Emerson Electric Co. (EMR) Earnings Call Transcript & Summary

Good morning, and welcome to Emerson's 2021 investor conference. My name is Lal Karsanbhai, I'm the Chief Executive Officer of Emerson. I'd like to say a few words before we begin today. I regret that we're not all together in New York City as we have been over the last few years. So having said that, I hope you and your families are all well. I'm joined here in the room with senior members of the Emerson management team. So as you see me look around and speak and not look at the camera, I'm addressing others in the room. It has been a very challenging period of time for our company, but we have done exceptionally well with our execution. It took a lot of courage for David and this management team, weathering the storm through the pandemic, giving guidance and then exceeding the objectives that we put forward. We're in a good place. Our future is incredibly bright. Our people are motivated, and they're excited about the road ahead for us. As many of you know, I've been a part of the OCE for the last 2 years. I've been a key member of the team that's developed the strategy of this corporation. And what I'll tell you is that the plan that we will present today is a plan that is mine. It is a plan that I believe in, that we can deliver. And that's very important. We'll share as we go through the day today between myself, Jamie and David, the components of that plan. But I'm very excited about the opportunity it brings. I take my hat off to the management teams across the world. They've worked incredibly hard to deliver 2020 and to commit to the actions that will deliver this plan going forward. Great job by everyone. I'm honored and excited about having the opportunity to lead this great team and manage this phenomenal company. I look forward to today and to future engagements with all of you out there. Thank you very much. Just very quickly. Obviously, we're going to be talking about our current business conditions. And as we make forward statements, they, obviously, have risks associated with those that you're aware of. I want to make sure I highlight that for everyone as we go through the day here today. So this is the agenda that we'll go through today. David and I will actually share the overview and the strategic update for the business. We'll have Mike Train come up and talk about our environmental and sustainability programs, a very important component of our growth opportunities as a corporation. Then we'll take a short 15-minute break to give everyone some time. And we'll come back with Jamie, and he's going to go through the Commercial Residential business, exciting strategies that we have for growth and value creation. I'll come back and cover Automation Solutions. We'll have a break again to set up a Q&A period where a number of you will be able to dial into a different line and ask us questions. And that's what we'll go through. So with that, I'm going to introduce David Farr, Chairman of Emerson Electric. Good morning, David.

Good morning, Lal. How are you doing, my friend?

Good.

It's good to see you. It's good to be here with everybody today. It's not quite exactly how I thought about my last investor conference. Sort of reminds me of the Boston conference we had one year, we decided to go to Boston -- to present the Boston investors, and we got 2 feet of snow. But we did show up. We were in Boston, but it was quite endurably day without many investors in the room. But today, it's a little bit different with this world today, you have to do everything remotely. And clearly, we've had almost a foot of snow here in St. Louis, and has been bitter cold the last couple of days, like minus degrees. But it's good to be here and talking about the path forward. Lal and I are going to cover this first part here. I'm going to give a little review over the last 18 months, where we sit today, then discuss a little bit about the path forward, and then Lal will talk about the culture of the company, the market dynamics, the growth opportunities and then his financial plan, as he looks at the company today, as he's gone through it the last several weeks, and that's what we'll cover here in the first part of the presentation. So let's go forward here. The first slide, I just want to give a quick overview of where we've been for the last 18, 24 months. And like Lal said, I also want to thank all the employees out there. The management team, the individual employees, we've gone through a lot the last 18, 24 months. As we know back in 2019, we, as a company, saw things were slowing down. And we made the decision, talking to the Board that we thought that we needed to take a quick review of our cost structure, a quick review of the businesses very much like we did back in '14 and '15 to make sure that we're composed properly to grow through this cycle and come out stronger in the end, and we did that. For 6 months, we had outside consultants working with us, taking a look at everything from the cost, the portfolio. The decision was made in November, and also February to stand pat, but we launched a very aggressive cost reset program, which you've seen over the last several years. And as we've gone through this year in 2020 and into '21, we've accelerated those programs, and I'll show you that we're ahead of the plan at this point in time. And then this -- right after the February conference last year, a pandemic hit. As all of you know, we started talking about the COVID pandemic. In February, what we saw going on in our China operations and what we saw going on in our Italian operations. And it's clearly changed the way we had to govern the company. And we're living with the COVID today, and we're managing accordingly. During this time period, we also were able to make some acquisitions, the OSI Power acquisition, the American Governor acquisition and the Verdant acquisition, all very strategic to us going forward, and I think will create a very core growth opportunity for Lal and his team. Finally, as we've left the calendar year 2020 and finished our first fiscal quarter, we had a lot of momentum. For -- growth was returning. The margins were starting to improve. Cash flow was strong, as you saw in the quarter. And we really had a lot of momentum behind us as we moved into the 2021 time period. The one issue as we've seen in the cross currents, which they'll be talking about this morning, is basically the material shortages and the issues dealing with those material shortages, and then also labor to keep our plants open as the growth returns. And both Jamie and Lal will talk about that. But clearly, we're managing that as we've done in the past. We can manage through that. And then finally, the Board and I decided in early -- late January or early February, that we should move forward with the transition. And as I talked about in the conference call, Lal is clearly the right guy. He has the right stuff to run this company going forward and do a great job for all shareholders and all the employees. So again, I want to thank everybody. As we go forward here, I want to update a couple more things for you. As we did in April last year, we did something unusual. We called a special Board meeting. We called an Audit Committee meeting, and we made the decision to go out with a forecast for the next 4 quarters. We made the decision to give the investors insights to what we saw happening through the pandemic. So we set a forecast of sales, margins and cash flow. And we made the decision to share our thought process with almost a 90-minute earnings call with investors, which I think was very insightful for our investors, but also put a lot of commitment on the Emerson team to deliver, and they did deliver. So we made tremendous progress through this year from a growth standpoint in sales, underlying growth in sales. Profitability margins were much better, and we also had strong restructuring as we -- increased restructuring as we went forward. Cash flow came out stronger. We paid back $2.2 billion to shareholders. And our adjusted EPS got to $3.46. This is clearly better than everybody else expected and better than we thought for the year. And we also finished 2 key strategic acquisitions of OSI Power and the American Governor. So really, we reset the plan in April, and we delivered, and the momentum in the fourth quarter going into the first quarter, clearly shows coming forth very strongly right now, and I'm very excited from where we sit at this point in time. As we've talked about in the past, Emerson does continue to reevaluate its businesses. I've been at Emerson for 40 years. We do not sit still. We constantly look at the portfolio. We constantly look at what needs to change. If you just look at the last 30 years, as we've gone from $7.6 billion to almost $18 billion in size, you can see the changes in the portfolio. I guarantee you, Lal will have the same process underway, just give him some time. From the standpoint of what we're seeing across the company, we will constantly change based on the markets, based on our technologies, always focused on trying to drive premium growth in sales, profitability and cash flow. The work will continue under the new management team. I did it as part of Chuck's leadership, and I did it myself over the last 20 years. And clearly, one of the major moves we made back in 2015 -- or 2014 -- 2015 was to reposition the company. We sold off 1/3 of the company. Keep in mind, in that process, we've had 2 outside consultants work with us but I also brought in 2 -- 4 young next-gen leaders: Jamie, Lal, Mark, and Pat Fitzgerald, who is now down in Austin, working as a CFO down there. These 4 guys were involved in the process to look at where this company should go back in '14 and '15, and now they're running the company. That's an amazing process we went through. And also one other comment on Network Power. As you know, we did sell it and it's now spun into a SPAC. We did receive $4 billion at the time we sold it. We still have upside because we still have some equity in the SPAC. And I believe that we'll probably drive another $500 million, $600 million of incremental cash flow for the corporation for that Network Power sale. One of the key outcomes of the 2014, 2015 review, was the technology pyramid, the technology stack. We look at this as sort of a governor and driver of our growth today. And where we need to invest, where we need to divest, where we need to increase our investments internally or through acquisitions, it's become a very important process for us as we look at the core technology and the base: the control, the instrumentation, the sensors. Then you look at the next line, the control line, and you look at the data management services. Over the last several years, we've been making acquisitions in all 3 categories, but in particular, across the top as we look at trying to change our services, our software and our data management, leveraging the strength that we have in the foundation of this company around the sensors, the control valves and our capability and instrumentation. We finally have a strong foundation. We've built this foundation up, and we continue to add stronger and stronger layers. In the most recent acquisition, OSI Power, really brings a lot to the top of this management pyramid, and I feel very strong about the review process that each of the platforms go through and the corporation level we go through to make sure that we're staying competitive, strategic and very successful across the company. It drives where we look at things today, and I look forward to seeing how this company evolves over the next 5 or 10 years from off the side with my shares of Emerson. One of the things people have to understand, this company has a unique ability to make it through the tough times. In my 20 years, I've had a few things hit me. I had the dotcom bust. We had, obviously, the 9/11. We had tremendous growth in the core company and also internationally in the '20s (sic) [ '00s .] And then we had the recession, the Great recession, the financial crisis of 2008, going down to 2010. We flattened out. Then we went back and did a whole key reposition effort, as I said earlier. We took a look at the company, do we have the right businesses? How do we maintain our profitability? How do we maintain our cash flow? What do we need to do differently? This went on for almost 6 months, used internal reviews and also external reviews. The Board did a lot of work in this effort, again, focusing on where -- what should Emerson look like in the new world as we go forward here. We've gone through a lot of challenging times over the years since I've been here 40 years, but this management team, this management process always looks forward and looks into how to make this company stronger and come out of it. We did the same thing last year in 2020 with the pandemic. The pandemic recession hit us, we look at the opportunities to accelerate some of the repositioning effort or the restructuring effort that we had started back in 2019. Jamie and Lal did a great job of trying to accelerate those, and we actually spent more money, and it's the savings faster as you see in the early quarter of this year. Fundamentally, we know how to manage through challenging times. And we, as a management team, know how to get through those times and really look at those opportunities to make things happen within the company. And I applaud the organization around the world as we've gone through the last 18 months. And we've looked at the effort inside this company to grow faster, to improve our cost structure and to really make a stronger company as we've gone forward here in 2021. And I think the company is extremely strong at this point in time. As you'll see, the growth is starting to return in both businesses and will be growing by the end of this fiscal year in 2021 by a lot of hard work and it's all about sustaining value creation for the shareholders. As the last things I look at here, the global macroeconomics. We're learning how to live with the COVID. We're learning how to survive in COVID, how to invest, how to grow and what can we do. The V recovery has started. You'll remember back in April, we laid out that V. That V is pretty well mapped out exactly how we laid it out in April, maybe slightly faster in the Commercial & Residential, and a slightly smaller in Lal's business. But in total, very much on track to where we are today. And I firmly believe that, that line will be touched on a positive way when you hit the end of the March quarter. So we're coming back up, and we're starting to grow again. From my perspective, we're looking at the economics around the world, they're better. We're seeing GFI get slightly better both in the U.S. and also in the G7. That will be good for us from our customer standpoint. It's going to be a different mix of businesses as we'll talk about here today. But we're seeing the growth, and our businesses are driving growth. And finally, the last wind to our back would be the government stimulus around the world. The governments are spending like crazy. They're spending on new technologies. They're spending on new power generation. They're spending on areas that we can help. You'll hear both from Jamie and Lal talking about those investments and what we're doing with those investments. As we look at the markets, Commercial & Residential has come back strong, primarily U.S. in residential. Then we saw Europe coming back and the sustainable technologies that Jamie will talk about. Now Asia, we're starting to see the Cold Chain. We will see the Professional Tool business come back by end of this year. So his business has a strong momentum going on. He's got some changes in the refrigerants' and efficiencies that will drive growth for him for the next couple of years. The other key areas we're seeing major change is in the power markets and energy uses. We're seeing quite a turmoil in that area. There'll be growth opportunities for us. There'll be incremental investments here as they come out of this cold weather as we saw just in Texas, windmills don't work very well when it's freezing weather. So where do you see that LNG coming into play again in Texas, maybe in '21 and '22. We're seeing a boom in life sciences in the medical area, which we're very strong. And we're seeing a strange -- a very strong recovery in some of our core businesses at this point in time. There will be some fundamental change in the digital transformation of our customers, and we are well positioned to help that. It's one of our core technologies that we invested in for years, years and years ago. And we have created a separate business under the automation business focused on digital transformation, which is having great inroads in the marketplace today. As I said, I think Emerson is going to start seeing growth in the second quarter. I see the diversification we've made across this company in the last several years is really helping. I see this -- the opportunity for us to grow over the next 2 to 3 years. I think Lal has a very strong solid plan with some potential upside in certain marketplaces for growth. I think our aggressive cost reset has taken a hold. You're seeing it today in the margins that we delivered in the first quarter, and also the fourth quarter of last year. We will have improved margins this year. We have some cross wins, as we talked about, between the materials and the labor. But we'll work through those, like we've always done in the past. We're strong, and we're going to get through this as we can in 2021. We continue to invest in technologies and acquisitions. And also important, as you see with Lal and his new team, we have a process inside the company that teaches leadership, that trains leader to be leaders. We help people become stronger leaders. Out of that process, you've seen people like Jamie and Lal and Mark and other many other leaders in this room. They've emerged through that process, and they are stronger for it. So Lal has a very strong team behind him coming through the leadership process, and I'm very excited for him, and I think he's going to have a great run with his team. They are ready to go. They are ready to win, and they're ready to take over from my leadership. I'll be glad to step aside and clip my coupons and my dividends as we go forward here. Thank you very much. So let's talk about Lal. Lal has the right stuff. I've known Lal for a long time. He was a young planner working for me in my early years when I came back from Asia. He was a very interesting planner at that point in time. But he had a lot of energy, a lot of strength, a lot of smarts. So we sent him down to one of the process business, the regulators, which he did a decent job. We then sent them over to Europe. And then we brought them back to run the regulators business. I then brought them back into corporate to become the Head of Planning and Strategy, which is a good chance for me to see what the guy thinks like. Really thoughtful person, very smart from a strategic plan standpoint. And as we went forward, and we decided to sell the Network Power business because he was part of that process, we decided to move him to Europe. And the reason we decided to move him to Europe, couple of reasons. One, he was born in Europe, but more importantly, there needed to be a massive amount of restructuring, and Lal understood how to do that. He truly understood how to get that plan and how to execute in Europe. And he did a great job. Recently, we bought a bat to run the Rosemount business. And then 2 years ago, we promoted him to be the platform leader for Automation Solutions. He has the skills necessary, both at the platform level, at the division level and at corporate. And I think he's going to be a great CEO, and I wish him well. And with that, I'm going to turn it back over to him, I want to say goodbye to everybody. I won't see you unfortunately, because we're not traveling these days, but I hope to run into all of you in time, someplace in New York or Boston, around the world because I'll be moving. You take care now. Thank you very much.

