Rockwell Automation, Inc. (ROK) Earnings Call Transcript & Summary

Good morning. Welcome to Day 2 of Global Industrial Conference. To kick things off today, I'm Andrew Obin, Bank of America. U.S. multi-industrial analyst. To kick things off, we have Christian Rothe, Senior Vice President and Chief Financial Officer of Rockwell; and we have Aijana Zellner, Vice President of Investor Relations and Market Strategy. I think Christian is going to kick it off with a presentation, and then we're going to go to fireside. Thanks so much for being here.

Thanks, Andrew. Appreciate that. So I figured we were going to take a few minutes and just give a quick overview of Rockwell, for those of you that aren't familiar with the story. Of course, we have our safe harbor statement. Rockwell Automation, based in Milwaukee, Wisconsin. We are a global industrial automation company, that's our focus, and we are a pure play. I'll talk about that here in the next slide. But we are a diversified industrial in the sense that we have really good diversification across geographies and we also have a really good diversification on the end markets that we serve. When you think about Rockwell, you should be thinking about an organization that serves a lot of verticals across a lot of the industrial universe. So 40% of our sales in the process space, 25% in discrete and 35% in hybrid markets. We have 3 reportable segments. You can see our split in the upper right-hand corner there, $3.8 billion in the Intelligent Devices segment. Lifecycle Services is $2.3 billion and $2.2 billion in Software & Control. We are the world's largest pure-play industrial automation company. Again, a lot of different verticals that we serve. Some examples of those are on the lower part of this slide. Importantly for us, we serve those customers in 3 different ways. We have hardware, we have software and then we also have solutions. And all of those come together for a really nice, broad offering for our customer base. About 1.5 years ago, in November 2023, we gave the world our view of what we think the strategic growth framework for our organization is going to be over the long term. When you think about this, think about it from a mid-cycle to mid-cycle, and this would be the CAGR. So about 5% to 8% organic growth is our target with another 1 point coming from acquisitions. That 5% to 8% organic is broken into kind of 3 different areas. The first one is that just the addressable markets that we have, we believe are going to give faster secular growth. That's because not only are those markets growing, but we also believe those markets are going to continue to adopt a higher and higher level of automation. On top of that, we continue to expand the markets that we serve. We do that through new product development. We do that through adding to our software portfolio via acquisitions that are going to give us a higher level of growth. And of course, we do that just from continued innovation and driving more and more through the markets that we have and the sales organization that we have. Lastly, again, on the organic side, ARR, software and services. So annual recurring revenue for us is about 10% of sales. That's growing at a nice clip. It's been growing at double digits for the last several years. We expect that to continue. And again, acquisitions, although we're taking a pause on acquisitions today, we expect acquisitions and that growth framework are going to add about 1 point again on that CAGR. On the right-hand side, you can see some of the key metrics that we look at when we think about that financial framework. So on the left-hand side, it's really about top line. On the right-hand side, it's about the other metrics. Core earnings conversion of about 35%, that's the flow-through profitability; EPS growth and getting leverage on the P&L off of that sales growth; free cash flow conversion is better than 100%; ROIC, greater than 20%. That's -- those are the targets, and then 2x leverage. North America is our home market. North America is where we have the highest market share. We have the largest installed base in the competitive world for our products, and we have the deepest relationships and really strong channel partners. So as we talk about, I'm sure we're going to have a discussion this morning about shoring opportunities and what's going on in North America for sure, it's nice to be in our home market for that. And lastly, we're in the midst of a self-help story. So last year around this time, we announced that we were going down the path of a margin expansion and productivity process. And so that was in the second half of last year. That was mostly headcount related. As we turned the corner and went into 2025, our fiscal 2025, we're focusing more on the margin expansion aspect of that. So we've got a lot of product cost reductions that are underway. We're working on indirect and supply chain optimization. And we're also looking at our portfolio. Last year, in fiscal '24, we had about $110 million of cost out savings. And this year, we're expecting an incremental $250 million of cost-outs. And I'm sure we'll get into that in some more detail here in a moment. So with that, Andrew, I think we're ready for the drilling, right, today.

