updated the adjusted EPS guidance Margin is expected to be approximately 19.5%. This is unchanged from prior guidance and primarily reflects strong Q2 margin As a reminder, second half includes higher spend as well as the incremental one time software Development and sustainability investments that we discussed on last quarter's call. The one time investments will primarily affect Our adjusted effective tax rate is still expected to be about 14%, give additional comments on fiscal 2021 guidance. Corporate and other expense is expected to be about $110,000,000 Total purchase accounting and amortization expense for the The full year is expected to be about $50,000,000 Net interest expense for fiscal 2021 It's still expected to be between $90,000,000 $95,000,000 And finally, we're still assuming average diluted shares outstanding of about 1 from core operating performance, primarily due to the higher organic sales guidance and favorable mix, Which brings the new midpoint of the guidance range to $9.15 Finally, a quick comment regarding the second half.
Thanks, Nick. With the solid first half under our belt, look at the remainder of fiscal 2021 with optimism. Strong order trends and record backlog underpin a robust top line outlook. We have confidence in our team's ability to navigate the Looking to our future, we continue to invest in software capabilities, Including development, sales resources and infrastructure. These investments support strong growth in our software business and ARR, fiscal 'twenty two and beyond.
Our momentum would not be possible without the tremendous efforts I'd like to thank everyone at Rockwell and particularly our integrated supply chain organization, Which has done a great job managing pandemic challenges and now mitigating our sourcing and logistics constraints. We're leveraging our own manufacturing expertise to help customers be more resilient, agile and sustainable. To update the opportunities in Rockwell and our ecosystem of best in class partners. With that, Let me make some remarks about Steve Etzal, who's participating in his final earnings call. Steve stepped up during a critical period of dress As we pivoted into the early stages of this recovery and accelerated our transformation, Experience, dedication, caring for fellow employees is exactly what we needed.
Nick and I joined thousands of employees in wishing Steve and Michelle all the best, happy retirement, COVID Venture. Now pass the baton back to Jessica to begin the Q and A session.
Thanks Blake. To follow-up. And for those of you that had some trouble hearing us on the call, we'll make sure to have the prepared remarks available on our Investor Relations website
Your first question is from Scott Davis with Melius.
Good morning, everybody, and congrats Steve on retirement. Good to hear your voice, Nick. Anyways, I like this is about the most excited I've heard I've heard you on
an earnings call in a while.
What when you think about these big new giant semi projects that have been announced, when do you start to Submitting RFPs for those. And do you envision that being kind of 2022 or 2023 business? I assume none of that is in The new projects are in your increase in forecast in 2021.
Scott, we are seeing some increase business in semi. I don't know that it's going into the U. S. Fabs That have been announced, but with some of these customers, we're already seeing some significant orders, which contributed to semi up in the power of the So it's not just the big fabs going into the U. S, it's activity in other parts of the world.
We're starting to see that now. As far as the U. S. Fabs go, I think you're right. I think that's more of a story for next And we're working hard to maximize our share of wallet at each of those customers.
Good. And just a quick follow-up. On the incentive comp, is that is the run rate guide for 2Q what we should expect in each of the quarters this year? So
Scott, the run rate that we've been at for the first half is what we should expect for For the second half as well, it's a little higher in the actual run rate in the second quarter because there's a little A bit of catch up given our added performance, but the run rate we're at through the first half is exactly what we expect to have in the second half.
To Okay. Thank you. Good luck, guys. Thanks, Scott.
Your next question is from Andrew Obin with Bank of America.
Yes. Good morning. Just a question, sort of longer term question. What kind of conversations are you having with your customers? We know the short term things are getting better.
You guys are Andrew, I do believe That this is the beginning of a sustained period of expansion in the North American manufacturing economy. The breadth of the orders that we're seeing, the mix of supply for existing operations plus expansions and then The occasional greenfield gives us a lot of confidence that we are seeing a sustained period of growth. And we're having those discussions Across various industries, you look at EV, there's no chance of that slowing down. You You look at semiconductor for the obvious reasons as they're increasing capacity, e commerce With the secular tailwinds there, life sciences, food and beverage, the return of oil and gas, All of those are areas that we have significant exposure to, and we expect that that's going to sustain for a period of time. And just a follow-up question.
