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

Good morning. Thank you. Welcome to Emerson's 2025 Investor Conference. I want to invite everyone here in the room and those virtually online with us today. I'm Colleen Mettler, many of you know me, and I got to meet some new faces this morning, so that was awesome. Thank you. Three years ago, I stood on this very stage welcoming everyone to Emerson's 2022 Investor Conference. Emerson at that time was a company in motion. And today, Emerson is a different company. Our portfolio has been transformed, and Emerson is now the global automation leader that is engineering the autonomous future. Before we dive in, please keep in mind that today's presentations may include forward-looking statements, which contain a degree of business risk and uncertainty. Please take time to read the safe harbor statement as well as a note on the non-GAAP measures discussed in the presentation today and in videos you will see. All financial metrics are presented on a current continuing operations basis, unless otherwise noted. And finally, we have included footnotes in the appendix section of our presentation for your reference. This morning, we filed an 8-K updating our segment and group structure. Now that the transformation is complete, we are taking the opportunity to reorganize our segments and groups. This will simplify our reporting structure, aligning how we report our financials, how we provide guidance and how we will deliver management discussion. Starting on the left-hand side of the chart, you can see our prior 6 segment 2-group structure. And as we walk across the chart, you can see that we are eliminating one segment, dissolving the Discrete Automation segment and distributing businesses from that segment into the respective technology groupings. Software and Systems Group, which was previously named Software & Control, continues to contain 2 segments: the Control Systems and Software segment and the Test & Measurement segment. Intelligent Devices also now contains 2 segments: Sensors, which was previously named Measurement & Analytical and an expanded Final Control segment, which now includes the Fluid and Motion Control business from our former Discrete Automation segment. Software and Systems and Intelligent Devices make up our automation portfolio, which is about 90% of our sales. Branson and Appleton did not purely align to automation, and we have moved that to the Safety and Productivity segment in group, making up about 10% of our sales. In this morning's 8-K filing, we've included 5 years' worth of history. And in our financial section of our Investor Relations website, you can now find a data analytic tool that will allow you to download not only the information in the 8-K, but all the historical information as well into Excel for ease of model updates. Starting in Q1, we will be reporting these 5 segments in our financials, and we will provide guidance and management discussion by the 3 groups shown in the updated bar. In addition to the portfolio transformation, there were other transformations happening inside of Emerson. Here in the audience with us today, we have Lal's executive management team and our group presidents. Many are new in their roles over the last few years. But as you can see, we have a very long tenured and experienced team. Team, if you wouldn't mind, please raise your hand so those here in the room with us today can see where you're seated and they can say hello if they choose. Thank you, team. Our Board of Directors has also been refreshed during this time, adding new skill sets and fresh perspectives. Today, we have 2 of our Board members here with us in the audience. Jim Turley, our Board Chair. Good morning, Jim. And Gloria Flach, our Compensation Committee Chair. Good morning, Gloria. Finally, I'd like to take a moment to talk about how our culture continues to evolve, enabling us to realize our performance objectives. Our purpose has remained the same throughout the transformation, and our values continue to be our foundation. We have modernized our ways of working with 5 core capabilities that enable performance and accountability. The first, deliver with discipline and rigor. This means we operate with focus and accountability as we translate commitments into results. Next, collaborate to realize value. We build trust and align around common goals to deliver value. Third, fuel growth through customer focus. This is how we translate customer insights into new solutions that drive growth. Fourth, innovate for impact. We take smart calculated risk to drive innovation. We act decisively. We learn quickly and we adapt. And finally, unlocking the power of a team. We foster teamwork, utilizing our unique skills and perspectives to advance outcomes. By empowering our people, we can deliver on our value creation framework of organic growth, continued operational excellence and capital allocation. Turning to the agenda today. We will begin with Lal, our President and Chief Executive Officer, who's going to talk about how we drive growth and how we're engineering the autonomous future. After a short break, Ram will take the stage, our Chief Operating Officer, and he will dive into how we deliver excellence at scale. Our last presentation today will be from Mike, our Chief Financial Officer, who will discuss how we realize value for our shareholders. After his presentation, we'll take another short break and then return to the stage for Q&A. It is my pleasure to welcome you all to Emerson's 2025 Investor Conference, Engineering the Autonomous Future. [Presentation]