Thanks so much, Christian. So I know that you have provided guidance, but maybe a big topic for investors here. Could you just give us a view on demand environment? And maybe both near term, what are you seeing? Because obviously, at top of everybody's mind, but also obviously, what's your longer-term view? How much visibility do you have on this potential CapEx resurgence in the U.S.?

Sure. You had a lot in there, but we'll go ahead and we'll try to unpack that. The first part is that we are not giving an interim update since what we talked about at our Q1 conference call. So that was in early February of this year, where we discussed the fact that we were having a pretty good uptick in our demand environment. That is in the first quarter, we had orders that exceeded $2 billion. That was the first time in the last 7 quarters that we had been over $2 billion. We exceeded our own expectations, frankly, on that order intake because we were expecting more flattish orders from Q4 to Q1. We actually were up mid-single digits sequentially. As we go through the remainder of this year, we're expecting that we're going to get a gradual increase in order intake and continued growth on the sales line. So that part is good. Yes, I fully need to acknowledge that there are a number of dynamics that are in the market right now, right, the tariff environment, which I'm sure we'll talk about more here in a minute, and there's some difficulties for our customers for thinking about the future. At the same time, we still believe very strongly that the dynamics that lead towards a really good, robust industrial automation world, things like labor availability, the cost of labor are going to continue to drive good demand for industrial automation from long term.

Excellent. So maybe, yes, you brought up the tariffs, maybe we'll jump to the tariffs, get that out of the way. So to what extent have you guys embedded the impact of tariffs in your FY '25 guide? And maybe remind us of your manufacturing and sourcing footprint in affected regions. How much capacity do you have to flex in the U.S.? And how much of your Mexican capacity is subject to USMCA, so would be exempt from tariffs?

Yes, absolutely. So our manufacturing footprint, currently, what we import into the United States of finished goods from Mexico is about $350 million. That's both from our own manufacturing facilities as well as from other suppliers. And from Canada, it's about $100 million. And from China, it's about $100 million. We are in a position with the current tariff environment the way that it's been enacted. Our expectation is that if we're incurring the cost, we're going to recover it. When it's enacted immediately, which is what we've seen in a lot of cases, then our expectation is that really the only lever we have to pull is do it via price. And so we have been running through price changes to reflect whatever the changes have been on tariffs, including rolling them back in cases where it was put on and taken off again. So we now have a little bit different cadence where we're doing it in a more gradual way, at least taking it kind of almost every week. We're taking a look at what's happened with the tariff environment. Longer term, right, because that was the other portion of your question, which is, well, what are we doing to mitigate it and what opportunities do we have to bring that back into the United States or to change the production location? We do have some of those opportunities. Coming out of the supply chain crisis, I think Rockwell is not any different from a lot of our customers, which is we put in place a number of initiatives around resiliency to try to make sure that we were in a position to manufacture the same product in multiple locations, in some cases, closer to our customers and in other cases, trying to just ensure that we have a really strong backup in place. And so that resiliency is allowing us to -- we're going to take advantage of that and continue to ramp up in areas where it makes financial sense, of course, to bring some production back into the United States. Right now, at the moment, it's really probably more about leveraging the existing lines that we have and putting in third shifts for some of those products we're -- again, we're making in a couple of different locations. So we're allowing -- we're using that resiliency to do that in the United States now.

But just to go back to what we have embedded in FY '25, so the idea is April 2 tariffs go in, you hit a button and it flows through the system. And would you be caught up by the end of the quarter effectively? Or how long would it take? It sounds like you expect that net-net, you're going to be whole for the year. But how long would it take you to catch up from April 2?