How do you adjust your own supply chain and manufacturing footprint to to be able to service this, which seems to be a structural increase for a while. Well, you look at increasing internal operations. In some cases, that's redundant supply. In other cases, it's redundant lines within our own operations. When it comes to areas where there's engineering required for Specific projects, more work in terms of remote operations to be able to go deeper in the commissioning process remotely.
Final acceptance testing doesn't require the same degree of travel that it once did. And looking carefully at to To be able to maximize the number of different products that can come off a single line. So you look at the same Packaging flexibility that's driving the strong double digit growth packaging OEMs. We're incorporating a lot of those same concepts in our own operations, including our manufacturing just down the hall from
Your next question is from John Inch with Gordon Haskett.
Thank you. Good morning, everybody.
I'd like
to start on taxes. Rockwell carries, I think, the lowest tax rate in multi industry or very close to that. If Biden's drive to raise U. S. Corporate taxes succeeds, are there tax levers, Rockwell and Coal, to offset what would appear to be Possibly a disproportionately negative impact for your company.
John, as far as levers we would pull, I mean, summarize our supply chain in servicing our customers and what that would mean for our ultimately for our taxes. But in terms of other levers, I think we're just waiting to see what how this materializes. As far as the impact It will have like we've shared in the past in our 10 ks the components that this of our current to tax rate and certainly a higher tax rate would impact us, but also components like FDII and GILTI. And Those are the provisions we're really waiting to see more specifics of what it ends up looking like to really know how this will impact us in total, And whether there are any additional levers we can go after?
Well, Nick, based on your understanding of what's being proposed, because it's all there on the web, right? Rockwell's success in having lowered its tax rate, presumably through international your international operations and the way you're structured, to Is any of that prospectively more at risk versus simply you being in the same boat and And your U. S. Taxes will rise along with everyone else. I don't think anyone's that concerned if Rockwell's U.
S. Taxes book the same as everybody else's because it is what it is. It's more to the question of to The opportunity to maintain disproportionately lower tax rate based on your success of having achieved this Are there provisions that you understand that could be sort of tackling those areas and can
you do something about that type of thing? Yes. So yes, you're exactly right, John. If there's an increase in the tax rate, that will impact us as I presume it will impact others Early proportionately, what we see in what's been written, that has an impact on what we have as an advantage in Relatively low GILTI rate and some benefits from FDII. We're still waiting for any kind of information to Rockwell does have a significant base of U.
S. Manufacturing. So and then in the end, John, just making a bit broader macro, That's ultimately benefiting our underlying business as well given our strong presence that we have in the U. S. Yes.
No, I agree with that. Just then lastly, Nick, in the short time you've been at Rockwell, I'm wondering if you could talk about best Practices or accomplishments you'd like to say bring over or see adopted based on your many years at 3 ms?
Hey, John, thanks for that question. So let me just describe it this way. What am I seeing as priorities and then what I'm observing in 1st from a priority standpoint, a high degree of priority in my early days here on execution. There's a lot of moving parts in the world and in this company and making sure that our company delivers from an execution That's a high priority. And then, Rockwell has some very sound strategies about how to be Continuing to increase our importance on our customers as the world of automation changes and industrial automation changes.
And my focus is going to be how do we best realize those strategies and make those happen. Now, John, part of your question, just Early observations, a great company. And one of the things I find very refreshing and Positive. This is a company full of engineers. Engineers focused on productivity and that kind of productivity and So I find a very healthy balance here of what are we doing to drive productivity, But also how do we invest it for future growth.
Your next question is from Julian Mitchell with Barclays.