Okay. Good morning, everyone. Great to be with you this morning, and thanks for coming. And for those of you online as well following us, thanks for joining us today. I'm Walt Karstenbai, President and CEO of Emerson. Before I dive into the presentation, I just want to spend a few minutes giving you a little bit of context to the journey that we've undergone over the last 5 years. It's nearly 5 years that I've been CEO. It's been a tremendous transformation in our company. Most evident to you has been the transformation of our portfolio. We strive to create a company that had higher growth, that was more resilient that had a software-defined technology stack that was unparalleled in the automation industry that served a diverse set of industries and a large diverse set of customers. That's the company that we turned into a vision that we turned into a reality, and the Emerson will talk about today. None of that would be possible without a performance-driven culture. And Colleen did a great job expressing to you how we work inside of our company. Our performance-driven culture is earmarked by 3 very important elements: trust, empowerment and accountability. And with that, you're able to attract and retain the best talent, of which you have over 330 years of automation experience in this room alone. And it's this management team alongside our 70,000 colleagues around the world that have delivered this vision into reality. The last thing I'll tell you is we're going to talk about bringing affordable and secure energy to the world. introducing the next new drugs to cure diseases, exploring the far reaches of space. All those things are possible with Emerson's technology. Things that I used to dream about when I was a kid, we get to do in this company, and it's a lot of fun. What we'll spend time on today is talking to you about what the next 3 years is going to look like in terms of growth, in terms of operating excellence and in terms of capital allocation. So let's get started in the presentation here. The company is very different. On the left side of this chart, was a 2021 company. And honestly, there's just a very simple way to describe it. It was an industrial conglomerate. We were in a variety of different businesses, as you may recall, with a large commercial residential business within Emerson. Only 5% of our sales were software. The margins in the company, 41.5% at the GP line, 20.9% at the adjusted segment EBITDA line. And we underwent the transformation. In November 2022, when we stood last met at the Capital Markets Day, we were in the midst of that transformation. We had done the first step in the Aspen transaction. We had done the first step in the Copeland transaction. We were engaged with NI. We didn't talk about it publicly at that point in time, but that process had started. Over that period of time from 2022 to 2025, we completed the journey. We bought in the remaining elements of Aspen. We certainly completed now 2 years ago, the NI transaction. We completely got out of the Copeland business with Blackstone. Obviously, InSinkErator was sold as well. And the company that we have today is an automation-focused company with nearly 90% of our revenues tied to the automation business. a global leader in the automation markets. But what's even more dramatic is how the financial profile of the company has changed in that period of time. Software is a relevant 14% of our business today and growing, as I'll show you, in the low double digits. Our gross margins, fundamentally different in the quality of the technology and the value that our customers assign to our technology at 52.8%. That is the single best indicator to the health and the value your customer places on the stuff you're selling is the GPs of the company, 52.8% and you'll see when Ron gets here to present and Mike, there's opportunity for additional expansion in this business. And thirdly, the adjusted segment EBITDA margin, 27.6% across tremendous improvements across all the businesses that are here, and I'll show you a little bit later. A lot of that improvement is organic to the company we owned. 600 basis points of that improvement was driven in the businesses we already owned, not acquired. So really important distinction. We feel great about the company that we own and get to run now. The transformation and the vision for the transformation was predicated on one very simple thing, growth. I've been in this company for 30 years. It's my 30th year. We all work collectively very, very hard over those years. We did a lot of great things, and many of you have followed our company for a long, long time. I learned a lot. I got to live around the world, ran many businesses, as did many of the 330 years that I represented in this room. But what we struggled with since 1973 was growth. That's been the single biggest challenge that we've had. I believe that growth is predicated on 2 core elements: number one, the technology; and number two, the end markets that you address. You have to have the right tech and you have to point it at the right set of customers that are growing and expanding in end markets. That was the vision for the portfolio transformation. We grew 2% for 11 years since the last 11 years. There were a lot of good years in there, as you can see on this chart, but overall, it was a 2% company. We have significantly step changed the performance of Emerson over the last 5 years. We've averaged 7% CAGR over the last 5 years in growth, and we've had 18 consecutive quarters of growth. And you add in our guide for 2026, there will be 22 consecutive quarters of growth. Despite cyclicality in certain markets, Weakness in others, the portfolio is aimed to be resilient and to drive growth through the cycle. And that gives us the confidence to stand up and guide of 4% to 7% through the cycle. Now certainly, as many of you will note, there will be quarters that are below that guide. There will be quarters that are above. But through a cycle journey of 4% to 7%, we believe the resiliency of this portfolio, tech and end market exposure supports it. So this is the company we created, the global automation leader with revenues of $18 billion, the 528 GPs we talked about, 27.6% adjusted segment EBITDA margins, 14% software, which in this pictorial here is represented by $1.56 billion of annual recurring revenue or contract value, excuse me, growing at 10% on a forward basis. Colleen covered the group structure. The company continues to be geographically diversified, as you see in the middle pie there. And then the resilience around the selling -- around sales growth comes from a large installed base and from a very significant MRO business, which represents approximately 2/3 of the business. And I'll give you a little bit of a perspective of what that looks like a little bit later. About 35% of the business is new capital formation. This is the new business that we win over time, either through greenfields or modernization of existing facilities. And that's the profile on a forward basis. But that MRO resiliency is very critical to our growth trajectory. That installed base is $155 billion today. If you think about it at 2/3 of our business, that means it's replaced about at an 8% rate every year. the pacing at which the business and the technology wears out, gets renewed, gets upgraded. That's a very important annuity to the company. The end market exposure is very critical. The largest single market exposure is 10%. And we're giving you detail here. We did break out gas and oil, which is important to note. But there's a large diversity in the end markets. Markets that in the past, we didn't spend a lot of time talking about, like power, we'll talk about today. We talk about semiconductors, aerospace and defense, life sciences and of course, gas, growth opportunity markets, which will define our growth verticals of $4 billion of our sales. And lastly, but equally important to the resiliency of the company is the large customer base. We have over 125,000 active customers at Emerson with not a lot of concentration. Our largest customer represents right about 1.5% of sales. Our top 20, 11% of sales. And just to give you some perspective, our 100th largest customer is $14 million. Our 250th largest customer is $6 million, but there's 125,000 active customers. That's resiliency across the customer base and diversity across the customer base, which is very important to our business. And this is what we've done. This is what this incredible management team has delivered over the last 5 years. Yes, in the midst of very significant portfolio transformation, which we drove at the top, the operating executives of this company delivered phenomenal performance. We talked about the 18 consecutive quarters of growth, the 850 basis points of margin expansion at the GP line, the 700 basis points of adjusted segment EBITDA expansion and doubling the EPS. We kept our eye on the ball. And the core element of our culture that's been part of our culture since Chuck was CEO, has been operating excellence. That DNA is one that we carry forward with us. And if you mix that with the opportunity to drive a higher growth portfolio, that's the company we want to talk about today. So let's think a little bit about the value creation framework. Colleen introduced it. I want to dissect it and build it back up for you. The value creation framework is based on 4 parameters that are on this chart. We believe we have the right portfolio. We believe that we are the global automation leader with nearly 90% of sales exposed to the automation thematic and a strong MRO base of recurring revenue. Number two, we believe we're in the right markets that we, as I showed you, have broad market exposure and diverse sets of customers across the company. And some key verticals, which I'll walk you through, have accelerated growth potential over the next 5, 10 years. We play in a large sandbox, $175 billion served market across the world that's growing mid-single digit. Thirdly, we have the right differentiation. Our software-defined technology stack is unparalleled in the industry. Our 14% of sales in software, our 14,000 engineers around the world that are driving innovation at a higher rate than we've ever invested in the past. And lastly, is our financial profile, a strong company with growth opportunities in the 4% to 7% range and 40% incrementals on a forward basis as we move that GP up. That gives us ample opportunity to invest in our businesses and to deliver underlying EBITDA growth and EPS growth. So this is the framework. Organic growth, the 4% to 7% we talked about, operational excellence, which will drive 40 points of incrementals. That's up from the 30 we've talked before, 10% EPS growth, and I'm going to give you some hard numbers around that as we go towards the end here and 18% to 20% free cash flow margin in the business. This company is built for performance. This company is built for resilience, and it's built to deliver long-term shareholder value. So I'm going to talk to you about these 3 elements. We'll start with the growth, where I spend the bulk of my time. Ram will cover the operational piece, but I'll tease it a little bit for you, and Mike will dissect in detail the capital allocation piece. I'll give you the headline there. But let's start with the growth piece. Remember, 2 core elements, technology stack and end market exposure to think through this. The first thing to understand is why is automation important? I know that most of you get this, but I felt compelled to put this chart in here. Automation solves customers' challenges. And I'm sure that you can pick up the Wall Street Journal on any given day and talk about productivity improvements, digital transformation. That's the kinds of things that automation solves. Complex operational challenges, lack of labor, retiring labor, driving for safe, resilient operations and improving business outcomes. That's what drives investment in a $175 billion served market, $160 billion of which is automation and grows mid-single digit. These are the underpinnings of our market that drive the automation thematic for us and why we felt very compelled that aligned to the market and to the growth opportunities within that market were important for our company. Here's the plan. We have the most complete automation portfolio in the industry. We are the market leaders. Every single one of these brands is #1 or #2 in their marketplace. across the entire technology stack that you see here. The third thing I'll tell you is this plan is entirely organic. There is no M&A in anything that we'll show you today. $18 billion company growing $3 billion or mid-single digits, but 5% is a CAGR to $21 billion in 2028. That's largely driven by our Control, Intelligent Devices and Safety Productivity segments that grow from $15.5 billion to $17.5 billion in this time period, delivering $2 billion of growth, which is mid-single digit. And then our software business, our industrial software business that grows from $2.5 billion in revenue to $3.5 billion in revenue over that same period of time. That is low double digits, driving $1 billion of growth in the business. I'm going to spend a little bit of time on that software piece specifically. It's a large market. It's a $30 billion served market. And the underpinnings and the drivers of that market are familiar to all of you. It's the IT/OT convergence. It's the data fabrics and industrial AI revolution. It's the automation of workflows across a variety of different industries. There are enormous spend dollars out there and commitments around next-gen AI, investments in equipment across industries and the digitization of elements like the grid and major factories and investments. The way we will talk about our software business is on an ACV basis, on an annual contract value basis. That $2.5 billion in revenue translates to $1.56 billion of ACV in 2025. You can see on the bottom there, the 4 brands of industrial technology that we take to market, the software technology we take to market. It's grown 10% over the last 3 years on a compounded basis, and we expect it to grow low double digit to 2028, $2.1 billion of ACV in 2028, supported by the macro trends that I just described and across our customer base. Now why do we believe that we have the right to win in the software space? This is the history of automation. The X-axis represents time. The Y-axis are the various states of automation over time, starting with manual operations to our first introduction of automation in the industry to the optimization of automation with, of course, still regular human contact to the semi-autonomous state of industry, where there's some occasional human intervention and then to our vision to deliver an autonomous operation opportunity to our customers. The curve represents innovation, innovations, many of which were new to the world at the time that we've driven inside of Emerson. On the left side of the curve, our innovations around production operations. On the right side of the curve, our innovations around test