Yes. Net-net, we do expect to be whole for sure. There is nothing embedded in our guide around tariffs because our expectation is that we're going to be able to recover and we should be able to recover fairly quickly. And that is those price list changes are happening relatively fast right now. In addition to that, we do expect, in cases where we're talking about larger projects and systems that we're going to be able to reprice the backlog.

Okay, okay. So you will -- okay, got you. Okay. So that's good. Okay. So maybe why don't we do that right now? Let's do sort of the market share because that has sort of come up. What's your perspective on market share in discrete in recent quarters, right? You have a large competitor that's, I guess, green, bluish green. What is the market dynamic in the whole market in North American market?

You want to take that one?

And basically, maybe what you can expand because what we've been picking up is that because U.S. is adding greenfield capacity, it seems that because of the ecosystem in the U.S. runs on red stuff, and if you actually really going to make stuff for the U.S. in larger quantities. Is there an opportunity for European machine builders to sort of move towards Rockwell brand?

I can start with the first one. The market share, the topic has come up quite a bit lately. If you look at -- and we track market share in many ways, you have to look at it over longer periods of time. Industrial automation market share gains and losses move at very slow speed. With that said, we've been pretty stable, if not slightly up in our overall market share. If you look at PLCs, our controllers, we actually have been gaining share, including in the U.S. where we have, by far, the highest market share. I want to address one topic. You mentioned one of our competitors that we get compared to quite a bit, Siemens. If you take everything we sell and everything they sell into this addressable automation market, together we make up less than 25% of the total addressable market. It's an important point. It's not a zero-sum game. There are lots of players there. They are regional players, niche players that we're competing against. And we don't have...

That's a global -- 25% is the global.

That's right. So we don't have to take share from our biggest competitor, our nearest competitor to grow. And I think it's an important topic. In general, like I said, if you look at whether it's global market share data, if you look at product-specific offerings, if you look at just comparing us versus the automation business for competitors, right, not other software areas, not other areas that are not in our sandbox, we've been outperforming our competitors for the last 6 or 7 quarters. So there are many ways we look at it. We feel good about our share. We're not complacent. U.S. is where a lot of new investments are happening and it's our stronghold. And we are very much focused on getting more than our fair share there.

Yes. You asked about the machine builder market and the Europeans and opportunities there. So we do have a really strong position with a number of European machine builders, in particular, in areas like Italy, where they have a stronger food and beverage and life sciences base. And so those relationships have helped us to continue to grow in Europe but also in Europe with those machine builders and because they have really strong interest in building a relationship with Rockwell because they want access to the U.S. market. They know if they're going to be in the U.S. market that they need to work with Rockwell or at least they're in a good position to work with Rockwell because we have a lot of those relationships with those customers. And just to build off what Aijana said and in one of the slides that I hit on, right, it is our home market. We do have the largest installed base. That does allow for an opportunity for us to build off of relationships that have been there for a long time. And that's not just for -- in market, for market. But as you said and as we talked about, the European machine builders and machine builders from, frankly, around the globe are highly interested in working with Rockwell because of the access we have.

And maybe we can talk, just expand on it, just generally talk about competitive dynamic. Because what our numbers show is that was going to be different by the U.S. market is that, I think, it's been market for 20 years. That was dominated by replacement capacity, right? And probably for the first time in 20 years, you have real sort of greenfield capacity coming online. So how do you think about competitive dynamic in this higher CapEx environment? Can you just explain how does the software -- because it's not just -- people always think about the hardware part, but there is also the software ecosystem related how we actually code the library that engineers use. Can you just maybe expand on that? And maybe I'll just add, my understanding, there are also incentives in the U.S. for machine builders to use domestically sourced. Just -- it's sort of not quite CHIPS Act, but there's also -- even in an industry like food and bev, there are incentives in place for domestically manufactured equipment in the U.S. Maybe you can talk a little bit about that, if that's correct.

Why don't I start?

Go ahead.