Just wanted to highlight maybe on the segment margin outlook. So it looks like in the second half, you're implying a segment margin down slightly year on year Despite the very high organic growth of 20%. So understand what's going on with incentive comp, but maybe just on investment spend, remind us sort of the scale of that investment in the second half, if there's any specific weighting between the two quarters that are left and whether there's any sort of carryover investment spend into next year as an increase.
Yes. As far as the year over year margin, so comparing second half of to 2020 to the second half of twenty twenty one, those margins are going to as you just said, are going to be pretty similar. And Some of the things that will be improving that margin year over year is the growth, which you just mentioned, some added price And also we'll be benefiting from some of the actions, structural actions that we've taken over the last 18 months. What will be depressing that or bringing that margin back down to year on year more or less flat is this bonus impact, which we've talked About some rising input costs and then the investments that I think is really the heart of to And the investment spending that we're doing and I'll put it in perspective for you. For the the Q2, our investment spending was down a couple of percentage points from the Q2 last year.
For the full year, we expect them to be up 2.5 percentage points versus full year 2020. And those are coming from the investments that we've talked about with you already. Some of it the one time accelerated software development expenses that we're Funding and that's going to be happening fairly evenly in the last two quarters of the year. But we're also investing in In adding growth platforms, that's been part of the plan. Some of that involves hiring and projects.
And just as a little bit of color, we Did see a $5,000,000 to $10,000,000 shift of spending from the that we intended to have in the second quarter shifting into the second half of the year, I'm not changing our overall spending plan, but shifting a little over that into the second half of the year. So overall, we're We're expecting a noticeable uptick in investments in the second half of the year. As far as the run rate into next year, some of that will be trailing off. We've been very careful about some of these incremental investments, particularly The ones we talked about last quarter, but they will, they are temporary one time and will not be carrying forward into 'twenty Thank you. And I'll pass it into our second half EPS assumption, Which more or less is unchanged from what we were saying a quarter ago.
Thank you, Nick. And maybe just a follow-up question around Life cycle services trends, the sales were down, I think, low double digit last quarter, Put a book to bill of almost 1.2. So maybe characterize for us what kind of recovery Yes,
let me just make a General comment and then Nick can add additional color, but Lifecycle Services backlog is up year over year and sequentially. And so we are expecting Sequential improvements through Q3 and Q4. Yes.
And yes, as Blake just said, it will
Great. Thanks very much and I wish Steve all the best. Thank you.
Thank you, Julien.
Your next question is from Steve, Jeff Sprague with Vertical Research.
Thank you. Good morning, everyone.
Good morning, Jeff.
Hey.
Just maybe 2 from me. 1st on supply disruption, and I'm sorry if I missed it. You were cutting out a lot at the beginning. But can you just elaborate a little bit What you saw in the quarter, and we did pick up some things in our survey that suggested you were having some problems delivering PLCs and other things.
Can you just give us a little bit of
color on where you're whether that's accurate, where you're at on kind of untangling that? And was there any kind of discernible negative top line impact from supply disruptions either in the
quarter or in your
outlook for the back half? Yes, Look for the back half.
Yes, Jeff. We factored supply chain constraints into our outlook. So there is an impact, and I think it's the things that you're hearing about throughout the industry that are affecting us like other manufacturers. So certainly, electronic components, including chips, are in short supply. Seeing other mechanical Products and materials, sized strengths with resins that are used in a variety of to be narrow and so seeing constricted support products would be another area.
Done a nice job of having the necessary labor. So we really kept to to an absolute minimum in our manufacturing operations. We've still hired more. We've added Several hundred people last quarter, and so that part is great. But we're going to continue to be in a very dynamic situation based on sharply increased demand
Okay. And just on the investment spend, I understand there's some identifiable things you're doing that might be a little bit larger than the typical project, but it doesn't Strike me that a 2.5% increase in investment spend for the year is unusual, but You're kind of suggesting it is as part of this margin construct. So perhaps I have that wrong, but to 2.5% growth in investment spend, I think, would be about $50,000,000 That kind of dovetails to the $0.35 you talked about in the back half On the software deals, is there something else in that equation? Maybe you could just frame the kind of the normal trajectory of investment
Yes, Jeff, I think the part of that that I just want to make sure is clear is that, that increase Investment spend is all second half, in fact, more than all in the second half because year on year in the first half, It was down. So just as we look sequentially first half to second half, we're seeing that sequentially going up, Bring the full year to that $50,000,000 that you're talking about of the year on year change, but more than All of that change is coming in the second half.