operations. And I can pick out 3 or 4 of these that didn't exist until we invented them, things like LabVIEW, DeltaV, our wireless heart business, Mtell at AspenTech and now the latest suites of AI agents, Nigel at NI and the various suites of in DeltaV. Our vision is to create an enterprise operations platform across production and a test operations platform across the test and measurement environment. We believe we have the right to win. We believe we have the technology to be able to accomplish this. So let me walk you through each of the 2, starting with operations, our enterprise operations platform. Now I'm trying to keep this as simple as I can, and we'll hit this a couple of times today. But think of it this way. There are many barriers to get to an autonomous state in manufacturing today. Data exists. There's lots of data, but it's hard to get at it. It sits in silos. You may have reliability data in one place, safety data in a different place, production data in a different place. That's a big challenge. Furthermore, that data is unstructured. Another way to think about it is some of the data is in German, some of it is in Japanese, some of it is in English. It's diff -- it doesn't connect. It doesn't -- it's not in the same language. It's unstructured data. The architecture that exists across these facilities is rigid. It was not designed with the vision of autonomy. It was designed for a very different world around automation, optimization perhaps, but that vision forward never existed. So there's rigidity in the architecture that exists. And of course, it makes scaling AI or any modern tool of productivity very, very difficult across that stack. Our solution is listed here on the right and how we're addressing each one of these opportunities in the marketplace. Our vision, simply put, is the following: you have to begin by designing for autonomy. So the product technologies that we're bringing to market and were listed on the prior chart were all designed with this future end state in mind. Secondly, that technology adoption cannot require our customers to rip out the stuff that already exists. It has to layer in on top of existing hardware to utilize the data that's in place. Secondly, we're embedding intelligence in our sensors, our control and our analytics, and we're integrating that intelligence into the engineering workflows of the business. That's very critical because it does start with the smart instrumentation in the business. And lastly, and critically important, we're developing unified data fabrics that enable our customers to drive to self-optimizing systems and ultimately to autonomous operations. Those are the 3 components of what's on this chart and how we're addressing this challenge for the industry. That same autonomous vision exists in the test environment. And look, customers are challenged with the same kind of stuff. They can't get at the data. There's too much complexity. The technology is disparate, but they're facing the same challenges in test as they are in production. They want to optimize yields, they want to optimize design and improve product. But with disparate tools that aren't connected and the data is not accessible, that is very, very difficult. And this is where our vision to create an NI test platform around unifying the data platform, making it available at the cloud and edge with modular test instruments and AI orchestrated workflows brings it to life. It's a significant opportunity and a vision where we can take this industry as the automation leader. So innovation is what will keep the technology stack evergreen and move us forward to deliver on this autonomous vision. We are investing heavily in our software and systems business at 17% of revenue. It has delivered 70% new product vitality. That means that 70% of the revenue in that segment came from new product -- from products introduced over the last 5 years. That's how we define new product vitality. But we're investing across the stack at different rates, aligned with market and technology needs. Overall, Emerson is investing at 8% of revenue in innovation, and we are driving, on average, 30% new product vitality. That's up 5 points from the last number you saw in 2022. We're doing that with an innovation engine. We have 15 major innovation hubs around the world. The 14,000 engineers we talked about, over 2,500 software engineers and over 300 PhDs working across our company, driving this innovation to bring differentiated technology to the marketplace and drive to our autonomous vision. The second driver of growth are the end markets. It's all good and fine if you have phenomenal technology. But if you're selling it into end markets that aren't growing, that's problematic. And we did a lot of work in the portfolio transformation to identify markets that would drive strong underlying growth on a forward basis. We started by trying to understand what the secular tailwinds were. And there are 3 very important listed on the left here. They're all familiar to you. electrification, energy security, nearshoring or sovereign self-sufficiency. And those 3 secular tailwinds drive investment in 5 incredibly important markets for our company. Power, and that's both generation, transmission and distribution, liquefied natural gas, life sciences, semiconductors and aerospace and defense. I'm going to walk through each of the 5 in detail. But today, they represent 22% of our revenue, $4 billion out of the $18 billion, and they represent over 50% of the new product capital funnel that we're tracking that we shared with you on a quarterly basis. So let's go through each of these in detail. And again, you follow these markets, you understand generally what's going on in the trends. We're seeing it in the outcomes in our business. So let's start with power. Certainly, data center demand is a big deal. But look, we do have an aging infrastructure. We have an aging grid, and there are investments in all segments of the power industry, from production, from generation all the way through transmission and distribution. In the United States alone, we will have 400 gigawatts of new generating capacity between now and 2030. That's a 30% increase in generating capacity in the United States over the next 4 years. It's a very significant number. We have the #1 position with Ovation in generating capacity controls. And we have the most advanced software platform for grid management, which sits inside of AspenTech. You can see the performance of our company on the left here, $2 billion in sales, 10% we talked about, slightly over 10%, growing 8% from '24 to '25 and a large project funnel to support the future growth. Equally, liquefied natural gas. Now liquefied natural gas, we've been talking about for quite a while. And for a reason, we've gone through 2 very significant waves. The first wave, you may recall, started in 2000, went to about 2010. The second wave went from 2011 to about 2020, odd. We're now in the midst of the third wave. The third wave starting in 2021, it will go to 2030. In the third wave, which is by far the largest wave of investment in liquefied natural gas the world has ever seen, it will deliver 585 million tons per annum of capacity to the marketplace. This is a large United States, Qatar and East Coast of Africa opportunity. But if you think about the investment in this wave already, 130 million tons per annum have been completed. 140 million are currently under construction, and we have 315 MTPAs yet to be awarded in the third wave. That 315 is larger than the first and the second wave combined, what's yet to come. We win at an over 50% rate in this marketplace. We have the #1 distributor control system in DeltaV in LNG with tremendous customer partnerships around the world. And the business in 2025 grew 12% to $450 million and is supported by a tremendous project funnel that goes beyond our control systems to our Final Control business and our sensing business as well. The third market I'll talk about is life science. I believe, and I get a little bit of a close look at this, obviously, with some of the other work I do, that we are in an unprecedented period of time in human science. The number of drug developments, new gene-based therapies, advanced treatments that are coming to market to address diseases like Alzheimer's, HIV, cancer, are fundamentally increased across the entire industry. You couple that with over $350 billion of committed investments in the United States alone to nearshore and to reshore manufacturing of drugs. This industry is going to have a great run for the next 10 years, and we're incredibly well positioned. DeltaV has nearly 4,000 systems installed across the industry. It's the #1 platform for automation in the life science industry across 25 of the top 25 largest pharmaceutical companies on the planet. Business is growing. You see we grew 20% in 2025. It's supported by a large funnel opportunity for us. So very excited about what's going on in life science. Equally, in the fourth market, semiconductors. Huge opportunities here in terms of nearshoring, expansion of technology and the role that we have, particularly in -- with test and measurement. That's the most obvious. But inside of every fab, underneath, there's a basement. And if you've ever walked to one of these basements, that's a chemical plant and a water plant. That's what sits underneath the fab. So our opportunity in semiconductor is very significant in testing, in test and measurement and the position there is very strong. 9 of the top 10 semiconductor chip makers are standardized on NI, standardized. But our opportunity is also underneath that fab to ensure that we have the final control elements, the sensing elements and the Delta Vs to run the fabrication and make that water and those gases available for the chip making. Very excited about this industry. You can see we have a very sizable business. It's coming out of a trough. We had a great second half in that business as we went through 2025 and expect really good things here in 2026 and forward in the cycle. And then lastly, the fifth end market, aerospace and defense. That's new. We haven't talked to you guys a whole lot about aerospace and defense, but it's a $525 million business growing at high single digits. Now this is not just defense. There's a whole space industry being developed that will be close to $1 trillion in size by 2030. We spent a lot of time at NI developing relationships with the new space companies. And you can see we are standardized in 9 out of the 10 new space companies. We'll continue to invest in this business, and we believe with our strong modular test equipment position, ability to bring LabVIEW and AI, Nigel AI into the marketplace, we'll continue to drive our differentiation in the validation and production of electronics for the aerospace and defense industry. So that's the growth piece. Technology differentiation, driving to an autonomous future and end market exposure, 5 key markets that will drive differentiated growth for our company. I'll touch on operational excellence, which I said is a hallmark of Emerson. This has been the journey over the last 5 years. 700 basis points of margin improvement. Now you think when you trade a Copeland for an NI or an InSinkErator for an Aspen that you'd naturally get adjusted segment EBITDA margin, but we actually did not. The core improvement here came from the organic, the company we already owned. It came from our DeltaV Innovation business. It came from our sensing business, from our Final Control business, 600 to 700 basis points in the business. And we see more opportunity. Ram is going to talk through in detail, but there are 3 key levers for us. One, a very disciplined price culture in our company. Price for us is not a top line number that we throw out our businesses. It's something they build from the bottom up, taking into account the risk of pricing and products, taking into account customers and markets to adjust price. Secondly, we continue to have operational opportunities, whether that's cost reduction in products in plants, rooftops, the advent of digital transformation of our own factories and use of AI. That opportunity sits in that operational segment excellence segment. And then lastly, we did 2 large deals. NI, where we committed $200 million of run rate synergies. We completed that in 2025. That runs into the future. And AspenTech, where we committed to $100 million originally in 4 years, now will be done by 2026. We'll get the benefit of that $100 million run rate in this plan as we go forward as well. So there is more opportunity, and we're committing that 40% incrementals to 30% adjusted segment EBITDA margin in 2028. And lastly, this story is going to be a little bit different. And we have to deploy a significant amount of capital, nearly 1/3 of all the cash generated in the company to reposition the portfolio. On the left are the sources and uses of cash over the last 5 years. We generated $38 billion of cash. That's earnings, of course, we borrowed and we have proceeds. We used $24 billion of that to do the work to create this company, predominantly, of course, NI and Aspen. We returned 30% of that cash back to our shareholders, minimal dividend increases and minimal share repurchase over the 5 years. We certainly offset dilution. This is the next 3 years on the right side of the chart. We will generate $14 billion of cash flow. $10 billion from net earnings in this plan. If you look on the right side on the uses, we'll continue to invest in our facilities, but we have a relatively CapEx-light model between 2% and 2.5% of sales on CapEx. We'll continue to pay down debt. We believe maintaining our A2A credit rating is important, and we have ample room to do bolt-on acquisitions. But 70%, 7-0 percent of our cash is going to be returned to our shareholders. The dividend, we announced an $0.11 increase in the dividend this year. There will be $0.10 and $0.10 in '27 and '28. Share repurchase. We announced $1 billion of share repurchase this year. We'll do $2.5 billion and $2.5 billion in '27 and '28. That's $10 billion, 70% of the cash back. This company is positioned to create value. And that growth and margin opportunity translates to this chart right here, very critical and important for us in the value creation trajectory for the corporation. So that's the framework. These are -- the framework yields these very important numbers, which we're committed to. the $21 billion of top line, the 40% incrementals that delivered the 30% adjusted segment EBITDA margins, $8 of EPS, $8 of EPS in 2028 and 20% free cash flow margin. We believe that's a highly differentiated value creation opportunity. We're excited about the future of our company. We're excited that we get to run the company that we've created now. We have a phenomenal management team, phenomenal team across the world. And I hope you come on the journey with us. That's what I have. We're going to take a short 15-minute break. Please be back, let's say, 5 past the hour, and we'll go from there. Thank you, everybody. [Break]