From a competitive dynamic in the technology portfolio, what Christian said earlier is right. Us having the biggest installed base, the ecosystem, the largest market share certainly is a big advantage. In addition to that, we have a leading technology portfolio. Customers really want both technical capabilities and [indiscernible] access and support and installed base. All of it works together. What we've done over the last several years is significantly enhanced our portfolio, both software and hardware and services. The way we talk about it, there are 3 or 4 main areas. So if you look at -- we mentioned programming, so we look at production design and control. First of all, this is what Rockwell is focused on, production automation, production environment. And if you look at what we've done there with design, whether it's simulation and digital twin with our Emulate3D offering, in fact, we just recently announced an expanded partnership with NVIDIA, where we are expanding it to a factory test, so simulating and virtually commissioning the entire factories for customers. That's a huge advantage. We can get in earlier in the decision-making for our customers. And we are continuing to innovate and lead there. How you look at programming, what we've done with our FactoryTalk design, cloud-native programming environment, it significantly simplifies the process for customers. PLC programming is very difficult. And what we've done is by making it cloud-native, so people can collaborate; what we've done with copilots, what we've developed from our own development is making it easier using natural language models for these engineers to be able to quickly program and configure things and get the lines up and running, so quicker time to value. And that's been a differentiator. So that's on the design side. The control side, we've been innovating. We are a leader in controllers, as I mentioned, in the U.S., Logix, everyone knows Logix. We are not resting on our laurels. We are developing that next generation, which we talked about, software-defined automation. It's broader than just Logix, but Logix is a big piece of it. And that also separates us from our competition and helps us win these large accounts. If you look at production logistics, that's a combination of hardware and software. So AMRs, autonomous mobile robots, what we're doing there is different from our competition. It's a combination of these mobile robots but also how it plugs into the rest of the fixed automation we have, how it plugs in to our FactoryTalk software platform, how it interacts with Plex and Fiix cloud-native software. And no one else has that. And we see our customers across automotive, food and beverage, life sciences, investing in these AMRs because it certainly helps them with safety, optimization and costs, especially with scarce labor. And then finally, I would say SaaS. So a lot of these edge and cloud solutions we've developed organically and bought like Plex and Fiix, they're helping us. They're compelling for us because they help us with our annual recurring revenue. It's a resilient revenue stream because SaaS, it's a Subscription as a Service. But importantly, it's a great benefit for our customers. It means lower cost of ownership, quicker time to -- quicker to deploy, easier to maintain. Customers don't have to employ huge IT staff to have all that on-prem. And so that's kind of a modern way of doing business and what our customers are expecting. And we are leading in that portfolio as well.

And I just understand in terms of PLC programming and sort of the software-defined architecture because I think there's a handful of these standards -- open standards. But is it fair to understand that your ecosystem, right, the proprietary environment that Rockwell provides is sort of compatible. And if you were trained, it sort of evolves. I sort of think about Excel for Windows. And the way I sort of think about it, yes, you have Excel for Windows and you have Excel for Mac. And they're very similar. And if you understand Excel for Windows, you can certainly use Excel for Mac. But if you really know how to sort of do macros with keystrokes in Excel for Windows, not that easy. That sort of the analogy, I sort of think of Rockwell versus competition is the same, but it's not. Is that a fair way to sort of think about it? Or are there nuances there?

There are nuances and we can talk about it for a long time. Basically, Rockwell has been pushing for an open architecture for as long as I know. And -- but so we can inter-operate and we can work with a lot of different vendors. Because that's how industrial customers operate. They work with a lot of different players at different levels of the technology stack. However, we get premier integration when you use our offerings together. And that's what we continue driving for our customers. But at the same time, we want to make sure we can -- our customers can be agnostic in different levels because it's more practical for them.

Yes, I was just thinking more in terms of your support network. It's just how many people are familiar with your environment versus how many people are familiar with other environment. I think that's what I was sort of...

Yes. And in the U.S., by far, if you look at the engineering and maintenance stuff that many of our customers and system integrators, machine builders, they're very familiar with our.