Thank you, David. Actually, do you mind staying up here with me for a few moments? Come on up here.

Okay.

You don't know what's coming. You don't know what's coming.

That's why I get nervous.

You do. But I could not let this opportunity go by without recognizing the value you've created and how meaningful you've been to so many of us, both of -- inside this room, the teams around Emerson, but all the stakeholders: our investors, our customers and our communities around the world. I have known you for a long time as well. I met you in London for the first time in '97, I think it was. And I recall all the good times and the tough times that we spent together and the many learnings along the way, and I thank you for those. So let's talk a little bit about you, David. About the value you've created for all of us and all the stakeholders. Starting with the financial performance, 400% return over the period of your CEO-ship on a TSR basis. Outperformed the S&P and the XLI. You've returned nearly $36 billion of cash to shareholders in that period of time, phenomenal performance. And you're handing over a company that has over $50 billion of market value.

Very nice young picture of Chuck and myself there.

You look very -- you looked very good there, David.

I was a young planner. I was -- one of these young planners over here, that's what I looked like when I ran planning.

Yes. You've aged well, let's say that too. You've aged well. You're a lucky man. Globalization was one of the first things that you will -- put in place and the strategy that you took forward. Part of it was your heart. You spent 4 years in Asia. You got to see the opportunities from the ground of what we could become. Really turning us from a U.S. company that had international business to a truly global industrial company. But it wasn't just about setting up sales offices. It was about localizing our business, manufacturing, supply chain, our people development in the regions so we can manage locally. You spent a lot of time laying that infrastructure and invested a significant amount of time of your effort in creating the global company that we have today, tremendously well done in that respect. You also had many opportunities to invent -- reinvent the company. You spoke about some of those already. Whether that was around our management processes, as we looked at cash, as we looked at our on-time delivery efforts, as we thought about our management process and evolved it. The repositioning. 60 -- when I joined this company in 1995, there were over 60 independent operating divisions, we called them. We evolved that into business groups and ultimately, to the 3 franchise business platforms that we have today. That journey over 20 years was thoughtful. And as you said, you took your time. You acquired over 80 companies as CEO of this -- of Emerson. But none, I believe, closer to your heart than PWS, the Westinghouse business. The folks in Pittsburgh, that business has added over 10 -- 12 points, I believe, of market share globally, and over 25 points of market share in North America since you acquired that business in 1998. An incredibly meaningful business that now we're building around with OSI as we get out of the Power Generation into transmission and distribution. And then your passion for technology, David, has fueled our efforts around digital transformation. Many don't know that you are running the process business at the time of the original Plantweb. And that's evolved now to the business. That's over $600 million in size, and Stuart Harris runs around digital. But also your passion for technology led us down the paths of software and the investments that we've made. And we now have a $1.1 billion stand-alone software business with those efforts. Great work there as well. But you've engaged with everyone. You've engaged with all our stakeholders, with our customers at the highest level around the world. You've been a steward for U.S. manufacturing, and led the North American Manufacturing Association as Chairman for a number of years. Your passion with investors, well, I think everyone on the call will know and recognize that and how much energy you get out of those conversations and engagements. And then your commitment to all our communities. From Mexico City to St. Louis, to Milan, to Bangkok, to everywhere we do business, you're passionate and you put your effort and hard work around that. And we all feel it and recognize it. But there's one passion that you truly, truly, I think, have above all else, which is developing our people, your passion for all of us. The countless hours that you've spent with -- the OCE spends about 1,200 hours a year. You lead that, David. 5-, 6-hour presentations are not uncommon with David as he talks to our developing people. And the impact that you've had amongst so many will be felt for years and years to come. I thank you for all of that, my friend. I thank you for what you've done for all of us, what you've done for our stakeholders, our customers, our investors and above all, our employees and our communities. I thank you, David. I thank you.

The only people that ever listened to me are those little kids, at STEM day, until I threatened to cut their dividend to their parents. They paid attention to that.

They got quiet at that point.

They got quiet. They got quiet. But it's been a lot of fun. Thank you, Lal. Thank you very much.

You're welcome, sir. There will be no dividend cut.

No.