Welcome back. Hopefully, everyone got some coffee. We're fully caffeinated now. Yes. Okay, good. Before we dive into Ram's section, we have a video on customer-centric innovation that's underway here at the company, specifically with our enterprise operations platform and our NI test platform. [Presentation]

Well, first off, great to see everybody in person. Many, many familiar faces in the audience. I think I know many of you, but for those I don't, my name is Ram Krishnan. I'm the Executive Vice President and Chief Operating Officer. And hopefully, I'll get an opportunity to meet with all of you before we adjourn for the day. But most importantly, before I start off, I want to thank you for your interest in Emerson. Lal painted an extremely exciting plan that's ahead of us. I mean we've had a great run the last 4 years, but what's more exciting is the plan that we have laid out, and it's an exciting journey, and I am personally very, very energized to be a part of it. I'm going to cover 3 important topics today, starting with our automation segment leadership, which clearly presents a winning formula for us as Emerson to engineer the future of autonomous operations for the industry and our customers. And as you saw in the video, there is meaningful customer-centric innovation underway across the company, and we believe we're poised to separate from the competitive field as we bring this innovation to our customers. I'll talk about the 2 groups that we laid out, systems and software and Intelligent Devices and the 4 segments that define those groups and the important programs around innovation and commercial excellence underway in each of our segments. Two, the margin runway and the forward plan. We laid out a road map to 30% adjusted segment EBITDA margins by 2028. That's 240 basis points of improvement at 40-plus percent incrementals. I'll lay out the specifics of how we plan to drive that. Again, historically, we've driven 700 basis points over the last 4 years, 160 basis points in 2025. So there is momentum, but we have more opportunities ahead of us to drive to that 30% margin. And then finally, the differentiated management system that supports this value creation framework and underwrites this plan. So as you can see in this chart, I'll start off with the segment leadership. We clearly, as Lal showed, are the global automation leader with category leadership across all elements of the technology stack. Our $6 billion software and systems group is the category leader in control systems and optimization software for production operations and modular software design test systems for test operations in our Test and Measurement business. You can see, Lal showed you this, the DeltaV control system, 25 of the top 25 life sciences companies use DeltaV for their automation needs. From an innovation perspective, 50% of U.S. power generation is automated by Ovation, 20% globally from a capacity perspective, 30% on a consumption perspective, given the automation we deploy into coal, natural gas and nuclear. On the AspenTech front, from an optimization software perspective, 19 of the top 20 chemical companies use Aspen for their optimization needs. And then from an NI perspective, 9 out of the top 10 semiconductor companies use NI for validation and production testing. So phenomenal leadership position with our customers, category leadership, which I will highlight for you in many of the categories we play in systems and software. So very well positioned there. And then moving to our Intelligent Devices Group. Here, we clearly are the undisputed leader in measurement and analytical sensors, pressure, temperature, level, flow and analyzers that are used and then final control elements, which are valves, actuators and regulators, a critical and a differentiated part of the automation technology stack. Brands that you would recognize like Rosemont and Fisher, you can see the installed base of Rosemont pressure sensors, 12 million plus. The number of operating hours of wireless sensors from Rosemont, 70% of the world's LNG flows through Emerson valves, primarily Fisher and our lineup of isolation valves and 90% of the world's nuclear plants operate with Emerson Valves. So again, great positions within the served markets we play in, and we are poised to lead and separate in many of these categories, which I will detail out for you. Starting with our Software and Systems Group, play in an $85 billion served market that's growing mid-single digits with leadership position in 40% of the served market. So #1 or #2. Clear #1 positions when it comes to our DeltaV control system across the process industries. Ovation is the category leader in control systems for power and water, AspenTech in modeling and optimization software and NI when it comes to test automation systems across a variety of industries. So again, 40% of the served market, we're #1 or #2. A very differentiated financial profile for this business, $6 billion in sales, 60% gross margins, 31% adjusted EBITDA margins. $2.5 billion of software, which is about 43% of sales and a $1.56 billion of annual contract value. Balanced geographic exposure, 65% MRO with a $40 billion installed base. And as you can see, we delivered strong historical performance in this group. Back 4 growth was 7% organic CAGR and margin expansion of 13 points, driven by the softwareization of control systems. It's a hugely important initiative for us as we move the industry towards software-defined automation and set the foundation for the enterprise operations platform that had a meaningful role to play in the margin expansion in the back 4 and then the acquisition synergies, the $200 million of acquisition synergies at NI that we executed in the plan. Going forward, the through-the-cycle targets for this group and these 2 segments, 6% to 9% organic growth, 45% incremental margins. And as I will show you, game-changing innovation underway in both these segments and this group will support these through-the-cycle targets. I'll lay out 3 critical areas of innovation in this group where we're making meaningful investments to win with our customers and move the needle for the industry. Starting with the enterprise operations platform. Lal talked about it. You saw our customers talked about it in the customer video. But simplistically, we're developing a unified suite of best-in-class application software operating on a common data model that enables seamless integration across the production domains. This is a significant challenge for our customers today because trapped data and disconnected software workflows and that trapped data across their different OT silos of production, reliability, safety, sustainability, their analytical data, their engineering data, these are data silos that we will solve with a unifying data fabric and build a unified software suite that can operate on that data to drive that into actionable insights. And the most important element of how we're thinking through the enterprise operations platform is the ability for these solutions to accommodate legacy automation infrastructure, which gives us a huge playground to go into existing customers to deploy the enterprise operations platform to unlock meaningful value without having them to rip and replace their legacy automation infrastructure. Now we are building clear differentiation into our solutions, starting with that unifying data fabric, which allows our customers to liberate, contextualize data that Lal talked about and then democratize that data to be used by our integrated suite of software, which will then allow the deployment of AI orchestration at scale. And in addition to that, the ability for us to deploy our digital twins, a lot of which we acquired through Aspen gives us a unique opportunity to allow our customers to build digital twins at every asset at the site, every unit operation at the site, the entire site itself and eventually their network of sites, which is the enterprise. That is huge value for them to unlock productivity, drive energy efficiency, safety, sustainability in their operations. And the ability for our unifying data fabric to unlock AI orchestration at scale and build these high-fidelity digital twins is a unique differentiator for our enterprise operations platform. Of course, the virtualization of the DCS, the software-defined automation architecture will unlock flexibility and provide scale to our customers to now deploy control at the site or across the enterprise, which I think is huge with a software-defined architecture and then open up the opportunity to deploy cloud and edge applications that will convert that data into insights at the right time and granularity, all built with Zero Trust security in mind as we deploy this framework. We are investing in the building blocks of the enterprise operations platform over this planning period. You can see key specific programs there at AspenTech, DeltaV version 16, Ovation 4.0 that will have many of these capabilities built in, and these programs will account to about $2 billion in 2028 sales. So focused investment underway a critically important initiative for us to drive growth, but also for the industry and the value unlock for our customers will be significant as we bring this to life to help them achieve autonomous operations at scale. Similarly, on the test and measurement side, as Lal explained, customers in the test and measurement space are constrained by the same challenges around fragmented data and disconnected application software. Now NI has always used a differentiated approach with their technology stack to address these challenges and advance the vision of autonomous test. And they have been the leader in this industry with this approach around modular instrumentation, their PXI instrumentation that will allow for AI-enabled structured data acquisition. the flexible application software led by LabVIEW and now LabVIE+ to automate test workflows and then a centralized data platform that will enable product analytics and system health monitoring to help our customers run their network of labs, optimize production yields and then eventually improve product quality of that test data. So immeasurable value by solving the data problem and coming up with an integrated application software suite. Now released earlier this year, the purpose-built NI Nigel AI Advisor accelerates test design, setup and orchestration and takes many of the workflows of a test engineer and drives them to autonomous workflows. And so we are investing in very critical innovation programs here. Nigel NI is a big area of investment, but also investment in the integrated suite of product analytics and test automation software in addition to our RF suite of instruments, which is important for a very important end market like aerospace and defense and then our next-generation data acquisition system. So important innovation underway, will drive a competitive advantage for us in many of the markets, but most importantly, advance the vision of autonomous test for our customers. And these programs will deliver about $750 million in 2028 sales in the Test and Measurement business. Finally, we are taking a practical and programmatic approach to AI, building on decades of experience in machine learning for process control, optimization and test. And our right to win here is defined by first principle models. We have a lot of experience in first principle models with deep OT expertise and the ability to train our agents on decades of OT data anchored in trust and reliability for our customers. And we believe this gives us a clear advantage today in Gen AI models for task automation, which is really where we are and where the industry is through these AI advisers that we've developed. And you can see examples of products we've released at AspenTech around accelerating and optimizing operational decisions, abnormal situation prevention with the Ovation adviser that we've developed predictive reliability insights at DeltaV and then all of the work underway with Nigel and I on test design and orchestration around workflow automation for the test engineer. We will continue, we believe, to separate from the field as we drive from task automation to complete autonomous workflows in an aggenic framework. We're effectively integrating generative and AgenicAI to drive meaningful value. But our right to win will be defined by our understanding of the first principle models, access to OT data and deep OT domain expertise. Okay. Now switching to our Intelligent Devices Group. Here, we play in a $75 billion served market with leadership position here in 45% of the served market. You can see Rosemount, #1 in pressure sensors, almost 40% market participation. Micro Motion, #1 in Coriolis flow sensors, almost 47% market participation there. And then Fisher control valves at 28% is the leading control valve manufacturer. So again, in important categories of pressure, flow, control valves, strong position, a very, very balanced financial profile, $10 billion in sales, 51% GP, 27%, leading industry in terms of adjusted EBITDA margins. Balanced geographic exposure, 65% MRO and here, operating in a $95 billion installed base, $40 billion in Sensors and $55 billion in our Final Control business. This group delivered strong historical performance, again, 8% organic sales CAGR, driven by a lot of innovation, strong MRO and a favorable CapEx cycle in LNG and power, 6 points of adjusted EBITDA margin expansion. And through-the-cycle targets here for this group, 3% to 6% at 40% incrementals. And here, next-generation products that I will show you and redefine go-to-market motions in our sensing business and a resilient installed base annuity plus the CapEx cycle in power and LNG will support the through-the-cycle targets on the Final Control side. So for this group, 3% to 6% at 40% incrementals. On our sensing business, a complete revamp underway of our core product platforms. You can see a lot of next-generation products being released in this cycle, pressure, temperature, magnetic flow sensors, level sensors, a complete revamp of our pervasive sensing or our IIoT sensing lineup. And in each of these capabilities, a significant improvement in performance and cost, and we will drive almost a 15-point improvement in new product vitality. In Lal's chart, this group was around 9. Sensing is around 10% today. That will become 25% new product vitality as we gain market participation across core and adjacent markets by bringing these new products to our customers. In conjunction with that and as important is are the investments we're making around our refined go-to-market motion in this business to unlock productivity in our sales structure to allow us to invest more feet on the street to go after new opportunities, new account acquisitions and white space. Simple, but very important to do and investing in our state-of-the-art digital front door. We have a lot of light touch accounts, and we can -- with a state-of-the-art digital front door and digital sales engineers have the opportunity to then unlock investment capacity to put more feet on the street, more salespeople to drive new accounts and white space capture. And then at the same time, we're making investments in modernizing our sales operations technology stack to operationalize our commercial excellence framework, almost run sales like we run operations, which is a very important step in making sure that we can stay disciplined in bringing these new products into new markets and new adjacencies of our customers. So important initiatives underway in our sensing business that will drive growth in the framework I defined. And then our Final Control business, here, we have clearly an unmatched service footprint supporting our customer operations globally, a 5 billion installed base, almost 200 service centers between us and our partners serving these customers. But here, the opportunity is the significant spend underway by our customers to maintain and upgrade valves. In 2025 alone, there were 5,300 maintenance events we call shutdown, turnaround and outage events. And each of these events is an opportunity for us to go sell more valves, more service, but also drive competitive displacement. And we have almost 1 million valves as our installed base, and we serviced approximately 80,000 valves in 2025. That translates to that 8% yield that Lal talked about, which will underwrite mid-single-digit growth for this segment. And more importantly, we're making strategic investments here to continue to separate from the field, extend our leadership position and separate from the competition. So very important businesses in the framework of our tech stack in sensing and Final Control and a very focused set of initiatives around next-generation products, refined go-to-market in our sensing business and then most importantly, a continued investment in our Final Control service infrastructure to keep moving the ball forward here. Okay. Now pivoting to my next topic, margins. 30%, 240 basis points of improvement at 40-plus percent incrementals coming on the back of 700 basis points over the 4 years. We exited 2025 with record margins, 27.6%, which is the 160 basis points of improvement. It was a great year from a margin perspective. A lot of things went our way, certainly mix, good set of cost reductions, the software side of the business contributed in a meaningful way. But what's important here is we continue to see significant margin runway with a focused set of multiyear initiatives. Our management process has a real focus on this, and we're constantly looking for new set of ideas. And that's really what funds these initiatives, and we're always 2, 3 steps ahead of where we need to be, and we continue to execute in a diligent fashion. So as you can see on the chart, 4 points from price, 4 points from operations, which has the leverage from the growth in it, 0.5 point from incremental acquisition synergies. I'll show you the $200 million plus the $100 million, $200 million at NI and the $100 million at Aspen. This is the incremental amount over this 3-year time frame, offset by inflation and then 1.5 points of strategic investments that gets us to the 30%. Time-proven levers is what I call them, price, our operational excellence programs where we have a new set of ideas and then the full realization of the acquisition synergies. Starting with price. It is a critical lever for us for profitability, but also growth in the new Emerson. As Lal described, our diverse customer base the many industries we play in, the high percentage of MRO, 14% software mix that gives us the ability to get automatic price escalators and then our market leadership position that I just described across many of our product lines supports value-based price positioning. So we're starting with a very, very good foundation with the discipline in our management process to make sure it's always an important part of our go-forward plan. And price staying above net material inflation is something this company has always executed well. The new Emerson has a much better ability to continue that journey in a meaningful way. So we've built a 2% price into the plan. We did 2.5% price in 2025. We guided 2.5% in 2026. Obviously, the tariff dynamic supporting that, and then we've built in 2% into '26. '27 and '28. The organizational muscle to deliver on price is built into our commercial excellence framework through fundamental pricing strategies. Our businesses execute this day in and day out, and this is a very, very important part of our thesis. But more importantly, the portfolio that we've created with software, with test and measurement with the leadership position across almost all categories within the automation space gives us the right to get price in a disciplined fashion going forward. So it's a lever that has served us well, and it's a lever that will continue to drive our road map to 30% margins. Our operational excellence priorities are focused on 3 specific opportunities over this planning period. Footprint optimization, our road map to 100 manufacturing sites by 2028. If you -- for those of you who were there in 2017, when we acquired Valves & Controls, we peaked at about 165 sites for continuing operations within this company. And over the last several years, we've had a disciplined road map to get to 100 sites for the company. We sit at 117 today with tangible plans to get down to 100 sites. Now I think what's important here is it's 100 sites, but the sites where we will make the right smart factory and automation investments to deliver world-class cost, speed, quality, safety, inventory management at these sites. So that's an important lever. The regionalization journey on manufacturing and supply chain continues. Today, we sit at 85-plus percent of our cost of goods regionalized. Supply chain regionalization is north of 90%. But from a cost of goods perspective, 85-plus percent of our cost of goods regionalized. We operate in 42 world-class best cost country manufacturing sites. I've laid that out in the chart. This is truly an important cost advantage for us and a speed advantage for us, and we have an opportunity in this plan. Today, 60% of our manufacturing headcount is in best cost country. That will move by 5 points. But most importantly, what this allows us to do is get an unmatched cost structure with speed and resilience. This has been a traditional strength of ours. but there is more opportunity here, and we're continuing to invest to get to the 100 manufacturing sites and continue to strengthen the regionalization of our cost of goods and supply chain footprint. And then the third initiative is really the new frontier, the next frontier of productivity, particularly when it comes to enterprise functions, which we've been able to centralize for the new automation company through AgenicAI operating models. And the 2 areas where we see the biggest opportunities are finance and customer care. We're investing in a centralized enterprise-driven technology stack with an Agenic layer with an enterprise data lake to allow us to capture these opportunities. And we believe there's about 30% productivity gains across both these functions as we deploy this framework. We're early in this journey, but we do believe that what we're learning so far, this would be a great opportunity to continue to drive productivity in our enterprise G&A functions. And then finally, I'm very proud of our global teams that delivered on our acquisition synergy commitments on both NI and AspenTech. It has had a meaningful impact on our plan to date and will be an important element of the go-forward plan that we have laid out. We talked about $200 million in NI synergies. All actions, as we said, have been completed in 2025 to achieve this run rate set of cost synergies. And this will drive NI margins to 31%, which is what we committed to by 2028. And similarly, on the Aspen front, $100 million of planned run rate cost synergies by 2026 as we exit '26, 2 years ahead of plan and will drive AspenTech margins to 55% by 2028. So a great body of work robust M&A processes that we have put in place and the new Emerson built into our management system to deliver on these type of commitments. But it starts with commercial due diligence and evaluation, which is an important part of the processes prior to buying these companies, rigorous integration planning with outside support, but with well-invested teams and then most importantly, putting the right people into these businesses, a combination of great people we acquired from these businesses, but the right Emerson leaders into these businesses and the right functions to help us deliver on this. And certainly, our M&A muscle has become a significant strength for the company. I think it's an important capability that we've built. It served us well with NI and AspenTech, but more importantly, gives us confidence that as we do additional deals, not much in this plan, but going forward, we will have a great set of capabilities to deliver on our synergy commitments. So that brings me to the final topic, which is our differentiated management system that supports this framework, underwrites this plan. I will say this is the funnest part of my job. The opportunity to drive a consistent and well-defined set of management engagements with these businesses and these business leaders throughout the year to drive collaboration with appropriate levels of planning and control. And we do spend a lot of time in planning and then executing on the plan, but long-range planning, annual planning around growth, margins and talent to optimize business outcomes. It is a high-touch process. I mean, Lal and I have worked in pretty much every business within the company. So that makes it very enjoyable. It is -- what it allows us to do is drive speed around decisions and investments. We don't take a lot of time. We -- a lot of our business leaders have worked with us. They've been with us for a long time. We can and will move with speed around decision-making. And this clearly is the secret sauce that underwrites the plan. We don't talk about it a lot, but we spend a lot of time on it, and we allow the results to do the talking. But this is a critical part of what gives us the confidence that we can deliver on this plan. And I am personally very energized by the journey ahead of us. I'm personally very excited to work with our leaders and Lal and Mike and Colleen to execute on this plan. So I will leave you with a customer video that shares their excitement around how our technology is helping them solve industry challenges following which Mike will come up and talk about our financial framework to close out the session. Thank you. [Presentation]