Got it. Thank you. Understood.
Your next question is from Andy Kaplowitz with Citi.
Hey, good morning, guys. So you mentioned the big March The shorter you had in your order trends, which makes 2 out of the last three quarters that you've called out larger orders. So given your focus, for instance, on independent cart, which does And to attract large orders and increased focus on e commerce. At what point are these large orders more the rule than the exception? And then could you talk about The cadence of your Q2 orders ex the large order in March, did you see a continued pickup in orders throughout the quarter?
Andy, let me start by saying I hope you're right and I hope seeing these large orders across different industries and Different offerings becomes the rule rather than the exception. We are happy to see it and the most recent one as you said was in E Commerce, we traditionally haven't called out in as much specificity the Orders development from month to month or quarter to quarter. We thought during the pandemic it made sense to give you that additional visibility And it does show a developing dynamic of having some of these large orders, industries and in some cases, Non traditional offerings gives us more ways to win. So we're looking at that. We have seen Cycle services segment kicks in, and that is where a fairly good caution our bigger traditional projects are homeroom.
So we do expect more of that to come. The majority of our business continues to be more run rate. We used to say $3,000,000 to $5,000,000 was a pretty big project for us. Now we're seeing an increasing frequency of bigger ones.
Blake, that's helpful. And You hired several new leaders, including Nick, a few months ago. We know Scott and Brian have different roles, but both seem focused on improving Approving and accelerating Rock software sales, annual recurring revenue. So maybe it's early days, but could you talk about the impact they're having so far on that side of the business? And we just focused on software and controls.
It obviously has easy comparisons in the second half of your fiscal year, but it's already growing 12% in So is the expectation at this point that this segment could be a double digit grower through maybe 'twenty two?
I won't comment specifically on 2022, but I really like the idea that our highest margin segment is also fastest Growing, so that's a nice place to be. I've been very happy with the new perspectives that our new execs have brought to the organization And the way that the organization has embraced them. That's not easy to do is to bring people in at a Your position into a well established company with a long culture, a strong culture, but I've been very Happy with the way that we brought in those new perspectives into the organization. Brian is focused on increasing the frequency and the impact Obviously, as Nick said earlier, that the financial organization catalyze the execution of this strategy are all good things.
Thanks, Blake.
Your next question is from Steve Tusa with JP
work in. The Slide deck is very straightforward and a lot of very informative, so easy to digest. Thank you for that. Appreciate it. The $2,000,000,000 in orders, I think that's like the total absolute number For the quarter, correct.
And I mean, that's a relatively, obviously, a big number. How do you see that kind of playing out over the course of the next Couple of quarters, given it's such a solid kind of book to bill, if you will.
Yes, Will. And we wanted to call that out because this is really before life cycle services is kicking in and full. So we're expecting a nice run of to that magnitude of orders for the company over the next few quarters. And this is primarily driven at At this point with products, but again, as the project business ramps up, which is our expectation,
Okay. And as far as this investment spend is concerned, just going back to Jeff's question, So I think you're saying that some of the uptick in investments this year to Sure. Because usually you guys do have anywhere from, I don't know, a $45,000,000 to $50,000,000 to even $80,000,000 year over year headwind, I mean, going Like 2010 from kind of investments growing faster than sales. Is what can Can you just kind of refine the messaging on that account and where it goes next year?
Sure. Thanks, Steve. I believe it's A little early to get anything too declarative on 2022. However, just to clarify, of this increase in investment spend, There's approximately $30,000,000 of that that we are saying is temporary. The rest of it is part of our normal increase in investment spend.