Just to clarify. Okay. Well, I'm going to continue from here on forward on this overview and business review. I'll begin with a culture, talk about the market and then review the Emerson financial plan. So why is the CEO of Emerson talking about culture first? Well, because I believe culture drives performance, and performance creates value. My strategy as CEO of Emerson is to put people at the center of everything we do. To foster an environment that's inclusive, where the best minds in the world are attracted to come and work here. We drive innovation that makes the world healthier, safer, smarter and more sustainable. What a great set of words. Over 17,000 of our employees over a period of 12 weeks developed that purpose statement. Those are the words we live by. That's why -- that's what guides us. That's the goal that we reach for. But there's an intrinsic link between our purpose, the management processes we use to our causes and our values as a company. All of this comes together as we manage the company and think about creating value. I want to spend a little time talking about our people. Over the 25 years that I've spent in this company, nothing gave me greater joy. Actually, it was a lot of emotions. It was joy, it was -- there were tears in -- then making 85 phone calls to 85 different individuals across Automation Solutions. We made over 130 phone calls between Commercial & Residential, and corporate, to people who went above and beyond, during the most -- one of the most challenging periods of time that any of us will have to manage through. The March, April pandemic crisis. These were people who went -- who decided to stay on-site to serve their customers. These were people who stayed in plants, some individuals who are living in situations they had never seen before, never thought they'd encounter. It was incredibly rewarding. There were many more phone calls we could have made. We picked 130, but there were many more. This is what makes Emerson a phenomenal business. The passion, the commitment, the energy of the individuals as are depicted on this piece of paper. And it energizes me every day as the leader of Automation, and certainly as the CEO of this company. So what I'll talk about in terms of culture are 3 dimensions. I want to give you some perspectives as to my leadership style. I know some of you have asked, so I thought I'd talk about it. I want to talk about diversity, inclusion and governance as well. I truly believe that trust and empowerment are the key elements of leadership. You got to let people run. You got to let people do their jobs and perform. What I ask in return is accountability. I hold people accountable for the goals they set and the objectives that they set on paper. But I'll let people run. And I think that's very, very important. As a manager, it's worked for me as I've scaled, David went through the history, from a regulator business down in McKinney, Texas, to Rosemount, to the leader of Automation. And I'm certainly -- that same style can scale to the CEO of the company. I think it's equally important for us to be very aware and deliberate about people development. The experiences that I had and that Jamie had, Mark, Ram Krishnan, did not come by chance. They did not come by chance. I was lucky a few times, as David will tell you. I was lucky a few times that someone turned the job down and I got an opportunity. But there were deliberate moves for me to gain experiences. I tried to make the most of those. And we need to think very carefully about our development of our young people so that in 10, 15 years from now, the next leader standing up here, and they've had the opportunity to run the company, to develop and to pick the right skills required to be the CEO or the business leaders of this great corporation. Diversity and inclusion. We've done a lot of work here, but there's a lot to be done. There's a lot to be done here. And I'm excited about it. Obviously, being a multiethnic person, I feel very, very -- it's just a subject that's very close to my heart, and I have a particular passion for it. We'll be coming out shortly with some targets for -- related to women and minorities in leadership positions in this company. And we're going to hold ourselves accountable. We're going to develop paths to get there. We're going to be smart about it, but we're going to hold ourselves accountable to those targets. A very important set of discussions that we've already kicked off as a management team here, and I'm excited about. I have a Board that's incredibly active and engaged around the issues of culture, but they're equally active and engaged on governance and compliance of this company. Done a lot of work, David and the Board over the years to diversify the experience of the Board as depicted here on the right, both in terms of gender makeup, ethnicity and experiences. And I think we have a path going forward working together to continue to create value at Emerson. So now I'll turn to our market, and I'll outline the growth dynamics and opportunities for the company going forward. We have 3 phenomenal franchise platforms, all of which have opportunities to grow, have opportunities to expand their served markets and opportunities to create value. Across their categories, there are leaders. There are sales leaders in market participation and there are leaders in profitability versus their peers. All of them have a hand to play in adjacent and growing to adjacencies, as you'll hear today, and in playing the software card, across all of these businesses, the opportunities to expand into the digital arena. And I'm excited about what they present. And what you'll see today is a commonality of strategies that is common across all 3 of these businesses in terms of the opportunities to grow and create value. And I'll walk you through what those will be. So let's start with the diversification, which is strategy number one. We've done a lot of work over the last number of years to diversify our portfolio. As a matter of fact, our oil and gas sales by end market are down 9 points since 2014 and 2020. But more importantly, our relevance in hybrid, discrete and the Cold Chain, as I highlight here has become increasingly more important. That's been done through organic investments in the company, but also through very deliberate targeted acquisitions. The example around Cold Chain is really around the mix of both of those. We have a great hand to play around temperature monitoring, both in food and cargoes and pharmaceutical. Jamie will give you a number of examples around that. Obviously, with the COVID-19 vaccines and the distribution challenges around those. We've had a relevant, very good opportunity for that business. Around discrete, we spoke about this at length 2 years ago in New York. Mike Train talked about the acquisition of the GE PLC business. But I can tell you is that we'll continue to build around those capabilities. We're not done. I think the discrete space is highly attractive. It's attractive from a perspective of the cycles that it exposes us to. And as we talked at the earnings call, we are getting the benefit of those early cycle businesses right now in the automation space. We've built on that PLC business that we acquired with another acquisition of a company called Progea in Italy earlier this year, which brought an HMI-based business in for the PLC. And so we have a complete offering now for our channel and our customers around the world. But we also acquired a motion control business in Germany called Aventics, a very interesting opportunity for us, which is now growing aggressively. It gives us access to a strong German economy in the discrete space. And we'll continue to drive opportunities around that business as well. So we have the basis for phenomenal expansion there. And then the last market here I'll highlight is hybrid. And in that, as you know, consists of a number of markets, including pulp and paper, mining and food and beverage. But the life science market, which we'll spend a little time speaking about in the automation piece, has had phenomenal -- experienced phenomenal growth in 2020 and into 2021. And that's obviously driven by the therapeutic efforts as well as the vaccine efforts around COVID-19. But we have a technology hand to play as well. This industry is undergoing a change from traditional batch manufacturing, where essentially you move chemicals or biologicals from one container to another into a continuous manufacturing process. And our ability with our systems and expertise to journey our customers through that process is very strong. So great growth across these markets. Look for investments that we'll be making around that, both internally and as we look at opportunities outside the company. I want to speak about the investments we made across the layers, the technology layers across the business. Starting with the devices into the control and then ultimately, up in the data management layer, what we call our software layer, which is today at $1.1 billion of stand-alone software business. That internal and external development is pervasive across all 3 of these technology layers. In the device layer, we are releasing a new generation of compressors, which Jamie will talk about, addressing the low GWP refrigerants and efficiencies. If you look across the control layer, the PK Controller, which we spoke about 2 years ago, Jim Nyquist presented in New York. It was one of Emerson's most successful new product launches. Alone, the PK Controller is over a $200 million business today in a short 2 years. Phenomenal work there as we continue to expand the opportunities for I-O in process and hybrid. And then in the data management layer, manufacturing execution systems, around Syncade for pharmaceuticals or mimic simulation software giving real-time simulation opportunities of business conditions for process plants, all around that layer, and I'll just give you a few more examples in a few moments. So if we step back and just look at the software layer, $1.1 billion of stand-alone, $2.4 billion of software when you account for the software that's embedded in our products. We've innovated from within. That's the bottom left of the chart. Many examples you'll hear throughout the day, many of which you're familiar with already, but we've been acquisitive as well. In the time that I ran Automation, we made 8 acquisitions, all of them in the software space. We made 2 equity investments in this space as well as we continue to broaden the opportunities to reach around that. Our strategy is to be very expertise-enabled in vertical as we look at software opportunities. It is not to go horizontal or to just buy software companies for the sake of software companies. They have to have the linkage to what we do: to our devices, to the relevance in our customers, they have to bring a level of expertise and provide an ROI in the industry. And that's the world that we start to look at as we think about adjacencies, which are the next layer and ultimately, to some of the broader opportunities that we have out there. A lot of work being done in this area. We put a target of 20% of our revenue out there as we look forward in this plan around software, but one that is a very important opportunity for us as a company. David spoke earlier about digital transformation, a tremendous amount of work going on here. And it's been slightly over a year since we set up the group that Stuart runs. He presented 1 year ago, if you recall, in New York City, and we've participated in many conferences as we've gone through the year with many of you. So on 2 dimensions that I'll highlight here, the first being technology. On the technology front, we've now created an operational software platform around our optics where we've taken diverse pieces of software that we've had across the company and singularly created one unique language where all of our software platform works together, communicates together, looks the same, feels the same for our customers. Tremendous work by the team in Austin and Minneapolis to get that done very quickly. But we continue to innovate on the sensor level as well. There are 2 examples here, one around vibration, very successful, which we released earlier this year. And the second, around location awareness, a wireless heart-based location awareness system, which is significantly more accurate and cost-effective to standard Wi-Fi use systems that are out there in the plants today. So again, continuing to innovate around the sensor piece, and the opportunity is, obviously, over here on the software piece, very important. But we also have done a lot of work on the selling side, on the channel side. We have over 10,000 customers today that are at the early stages of their digital transformation journey. They're just getting started. Interestingly enough, we have 45 sites where we have at least $2 million of installed base of digital solutions and at least 3 distinct solutions in place. We have aggressive plans to take those 45 sites to 100 this year, to take our installed base to $5 million from $2 million and to increase the breadth of solutions that we offer our customers. There is momentum here in many ways, as we've discussed in the past, and David referenced at the front end, this market continues to define itself. It continues to find its way, but we have a good hand to play in doing so. We equally have a great hand to play around the sustainability journey. Michael is going to come up and talk about that in length, I feel really excited. This is a future that we have that we can create a lot of value around. We play across the entire energy value chain, as you look at this from left to right, whether it's enabling their transition to renewable fuels, to clean fuels and energy sources on the left side, to our digital top quartile efforts, whether it's the optimization of the energy supply through transmission and distribution, and I'll speak about that a little bit more in a moment. Ultimately, in the efficiency of how we use our energy through our commercial residential businesses. Our hand is incredibly strong. And I'm really excited about what we're going to do here as we go forward, and I'll let Mike cover that for us in a few moments. The OSI acquisition was one of -- I think we'll look back at as a management team as one -- fundamentally, one of the most important acquisitions we've made in a number of years. It