Good morning, everybody. I'm Mike Baughman, Emerson's Executive Vice President and Chief Financial Officer. And I'm excited to be here today to talk to you about how we plan to realize value for shareholders over the next 3 years. I'll take you through the plan in a little bit more detail than you've seen, and there'll be lots of numbers, as you would expect, but there's going to be 5 key numbers that you've heard before that represent our targets for 2028, and that includes $21 billion of revenues, 30% adjusted segment EBITDA margins, $8 of adjusted earnings per share, a cumulative $12 billion of free cash flow over that 3-year period, and we plan to land 2028 at a 20% free cash flow margin. So those are the 5 key numbers. And I think there's an important bonus number to talk about that a lot of investors, I think, will appreciate. which is the $10 billion that we plan to return to shareholders in the form of increased dividends and share repurchases over the next 3 years. So we've taken the bold moves to transform the portfolio. We've heard about that. We've got the automation portfolio to move forward with the management processes to drive towards these targets and achieve them. And I think we've got a great opportunity here to drive meaningful value creation for shareholders over the next 3 years. So before I get into the framework, I want to take one last look at the last 5 years, the 4-year performance here that has been a really great run. Since we were here back in November of 2022, we've had these 4 great years and overdelivered to the value creation framework that we laid out at that time. We grew revenues at a 7% CAGR, and it was a resilient set of growth with 18 quarters of underlying growth, and we landed at the top end of the 4% to 7% framework that we presented back in 2022. Since 2021, we've expanded gross profit margins by 8.5 points. We've expanded adjusted segment EBITDA margins by 7 points, and we've got runway to go up another 2.4 points, and I'll unpack that for you in a little bit here in a little different way than Ram did. And we've driven 60% average incrementals over those time -- over that time in excess of the 35-plus percent that was in our prior framework. We doubled EPS Free cash flow grew at a 12% CAGR, and we landed 2025 at an 18% free cash flow margin at the top end of our former range. And remember, that had 1 point of headwinds in it related to the transaction costs from the Aspen buy-in. So it was a really great 4 years. And Lal, Ram and I get the privilege of standing up here and talking about the great performance. But the great performance is driven by the BU presidents and the presidents in the back of the room and their team. So to you, I say thank you very much. It was a great run. We'll get going on the next 3 years. And to the Emerson folks listening, thank you very much for a great 4 years. So before we get into the framework, I'd like to set a little bit of context around Emerson's profitability versus peer profitability across the 3 business groups. of software and systems, intelligent devices and safety and productivity with gross profit margins and adjusted segment EBITDA margins. And what jumps off the page is the superior profitability of the Emerson businesses compared to peer. You've heard that we ended 2025 with a gross profit rate of 52.8%, reflecting our technology leadership and the value that customers place on our products. The adjusted segment EBITDA margin of 27.6%. I think that's a great reflection of the management system and the processes that we run and our relentless continuous improvement and cost actions that are all over the company that drive that profitability. So if you look at each of the business groups, and then we think about our incremental margin, which is off on the right side of this chart that we're expecting through the cycle for these businesses, Software and Systems driving 60% GPs. That's where the software revenue is. It has a very good mix of businesses in there, 60% GPs, 45% expectation of incrementals. Intelligent Devices, 51% GPs, expectation of 40% incrementals through the cycle. And then Safety and Productivity, a little lower at 43%, but 22% adjusted segment EBITDA and a 35% expectation of incrementals. That 45%, 40%, 35% is the support for the 40% that we're expecting through the cycle, and we'll continue to talk to you about the business in these 3 groups as we move on. So now getting to our value creation framework as we move forward and the key numbers that I talked about that you've seen before, starts with the $21 billion of revenue, 5% growth expectation in each of the next 3 years. That will be led by software and systems, growing in low double digits, Control Systems and Intelligent Devices growing mid-single digits, and that will support our 4% to 7% growth through the cycle value creation framework right in the middle there. 30% adjusted segment EBITDA, expecting 2.4 points of margin expansion. Ram talked about that. I'll show you the bridge for that in just a second. That growth and margin expansion will drive 10% EPS growth. That's our third key number, gets to our $8 per share. I'll show you what that looks like as well, $12 billion of cumulative free cash flow during those 3 years, and we expect to land 2028 at 20% free cash flow margin at the high end of the framework of 18% to 20% through the cycle here. And then just one other point on the value creation framework. that 40% incrementals. I can't tell you how many times I've heard over the last 3 years, when are you going to take that up? We took it up from the 35% plus to the 40% and I'll talk about that a little bit more. So here we go on the EBITDA expansion of 2.4 points. Ram took you through the 3 key profit levers, price realization, operational excellence in the form of footprint optimization and digital transformation as well as finishing off the incremental synergies from the AspenTech and Test & Measurement acquisitions. I'll take you back to the conference call for the fourth quarter year-end, and we talked about a headwind that we were facing from our long-term software contract renewals. And at that time, we talked about a headwind of 40 basis points that would reverse as we move forward. into '27 and '28. So that's what we're showing here, bridging from the 27.6%, you see the 40-point headwind in '26 reverses in that '26 through '28 period of 50 points and becomes a little bit accretive. And then the operations will be driving the EBITDA margin expansion, 80 basis points in 2026. That will be split pretty evenly between Software and Systems and Intelligent Devices. And as we move forward, 1.5 points, which is weighted slightly towards software and systems. And remember, inside of that 2.4 points of adjusted segment EBITDA margin is 1.5 points investment back into the business. This type of margin expansion is a hallmark of Emerson. It's something that we've always done. It's why that profitability that I just showed you a couple of pages ago looks the way it does. We've been doing this for years. In the last 4 years, we drove the 6 points of improvement as we move forward. We're very confident in our ability to do the 2.4 points over the next 3 years. I'll dive into the next key number here of $8 of adjusted earnings per share, a $2 increase. It will be driven by the profitable growth, the synergies, the share repurchases and tax rate. We're going to see a small reduction in tax rate as we move forward. Operations and synergies will drive $1.70 of that expansion. That's the 5% growth at a 40-plus percent leverage as we move forward, and all business groups will contribute to that, but it will be led by software and systems. And then there are 2 nonoperating items here that account for $0.35. The cash flows that we're going to generate will enable that $6 billion of share repurchase, and that will drive $0.35 of incremental EPS over the 3 years. And then we're going to benefit from some reduced taxes going from our 22% rate down to about a 20.5% rate in 2028. As we've settled into the new portfolio, the cohesive automation portfolio, and we've considered the effects of Pillar 2, which is a bit of a headwind in 2026, and we've looked at OB3, which will create a little bit of a tailwind, and we've rethought some of our internal financials and the way that we're doing business, we believe that we can bring down that tax rate from 22% to 20.5%, and we're already underway. You'll recall that we guided 2026 at a 21.5% tax rate. There will be a 20% headwind there that you see, that is primarily net interest expense, but the compounding effects of the profitable growth, the share count and the lower taxes will drive the $2 of EPS to take us from $6 to $8, representing the 10% cumulative growth year-on-year. Okay. Now we get to the bonus number, the $10 billion that we plan to return to shareholders, that all starts with the profitable growth and the $14 billion of cash earnings that we're expecting over the 3 years. And whenever we do our capital allocation planning, one of the first places we start, as Lal mentioned, was making sure that we maintain a strong balance sheet. And that means that we focus on the target net debt leverage of 2x, and that becomes the anchor point. We talked about how as we went through the transformation, we took on some debt. We need to bring down debt. We brought it down in 2025. We'll spend an additional $1 billion to bring down the debt a little further in 2026. And then we'll need $2 billion over the next 3 years in CapEx and the working capital needed to support the business. And that will leave us with the opportunity to return $10 billion to shareholders in the form of increased dividends and share repurchases. Lal covered the dividend, $0.11 in 2026, $0.10 in 2027 and 2028. And we're targeting 30% to 40% of free cash flow in each year to allocate to dividends. And the modeling that we've done here fits very well within that range. We'll also do $6 billion of share repurchase. That's what we've modeled, $1 billion in 2026, $2.5 billion in each of '27 and '28. That will retire about 36 million shares by the end of 2028. We have modeled in multiple expansion and share price as we move forward. And so there's our capital allocation plan for the next 3 years. I want to spend a little time talking about something that we haven't talked about in a long time at Emerson, which is returns. And we have picked a cash return on invested capital as a metric that we will track as we move forward here, and we picked it for 2 reasons. One, we believe that cash equates to share price. And as we grow cash, we can grow the share price. And two, it's a simple metric that's based on GAAP numbers. There's nothing adjusted about it. It's operating cash flow divided by the average of equity plus long-term debt and long-term lease obligations. And as you can see in this chart, the portfolio transformation certainly had a negative effect on our returns going from about 24% down to about 11.5% over that time. And what I'd like to say is that we had a denominator problem. We generated $11.5 billion of gains. We took on debt to execute the transactions, and that's what drove this return level down to the 11.5%. Now throughout all of this, it's important to note that the 11.5% is still well above our cost of capital. And the good news is that as we move forward, the combination of growing operating cash flow at 9% and distributing $10 billion of the earnings out to the shareholders should drive us to about a 12.5% cash return on invested capital to 16% by 2028. This is also a nice metric because this is the same metric that is in FactSet. You'll be able to track this as we move forward. And it's one that we'll report on from time to time as we move forward as well. So that concludes my comments on the '26 through '28 plan. But before I wrap up, I'd like to reiterate our Q1 and fiscal year 2026 guidance. There's no changes. We're still expecting a very good year with 5.5% GAAP revenue growth, about 4% underlying growth, about a 28% adjusted segment EBITDA margin, EPS of $6.35 to $6.55, and recall that the software renewal dynamic that we talked about on the call at year-end is about a $0.15 headwind in that EPS number for 2026. I will also expand for just a second, the sales guidance that we gave on the call. Now that we've got the resegmentation, we will include sales guidance moving forward on safety and productivity. That's the only change on this chart from the same chart that we showed at year-end, and we're expecting a 2% underlying sales growth rate in the first half, 4% in the second half and 3% for the full year. So that wraps it up, and I'll wrap it up on a page here. I believe we have a very clear value creation framework and a strategy for value creation that has 3 pillars. It starts with organic growth. We've got the automation portfolio. We have end market diversity. We're aligned to secular drivers like never before. We have an unparalleled tech stack, and we've got durable revenues, 65% MRO, $155 billion installed base, and we're innovating as we go toward the autonomous future. We will continue our dedication to operational excellence with 2.4 points of margin expansion coming from pricing, footprint optimization, digital transformation, synergies, and we'll be increasing our cash generation. Those 2 elements of the value creation strategy support the value creation framework of 4% to 7% organic sales through the cycle, 40% incremental margins, 10% adjusted EPS growth and 18% to 20% free cash flow margin. The final element is the capital allocation. We will have a capital allocation that favors shareholders with an expectation of $4 billion in dividends, $6 billion in share repurchases. So one last time, the 2028 targets that we're setting, $21 billion net sales, 30% adjusted segment EBITDA, $8 of adjusted EPS, 20% free cash flow margin, $12 billion of cumulative free cash flow during the period and the bonus number of $10 billion returned to shareholders over that time. So these are not aspirational targets for us at Emerson. These are the result of our rigorous planning process, and this is what we're going to be laser-focused on as we move forward. We believe we've got the right portfolio, the right management system to achieve these targets, and we've built a world-class automation leader. We built the company for performance. We built the company for resilience, and we built the company for long-term value creation for shareholders. So that's all I've got for you. Thank you very much. We are going to take a 15-minute break. So let's try to please get back by 11:20. We're going to set up the stage for Q&A, and we'll look forward to that. Thanks. [Break]