Right, that's what I was...

Exactly. Yes.

And as Aijana said, that the AI environment and the copilot capabilities we're continuing to add just makes it more of a natural language model that allows that to level the playing field and letting new entrants in our space that is people that are in -- like the European machine builder market to be able to work with Rockwell technology and not necessarily need all that legacy knowledge.

Well, let's sort of shift to operations. So what is the framework? And Christian, I know that's at the top of your mind. But what's the framework to reach the 21.5% long-term margin targets from the '25 guide for 19%. What do you need to do to your operations to get there?

Sure. So just not to correct you, but I guess I will. So 23.5%. So 23.5% is what we're looking to go in our long-term framework. And we've got that broken out by segment. You can certainly see that in our slides in our -- from our Investor Day back in November of this past year. But to get there, really, we -- it starts with the cost-out programs that I talked about, and that allows us to get a reset, which is good, and to put our operations at the right size for the business that we're in right now. We do need some revenue growth to happen. We're coming off of a period of -- in 2024, we were down on sales. This year, we're guiding to organic at negative 1. There's a lot of destock that's happened, which was really the drag on our results. So we do need revenue growth to help us out a little bit. But I think the self-help story is a big driver of that. And again, we're at 19% today. Expectation is to get to 23.5%. That's going to be both on the gross margin line as you get expansion on the gross margin line as well as from getting leverage on our SG&A.

Okay. And maybe from that perspective, sort of the cost-out, yes, $250 million on your slides. So how much of it is structural versus what's tied to sort of the current slowdown in growth? And I guess what I'm getting at the spirit of the question is, do you need to add cost back when you return to growth?

Yes. So that entire program is built on making sure that we're doing structural activities to get those costs out and to keep them out. There will be some direct labor obviously we have to add back as we -- as volume returns. Obviously, that's built into our standards. That should be just fine. We should be able to get some better efficiency out of our factories based on some of the activities that we put in place today. So that -- from an add-back of cost perspective, we're looking at R&D that's in the 6% range as a percentage of sales. That percentage is probably going to stay the same. So there will be some additional spend, but it should not have an impact on the leverage side of it.

And you had a slide that sort of listed various sort of cost saving initiatives, I guess, the same slide. So what inning are you in terms of addressing the cost savings? And maybe what investors, I think, are looking for, what programs have you initiated and -- that are benefiting margins this quarter and this year? And what sort of down the line '26 and beyond from the list that you have provided, how should we think about it?

So I like your inning analogy. I'm going to build off of that a little bit. Honestly, I feel like we're in pre-season, that is, we're still in a position where we're preparing and getting ready for going into the regular season, getting into the game. That is, we're getting the fitness level to the right spot. We're getting the organization to a position where we're working really strongly as a team and we're going to be ready to start that regular season. So -- and the reason why I say that is that I do feel like what we're doing and what we've done in those programs is more about getting a reset for the organization and giving us a chance to build off of that. And so the second half of last year, it was really more focused on headcount, and that's what gave us $110 million of yield which, of course, will annualize this year, give us about $120 million of benefit in fiscal '25. The remainder of that $250 million is going to come from more cost of goods sold and indirect spending. And those, to get into just more detail so that you -- because I think that was part of your question, which was, okay, what do we have really going on there? Direct material spend is a big portion of that. That is renegotiation with suppliers, changing our suppliers, doing a better job buying. And that has a lot to do with the fact that during the supply chain crisis, we were in a position where we were just trying to get product in the door, convert it and get back out the door as quickly as possible. And in a lot of cases, we had to buy components at prices that we were not necessarily happy with. But again, we needed to get it done to get our customers served. So now we're in a position where we're going back, and we're taking another look at those costs and that spend and taking actions to either resource or to renegotiate. Things like logistics, again, when we're trying to get things in the door and out the door again as quickly as possible, we do a lot of things via airfreight. And now we're transitioning that more either to closer suppliers or we're trying to take it via ocean. And so that's pretty well long for us right now. Indirect spend, going back and looking at our indirect spend overall, and do we need everything that we're spending our money on. So those are being taken care of. And again, that's built into that $250 million for the year. But all those items are really -- they're just the start. Because what's important is to take this reset and don't miss the opportunity to really build off for the long term for the organization. So what we're doing in the background underneath all those initiatives is we're putting in the Rockwell operating model. So we've had a lean and continuous improvement models in place for Rockwell for quite some time. But during the supply chain crisis, productivity was not necessarily our #1 objective. We need to find a way to get back to that. The Rockwell operating model is going to help us with that via an operational excellence program, bringing in a lot of different tools for the organization to try to turn this into a flywheel, right, building off the really strong culture we have, building off the learnings from this cost out and continuing to drive that margin expansion over the long term.