opened up an addition -- a total market of almost $7 billion around power generation and power transmission and distribution. It has an incredibly relevant hand to play, both around sustainability, and around the modernization of the grid with it. It is a great fit culturally for our company, the management team, delivered a great first quarter, and there's momentum in the business. We're going to globalize the business with significant stakes in the ground already in Europe, in Australia, we continue those efforts. We have the opportunity to leverage strong power generation presence in utilities across the United States into the transmission distribution and our hand to play in the transition to ADMS here. And I think that our opportunity here is vast. What I'm also excited about is the additional market that it brings to the table. It brings a $1.3 billion sensor market in transmission distribution that we did not have access to before. And there are opportunities to make further acquisitions or internal developments in that space as we go forward. So much like we did on the power generation side, and I referenced earlier, where we expanded our global participation by 12 points with Ovation since acquisition, we have the opportunity here to 2x or plus the market participation of this great company with these great technologies that they brought to the table going forward. So that's the elements of the strategy that you'll hear today. We start with market growth of about 3%, as I'll highlight in a moment. We'll drive industry diversification. We'll continue to invest both organically and through acquisitions in software and digital, and we have a great hand to play around environmental and sustainability. A very exciting plan that will deliver underlying sales of about 4% going forward in the plan. So next, I'll cover the Emerson financial plan and the details of it and -- as we go through '21 first and then into -- in the longer term. As David highlighted, the V-shape recovery is clearly underway. The acceleration out-of-the-box of the commercial residential business has continued as we've gone into January, the 3 order run rates at 16% in January. And the recovery in the automation business, although slight, has continued as we've gone through January as well, down about 12% now at the January endpoint. Emerson now in that down 3%. So slightly recovering, again, from where we were in the December time period. I would expect the commercial residential business to continue to be strong through the year and modulate between 8% and 15% or so as we go through the remainder of this year. The early cycle business in commercial residential as David highlighted is that U.S. residential. But Jamie also has some medium and longer cycle businesses, particularly around commercial and Professional Tools, which we'll see come in later in the cycle. So in that 8% to 12 -- to 15% band. In terms of automation, the pace of recovery, as we highlighted at the earnings call, continues to be around North America. The speed at which North America will come back at the rate at which you will recover. What I will say is that the discrete early cycle businesses have -- are recovering on a global basis now. If you recall, back at the earnings call, I spoke about just about every world area with the exception of North America, but we're seeing those early positive signs in the discrete markets in North America now as well. That's what changed for us in January, and is giving us more confidence of the recovery in the automation markets as we go forward. This is the guidance that we gave on the February 2 earnings call. No change to the guidance. We're looking at a underlying sales growth of flat to 4% for the corporation for the year: automation, down 3% to plus 1%; and commercial residential at 8% to 10%. We've identified about $200 million of restructuring, and I'll update where we are on that, but we're well on our way to spend close to that number. We'll generate $3.15 billion of operating cash flow, spend about $600 million or so of capital as we look at the plans across the businesses. And between share repurchase and acquisitions, $0.5 billion to $1 billion and then $1.2 billion of the dividend. The commitment that we made was adjusted EPS of $3.70, plus or minus about $0.10, and we've not changed that. The key headwind and David highlighted that I want to speak about is material. Whether it's steel, copper, resins, the electronics or logistics challenges, we're fighting those right now, particularly in the Commercial & Residential business, as you heard at the earnings call. We -- it's not the first time that we've faced this. We have a long history of addressing material inflation in the business. And we believe that with the strong efforts of our supply chain teams, and working with our suppliers, we will continue to mostly mitigate those impacts. Part of that will come from the COVID savings that we had assumed. But obviously, we continue to be in an environment that's curtailed in terms of travel and entertainment. And so most -- a lot of those savings that we thought we would we give up through the year will still be on the P&L as we highlighted during the earnings call. But that's the key challenge that we've got to be very aware of. Ultimately, over time, that will come back and we'll unwind the other way over the next 3, 4 quarters. But this is the challenge that we're having in the business today, and it's not unlike many industrials out there are facing. I want to spend a few minutes talking about the cost reset plan that we presented 1 year ago and rolled out across the platforms in corporate. Tremendous work. Tremendous work by the platforms. Tremendous work by corporate, by all our teams around the world. It's not the first time we've done this. We did it in early 2000s. And we did it again in the '08, '09 time period, where we've looked at our cost structure very aggressively and put programs in place to execute. But we've made tremendous progress this year. We will hit our adjusted EBITDA or we'll equal our adjusted EBITDA prior high in 2021. It will take us to 2023 to get to the adjusted EBIT record, but we're well on our way, as I'll show you in a moment. What's interesting about this plan versus the plan that we showed you and shared with you in New York 1 year ago is that we're doing this with $2 billion lower sales in the 2023 period, but we're still getting out there. We didn't move this out to '24, we stay committed to that year. But the strong execution that we have in the base company really enables us to deliver those EBITDA and EBIT commitments as we get out there in 2023. So I feel very good about that and the work that's been done there. So here are the details. In terms of restructuring spend, we committed to $600 million as part of this program that generates $650 million plus of savings. It's a better than 1:1 payback here as we think about the programs. 80% of the spend is already complete. And you'll hear from Jamie and myself a little bit later, that's consistent across the 2 platforms. So really good work. And by the end of fiscal '21, we'll basically be completed with this program. And we'll get back into normalized restructuring activities that we have in the business and that we've had in the business for a long time. The savings are hitting the P&L. You've seen that over the last 2, 3 quarters as they impacted. We've realized about $220 million of savings already, but we have a phenomenal future benefit heading our way as well. We went after the structural headcount actions early. We're now in the midst of the execution around the plants. And both Jamie and I later will give you some more color around where we are in our plans. But they're being managed, and we're being very cognizant of us returning to growth and how we move things around during that period of time. I feel really good about the execution here, and I feel very energized by the work that the management teams have done around the world to get us at this point, just great, great work. So let's walk across the EBITDA bridge. You're familiar with this. We shared, essentially, a similar bridge a year ago. Let me walk you from the 2019 period, which is where we made that commitment to the 2023 end point. We are at 21.5% adjusted EBITDA in 2019. The volume assumption that we made here is 30% leverage. We assumed the volume to come in at 30%, that's in line with our historical numbers. You've seen in our recent results that the leverage is a little higher than that. Obviously, we have the benefits of our cost reset already flushing through the P&L, and hence why. But we assumed the 30% for the basis of this plan. The red bar of almost $900 million are the headwinds that we face in the business. The biggest of which is wage inflation, valued at about $0.5 billion. And other inflation, including freight, and -- as a secondary headwind of about $200 million as we go through this cycle. We have positive price/cost in the plan despite the short-term challenges that we have in the business today, of $365 million. The cost reductions and productivity of $485 million. This includes also the investments that we're making in the business: the technology investments, the selling investments the marketing investments that we have across the business are embedded into that bucket right there. And then there's a $650 million of the cost reset across the business. All that gets us to that 24% commitment on adjusted EBITDA that we've made as part of the cost reset program. So feel good. We're well on our way. There's momentum in execution. And I feel very positive of making this commitment as we go forward. Let me spend a few moments now talking about the top line and the sales. Our plan is to grow organically 4% on a market that we estimate to grow around 3% going forward. Organic growth about -- delivers about $2.5 billion. But as David said, there could be opportunities there, depending whether we do have -- we do find $1 billion of revenue for the acquisitions. OSI represents approximately $300 million of revenue in this -- on this bridge. So there's another $700 million of acquisition revenue that we've embedded in this growth plan to get to $20 billion-plus in 2023. Walking across the EPS bridge now. It's this EPS road map to $4.75 to $5 is driven significantly by the execution of the base company. That's the biggest driver that we have. The net headwinds, if I step back and walk us from 2021, are predominately around the COVID savings that we've experienced over this year. That obviously get restored, partially restored as we go forward. There is the base company execution. And then we'll flex. We have flexibility between share repurchase and acquisitions as we go forward. It is important to note again, that this plan has a cumulative $7 billion less sales in it than the plan we presented last year. But because of that strong execution in the core company, we have a path to that $4.75, $5. We have a path to our peak margin performance, cost reset plan performance in 2023. That's very exciting for us, and that's a reflection of the hard work and -- that's been done across the organization. Shifting now to cash and the sources and uses of cash. We will generate over $15 billion of cash through this planning cycle. The dividends will remain an important component of returning cash to our shareholders. And that commitment will be unwavering as David and I joked about a little bit ago, very serious. The share repurchase will modulate, will modulate between acquisition opportunities and share repurchase in total to return 50% to 60% of our operating cash flow to our shareholders over time. The cash flows that we have in the business support the acquisition plans that we have. We have about $6 billion. But we have a strong balance sheet. And that balance sheet will bring the flexibility that we need if we need to do different things if the right opportunity presents itself for us. We'll be disciplined as we look at things in our processes, and we'll continue to invest in our businesses. Our businesses are thriving. We'll continue in that 3% of sales CapEx spend, which in this year, is about $600 million into the businesses. So I feel really good about the plan, and what we can deliver back to the shareholders with our cash. Turning now to free cash flow. We have a strong path to deliver free cash flow every year. The corporation made a commitment during the repositioning to the dividend. We went outside of the band of 40% to 50% target that we set, and then we grew ourselves back into it. That was the strategy that David laid out back in 2016, '17, and we've executed that. Now we are trending more in that 40% to 45% area on the dividend as a percent of the free cash flow, and that's where we're targeting the company going forward. The earnings quality of this company is incredibly high. And we're looking forward, continue to convert over 110% of our net earnings to free cash flow in the plan. The balance sheet of the business is strong, as I highlighted, and will give us that flexibility as we go forward to maintain the dividend and to do different things with the business from a strategic perspective. So in summary, this is the financial plan. I've talked about 2021 in terms of the guidance. That hasn't changed, but here is the numbers on 2023. Sales growth, $20 billion. Expansion of margins to the cost reset plan we covered, an opportunity to get to the $4.75 to $5 EPS range, an important commitment for us. The balance sheet ratio is very strong. Maintaining our debt rating, where we've been essentially for 20 years now to give us that flexibility going forward and total debt to adjusted EBITDA of 1.7x. With that, I'll conclude with this chart. I feel really good about where the company is. I feel very, very positive about the strategies that we've identified to generate growth and create value. We have a phenomenal hand to play with our technology and our people around software, digital, sustainability and the diversification of our industry segments. We have a path with a strong balance sheet with a -- and strong cash generation to create value for the shareholders going forward. And I'm very excited about our future as a business and the path forward. I'd like to now turn it over to Mike Train to cover the sustainability opportunities for the business. Good morning, Michael.

Good morning, Lal. Nice job.

Thank you. There you go.