Here we go, right. All right.

Here we go. All right, Colleen. I'll manage mics and everything.

Yes, we're going to do it. So a couple of quick notes. We've got Lal, Ram and Mike up on stage. We're going to take about 30 minutes to answer any questions you all have. Wait until you have the mic and, of course, introduce yourself as well. So who'd like to start?

Everyone who just raised their hand, will get to ask a question. We will get through if it goes longer than 30 minutes, we'll live with it, okay.

We're all really excited [indiscernible]

Mic working?

Mic is not working.

Andy Kaplowitz.

I will just stand by you. Go ahead.

All right. Andy Kaplowitz from Citi Group. So well, maybe frame the opportunity power across your high-growth markets a little bit more because like when I look at the table I see 8% growth in '25 in power, but it seems like it could accelerate from there. So like if more than 20% of your business or these high-growth businesses, you don't need that much growth in the high-growth businesses to kind of reach that 4% to 7%. So how do you think about that over the next three years? Do you expect things like power to accelerate life sciences, all that kind of stuff.

I'll give some comments and tell it to Ram as well. So certainly, you're right. We grew 8% in power in 2025, but our orders were up 30% in that segment. So we built backlog in that business, which is then going to translate into revenue in the '27 -- in '26, '27 and '28 time frame. Furthermore, I continue to see acceleration in orders in Life Science, Semiconductor, which came back very strongly at high single digits, low double digits in the second half of 2025. In orders, you saw revenue growth was only 1%. So we've got great momentum on the order side to support those five markets growing over the next three years. Anything you want to add?

Yes, no, you said it.

And then just one follow-up.

It's better when Colleen is...

So I think it's on Slide 45. [indiscernible] price versus inflation, price up 4% and inflation 1.5%, but you guys mix has gotten better. They're very good at price. So I'm just curious about that. Like is that conservatism, something else going on, or...

I'll take it. The 4.5 points is all inflation, okay? So price was 4 points, ops was 4 points, 0.5 point from incremental synergies. What's in the 4.5 points is all inflation. Material inflation is included in it, but NMI there is actually positive. It's favorable. So it's really -- or simply put, if you want to model it on a $18 billion sales, we have all cost of -- all of our cost is about 13%, 4 of it is material, you take that out. There's no inflation. So it's really the inflation represented on $9 billion of cost base. You do it at 3.5%, that's your 4.5 points. So it's SG&A inflation, overhead inflation, indirect inflation is captured in the 4.5 points. Price versus net material inflation is a strong positive.

You should not expect this business with a quality of technology, the diverse customer base that elasticity around pricing to flip at any point in this window negative on price/cost. And we couldn't find a year in automation where that was negative. Julian?

Julian Mitchell at Barclays. Maybe my first question just around the discrete business. It's been resegmented a bit. Maybe help us understand your aspirations in things like the PLC unit, how we should think about growth and sort of market share ambition there, please?

Yes. So I think simplistically, on the discrete side, as we explained, Brandson and Appleton, which are obviously were in the old discrete automation platform is now in safety and productivity. And the pieces that moved into the core automation tech stack was our fluid and motion control business that went into Final Control and then the PLC business, which is about a $300 million business for us that moved into control systems and software. the way we see it is our automation tech stack serves process, hybrid and discrete markets. Obviously, our market presence is strong in process and hybrid. We'll continue to be opportunistic on end markets in discrete with PLCs, with our fluid and motion control products, islands of automation that we can drive there. But that will be our focus there. And then Branson and Appleton moved into the safety and productivity.

I'll just add a couple of things. Two of the markets that we highlighted of the end markets that we highlighted, which is, I think, important for how we want to start thinking about the company are discrete markets in nature, aerospace and defense and semiconductors. We believe that those particularly, whether you are in the test and measurement space or in the automation process space will be differentiated in growth, and we wanted to highlight those. In terms of the technology stack, look, I think there are going to be continued synergies on the PLC side with software and systems. But let's be frank, with a $300 million business, we are -- I wouldn't even venture to say we're a 1% player. And that's the world that we're in.

And then just a sort of more financially, I know, CFO type question perhaps. You have the 9% operating cash flow growth guide and a sort of 10% EPS guide after buyback. So is the 10% EPS growth goal more of a sort of baseline, I don't know, bottom of the range? I'm just trying to understand why that couldn't be higher if you get 5%, 6% organic growth, 40s incremental margin and then a buyback on top.

Yes. So the delta there is really the working capital that we'll need to support the $3 billion of growth. And so there's a little bit of a disconnect between the 9% that we showed and the 10% EPS. So they're very much aligned the cash flow growth, and we're working on working capital efficiencies. We're making a lot of progress. We're bringing down the percent of working capital to sales over this plan, but that's what drives the disconnect there.

Next, my hand looks bigger.

Everything went well until this part.

Yes.

Seems to be working.

It works now.

Is that good?

Yes.

Small again. So just on the power side, how much of your power business is actually U.S. power? And then how much is do you -- are you now exposed to nuclear?

So nuclear globally, but it's Westinghouse based, AP1000 based. So wherever that technology travels, which is predominantly the United States, Eastern Europe and the Middle East will travel with it, 100% of those units. In terms of overall power today, it's probably 60% U.S., 40% outside. We still have a sizable power business in China, which continues to grow. We don't participate in state-owned power providers, but we are in the private markets. There are 25 or so coal-fired power plants in China being built, and we're participating in half of those in 2025 and '26. So -- but it's a heavy U.S. business with about 60%, which just by chance, falls in well with these layers of investments that are to build out the 400 gigawatts of power in the United States over the next 4 years.

And then just on the margin bridge, I think there's like 1.5% of strategic investments. Will that be something we'll see in the ER&D account? Or is that outside of that account? And how fungible are those investments if the revenue doesn't come or you want to like let it rip a bit more to the bottom line if the revenue gets there?

There are 2 broad categories, Steve, innovation and commercial excellence. They are the 2 levers that we have within the company to drive organic growth. Certainly, those can be levered by Mike and Ram, working with our group presidents depending on the volume environment that we see in the marketplace. So there are some degrees -- significant degrees of freedom there.

Great. Michael [indiscernible]. So first question is AspenTech s a great business, EBITDA margins, targets, low double-digit core growth. However, software has become a bit of a dirty word with investors, is about disruption. Maybe talk about what the walled garden and protection is for AspenTech and why this software business doesn't get disrupted.

Are you talking about your general question of software being disrupted by AI?

Disrupted by AI and...