And then the other way to think about it, Steve, is we also expect a 30% to 35% or core conversion. And That's the way we've operated and that's the way we continue to expect to operate.
Right. And that 30% to 35 Cent would be, again, like an all in kind of number for the segments, including whatever happens with This investment bucket for next year, correct?
Yes, that when we say that $30,000,000 to $35,000,000 that includes the investment spend,
Yes. Okay. That makes sense. I appreciate the color.
Thanks. Thanks, Steve.
Your next question is from Josh Pokrzywinski from Morgan Stanley.
Hi, good morning guys.
Hey Josh.
So, Blake, I just want to
talk about software for a minute and maybe what you're seeing out there.
Are you running into
Competitors, when you win some of these orders, is it more of a non competitive process where you're just Sort of attaching on to an installed base. And then maybe talk about what product lines you're seeing strength in. I think Honeywell Cybersecurity, I know you have an offering there as well. So maybe just sort of a landscape of what you're seeing in the software side. Sure.
So parts of the software business are still somewhat fragmented where You're largely competing against doing nothing on the part of our customer or A homegrown solution and we still see a lot of that within say IoT applications. In MES, it's It's a little bit more, let's say, mature and you are typically competing with a fairly well known Competitors, sometimes our traditional full scope automation competitors, sometimes niche competitors. And that visualization, I would say, is similar to that, Which is a big part of our software offering. Again, a little bit more stratified. But There's the new applications, IoT, analytics, things like that.
It's still a fairly diffuse, let's say competitor landscape, customers are looking for the outcomes and you're also having to dove into an installed base. That's a big part of it because a lot of your challenges come in the interfaces with existing to installations and that's why we're taking that open approach to expect that these customers already have With respect to cybersecurity, even apart from the hardware, We've got a cybersecurity business that's over $100,000,000 in terms of the services. It grew double digits, very strong. We're seeing good contribution from recent acquisitions of Avnet and Orlo and that's an area that I'm particularly proud of because it's an area that when we introduced it, it wasn't one that customers necessarily thought of Rockwell first for, But we're having a great impact on customers and we're working with a whole new set of decision makers, including the CIO And his or her team, it's a really big company. So very happy with the development of that part of our business.
Got it. That's helpful. And then just a follow-up question on orders. Maybe taking a step back, I guess that that 2 $2,000,000,000 of orders really only covers about 2 thirds of the business and some of that's longer cycle, but cyclically, seasonally, I don't know if you would necessarily go backward from here. Does that suggest that Rockwell is an $8,000,000,000 company over the next couple of years?
Like why wouldn't the $2,000,000,000 Get multiplied by something near 4 and you haven't been a fudge factor for life cycle services. Like what kind of leaks out of that equation? Because it seems like a pretty big number pretty early in
to Michael. Well, we're happy with it. That's why we've called it down. I want to make sure, and you know this, Josh, $2,000,000,000 is a company number, but we're notching that figure even before lifecycle services really kicks in to like we expected to over the next couple of quarters. But yes, we're expecting that As we've created more ways to win, our strategy is to accelerate profitable growth.
That's what we've been talking about the last 2 years, Doing it by growing as a higher multiple of industrial production in our core, continued double digits in information solutions and connected Services and making acquisitions that are going to again give us more ways to win.
Okay, perfect. Thanks for that. Best of luck, guys.
Thanks, Josh.
Your next question is from Nigel Coe with Wolfe Research.
Thanks. Good morning. Nick, it's great to hear your voice. We couldn't hear that well, but it's great to hear you. And Steve, congratulations on your retirement.
I hate to go back I'll be in that position again, but I'm a little bit bamboozled by all 3 of you people here. But when you talk about the increase in the full year, 10% but Mention $50,000,000 which you're okay with. Is that the second half increase or was that $50,000,000 for the full year And the second half is more than that number. Just want to clarify that, please.