Thank you very much. We're running a little ahead of schedule. That's okay. We'll take our time. Maybe you'll get a few bonus stories out of the deal there. So we'll see how things -- of course, you get to come back up again, Lal, and answer for us. Good. Well, first of all, let me harken back to the tribute with David. I think I can speak for a lot of the management team members both in this room and beyond out in the world that we've all been personally touched by David's leadership, by his training, by his coaching, and ultimately, by his friendship. My personal story, is Dave and I moved to Hong Kong, and at the end of 1993, set our path in Asia. And ultimately, for, I think, a lot of the globalization work that we did beyond that. And I was very young, very raw at the time. And David was younger at the time as well, but has been a great coach. And ever since then, he's given me opportunities to develop myself. He's taught me how to develop others. We've all had to learn how to develop others in the company, and it's been a massive team effort. So I want to salute David on that, and appreciate everything, again, on behalf of really, everybody in this room beyond this room from that point of view. Lal, we welcome you as our new Chief Executive Officer. Of course, we all know you extremely well. You've been around here for 20 -- almost 25 years. I think we're really excited about our future here. We love the portfolio that you just laid out for us. Really important as we go forward. I get the pleasure today to talk about our environmental sustainability efforts. And this is something that's not overnight or brand new. We've been working on this. But we felt it was the right time this year to really present this in a structured way to share with everybody. Our employees are passionate about environmental sustainability. It came through the work, that survey that Lal referenced to 17,000 employees as we crafted our purpose and our causes. This topic ranked at the top. Our employees have a passion for this. They want to be making a contribution. They want to be making a difference in the world. And in Emerson, they can make that difference. And I do want to share some of that with today. We have investors that are very interested in this topic. They also want to understand what our relevance is. I'm here to say today, I think we're highly relevant as we go forward into the future here. And ultimately, we have customers here, customers that need to make their progress. And again, the enabling technologies around the broad automation capabilities of Emerson, I think, are really going to land for them. And I think already, we're seeing them pull on us to work on some of those early novel solutions. And I'll share some of those examples with you today. So my agenda is kind of to walk you through the greening of Emerson, and what we're doing in our 4 walls. I want to spend some time really, on that sources and uses of energy, a little bit of a learning that comes from that and also how it relates to really, I would say every piece of our portfolio and what we do. Greening by Emerson of our customers and greening with Emerson as we work with others around the world to make real, actionable, practical progress. So let me start with our environmental sustainability framework. This is our greening of Emerson, our greening by Emerson with customers and greening with Emerson. so the left-hand side of this chart is extremely important. In fact, when we had our management's discussions the past 2 years, David was adamant on this topic, and we had to make sure that we put the focus on greening of Emerson. Back in August of 2019, we issued our target, Lal, our objective to reduce our greenhouse gas emissions intensity by 20% over a 10-year period. And we did that by baselining 185 of our major sites, manufacturing sites, large office complexes, really, almost the entirety of what we spend in the energy space, in those 185 sites. We capture that information. We audit that information. We have modeled our energy mix. We've modeled our greenhouse gas intensities. We understand our activities are extremely well, and we're working on those things. So we're really focused there. Greening by with our customers. We put it in the center of the chart. I use a little terminology at the bottom here called SCOPE 4. It's really the lever for Emerson is the impact we can make with our solutions with our customers. I'm going to walk you through these 4 strategies here in a moment. And then ultimately, greening with our constituents around the world, whether it's governments, industries, academic associations and so forth. So big role to play here. This is our framework. We introduced this to our employees. We're very excited about this, and we want to continue to drive this. So let's start with the greening of Emerson and our commitments. We introduced our metric around this. Again, it's a greenhouse gas intensity reduction metric. It's related to sales. We started off at 39 with our baseline. We're on the journey to 31. We've got 2 principal strategies here. One is to reduce in our 4 walls, the energy that we utilize. And we're very focused on that, and we are working on that. And secondly, we will increase the mix of what we purchase from a renewable or a low-GHG energy sources. This has been led by our Board of Directors. We just had a very robust discussion in our last Board meeting to talk about this. Our Board of Directors are very passionate about this topic. And we had a great dialogue on this. I lead our environmental Sustainability Steering Committee. Several of my fellow members are here in the room. We have others beyond the room, around the world. Really important focus that we brought to the company on environmental sustainability and driving our strategies there. We're embedding it in the management process. So all the different elements of what we do, whether it's planning conferences, reviewing what we do with our portfolio with our businesses or our operational reviews or even our organization reviews, we're going to be looking for how environmental sustainability has a very direct representation of those activities. And ultimately, in the place I'm really taking this to is to every individual site. We are creating environmental sustainability site teams with a leader. They are the ones, just like everything else we do in our management process, that are going to drive our progress, and we're going to enable them to be able to do that. In addition, we're having engagements beyond our 4 walls, with our energy suppliers, our supply chain partners, our logistics providers and making sure they understand where Emerson is coming from. We want to understand what they're up to. We want to collaborate with them as we go forward. Just a couple of highlights on the greening of Emerson. You see them listed down the right-hand side of the page here, some of the things we're up to. One of the really great tools that we're using right now is our energy treasure hunts. And this is where we ask the sustainability team of a facility, and we bring some subject-matter experts to the site to participate, to go walk through the site for 2 days. First day is typically on maybe a Sunday when there's not a lot of activity in the facility. Eyes, ears, listening, watching, learning. And then going back into that facility when it's at full pace operating, and again, doing the same thing. And finding those opportunities and learning what we can do from strategies. I've highlighted 6 of sort of what we've seen so far, LED lighting, control systems, air, compressed air is a huge topic for us. I didn't realize this, Lal, as you -- we have a lot of older air systems in our own factories. If you update those systems. We actually have the ability with Ventyx to measure our compressor leakage and these kinds of things. Air is a tremendous expense and a tremendous opportunity for us as we go forward. Same with industrial cleaning. Same with our temperature chambers and so forth. So you go down the right-hand side, we've got an on-site solar project going in Dubai, makes kind of sense. You're in the desert, David. We've got 3 buildings there. We're using that roof space. Should provide over a majority of the energy we consume ultimately, when that's put in place by the end of the summer. Renewable energy purchases, equipment, but beyond the commitments around our emissions intensity. We're working chemicals. We're working organic compounds. We're working recycling. We're working waste. Our employees are so energized by this topic. And we're getting a lot of feedback. One of the big pieces here is kind of a hub to connect everybody's activities, do the education, making sure that they have access to our tools and ultimately, celebrating success. I think that's what's going to be real important as we go forward. So I want to now turn you to discussing sources and uses of energy in the U.S. I don't know if anybody has ever presented this chart to you. This is a tremendous chart. It's not my chart. This comes from the Lawrence Livermore labs, part of the Department of Energy. And it's a full depiction of the energy complex across the United States. I use this as representative for the world. There's going to be some pluses and minuses as you go to different countries around the world. By and large, this is kind of what it looks like as you move around the world. Down on the left-hand side of this chart, I'm going to walk you through. These are sources of raw energy, oil, gas, coal, geothermal, wind, solar, hydro, nuclear and so forth. As you move to the middle of this chart, you go through conversions. As you move to the right-hand side of the chart, you go through its uses. And I want to walk you through this. The other reason I really love this chart is it just happens to add up to about 100 quadrillion watts of energy that's consumed in the United States. So all the numbers on this chart become percentages. So it's very easy to grasp as you look at this and you think about what's going on here. So let me kind of walk you through some of these. We'll start on the left-hand side of the chart, sources of energy. Again, you can see where we're starting from as the United States, and frankly, as the world with the infrastructure, the trillions of dollars of infrastructure we have out there today. And the first strategy this really points to is energy-sourced decarbonization. Working on the left-hand side of this chart to have sources of energy with less carbon associated with them. Three kind of critical strategies here, low carbon power, that's your solar wind, nuclear or hydro, where we touch and are involved in all of those. Low carbon fuels, biofuels, big category, using waste from agriculture and other products as biofuels. LNG still has a huge role to play in that switch away from coal towards gas from an emissions standpoint. And then ultimately, and you're hearing a lot about it, hydrogen and hydrogen-based fuels, and we'll talk about that here in a moment. Three live examples of energy-sourced decarbonization, solar and wind. This is an installation that we recently worked on using our Ovation, our Power & Water Solutions capabilities to get those assets on and off at the grid properly. Just the way we would switch a 600-megawatt fired plant -- fossil fuel fired plant on, we do the same thing with these smaller assets to get them on and off of the grid and manage them. In the middle here is one of my favorite solutions. It's right now, renewable natural gas. We're working on this in Europe. In the U.S., in Canada, in China and other parts of the world. And this one for me, I love because it combines everything Emerson does. It takes compression, sensing, edge computing, ultimately analytics, combines it in a solution and allows us to be able to go out there and really utilize some of these waste resources, if you want to call them that, and turn them into energy, clean them up, put them back into grids and get them transported to where they can help go provide an energy source to somebody else. And then finally, on the right-hand side is the next-generation around hydrogen. This one happens, are you talking to ammonia for storage and transport, again, using every -- really every capability across the company to be able to deliver on something like this. So this is the energy-sourced decarbonization. Emerson is right in the middle of every one of these type of solutions today. If you move towards the middle of this chart, where we're looking at both the primary sources and the conversion to electricity, emissions management comes up as a big strategy. And this is not our strategy. This is the world's strategy. Emissions monitoring control. We have every capability you need, that our customers need to focus on this, improve on this. Some of the novel solutions like carbon capture utilization and storage, where you take that carbon, you sequester it. You either store it or maybe turn it into potentially a usable form for something. And then I think, a really big and important one, Jamie, that you'll talk to a little bit later, is being able to enable natural lower, 0 GHG and low-GHG refrigerants across the different systems around the world. And again, from an emission standpoint, that's a huge contribution that we get to help make as we go forward here. A couple of examples here. I want to feature the ADNOC, the Abu Dhabi National Oil Company. They have one of the very few so far, at-scale implementations of carbon capture, 800,000 tons of CO2 a year. And it just happens to have Emerson system, Emerson instrument valves, Emerson engineering. We -- it was a real pleasure to support that and continue to support that facility. The fun thing about that particular application is they're abating a steel plant in the UAE and moving its CO2 out to the geology that the UAE has to put it into the ground and actually enhance oil recovery at the same. So great project, I think a great example. I think you're seeing many of our customers lean into this specific type of application as we go forward here, I think it's going to grow substantially. The middle case here, fugitive emissions reduction, big topic for our customers. I just saw some news articles again this week, circling back on that strategy. And we have it every layer. We have it in our devices. Our devices are being built to reduce or eliminate fugitive emissions. We have monitoring for fugitive emissions, of course then we have the analytics to detect it and to help see it, manage it and so forth. And then on the right-hand side, our CO2 natural refrigerants is one of my favorite applications. We're working with Hydro Quebec, it's in a lab right now. But it's looking very good for kind of an industrial-sized heat pump that could be used in commercial office buildings, eventually, with green-sourced power in Canada with their hydroelectric business. So really exciting to be on the forefront, again, engaged at the very beginning of these type of activities and helping develop them as we go forward. If you move to the third strategy now, it's around electricity and how energy is being utilized and more electrification in the future, pulling away and taking out combustion processes and replacing them with electrified processes. I just mentioned heat pumps, end-use electrification, big activity. They're already launching, and we'll share some of that with you today, energy supply optimization and energy storage, that's still a big question mark technologically in a lot of places, and grid management. Three use cases here on the left is a rendering of what we're helping customers do in Europe right now with heat pumps. We're doing the same thing in China. We're having those discussions with the Department of Energy in the United States. This is going to be a big thing as we go forward. In the middle of this, managing grids. This happens to be gas and liquid grids, the molecular part of this equation. Emerson's all over that with our capabilities, our ability to manage them, keep them safe, obviously, help make sure globally that all of those resources are managed properly. And then finally, on the right-hand side, this is the electrical grid. And this is where OSI, Lal just pointed to that, and again, I will double down on his comments, I think OSI is going to prove to have been such a timely way to expand our Power & Water Solutions business and be able to take us all over the world. The grids of the world are 80 years old. They need a lot of modernization. Now we're having all of these distributed energy resources being brought to the party. And we need that ADMS, that advanced distribution management system, brought to these different countries around the world. And I think that'll be a lot of fun for us as we go forward. And finally, the fourth strategy, energy efficiency and optimization. Look at this piece of the Sankey diagram right now. The pink parts are where we utilize energy, the darker grays are what actually get used, what actually gets to the finish line. So if you go back to the beginning of the chart, 33% of what we started with actually makes it to its intended use. 2/3 of the world's energy is lost in the middle of this process. So energy efficiency and optimization is still a critical strategy as we go forward. Again, advanced controls, analytics, simulation, and then waste management and those types of things. So a couple of examples in energy efficiency. Our Sensi smart thermostats continue to make great progress and doing very well around the world, and we're expanding our capabilities there. We've augmented that with acquisition to top that off. This middle one for me is really exciting. This is the whole space of simulation, making sure that the people that are operating are well trained when it matters. We depict a bioreactor here. This might be something you used maybe in a life sciences application. You might use the mimic software in this particular, and tied to our delta V and our Sankey capabilities. But the value of what's in these batches is $5 million, $8 million, $10 million. And you don't want an operator to make a mistake in the middle of that. So this whole simulation field, the process modeling that we can do and making sure that our customers can simulate -- and we do this across all kinds of different industries, life sciences. We do it with pipelines. We do it with reservoirs under the earth, all kinds of applications there. And then finally, on the right, this is our Cold Chain. We just announced our Lumity branding for this. Like I said, we're very excited about this. And again, our ability to have all those touch points through the value chain making sure that food stays at quality and doesn't get wasted and doesn't become waste energy as depicted on that last chart that I shared with you. So you now know how to navigate the Sankey diagram. I encourage you to pull this out once in a while, start following the lines on this chart. You'll find where there's -- the EVs are on this chart. You'll find where different things go to different places. Ultimately, hydrogen will come on to this chart. It's so small, it's not detectable today, but we are going to start converting primary sources of energy to hydrogen to be moved and then utilized, on the right-hand side of this chart. So I want to take just a moment to talk about hydrogen. It's been in the press a lot lately in the last 1.5 years about hydrogen, the promise of hydrogen, road maps for hydrogen. I want to make sure people understand the use cases for hydrogen. So I've outlined 4 use cases on this particular chart, 4 distinct use cases, and I -- and Emerson is participating in every one of them on real projects right now. The first one is blending of hydrogen into natural gas. This is -- injects into existing infrastructure. Again, we got to keep finding ways to leverage those trillions of dollars of existing infrastructure. Blends of 5% to 30% hydrogen are out there. Make sure the turbines can take them, to make sure the pipe materials can take them, make sure they're safe, Emerson has a huge role to play there. And ultimately, this will help build the market. So we get more hydrogen out there, this will build the market for hydrogen, and then all of those sources of hydrogen will follow. The fuel infrastructure for transportation, the fuel cell case. This has been around for 20 years. This is being worked on, picking up pace. I think we're going to see it personally in commercial trucking, fleets, that type of thing. Maybe we'll get to residential vehicle ownership eventually. Emerson has great technologies here. Our coil-less meter will be absolutely perfect for this. Our ASCO capability, our solenoids, perfect for this use case. So we're right there with all the OEMs and all the different people that will be involved in that particular process. The third one here I really want to highlight. This is the hard-to-abate industrial processes. This is where -- if the world is going to make it to the finish line, this is what they've got to solve. And this is where you transition from using a high-temperature fossil fuel, could be a coal or a gas today, and using hydrogen to fire that process in steel, cement making, petrochemical furnaces, that sort of thing. Again, we're very involved in the conversations around that. We have a lot to offer from a portfolio standpoint. And finally, is the nirvana case, the last case. This is your green hydrogen power generation, where you use an electrolyzer -- with an electrical source, use an electrolyzer to convert water to hydrogen, then you store it and then it becomes a dispatchable opportunity to then run it through a turbine and create electricity for it. You need geology for this to work so far. We haven't gotten beyond the geology cases for the storage, yet. But there are active projects on this right now. We're involved in them. Again, the world needs to build some of these at scale, so we can all learn from them as we go forward. On the right-hand side of this chart is our hydrogen outlook. This is not my outlook. This is the IEA, The International Energy Agency's outlook. This happens to be under one of their scenarios called the Sustainable Development Scenarios. And what the expectations are for hydrogen. Growth, absolutely growth, but also the parts of the economy and where that growth will come from, I think, are interesting here. And that's why you're seeing a lot of conversation about this going into the road maps. And I think as we get future proofs, more of it going into the road maps into the future. So I want to circle back after walking you through those strategies, the 4 strategies, they're not my strategies. They're not Emerson's strategies. They're the world strategies for environmental sustainability, energy-sourced decarbonization, emissions management, electrification and system integration, energy-efficient optimization. And a lot of those novel solutions underneath those that I highlighted for you a moment ago. Again, I think Emerson is a highly relevant in a lower carbon future when you contemplate these strategies. As a bit of a proof here, I've laid out for you all of the novel solutions that I referenced here: biomethane, biofuels, emissions monitoring, the grid, carbon capture, industrial hydrogen. And looked at the capabilities you need to create those solutions. And across the top of this list are the technologies in this corporation across our 2 platforms today, and we very much have the ability to combine our technologies to help create these solutions for our customers. So I think we're very relevant as we go forward here. I think we're very excited about it. Where you don't see a dot on here is where you don't need to have a control system. You don't need to have a compressor or you don't need to have a meter. I'm really tickled by this. And I think our organization sees where we are, what we can do and how we can really enable customers and enable the world as we go forward. I want to land finally on a little bit of a forecasting thing here. I showed you the U.S. energy complex, and what its mix has looked like. This is the worldwide, the world energy outlook, again, from the IEA, and its primary sources and how those sources will move over time. I picked the 2 of their scenarios, the stated policy scenario, which kind of says, what is in place today from a regulatory aspect or near term, it's got the rules already established. That's kind of where the world is headed to in 20 years. 20 years equals like 1David Farr CEO-ship. So this is out there. But it's not that out there, David. 20 years is about 3 or 4 capital cycles. So we're not that far away. You could see is the world is going to grow its population, 7.9 billion to 9.2 billion. In the stated policies scenario, there's more energy required to satisfy everybody. The mix has moved around a little bit, as you'd anticipate, already with a lot of the momentum that's going on. The challenges are: everybody would love to make the second scenario happen. That's a sustainable development scenario. This is the one that will tie to Paris, kind of achieve or at least be on the path to achieving the targets for Paris. And again, IEA has published a scenario what that might look like as we go forward, less energy required because of the efficiency and having more used energy and not wasted energy. And then, of course, how maybe some of these different areas will move around. There are challenges in either one of these scenarios. And I've listed some of those challenges down the side, where there are minerals and processing, big deal for us. We want them for our alloys and our steel valve or in our valves. Our customers want catalysts. Somebody wants them in their battery, somebody else wants them in the magnetic, for their wind. Big topic. Big, big collaboration area required. Energy storage, no great solutions yet. I personally don't believe that battery is going to solve that. We all got to keep working on that. Maybe pumped hydro has a role to play there. There'll be other ways that people try to work that. And then as you kind of go down this list, energy access and energy security for a lot of the countries of the world is still a primary topic. So they're listening to this conversation, but they want to make sure they create energy access for their people. So again, finding those practical, actionable steps that we can all take together to work forward as we go here requires a lot of collaboration. So in that light, the greening with Emerson, that area of our sustainability road map and framework is really important to us. So we have been actively working as Emerson with a number of parties around the world, different world areas to be in the middle of the conversation. We have a unique perspective with our automation and our technology foundations, also just participating and being so broadly around the world in the relationships we've created over decades with these different people. So we're in there talking to governments about what's possible. Policy pieces, what's practical. If you're designing a new product, what's a practical way to do it? What's the way we can get everybody to maybe adopt as we go forward, innovation, technology and ultimately trying to get these at scale implementations put in place. So important for the world to get to some of those to get finished and then build those into our road maps. So finally, I want to kind of wrap it up with a chart, really tying together, allow some of your great comments on culture. The work we're doing around social, the governance, the way this company runs from the Board down, the integrity we have and then our ability to deliver on the greening of Emerson, greening by Emerson and greening with Emerson. So I think we're in a great place. Again, our people are so excited about this. I think our customers are really interested in having these conversations. And we want to see the world succeed, we're going to do our part to make that happen. So with that, I think we will move to a break at 10 past the hour. 10 past the hour. Thanks, everybody. Appreciate it. [Break]