Yes. So good question. First off, I think that is more applicable to horizontal software workflow automation, products like CRMs or even an ERP for that matter or tools of that nature. When it comes to Aspen, it's a very sticky domain-specific high-fidelity simulation of chemical processes or processes across different process industries that is built on first principle models where we have years of experience, and it will be very, very difficult for an AI framework to come in and displace that capability. So it's, A, very sticky; B, I think a lot of domain expertise built into those solutions, and it's more vertical software as opposed to horizontal software. And that's why we believe there's a lot of longevity. Now obviously, we're also investing in AI capabilities with Aspen to continue to drive productivity for the users of Aspen software in terms of advisers and workflow automation within the Aspen workflow. But we feel pretty good, whether it's the simulation side of Aspen or advanced process control or their reliability suite, there's a lot of domain expertise built into that software capability that gives us that protection of the moat.

Great. And then taking down the plant number, I think, from 160 in 2017 down to 117 today, down to 100 by 2028. Can you just talk about what that does to your kind of cost base? And then what have you done to mitigate supply chain risks going forward?

Yes. So I think from a cost base perspective, I mean, frankly, what we're trying to do is get to the right set of large, well-capitalized factories that can support our global business with the right levels of speed and regionalization. That was the playbook on going from the 160 down to 100. We believe a company of our size with the different business models we have where a sensor factory is different from a valve factory is different from where we assemble systems and software or NI, which is electronics manufacturing is different. And so we've optimized to believe that the $100 million is the right number. Obviously, the overhead savings from going to $160 million to $100 million or $117 million to $100 million from where we sit today is an important element of the productivity that we're driving and the operational excellence savings that we've built into the plan. But all of this is with a thought of making sure we have regional manufacturing and regional supply chains to speed. 85-plus percent of our cost of goods are regionalized. As we execute that, we'll continue to move that number up. There are certain parts of the Middle East and rest of Asia where we need to get better, but we're very good in China. We're very good in North America. We're very good in Europe. But that's going to be the risk mitigation of our supply chain, the regionalization of our supply chain and then putting our manufacturing, 42 of the 100 is in the right locations where we need to be that give us the cost base.

I'll just add a couple of things. The rooftop consolidation has driven a tremendous amount of value with the build-out of the 42 best cost facilities. When you go from small sites to large sites, the magic thing that happens is you get better people. You now can go hire an HR manager that runs a plant that has 1,000 people instead of 4 plants of 100 people or 200 people. You get a higher-caliber plant manager. And the leverage opportunities and synergy opportunities are tremendous. So we've been able to -- we are able to upskill talent as you consolidate the plant, which is another added benefit of reducing sites. And Nigel, the last thing I'll say is we set a target at 100. We get to the 100, we'll set another target.

It's Deane Dray with RBC. A question on capital allocation. It's a bit unusual for a company to commit to a dividend increase annually to the cents number that you've given. How do you and the Board land on that in terms of an increase, your payout ratio, 35% to 40%. It's already there. But how do you -- how do you optimize the dividend between that and buybacks?

Yes, I'll just start and... No, go ahead.

Yes. So Deane, thanks for the question. The $0.10 is per year in '27 and '28 is obviously how we built the model. So we wanted to give clarity to everybody how we do that. We had a discussion -- a couple of discussions with the Board around dividend policy. We've done various studies that we've talked about. So as we took a look at the dividend, I mean, as you well know, we've been committed to the dividend for 70 years and increasing that dividend.

73.

Sorry.

73.

70 years.

70 this year.

70. So as we looked over the past few years, we were obviously very conservative as we were going through the transformation. And so felt that it was time to do a little bit more in the dividend. And then we talked about this target of 30% to 40%. And if you go back to those years, we were actually outside of that. But as cash flows have grown, we're now in that band, which I think is a band that we're very comfortable with in terms of allocation of free cash flow to dividend. And the reality is as that free cash flow grows, we're going to have to keep that sort of increase, which is why we did the $0.10 a year or we're going to fall out of the band and be below, which frankly would be outside of, I think, the norm of most of our investment peers. So we give it a lot of thought. That's how we landed there. And again, it was really about giving clarity on how we built the model. The last thing I'll say is dividend decisions are things that we make each year, and you've got both a backward and forward look at that time, but we feel confident going into it that, that's about the dividend increase that we expect to give to shareholders over the next 2 years.

I'll just add one thing to that. And it goes without saying that in the prior 5 years, during the transformation, this was a lever that we use differently. We increased the dividend, but it was de minimis. We needed the cash, obviously, to transform the company. We're in a very different place today in a capital allocation model that has no large M&A, leaves us room, headroom for bolt-ons if they come, but gives us the opportunity to play within that 30% to 40% of returning cash to shareholders. We'll get to 73 years on this plan.

Great. And in terms of the market share profiles that you've shared today, one jumped off the page to me was the National Instruments at 9 out of 10 semiconductors. That -- just to make sure I understand how did you inherit those market positions. And the use of the word standardization was interesting because -- most of NATI is not standardized. It all gets customized. But just can you give us some color there in terms of how much customization and this is all validation testing as well. Just wanted to be clear.

Correct. Yes, you said it. I think, first off, yes, we inherited that position when National Instruments came in. National Instruments has obviously been in the semiconductor space for a long time. And you're right, they are in the validation side. When it comes to production testers, which is the CapEx side, it's the likes of Teradyne or Advantest. So those -- they make the ATEs or the end-of-line testing . NI does some of that, but the majority of our presence in semis is validation testing in RF and mixed signal type semiconductor products with the likes of TI and ADI. Now when we use the word standard. NI's architecture is modular. I mean they have PXIs and the LabVIEW and -- but customers will then deploy that into standardized validation test systems for their own needs specific to the product that they are testing and hence, the word standardization is used there.

Just want to confirm on the plants. We're never going down to just one giant plant. Interested on where you're taking shots on goal on kind of the growth investments. For example, I think on the software and sensor side, you noted kind of 40% of the market or served market, you're 1 or 2. So if you think about the strength where you're 1 or 2 and looking over where you're 4 or 5, where are those opportunities most prevalent? Are there any that you're specifically targeting? And how do we think about just kind of that share capture dynamic?

Yes, go ahead.

Well, the simple answer is we're investing in our leadership positions to further extend leadership. I mean the categories we talked about, whether it's DeltaV, Ovation, our pressure business, our flow business, I mean, the next-generation products level, for example, these are all areas where we lead, for the most part, #1 in several of those, #2 in a few. That's really where we're making the investment because these are the big markets, the right technologies needed to move the industry. And then the areas of investment, if you really look, I mean, the EOP, the enterprise operations platform, huge area of investment for us, and that really is in our control systems and software business that encompasses DeltaV Ovation and Aspen, big investments in NI around Nigel, but also the Next-Gen of RF instrumentation and DAC. Big investment in the sensing business from a product perspective. On the final control side, we are investing, but the investments there are in our service footprint because there, it is a big valve replacement opportunity, the MRO opportunity. So service centers, service technicians, that's really the area we're investing in that side of the business.

Just a follow-on to that. The pace of innovation differs greatly, as you know, Jeff, across the different businesses. The life cycle of products, the advancement of technology. One of the things that Emerson has done incredibly well through generations of leadership here is invested across the entire portfolio stack. We want to remain in the #1 positions we have in sensing. That means that we have to introduce products with the new processing speeds. Different displays with better sensing, more accurate sensing. To do that, you have to -- and that's the investments that we're making. Likewise, the innovations around software, many of those are new to the world in the way that we're thinking about what we can do at our customers. So we'll continue to invest across the stack. We believe that there's value to bringing that stack to market as one, and that's embedded in this plan.

And then maybe you mentioned life sciences. Just where are we at on sort of those opportunities kind of hitting the street as it relates to you, right, the $350 billion of announcements, how long the groundbreaking, how long the Emerson order? Is that stuff even in your pipeline?

Yes. No, it's a great question. You've seen a few groundbreaking announcements already. I think last earnings, we talked about an announcement of a large Indiana-based pharmaceutical company for GLP-1 drug expansion. I almost said the name of the thing. They didn't want us to use their name, but okay, which is fine. So we're seeing some of that going to the ground. Now that one is purely demand-based expansion. The $350 billion is the near-shoring expansion, which large pharma has committed to as part of their negotiations with the administration around MFN and tariff avoidance. So a lot of that is still in flux. I think the ones that are firmer are those that have reached the deal with the administration. So Eli, Pfizer, Novo Nordisk, we'll see those come first. We still have a large list of big pharma that aren't quite there yet.

Andrew Obin with BofA. Just a question. I think on one of your slides, you sort of said that you're improving best cost countries headcount by 5 percentage points. I would have guessed that consensus that in terms of CapEx, U.S. is one of the best markets. And I'm just sort of thinking, does this say something about more capital intensity in the U.S.? Does it say something about actual -- how feasible real reshoring is in the U.S.? Or does it say something about how much growth opportunity you see outside of the U.S.?

Well, first off, I think there's growth opportunity -- I mean, there's certainly Middle East, India are important markets for us. Rest of Asia are important markets for us. So some of the capacity investments into Eastern Europe and Asia drive some of that. There's obviously -- Mexico still remains. I mean, obviously, we're watching the tariff situation carefully. But with the USMCA exemptions, Mexico still remains an important area of manufacturing opportunity for us, and we're making some investments in the sensing business. And that's really what drives the 5 points. But with that said, North America is by far the fastest-growing market for us today and in this plan, and we believe we have a great footprint here. We're investing a lot of the capital to recapitalize many of the facilities in North America, which includes Mexico, and that's really where the focus has been. But when we -- as we expand in the Middle East, as we expand in rest of Asia, some capacity into Eastern Europe and Mexico is what drives that 60% to 65% dynamic.

And I think it's important to note that we have ample capacity in the United States to meet the growing demand in this plan. We've made significant investments, particularly around final control and our sensing businesses in facilities, and we're currently in the process of building an expanded campus in Austin, Texas for those businesses to support the growth in America.

And just a follow-up on power. There's a lot of talk about grid resiliency. So it's not just adding power, but grid resiliency and the supply chain on your capacity seems will be constrained for a while. So what are the new opportunities for you in terms of you have OSI Power, you have Ovation. What kind of service revenue can you derive sort of from operating existing facilities from improving efficiencies? How big of a market is it and how much visibility you have? Yes, just expand on that.

Yes. So I mean, obviously, all of the grid resilience, modernization investments or the digitization of the grid are opportunities for the OSI business, whether it's with ADMS, EMS, their outage management system capabilities. And that -- the ACV on that business is growing at 30-plus percent. So we're seeing the scaling of the OSI business, which sits within AspenTech and within control systems and software. But the Ovation product, whether it's Ovation Green or some of the Ovation opportunities we're seeing in substation control as well as battery energy storage systems and some of these other capabilities that Ovation brings to build out the resilience of the grid as capacity gets added are all opportunities on the Ovation side that is something we're seeing as well. So I think AI and new capacity in gas-fired power to bring power to AI, nuclear are on the capacity side, but equally important is the investments that is happening on the transmission and distribution side as part of this. That's probably not AI related, but more generally, the modernization of the grid, we're getting that on the OSI side of the business.