Yes, Nigel. Happy to clarify that. We were down in investment spend in the first half of the year. We were down Approximately between $40,000,000 $50,000,000 We now expect the full year to be up Approximately $50,000,000 or $55,000,000 that means the delta of $90,000,000 to $100,000,000 higher Investment spend in the second half stand alone.
Okay. That's clear. And then that's nicely the 100, About 30 is temporary and washes away this year, correct?
Exactly. Okay,
got it. Okay, Clear, clear. Just a moment. And then moving on to semi, I know it's a relatively small kind of portion of your revenues, but Obviously, I'm very excited about the investment spend that we're seeing committed in the U. S.
Can you just remind us where do you currently play? Where does Rockwell play in the fab. And what opportunities do you see to maybe increase the scope going forward?
Sure. Nigel, the primary applications are around facilities management. So it's making sure that the environment It's clean and at the right temperature and the right humidity and so on. It's a fairly complex automation And that's our traditional area. Lately, we've had some success in increasing the So even within that facilities management, including things like cybersecurity and other related services and networking, We see additional opportunity in the materials handling and also Given that we are a good sized user of electronic components and use circuit boards and so on, we've developed Some artificial intelligence applications that have helped us be more productive and we're working with some customers to acquaint them with our capabilities there as well.
So there's a lot of additional room expansion from that base.
Your final question is from Noah Kaye with Oppenheimer.
Good morning and thanks. You commented earlier about the process of continuing to increase your importance to the customers. And Blake, some of the supply issues you've cited on this call around freight narrowing and the chip shortage and Just materials available in general. I mean, obviously, a huge portion of your customer base is all going through that at the same time. And so I'm curious if you can talk to us a little bit about how you're seeing the customers use of your software offerings like FactoryTalk to And others to deal with these supply chain issues and how that is advancing your dialogue with them and your opportunity set.
So one of the ways, just for an example, looking at our own MES software, when we added that into our operations over Over the last decade, there were a couple of ways that that increased our efficiency. It decreased work in process And it also helped us with error proofing to be able to have a defined workflow. So as our customers are having to bring new talent on that may be new to these types of operations. That workforce development It's a big deal and it sometimes sits right on the critical path of getting new capacity up and running. So whether it's the MES software that we've been offering, augmented reality offerings that we have with PTC.
We've got some great solutions as well as the training that we provide to help with these new hires that our customers come online just as fast as possible. I also believe that the flexibility that We are adding in our own operations, and I mentioned earlier, in our own contactor facility here in Milwaukee, It's giving us insight that we can impart to our customers to help them be more agile to produce a wider variety of on a single line. I saw an application recently with a beverage company It's able to make a very wide range of packaging formats for beverages Using our independent car technology and it's a whole different game than it Hello, Alex.
Yes. And you mentioned MES being able to reduce work in progress. But we're hearing about, for example, in auto, suppliers are trying to reach 2 and 3 layers deeper into their supply chain And trying to through software do better tracking, not walking away from just in time, but We're trying to evolve and get a better visualization of the entire supply base. Is that something that Rockwell can play a role in and how so?
Yes, absolutely. Being able to take those real time production signals and to be able to look to It's a requirement to be able to look at those suppliers and to be able to marry that with your real time production to acquirements, particularly when you're looking at increasingly multiple potential sources of supply for those components So we see a lot of activity going forward. And you talk to customers, Nothing gets them more interested than when you talk about the role that we can play in a connected supply chain. There's huge amounts to of additional productivity that we can help with there and our ecosystem, because that's an area that
Operator, now I'll turn it back to Blake for a few final comments.
Thanks, Jessica. In summary, We're very pleased with our strong performance in the quarter. The recovery in manufacturing is accelerating at a much faster Rockwell is extremely well positioned in this recovery and we're especially excited about the new product introductions and services that we will bring to market over the next couple of years. It's an exciting time to be a part of the Rockwell journey. We
That concludes today's conference call. At this time, you may now