All right. Good morning, everybody, and welcome back. I'm Jamie Froedge and help lead the commercial & Residential Solutions business. Before we jump into the broader presentation, I wanted to share a chart with you because I think the pandemic has been obviously a challenging time period for all of us, but it's also revealed a lot of things that I think will drive a progress in the future. One of the things that it's revealed is how important the integrity is of our critical supply chains and value chains around the world. On this chart, you can see some of the data points in regards to the presence that our Commercial & Residential Solutions business has in some of these critical markets. Whether it's the $250 billion-plus perishable product that we help protect annually with our monitoring, sensing and software products or it's the 8 billion data points that we collect for critical medicines and vaccines within the health care industry, we play a vital role in these critical value chains. I think it's more than that. I think it's more than just the solutions that we've been able to help out. I think a lot of companies, a lot of citizens, we've all rallied to help each other during the pandemic. So there's another thing that's happened during this time frame, which is it's really crystallized our thinking and our strategies and our purpose. And as we've talked about today, companies with purpose, they deliver more value. People are excited to come to work. It's easier to recruit, retain and develop people. And it's exciting to tell your friends, your family and your kids the difference that you're making in the communities that you serve. It's also helped crystallize for us the markets that we want to develop faster and the adjacent markets that we can expand into. We've been playing in these spaces for a long time. It's great to see a new and increased focus on sustainability and all the great things that Mike and Lal have talked about today. The fact of the matter is that the Commercial & Residential Solutions portfolio has been playing in these markets for some time and stewarding changes in efficiency, stewarding changes in more environmentally friendly refrigerants. And so this is really a boost to us, a wind to our sails to drive more positive change. So let's -- here's what we'll cover today. I'll give a little overview of the portfolio. And then we'll talk a little bit about the financial plan, a little bit more detail than what Lal shared in regards to specifically this platform, this part of the business. And then we'll shift gears, and we'll get into the growth and the market dynamics that we're seeing, specifically as it pertains to the Commercial & Residential Solutions business. So let's look at the first of a couple of profile charts. We serve broadly residential, commercial, a variety of commercial markets. We have a huge presence in the food industry, both retail and service. We play a large role in transport, industrial, and we have an increasing position in the healthcare market. As you can see, we've talked about some today. We have a large position in the residential marketplace, about 47% of our business. And we play very different roles within that residential marketplace, and we'll talk about that today because we play roles in our home products -- Tools & Home Products business. We also play a major role in the HVAC and refrigeration space within those industries. We're seeing an increasing presence and growth opportunities across the 3 platforms and globally. We see a great opportunity for global expansion within many of our market spaces that we play in today. We have a large Americas presence to build off of, but I see a lot of growth opportunities in Europe, Asia and across the Middle East, and we'll talk about those as we go through the presentation today. All right. This chart drops -- dives a little more deeply into the products and the solutions that we have across these 3 pieces of the platform. We primarily have a heating and A/C business, which has a foundational compression, leadership and stewardship position that we've had for many, many years, over several decades. And we've augmented that capability with our Sensi, our Verdant smart thermostat, energy management product lines as well as our Sensi Predict product that does diagnostics and monitoring across the HVAC industry and product lines. We have a Cold Chain business that is also foundational in compression for refrigeration. But increasingly, we've added to this portfolio temperature, humidity, location, sensing, tracking capabilities, augmented with software solutions that give you real-time access as you track critical goods across the value chain globally. Our Tools & Home products business is led by leadership signature brands like InSinkErator, RIDGID, Greenlee. These are brands that are leaders, as Lal said, in our spaces, not only from a top line sales standpoint or profitability standpoint, but a product quality standpoint, we have deep, deep and very important relationships with our customers there as we advance these industries, both in the home product side with our wet/dry vac business or our InSinkErators or our Professional Tools business where we have a broad capability across the mechanical, electrical and plumbing trades. We drive things like human health and comfort, energy management, sustainability. We're protecting food quality, sustainability, safety, and we're helping drive productivity and safety as we build and maintain the world's infrastructure, and we'll talk about some of the growth areas we have in each of those spaces as we move forward here today. Let's spend a little bit of time on the financial summary. Okay, so we're off to a good start this year. We -- in the last earnings call, we increased the outlook of what we saw from a topline sales standpoint. We're now outlooking 8% to 10%. That still looks very much in line with what we see for the remainder of the year, which is very positive. So we're going to have double-digit sales, double-digit margin growth in '21. Yes, it was led by residential, but I'm going to show you in a couple of charts, it's not maybe the same residential kind of bounceback that we've seen, historically. The drivers behind it are very interesting. And I think there's more growth to come in the residential space, medium-term, in the markets that we serve, and I'll show you why we see that. As David and Lal talked about, there are some crosswinds. There are some headwinds on the material side. Again, this is nothing we haven't seen before. We'll manage through it in over 3 to 4 quarters at unwind. So we still feel very good about improving our adjusted EBIT and EBITDA margins this year. And as we go through the cycle, 5% to 7% underlying growth. I think one of the things that's very interesting about this cycle, Lal talked about it, it's a multi-phase cycle. It's led out by Residential, but we saw industries like Transportation, Cold Chain -- various Cold Chain markets, the food retail marketplace. Some of our industrial markets, we've seen them come back sooner. We've seen some of our world area markets come back faster, really cold winter in China and other parts of Asia. Europe is accelerating some of the rollout of their more sustainable heating offering. So we've seen those markets come back sooner. Behind those markets, we're going to see an actual real and sustainable growth in the industrial space. And then you're going to see some opportunity for growth that comes later in commercial, hospitality and other markets. So because of those trends, we see good opportunity midterm. In this cycle, we should achieve our historic highs in sales this year. Adjusted EBITDA will either happen next year on a pro forma basis after the Tools & Test acquisition we did or in '23 on a reported basis and operating cash flow, we will achieve our high either this year or next. It's very close this year. So we might get there this year, but if not, we'll get there next year. Just a minute or two here on the cost reset plan. We've really shifted to execution and growth. You can see most of the spending is complete, as Lal talked about. It's just coincidentally, Lal, 80% of the reset spend in each of the platforms, as he mentioned. But this means that we've got that work behind us. We -- obviously, the top line went down in '20, but we still improved adjusted EBITDA percentage by 40 basis points during that period. We reset the cost structure, we put a lot of great plans in place around footprint optimization, organizational optimization. And now we're in execution mode. You can see on the bottom right that we still have a lot of future benefit to come in '21, '22 and '23, but most of the planning is already in place. For example, our footprint optimization activity, 75% of those actions are completed or underway. But the financial benefit will largely come in the back end of the plan. So we think we have a really good runway here to the 28% adjusted EBITDA percentage. The teams are focused on growth and execution and keeping our customers happy and product in their inventory so that we can meet this incredible demand that we're experiencing right now. Let's shift gears and start talking a little bit more about our growth dynamics, our market dynamics and our strategies. So I've talked about some of these trends already. And just to give you a little bit more detail. Residential, the marketplace, there was more people wanted to buy a home than could recently. Inventories have been fairly low. It's driven pretty dramatic remodeling demand. And in fact, most of the forecasts that I've seen expected that demand to continue over the next 2 to 3 years. There's also an emerging thought process that the millennial generation will start to be much more active in home purchasing. And so I'm not sure that we're done with this first wave. There's definitely a bounceback. There's definitely a replenishment of channel inventory, but there's a lot of trends here that support a more sustained, solid residential marketplace. Food retail has changed dramatically. I'll talk more about that as we go. The pandemic changed the way, fundamentally, that most of us buy food. It's had, obviously, a large -- a near-term impact on food service, but we'll see that around hospitality, food service turning around. And then we talked about the fact that our commercial marketplaces -- the commercial buildings will take a little bit longer to come back, but that actually gives us a little bit more growth runway in the back half of our cycle, which is good for the business. All right. This is an important chart for us. This chart -- if you look at the left side of this chart, these are the 4 fundamental strategic imperatives of the business. When our teams wake up around the world and we think about where are we building products, where are we serving customers, where are we delivering value, these are the 4 areas that focus all of our energy and attention. Energy efficiency optimization, emissions management, decarbonization, sustainability. You heard Mike talk about it. It's a common theme across the 2 platforms. We're working aggressively in this space. In fact, we've been a leader and a steward in this area for many, many years, and I'll talk more about that as we go forward. Human health and comfort. We get there in a variety of ways, whether it's in the health care field or whether it's in residential and home products. So we'll talk about those solutions. Food quality, safety and sustainability. We have a $1.7 billion sales top line position in these food markets. We'll talk to you about what our strategies are there. And then infrastructure management, really driving productivity and safety, largely around our Professional Tools presence. All right. So let's start out with that first strategic imperative. This is really around energy efficiency, sustainability. This chart, the blue line is the trailing 3-month order trends that goes all the way back to 2008 for the overall Commercial & Residential Solutions platform. But because of our very large presence in the HVAC and refrigeration spaces, you can see the impact that major refrigerant and efficiency changes have on our business. Now the -- 2010, '11 bounce back may be a little higher peak because we had the '09 financial crisis. But you can see as you move forward in 2015 with the efficiency change that occurred. You see, again, another big spike in our growth. Well, this V-shaped recovery that David and Lal have spoken about so far is not driven by those changes currently. It was driven by the trends that I've talked about so far in the presentation today. Fundamental changing behaviors that drove Residential demand. We still see over the next several years, major, major changes coming. January 23, the new DOE efficiency standards will go in place. And that always drives big change in our industry, especially in the year leading up to it. AIM Act was signed into law December 2020, and we will start to see HFC reductions across our commercial, across our residential, across our refrigeration businesses. This is very important because these new laws, these new regulations will provide clarity to how the market will evolve. At first, we were focused on eliminating fluorine-based products that had ozone-depleting challenges. Now we're trying to limit the amount of HFCs that are out there, the high GDP refrigerants and other chemicals that can create a warming effect for our environment. Change is coming. I see it accelerating around the world. And we are well positioned to help steward this change. Staying within the efficiency and sustainability and building on the last chart, let's look a little bit closer at what kind of change we're talking about. I mentioned to you on the right side of the chart, you can see the timing of the efficiency changes as well as the changes around low GWP, [ lead ] low GWP refrigerant transitions. But let's look at the left side of this chart. The last big change we had was 2015, which was primarily driven by efficiency changes. Today, we're managing efficiency redesign and low GWP refrigerant redesigns. And you can see that just in the U.S. alone, this is driving OEM system redesigns at 50% to 60% greater than what we've seen in the previous cycle. What does that mean for our business? This is where our global scale, this is where our global scope, our engineering and manufacturing capabilities really help us partner with our customers and our end users to steward and drive change. Not only participating in the important committees in groups like AHRI or the Alliance group, but working closely with our OEM partners to make sure that we have the right product there available to our customers when they need them to manage these changes. Historically, during these transitions, our businesses have gained market penetration because of those capabilities, and we believe that we'll do so again in this cycle. Staying within efficiency, sustainability, but then starting to trend into human health and comfort, I want to talk to you a little bit about what's going on in Europe and in our China business. The regulations, the incentives, the subsidies around Europe, decarbonization are accelerating. And we're seeing the evidence in our business. On the left side of this chart, you can see how fossil fuel boilers are being replaced with other alternatives, the primary alternative being heat pumps, which is one of our leading product capabilities. It's growing faster than we expected even this year. We're on track for 25% growth. We grew more than 40% in the first quarter. But you fast forward and we've not reached the big clip, the big inflection point for growth here. It's still to come around the 2030 time frame, where we see a reasonable share expectation of $400 million type opportunity for this business. And as large as a $700 million opportunity for just this solution alone in the next 30 years. In China, it's not as driven by regulations, incentives and subsidies today. We've seen periods of that in the past, and there's still some that exist. But it's fundamentally being more driven by just the need for better air quality and overall decarbonization. And we're seeing the growth come across district, industrial, sanitary and individual type solutions, especially around the heating market, which we think will help us drive double-digit growth in this space during this cycle. Let's talk a little bit more about human health and comfort. I chose this specific example around our healthcare and our life sciences value chain. We talked about, at the very beginning of the presentation here, the importance of the integrity of the value chain. And we've seen that really in spades. We've got many examples of how we've helped our customers and worked closely with them. Whether it's signaling, the refrigeration going out and giving real-time insight to a partner that's then able to make sure that vaccines are not wasted and they're distributed or it's our ability to help that last-mile distribution with groups like some of the veterans affairs groups that we've worked with across the Midwest, and we're very excited about those partnerships. There's more room in this space to connect the dots. One thing that's become very clear as we've gone through the pandemic is the data across these pieces of the value chain is disparate today for the most part. It's isolated in too many cases. And we have unique capabilities across compression, controls, monitoring, different types of ultra-low temp compression and control we can provide for ultra low-temperature refrigeration as well as temperature and environmental monitoring, both in transit and when it's stationary within a cold storage or a hospital facility where that medicine is staged. So we're very excited about the opportunities to expand our capabilities here, and we're already seeing double-digit growth this year expected as well as through the cycle. Let's shift gears and talk about food quality, safety and sustainability. As I mentioned to you before, we have a $1.7 billion top line presence in the food value chain. The food value chain has changed dramatically. I don't know about your own personal shopping behaviors, but a majority of people around the world purchased food online during the -- and still are, and all the research indicates and the surveys that we're doing is that most people intend to keep doing that. Now when you move from a go to the grocery store and buy it to a click-and-collect or someone is delivering it to you, it changes fundamentally the architectures that house and keep that food at the quality level that it's supposed to be at. It changes the architectures required because people are coming in and out of those cold storage facilities more frequently to prepare those, folks pulling up to give them their food or to get to the person that's going to deliver it to the individual. And not only that, but as I mentioned to you earlier, the focus on efficiency and the change in the refrigerant policies are also going to drive new store architectures. There'll be limits on how much GDP -- GWP, a particular food retail source, we'll be able to put out there as part of their operations. We can help them navigate that change. The cargo monitoring space, I think the visibility -- we've been looking at this space for several years. We've made investments in a couple of businesses many -- several years ago, and they've grown exponentially. And we've been very focused on it. I think now with the pandemic, we'll hit another inflection point where people's understanding of the holes and the gaps and the integrity of the food value chain is so clear now that there's huge opportunity for us. And then as we go into the food waste piece of the equation, our InSinkErator capability, the ability to turn that waste and send it to advanced water treatment facilities that can turn that into good energy or turn the solids into fertilizer is a great way for us not only drive sustainability here, but across the world, and we'll talk about some of those global expansion opportunities here soon. And if, unfortunately, that waste gets into a landfill, one of the solutions Commercial & Residential Solutions has is our Vilter product, which allows us to, as Mike talked about, compress it, clean it, turn it into a clean energy source. So we play a very broad role across the space, and we're looking forward to expanding our capabilities here as we move forward. Let's build on that. So let's look at the global waste disposal industry. On the left there, you can see the U.S., 68 million installed base, about 54% of household penetration. But there's still a lot of places in the country that are underpenetrated from the standpoint of disposers. And we're making good progress in helping drive policies and education, make it easier for the product to be used and installed and understood, overcome some of the misconceptions about where a disposer can and cannot be used, both in those underrepresented areas and specifically in folks that have septic infrastructure. And so there's still growth runway in the U.S., but let's look at our global expansion opportunity. China has been very aggressively putting in waste classification regulations. Really focuses on the separation of waste classes and how you properly dispose of that waste. And over the next decade plus, hundreds of cities in China, will put these waste classification regulations into practice. And one of the main ways they're finding to address these new requirements is to use a disposer. And we've seen tremendous growth the last few years. But look at how much of the market there is still to be developed. 2 million total installed base today expected to grow 10x, will still only be 3% to 5% of household penetration. So we have a long runway for growth in China in this business that we're very excited about. Let's switch gears here now and talk about our fourth focus area, which is really around our drive to lead productivity and safety as it pertains to infrastructure management. We play a broad role across mechanical, electrical and plumbing trades. I've given you some examples here on the chart where, in some cases, we can improve efficiency by as much as 85%. Why is this so important? There is a global skilled trades shortage in the U.S. and other places around the world. Some of the studies show that more than half of those workers are greater than 45 years in age and maybe 25% plus are greater than 55 years in age. And so we need to do things to make the work more productive. And you can see on this chart many examples of that. We need to make the work smarter. So if you look at that leading conduit bending technology there with the, what we call BIM, building information modeling, that's an AutoCad plug-in that allows us to take 3D modeling, use our standards, turn that into usable work, very precise work, automate it, enable prefabrication, reduce scrap, improve productivity. And this is a huge advancement in our industries. And it's an example of the kind of things that we're looking to do across the portfolio. MegaPress pricing is still underpenetrated in the U.S., about 20%. It's about 70% in Europe. It's only 3% to 5% in China. There's a long runway in the U.S. and other parts of the world to use pressing to replace traditional methods that aren't as safe and that take longer to perform. And then you can look on the right there with the safety. I've talked about this solution before on earnings calls, but the fully -- it's the industry's first fully insulated battery hydraulic tool, up to 1,000 volts of protection that helps prevent up to 60% of common accidents and then our remote cutter as well. So look, we have -- there's trends in our marketplace, where customers are increasingly wanting tools that are smarter, more connected, battery operated. And one of the big trends that we see is the higher voltages of tools, the larger tools, there's a long-term trend of transitioning from corded to cordless and battery across that landscape, including all the way up to 60-volt, which we've already got products out in the market today, and we're expanding that portfolio very, very quickly. All right. So we talked about our 4 major strategic imperative and focus areas. Across the portfolio, one of the other prevailing trends is the acceleration of development of software-enabled solutions, leveraging our large and diverse installed bases. Look, we have a great position in our markets. Whether it's Residential, Industrial, Commercial, across the Cold Chain, there's a lot of data that we're capturing today. We are barely scratching the surface, in my opinion, of what we can do with that data to unlock value for our customers and to meet our strategic imperatives. So whether it's driving human comfort -- most people that we survey when we do industry surveys, they don't feel very comfortable most of the time at work or at the office. In fact, a large percentage will tell you that they've actually left a location because they weren't comfortable in that shop or at that home or in that office. There's still a lot of work to do there around precision humidity control, around temperature control, around efficiency. And we need to do that and create that value by using environmentally friendly refrigerants. So there's a lot of work to be done there. The Cold Chain, we talked about the ability to connect the dots across the supply chain, across the value chain. And then we talked about driving connectivity, data management as it pertains to driving productivity and safety across our commercial and industrial marketplaces. One of the other strategies that we have is this clarity that we have around our strategic imperatives has really been great for us to say, okay, where do we go next? Where do we go next? You can see the markets we play in today, the traditional market for heating A/C, we play in would be about $19 billion, $8 billion for Cold Chain, about $11 billion for Tools & Home Products. But some of the areas there you see within those dotted boxes are spaces that we have a small presence in today that we expand to really accelerate development or there are spaces that we see future adjacent expansion opportunity. So for example, as you move to A2L or lower GWP refrigerants that are slightly more flammable, environmental sensing and remediation becomes increasingly important. That's a space that we think we can play a very important role. We've talked about in the middle, connecting the dots in the life sciences, pharmaceuticals and food value chains. And we talked on the right here about some of our professional tools products. We have a lot of great products in our professional tools portfolio that do metering and monitoring, including high voltage. The test and measurement space is a market that could make a lot of sense as part of our overall corporate strategy. And it's a space that we're looking at, and we've been looking at for a long time. So we have a lot of opportunity to expand the portfolio organically, developed some of the new positions that we've recently gotten into as well as get into adjacent spaces. So I'll finish similar to how Lal finished here with a key messages chart. But essentially, five key messages: Sustainability, health, productivity and safety trends are really leading to a lot of double-digit growth opportunities across our portfolio. This is a great time for our portfolio. If you look at our portfolio, it's always been focused in these areas. But the new attention to it, the new regulations, the new incentives and the general public's desire to drive these things faster, we're really well positioned to help folks get there and create value. Our global leadership position in the HVAC refrigeration industries positions us well. This is the largest efficiency and refrigerant period of change we've seen because they're happening simultaneously. And again, the regulations, the subsidies, incentives around the world are accelerating. And so we're uniquely positioned as that occurs. And our installed base across industries, applications creates terrific runway for us to build out our software-enabled solutions. And market trends, core strengths of ours align really well with multiple adjacent spaces and expansion opportunities, and we feel very good about our path to 28% EBITDA in 2023, and we're going to hit some of our historic highs financially even before that time period. So thanks for letting me take some time with you today. I know we'll do some Q&A later. And with that, Peter, we head into -- passing it back to Lal for Automation Solutions.