Brett Linzey, Mizuho. Just on LNG, so there's a $2 billion pipeline of opportunity sitting there. You talked about Wave 3. How much of that $2 billion is representative of Wave 3 versus what's in process? And then when do you think you begin to see some of that convert -- that Wave 3 begin to convert into orders?

So it is converting as we speak. There's probably half of what's in process in that -- in our backlog. So under construction, awarded, that's in backlog. And then the funnel represents the next 2, 3 years of that wave. So as you know, that wave is going to go to 2030. So it's not entirely in the $2 billion. It's probably another $1 billion to $2 billion in addition to that to complete the wave.

Okay. Got it. And then just a follow-up on the footprint optimization. So the 117 to the 100 sites, is this going to be an announced plan that you'll restructuring, repositioning? Is this pay-as-you go? And then are you able to quantify the cost savings there?

Yes. It's pay as you go. We've been paying as you go on a lot of that plan, certainly not in the early years when we started at 170, nearly $170 million post V&C. That was a very specific restructuring plan to reduce rooftops. But this is a pay as you go. The businesses are embedding those plans in their P&Ls, reviewing them with us, and then we're funding the capital to get that done. And there's certainly the savings that you see in the operating margin plan that Ram presented in the operational excellence piece.

Can you guys prioritize your M&A, your bolt-on kind of within the segments, where do you expect perhaps to be focused?

Look, there are 2 broad categories that I think about. Number one, growth and technology, right? So they've got to be -- the bolt-on has to be accretive to growth for the company. We did a lot of work to have an opportunity to grow at 4% to 7% through the cycle. We certainly don't want to go backwards. So growth is critical. But the technology has to be accretive to what we currently bring to the table. So we're certainly looking within the elements of test and measurement. We continue to be interested in sensing as there are technologies, much like we proved with Flexim, which is an ultrasonic company, self-flow measurement company based in Germany, which we acquired last year. There are opportunities like that in the marketplace, and we'll continue to look. At this point in time, we're always inquisitive. Our business presidents are inquisitive. They understand the market. They have a lot of relationships. So if one of those pops, those are really the priority areas that we think. And then, of course, we think about the software area. The problem with the software area is the obviously, the valuation around those assets. And we just did a lot in industrial software at this point in time. So in this plan, in that $1 billion of bolt-ons, there isn't any room for large software M&A as we present.

If you take a step back and look at your deal model for NATI, you're probably below on the revenues, but you've taken a lot of cost out. Where would you be -- how far below the deal model would you be on a return perspective right now?

We're probably...

I'd say we're tracking -- Maybe around there, but we're confident that we'll get that back as we move forward, and we'll clear cost of capital. And obviously, those deals, both the Aspen and test and measurement deals were about multiple expansion, and we've seen that. So they've been very successful. The integrations have gone very well and obviously feel great about those 2 transactions.

It's Andrew Buscaglia here from BNP Paribas. Clearly, the message today is the transformation is pretty much complete. M&A is going to be rather limited going forward. So wondering on the flip side of that, your safety business, you decided to retain that. You've given some color around outlook on that. What is your commitment to that piece of your business?

Yes. No, look, it's -- there's perhaps a perspective that I can share. In the legacy of our company, there were some questions about the quality of M&A that we have done. And we're very cognizant of that as a new management team coming in. The deals we did do both the disposals and the acquisitions, we felt strongly that we got great value. We worked really hard to get 18x from InSinkErator 14x from Copeland to buy a phenomenal asset in NI and Aspen. And I certainly was not going to give away what I believe is a great business, an American business that generates great cash, high margins and really has no peer in the marketplace that operates at the financials that Mike shared with you, as you saw. And so we believe as a management team that we could run the business better, and we could create more value for our shareholders within our ownership than going out and essentially giving it away. So we're going to own it. We're going to run it. We've made some investment decisions inside of that business. And we'll see. We'll see as we go forward. The core of the company is automation, as you saw, and we'll continue to run that business as best we can.

Nicole DeBlase from Deutsche Bank. Just wanted to focus a bit on the cross-cycle targets for Intelligent Devices. You said 3% to 6% cross-cycle growth, but that business has grown at an 8% CAGR over the past few years. What was special about the past few years that can't be repeated? Is it the price because of tariffs? Is it strong LNG cycle?

Do you want to take it?

Yes. Listen, I think -- I mean, obviously, we were coming with -- through a COVID recovery, and there were some dynamics in terms of the capital cycle, which was good, and that will continue, but tariff-related pricing. There were -- the COVID -- the electronics supply chain dynamic, which impacted the sensor business during COVID, rebounded in a very meaningful way in the 2 years post-COVID. We're not baking that into the plan. I think 3% to 6% is a very optimal plan for that business. If the capital cycle remains strong, it could be in the high end of that range. But if I took out the dynamic around the electronic supply chain for sensing, I think if you go back and rationalize the 8%, it's still in that 3% to 6% band.

And the only other color that I would add, Nicole, to that is a geographic lens. The plan that we presented today is predicated on a strong U.S.A., a strong India, a strong Middle East and Africa. It has a relatively softer outlook on Europe and on China. If you go back and you look at that 8% growth, there was a stronger China coming out through the pandemic into '22 and '23. We haven't planned a high single-digit China in this plan. So think more of a low single-digit to mid-single-digit environment there. That makes a bit of a difference as well.

Okay. That all makes a lot of sense. And then just to dig into the operational improvement piece of the margin plan, 4 points you guys are targeting of improvement over the next few years from that bucket. Would you say that the bulk of that is related to footprint and supply chain? I'm just trying to get a sense of how impactful the Agentic AI piece could be as well.

I'll take 4 points about hundred million dollars on a -- if you wanted to quantify it on dollar terms. That's actually the way we've built the bridge, the leverage on the volume is in that number. All of the footprint rationalization savings is in that number, plus the ongoing productivity on product cost reductions that we do on an annual basis in that number, plus, I would say, the 30%, the digital transformation of the enterprise functions. If I'll give you a ballpark number, that's probably 10% to 15% of the $800 million.

Yes. I would only add that the 2.5 or 2.4 points of improvement will be split about 50-50 between GP and SG&A. Think of it that way.

Chris Glynn, Oppenheimer. I had a question about how you're thinking about the MRO growth. I think you've talked about low single digits in the past, but nothing today. But if I think about maybe the algorithm, so to speak, you've got price, you've got installed base growth, installed base aging, maybe customer readying for digital transformation. Is there a mid-single-digit opportunity on the MRO side?

Yes. The last part of your comment is captured in the modernizations. So when customers upgrade, it's not a pure MRO opportunity. Technically, you could argue that it is, but we count that as a modernization. When you're uplifting your technology in your facility, whether that's upgrading your control system or your devices. So we count that as a modernization. Combined, certainly, that's a mid-single-digit market. MRO would be on the lower end, simply because of the -- it's based on certain shutdown turnaround programs, which are very specific in our valve business, but then the rate of utilization of the products and the decay of the products as they're utilized. So I'd say that's on the lower end.

It's Joe O'Dea at Wells Fargo. Can you talk about the adoption curve around software-defined enterprise operations platforms, just how you're thinking about that time line? And then how you think about thresholds and customer size and their ability or willingness to make this kind of transition when you talk about that diversification of customers, the 100th largest is $1 million of revenue for you, just where those thresholds could actually run into a little bit of a choking point on like can they move forward and make these investments?

I'll start and hand it to Ram, if that's okay. You heard from the leader at Total, who is driving the digital transformation journey. And what she's challenged with is isolated siloed data, unstructured data and an inability across the entire fleet of Total from refining through chemicals of driving an enterprise operations model. They don't understand in live action, the profitability of one plant versus another, the productivity, the reliability, the safety measures. And so the investment they're making is very sizable in the data fabric, step one. Once that's laid in, then it enables a company like Total at a very large scale to bring in all the additional software tools that start to drive from optimized through semiautonomous ultimately into autonomous. We need another 5 or 6 early adopters like Total at scale because that's a very scalable opportunity and one that the entire industry is watching, which is important.

Yes. Just to add, I mean, to probably go back in time, if you went back 3, 4, 5 years ago, and you talked about software-defined journeys to autonomous operations or the use of software to drive OT workflows, OT/IT integration, you would argue that there were certain industries that really needed to do that, be it offshore platforms or mining, the life sciences customers were generally more amenable to driving integrated software workflows and moving towards autonomy. Today, I would say, almost every customer in every one of our industries is really sold on the fact that they've got to crack the data challenge and they've got to go to a software-defined architecture to truly unlock productivity in their operations because it's that trapped data, which is the issue. So I would say 3, 4, 5 years ago, there were certain segments like air separation, for example, those customers were talking more about autonomous operations. Today, it's across the board and in every one of our industries.

I think it's interesting. If you go back, Joe, and you think about -- we've been talking about digital transformation for a decade. But how many actual definitive revenue or profitability changing digital transformation projects have we seen? Practically none. And the reason is exactly what he described. The problem was in where the data is and the language of the data. If we don't -- and I think now the maturity has gone to a point where customers realize we got to solve that first. We have to have commonality and accessibility, democratization, whatever word you choose on data before we can apply the tools that will drive that optimization and that productivity on top. So versus the siloed stuff.

Jairam Nathan with Daiwa. Just I wanted to understand the -- when you talk about the software growth, in the past, you've also talked about how you kind of want to split the DCS revenue between software and hardware. So how much of that is led? And does it require like a change in the contracts? Or how much of that is just led by breaking it up, breaking the revenue stream up?

Yes, that's happening. I mean that is exactly it. There's in that software $2.5 billion, you've got the stand-alone AspenTech capability. You've got NI, obviously, but a lot of the control software, which is a journey we've been driving for the last 3 to 4 years, I referenced a term softwareization. I'm not quite sure if that's a real term, but that's what we use internally to talk about how we unbundle, unlock software, the DCS software and price it in a subscription model with our customers. And that's been happening in the last 3 to 4 years in our business, and that will continue to happen. And particularly as we drive the EOP journey, our control systems business, which has traditionally been 1/3 software, 2/3 hardware and services will flip to 2/3 software, 1/3 hardware and services because the EOP will require less services to install and commission and the hardware intensity with marshalling cabinets and controllers in a traditional DCS architecture will be very different with an EOP. It will be a server in a hyper converged environment. And the hardware footprint would be a lot lower, services would be a lot lower and the value will move towards software, which will be priced in a subscription model.

Excellent. Okay. I think everyone that raised their hand got to ask a question, correct? Thank you for your time. Thanks for being with us this morning. We're excited to share this with you and look forward to [indiscernible] Happy holidays.