Great job. Great job and tremendous momentum in this business. And giving us a path to the 2021 EPS commitment we've made and really into 2022 with a 4 plus EPS pathway that we see right in front of us here to execute. So very excited about what's going on in Commercial Residential. And now we'll spend a few moments on automation solutions. So this is the agenda. I'll give a quick grounding overview of the business. We'll talk about the financial summary and then talk about the drivers around what's going on in our market, and how we're going to generate growth and value in this planning cycle for the business? It's a very unique business. I used to say it was the best business, but it's a very unique business. It's what I'd like to say now. $11 billion in sales. Very -- $11 billion in sales. And participating across the device layer, the control layer and the software layer with sizable product categories in each one of those. And solutions offering across each one of those. Technology leaders across many categories, Final Control, instrumentation and really differentiated by the software offering that we bring to the table as an automation company. It is a global business with 55,000 global employees, serving a $123 billion installed base. We have over 130 manufacturing facilities, over 210 service centers around the world, serving that global installed base that we have out there. A very important set of investments, particularly when it comes to the service capability of this team, which then fuels the KOB 3 strength of the business. We play in a $203 billion sandbox that is made up of both process, hybrid and discrete markets, all of which we have a strong hand to play in and a growing opportunity to expand. We've done a lot of work on the diversification of our markets. Again, with the investments, both organically and with acquisitions in the hybrid and discrete spaces, in the software assets that are brought power, in the renewables markets and made those larger for us as well. KOB 3 is a core strength that we have in our business. It's set at 57% of sales as we closed out 2020. It's at 58% of sales as we closed out December of the first fiscal quarter of '21. So it continues to be very strong. A lot of the investments that we've made over time have put us in that position today to go after the $123 billion installed base, and then ultimately to drive into the modernization and upgrade opportunities that are captured in the KOB 2 environment. What's interesting about those 2 categories is they're not very CapEx dependent. That's really where the OpEx dollars of our customers land. The CapEx gets all the glory, that's the KOB 1. But when we live in this business through the cycles is in the KOB 3 and the KOB 2 opportunities. Like Commercial & Residential, we've had a strong hand to play through this very challenging period of time for the world. Across the top are various solutions that we provided through the COVID pandemic in 2020 and 2021. We're involved in 75% of the vaccine manufacturing in the United States and Europe. So there's a very high chance, basically just about everyone on this call, that when you do have the opportunity to get the shot, you'll have one made by DeltaV. We've been involved in PP&E manufacturing, masks, surgical mass, different types of masks that we've made using ultrasonic welding capabilities and others. And of course, with our valve, pinch valve, ASCO business, in the manufacturing of ventilators and oxygen therapy devices. But we play an equally strong hand in maintaining and upgrading the critical infrastructure around the world, be it power generation, which we've talked about already, with 20% of the global power generation capacity of the world is controlled by Emerson, by Ovation, very powerful there. We're now expanding with our sign to transmission and distribution and already 41% of the top U.S. utilities use OSI and what a great opportunity to globalize that for us. And then pipelines. Huge -- as Michael described in the sustainability journey, the importance of moving things around, be that methane as a transition fuel right now, or ultimately, hydrogen, it will be incredibly important. And we have a very strong hand to play with our device capabilities, but more importantly, with our software capabilities around pipelines. Let's turn to the financial summary of the business. We've spoken through the earnings calls about the shape of this recovery in the -- particularly as we close the last calendar fiscal quarter in the first fiscal quarter of '21 and I feel good about where we are today. It's being led by the right types of businesses that you'd expect early on in the cycle. It's our global discrete business, and the short-cycle instrumentation businesses within the process side of the equation. That's where we see some of that momentum accelerating. Clearly, we continue to have some challenges around site access, although improving. And I'm very optimistic that the spring STO schedules are holding, which is an encouraging sign as we think about momentum building, particularly here in North America as we go forward. Slowly, as people get back on sites, and start thinking about modernizations and upgrades, we'll see that KOB 2 business accelerate, which should then fuel more activity across the business. So we're watching North America very carefully. We had a good January, as I covered earlier. We have momentum growing in the business. And I continue to believe that we are on the path to a cycle recovery here and as demand recovers across the economy. '21 guidance for the business, as we covered in the earnings call, has not changed, down 3% to plus 1%, but it's built on solid execution across the teams. We will deliver 60 basis points of adjusted EBIT margin improvement this year and 100 basis points of adjusted EBITDA margin improvement. Tremendous momentum across the world around the cost reset plan that's generating those kinds of returns. For 2023, we'll grow this business in a 3% to 5% underlying basis as we go forward. And we'll hit that adjusted EBITDA number at that point. 2023 will be a very important year for us. We'll get to run rate record sales in late '22, we'll print it in '23, and we'll hit our record adjusted EBITDA and operating cash flow in that year as well. The execution, as Jamie covered in Commercial & Residential, has been exceptional in automation as well. Over 80%, again, by chance, by pure mathematical chance, 80% of the spend is complete through Q1 of 2021. And in this business, we will be complete with a cost reset activities very likely at the end of this fiscal year. That's really good work there. A lot of the early structure stuff was done early in '20 and now we're really focusing on the execution of the facility work. Nearly 1/4 of the automation facilities will be impacted in this plan. 82% of those actions are already underway, with 30% of the AC facility actions completed. And by the end of this year, we will have completed 60% of all the facility activities. That's important in this business because it coincides with the growth of the business returning. So very important for us. We will, much like in Commercial & Residential, in the total Emerson, have a tailwind of benefit impacting the P&L as we continue to execute these actions in '21 and into '22. And you can see that it will total $510 million. So better than 1:1 basis and a good path to get to that 24% adjusted EBITDA in 2023. I feel really good about the plan. Let's now turn to the market and talk about the cycle we're in and the opportunities, but more importantly, the opportunities that we have to further differentiate ourselves using our phenomenal people and technology in the business. A quick perspective of where we sit today, depicted here in three ways. Obviously, the KOB 3 business has been a stabilizing force across automation solutions as we've gone through a challenging period of time here. The investments we've made there have paid dividends for us. It is obviously a less violent cycle in KOB 3. A lot of that spend is done to keep things running, to keep things safe, and we benefited from that large $100-plus billion installed base. We'll see KOB 2 returning ahead of KOB 1, which will be more of a late-cycle phenomenon for us as we go through this recovery. The world area perspective looks pretty good. Everybody is lined up to return to growth. All the world areas are in the good part of the cycle right now as we see it, with North America slightly lagging, but showing that positivity already in the numbers. And then from the industry perspective, we are -- our diversity really helps us. We have exposure to different cycles as depicted in the chart, some of which are about to -- are still in the trough as we talked about, particularly around upstream and refining, but others have started to grow and accelerating. So feel really good about that. Diversity that we have. And of course, with transmission and distribution adding diversity into the portfolio as well. I want to talk about Oil & Gas first because it is a little bit of the elephant in the room, and I think it's important to speak about. And really focusing on three things. Number one, even though oil and gas production is curtailed, it is still a very important element of the entire value energy solution. The axis on the left, I believe, says $1 trillion at its -- over $1 trillion at its peak, and it's still a very large number. So it continues to be part of that equation. Whether you're looking at the state of policy scenarios or the sustainability scenarios and like it will end up somewhere in between. Number two, CapEx has been significantly curtailed, but OpEx continues to be relatively steady. The bulk of our business and what drives our KOB 2 and KOB 3, sits in that OpEx number. And it's what drives the automation dollars that we see over -- almost 80% of the automation business. CapEx is important because you've got to put capacity in. You've got to move things around. But OpEx is an engine for the business as well. And then thirdly, our technology is incredibly well positioned to drive the types of investments that our customers will undertake in this cycle. They'll be focusing on efficiency. They'll be focusing on cost reductions. They'll be focusing on production reliability. And that's exactly where our top quartile messaging, our digital solutions opportunities play in. So I feel really good about the hand we're dealt. We're going to go through this journey. These customers are important for us, and we believe that there is opportunity to create value as an organization in this market as well. I want to speak about the strategies across this business. They're consistent with what I spoke on an Emerson level and what Jamie covered for Commercial & Residential, but they're driven around 4 mega trends that are impacting the automation market today. Sustainability. Michael did a great job of walking us through the opportunities, the challenges that the world is facing and the opportunities that Emerson brings to the table. That's the clean fuels. That's a renewable energy. The modernization of the grid, which is, as Michael depicted, over 60 years old in Western Europe and in North America, great opportunity there. The journey to digital. In many ways, still the beginning journey to digital transformation across our customer base and our industries. The move from remote operations to autonomous operations. That is a cycle we're in today. That is a development of technology that we're in today, and we need to address with technology. And lastly, the infrastructure modernization, particularly as it relates to safety of people, usage of labor. Jamie talked about professional trade stresses on labor availability. It is no different in a process plant, in a power plant as we go forward. All of those trends will drive the three strategies that I will speak about: industry diversification, our software strategies and electrification and decarbonization. So let's start with diversification. A lot of work has been done around organic investments in technology as well as acquisitions that I've depicted. I'm going to talk to you about three specific industries here within hybrid life sciences, the power and renewable space, around power generation in this example and then chemicals and clean fuels. The work that we -- the position that we put ourselves in to be able to capitalize on what has been a herculean effort by the world to develop these vaccines in record time has been a great advantage for Emerson. We put ourselves in that position with work we did early on 30 years ago in Marshalltown, Iowa, when we first created a first batch DCS. We grew that with LTV and further investments in acquisitions as well as internally as we went through it. The work we've done with [indiscernible], who is a keynote speaker now in our exchange series this fall has been phenomenal. We've been able to reduce Moderna's cycle time from 14 days to 6 days. We greatly increased the reliability and efficiency, and we took their labor content in manufacturing, down 40%, as we move -- as we ramped up vaccine production, incredibly powerful and important for the world there. In power and renewables, the journey of 25-point gain of market in North America has been fabulous. And it continues. Our competitive displacement activities around power generation are very, very strong. You can see there the participation gains that we've had this year and the growth that we've had in the business and what we anticipate going forward. We now control all the power generation at the Tennessee Valley Authority power plants in a legacy that other competitors have had. And over years, with better technology and better solutions we've been able to displace that. And then lastly, the journey around chemicals. The chemical cycle is different than the oil and gas cycle, and it brings in the opportunity for clean fuels and biofuels, as Michael had described earlier. So again, well positioned there. That example with MedTech in Finland around fermentation processes in the plant. So I feel really good about what the portfolio can do, the leverage of the portfolio in the stack and the opportunities to invest in the different markets. I want to shift now to the second strategy, which is software. We've spoken about it a couple of times already. Jamie spoke about it. I spoke about it at the high level at Emerson. $1.1 billion of stand-alone software and associated services, and additional $1.1 billion in this business of embedded software in our devices and control systems out there. So a very strong hand to play, which we continue to invest in, in both organic and acquisitions. If you shift to the right-hand side of the chart, I describe the recurring revenue associated with our stand-alone software business. Sits at about 35% of that business today, and it's a continued -- important strategy that we can play as we convert and take advantage of SaaS models and moving customers to cloud models on software. So a great opportunity for us, and we expect it to grow at double digits as we go forward. Our software journey has been based on both internal development as well as acquisitions. I'll cover the internal developments first and give you a sense of where we've been focus and our focus today. And it falls really into three stacks. The first stack is automation control and software the example -- the best example I can give you there is our new DeltaV Live, which is an HTML5-based HMI for control systems. That falls in that left stack as an example. In the middle is our operations management software, and the best example I can use is Plantweb optics, which I've already covered in the digital piece. And then on the right, the advanced industry softwares. Michael used a couple of examples, the manufacturing execution systems at [indiscernible], for pharmaceuticals or pipeline digital twins that we've developed across our software. All of these internal developments have leverage points. We leverage fiber cybersecurity. We leveraged the SaaS subscription model opportunities, and we leverage the migration to cloud across all of these offerings in the business. But we have been equally acquisitive as well. On the left, the list of acquisitions we've made over the last 3-plus years, all very relevant as they expand our expertise across our customer domain. And that is very important. These are not disconnected from what we do every day. They bring specialized model -- knowledge embedded in the applications that they bring. And they focus on reliability, safety and sustainability emissions, the themes that we've been talking about today. They bring attractive adjacencies into our company, whether it's visualization, the analytics capability, which we need to continue to drive in both commercial residential and automation. They bring an [ IT IOT ] connectivity, which is incredibly relevant. And then they bring us simulation optimization capabilities to the table. As well as some of the modern technology stacks that we've talked about, whether it's cloud or the ease of deployment and the leverage across many of our businesses. I'll share with you two examples of how we make an acquisition and then we leverage OSI came in. One of the things that OSI brought with it was a cloud-enabled historian. Very interesting. We're going to -- we've accelerated the development of that historian to really help our customers accelerate the move of data lakes from the premise to the cloud. They also bring a lot of plant applications -- excuse me, web-based applications, which we're investing in. We also made an investment in a German cloud-native historian called QRI. Again, migration, delve data lakes from premise into the cloud, an important journey for our customers, and will have a hand in playing in. So I want to turn to the sustainable world. Michael did a great job reviewing this with us today. It's really 2 sides of the equation for us. Across the top at the categories that Michael described: the energy source decarbonization, electrification and system integration and then on the right side, emissions management and energy efficiency and optimization. Staying on the left side of the chart, we have almost $0.5 billion business already. That's made up of the categories that you see there, outlined in the blue and the green, and it's expected to grow double -- high single digits, double-digit going forward in this plan. On the right-hand side of the chart, around emissions management, energy efficiency and optimization, that's really core to a lot of what we do in automation. That's really core to the types of problems that we solve for our customers on a day in, day out basis. It's where a lot of our digital work is done and a lot of our newer solutions around Final Control instrumentations are developed. So a great hand to play there, as Michael described, and we have a great position with the customer base there. I was in Odessa, Texas, 3 weeks ago or so visiting our teams down there. As you can imagine, it's not the most exciting environment right now in that upstream space. A little -- it snowed actually the day that I was there, David. But what I saw was encouraging. The conversations we had were around these elements. This is where that customer base is thinking about investment. This is where they have to invest. They've made commitments around sustainability, and for us, that means around emissions management and efficiency in our hand and the technology that we can bring to the table is highly, highly differentiated. And I feel great about the opportunities that we bring even in a tough environment like that. Michael touched on hydrogen. It's a great opportunity. It's going to be driven by the evolution of green hydrogen at 70 million tons per annum today forecasted to grow to 500 million tons per annum by 2050. What's depicted on our chart here is the Emerson opportunity in investments of about 50 gigawatts of hydrogen to 2030. It represents a $750 million opportunity for Emerson across the value chain, from the electrolysis, which you see there, the electrolyzer, all the way through to the distribution and ultimately to the fueling, which -- this is going to be heavily driven by transportation as the use space -- as the use case. So lots of engagement already by our global teams. And I think we have the technology because what's interesting about this market is that it uses -- it's a chemical process in terms of what you're doing at that electrolyzer. There are new customers, new players that we get to know and we participate in, but there's a great opportunity to really bring the control topologies that we have and understand and leverage them into this new space. So I feel really good about the hand that we have to play here as an organization. It's a unique business. It's well positioned to take advantage of the macro trends that we see in the marketplace. It's executing incredibly well. The teams have been delivering value and working the cost reset aggressively, and we have a path to the 24% adjusted EBITDA commitment in 2023. We'll continue to work on diversification. We continue to work on software and digital, and we'll continue to work on sustainability. Great hand to play here for Automation Solutions. Okay. So that brings us to the conclusion. But before I give the break so we can set up the Q&A, I just want to say this. We were a little faster than we expected. Obviously, without you in the audience and having the energy of the room, it makes a difference for all of us as we present, and I missed that. Looking at the lens is not quite the same experience. It's a little different. But I feel great about the plan. It starts with our people. It starts with the phenomenal teams that come to work every day and make us unique. We understand the opportunities that the market will give us. We're going to make our own future as we drive our diversification, our software and our sustainability strategies. And we have a strong path to deliver $4.75 to $5 EPS in 2023. I feel really good about that. With that, we'll do a 10-minute break so we can reset the room and set up the Q&A and -- for the analysts to call in on the specialized line. Thank you very much. [Break]

Okay. Welcome back, everyone. We will begin our Q&A session now, and I believe I'll turn it to the operator to kick us off.

[Operator Instructions] The first question today comes from Andrew Obin with Bank of America.

Can you hear me?

Yes.

Just the first question -- I'll ask the first question on ESG actually because it's very interesting to hear you guys talk about it and more players in the energy industry actually talk about sort of the green aspect of making things more efficient. I was just wondering how much feedback have you received from shareholders? And from your perspective, what do you think is the most misunderstood aspect of ESG efforts at Emerson as the Street perceives them?

So I'm going to have David talk about shareholders, and I'm going to ask Michael to speak about the industry.

So Andrew, first of all, it's good to hear from you. I would say over the last 18 to 24 months, we've heard a lot from our shareholders. When Sara Bosco, the General Counsel and a couple of my directors went out and met with shareholders, as you know, in 2019, we started hearing the feedback about our program around the total ESG, but very much focused around that area. We have continued to hear it throughout the last 12 to 18 months. And the more we've communicated, the more they're picking up. And I would expect this is going to be a very important topic and -- for us as a company, as you saw, the presentation and also the engagement. And I would say the most misunderstood area about it, and I'll let Mike answer this, but from my perspective, I think people don't realize how broad base of help we can make for our customers and -- from the standpoint of what we bring to the party. And I think this is the first time we've tried to communicate externally. I think Lal has worked extremely hard in this, Jamie and then through Mike, and I think that's been very important for us for the first time show, okay, this is what we can do and get our employees engaged across the company. So a lot to learn, but I think the engagement is quite significant, and I think the opportunity is very significant for us to help our customers. And so Mike?

Yes. I'd just add from the industry and the customer point of view, these past 2 years, especially last year, just prior to the pandemic, this was dominating the discussion. And I think a lot of our traditional energy companies were really leaning into it. We've seen their statements in the past 12 months. We've seen the strategies starting to emerge from these companies. And so I think really across the whole customer space, it doesn't matter what industry you're talking about. Everybody is out there talking about the ways that they want to push this as we go forward. I agree, David, with your remarks. I don't think people understand. That's why I really wanted to use and teach the Sankey diagram today so people have a perspective on our starting points, what's relevant, what the strategies are. And I think as we go forward here, I think Emerson is really excited about how we can contribute.

Absolutely, it is, and as I think you both said, an evolving story for us, both with shareholders and the expectations there and with the industry. But I like where we sit today and the investments we're ready to make as an organization going forward to capitalize on this.

And I think the other thing I would add is one of the areas our customers are focusing very, very hard on right now is around the emissions. I think they're starting to realize, as Mike showed in his chart, emissions is a huge area of improvement. And we actually have very, very unique solutions there, and we've worked with BP, we've worked with Shell, ExxonMobil, and all these are very much focused on that. But it's not just oil and gas, I would also say, Jamie has been working with the industries relative to CO2, relative to refrigerants. And I think your organization has an equally important place to play across this from the standpoint of what you can do help reduce the carbon footprint at our customer level. So anything you want to...

Yes, Dave, I mean, it's a great -- look, we -- as I said in my part of the presentation, we're really excited about what's going on right now because this is really where the business has been focused for a long time, and we would help drive these regulatory changes with our customer -- we kind of connect the dots, right, between the contractors, the OEMs, the end users, the government bodies, and we've been doing that for a long time. And I'll tell you what we've seen over the last 12 to 24 months is an acceleration, absolutely an acceleration. And some of the regulatory environment and the changes that will happen, our customers will have to adapt to the new changes. And so we want to get out in front of that with them, make sure we do it in a way where they create value for their businesses and for their customers as well as driving sustainability. But it's going to be one of the most active, I think, 3-, 4-year periods we've ever seen across the HVAC and refrigeration industry.

Yes. And just -- and to build on that, Andrew, and I'm sure you have, if you peel through sustainability reports that our customer base has issued, some, yes, use a lot of color, not a lot of substance. But there are a few out there that specifically speak to what they're going to do. And when you really look into what they're saying, it's really aligning around the technologies that both the commercial residential business and the automation business bring to the table today.

And just a follow-up question there, maybe it's tied to it a little bit, talking about Automation Solutions. When you talk to your oil and gas customers, I mean, you definitely talked about where the cycle is. But when you talk to your big customers, are they thinking differently between a mix of spending longer term between growth and efficiency and digital transformation? How different is their thinking post-COVID versus pre-COVID?

Yes. Andrew, great question. Absolutely, we just came out of a very significant -- really at the tail end now of a very significant LNG wave where a lot of capital investment occurred. We came out of that very well. We've won over 50%, slightly over 50% of all the automation dollars related to 8 LNG jobs, and we have one additional one in Qatar that's yet to be finalized. But -- so that's been a heavy capital wave. What our customers are thinking about today is really around the issues that enable the move towards renewables and sustainability, emissions monitoring, those elements that we discussed. And that brings in the modernizations, the digital investments, and the upgrades of their facilities. We see some projects around clean fuels, so conversions of refining capacity from traditional feedstock to biodiesels and others. That's going to have some momentum as we go forward, particularly in Europe and North America and at the detriment of what we'd call some of the traditional refining type of investments. Things like, in the industry, Andrew, and you're familiar with it, we call bottom-of-the-barrel-type stuff. That's basically been scrapped in lieu of the biofuels and other things. So it is shifted. I think we're in a wave where we'll see smaller projects until we get the next capital wave that will hit us. But at this point, it'll be absorbing the capacity that will be built with this LNG wave, using gas as a transitionary fuel but really focusing on those differentiating efficiencies, safeties and environmental strategies across the base. That's what I've been hearing across the automation space as I have talked to the teams around the world and customers around the world.

I would add one thing, I would say, just recently, Andrew, you saw the announcement of Shell and BP. And so I think you're seeing these customers make a shift in the type of liquids to gas. And the other thing that's quite interesting is they're going to have less investment in the liquids, which they'll just maintain it. They want efficiency, which we'll be able to help them quite a bit with relative to our products. But the other interesting thing that you've seen from the -- as they shift to gas and they want to become energy power producers. So now they're going to go into the power industry, and they want to produce electricity using some of their renewables and some of their gas and things like that. So I look at that as an opportunity, one, because of the gas, but also because of OSI. They're going to have to manage that power generation, and they're going to have to figure out how to manage that, something they've never done before. And given their big customers are, I think they're going to have to come to us and say, "Hey, how do you help us manage that as we generate that power, how do we manage that power?" And I think that -- so not only the traditional, but I see as they go into generation power and you keep hearing all the major oil companies, be it BP, you're hearing Shell, you're hearing the guys in France, what's the...

Total.

Total, they all want to be power suppliers. And so they're going to need OSI to help from that standpoint. Good opportunities.

The other thing, too, Lal, we talk about skilled trade shortages in the ComRes side, but I know when working on the auto sell side, the other thing is people are going to want to do less -- there -- more with less. There's skilled trade shortages in the automation space as well. So even in those traditional industries, they want to automate more, right? They want to get more productive by using that data. And they also want to outsource more of the services that they may have performed in-house over time to vendors like ourselves that can provide those services. So I think those are good trends for us.

Well, Andrew, you got almost 1/3 of our time there.

The next question is from Andy Kaplowitz at Citigroup.

So core growth in this year's presentation is higher than last year, is that just a function of the starting point given the pandemic?

Yes.

And when you think about the pieces, the 5% to 7% growth in C&RS, A&S up 3% to 5%, especially the C&RS, that growth seems higher. So maybe you can give us some more color into the assumptions you're making to achieve the growth in that business?

Yes. Speaking to Commercial & Residential specifically, Andy?

Yes.

Okay. I'll let Jamie take the cut there, and then I'll add a couple of comments on it.

Yes. I mean, look, you said it, it's the starting point, big drop to '20 and not quite double digit, but we got close to it, right? So we're building back off of that bottom. And if you look at a lot of our traditional markets, they could grow in the 2% to 4% range in normal cycles. Well, we got the benefit of a lower starting point, and I do see an acceleration of some of the drivers, trends, regulations and incentives that I think will give us a little boost. But look, that plan, the 5% to 7%, it's 1 point to 1.5 points kind of faster than the market is our expectation. And from everything we looked at, we feel like that's pretty reasonable. Look, nobody can -- we can't anticipate exogenous events. We're living in one right now, right? But the plan based upon normal conditions, I think, is pretty sound.

Yes. I feel good about it. I think Jamie touched on the refrigerants changes that are coming our way. Those will be impactful in the cycle in your business, Jamie. But we -- obviously, Andy, as you hit on, we cannot discount the starting point. '21 is in the planning window.

Yes. Got it. And then maybe just a follow-up to that. You obviously reduced your acquisition-focused revenue growth a little bit in the walk versus organic. Is that a function of actually redirecting investment opportunities inwardly or maybe higher valuations since it's a little harder to find good opportunities? Give us a little more color on what you're seeing in sort of the acquisition pipeline and in internal investment versus external.

Yes, sure, Andy. So both. We're very focused. We think that we get a very high return on our internal investments that we make in the company around technology, but we also have to be cognizant of where the pipeline on acquisition sits today. We're going to be very measured as we look at the opportunities that line up to the strategic -- the 3 strategic initiatives we discussed today. And we expect that post-COVID, that funnel will strengthen as we look at it. There will be good assets that become available to us. We have to have a solid grounding understanding of the markets so that we can act quickly when they become available. But I feel that, that will ultimately develop a little bit better than we're seeing. It is, we have about $700 million of sales value in the bridge related to additional acquisitions. Again, you can fluctuate that between the base company growth and the acquisition revenue. It doesn't mean that we're taking our focus away. We continue to see that as a very important driver for us, but we're also being cognizant of the environment that we're in. David, do you want to add anything there?

I think the only thing I would add is, I would call this more plan more derisked. If you're looking at the core growth, which I think both businesses have a potential growth period here because of effort that our customers have underspent for a couple of years. And the fact that -- so we feel more opportunity will go into the internal growth. And there's -- right now, the opportunities within acquisitions are somewhat limited. And as Lal said, they will open up again. But I think we have a lot of internal opportunities right now around the investments to help our customers around the world deal with the sustainability as they try to shift to lower-carbon industries. And also, as Jamie said, they're going to need our help because they don't have the expertise. And so I think that right now, there's a unique opportunity to have more internal growth and put more money back into that. And that's a richer growth for us, so I call that more of a derisk plan, a less risky plan for us to execute on.