And just sort of -- just to think about an incremental margin question. So historically, in an up cycle, you have delivered very high incremental margins, particularly in Software & Control, right, given your position in Logix. Do you still think you can deliver these incrementals north of 50% in an environment where sales are growing double digits? Or if you actually -- I mean, this goes back to where we started, right? So you were in a low-growth environment. And does the math change if you go into a structurally high-growth environment in North America?

Yes. I mean, obviously, the math does change. I mean, for any organization, hopefully the answer is that when you're in a higher growth environment, you should be able to get some pretty good flow-through profitability. There's no doubt. What we've signed up for, what we're talking about as part of our overall message is the conversion -- when you think about conversion for Rockwell mid-cycle to mid-cycle, that we're at that 35% rate. I definitely understand and recognize that there are going to be times where from quarter-to-quarter, we're going to have some outperform, maybe we're going to have some underperform. At the average, we're expecting to be at that 35% rate. Hopefully, that -- when we get to the point where we feel like, okay, it's time to -- once we hit that 23.5% segment operating margin, where we go back and revisit it, and we could talk about something that could potentially be different. But 35% is what we're signing up for.

And just -- so I appreciate 35% is what you are signing up for. But anything structurally, do you have to put in more costs if the growth accelerates, particularly given that you do have all the costs? I understand what the answer is. The answer is 35%, and I do appreciate it. I do not expect you to give me a different answer. But I'm also trying to understand, as I said, historically, when things go up particularly early on, incrementals can be 50 to 60. And perhaps in this environment, you have to sort of commit more cost, commit higher volumes. But at the same time, it seems the company is a lot more serious about cost takeout. Would I be considering these things?

Yes. I do think that the organization is serious about trying to make sure our costs are kept in check. And so obviously, it depends on the mix of what's happening where that growth is occurring. We do have some capacity that's available for a number of our product lines, again, based on that resiliency that we've been putting in place. So there has been spend and that spend has been mostly built into our base already. So we're in a pretty good spot. I will tell you, though, that philosophically, I do believe there are opportunities for us to do even more when we think about things like vertical integration, continuing to invest in our own facilities, bringing more Rockwell technology for our own automation into our own facilities. I think there's a pretty good runway around that. So do I see us potentially continuing to invest or even investing more? Yes, it will probably look more like CapEx, though, as opposed to OpEx. And the end result should be additional margin expansion because that should have really strong ROI for us.

Got you. And maybe orders. As you pointed out, I think orders came in above expectations in Q1. How should we think -- over $2 billion and up 10% year-over-year. How should we think about the cadence of the orders through the rest of the year given the first quarter outperformance? And specifically not asking you for update on macro, but was there a pull forward in orders for the -- in the quarter?

Yes. So let's talk about the pull forward first. So -- or the lack of pull forward is probably the better way to put it. So when we looked at the outperform on orders in Q1, certainly that was top of mind for us. Is there any pull forward and how do we think about that? And when we looked at the outperform, it was actually pretty broad-based. When I say broad-based, it was broad-based across product categories. It was broad-based across geographies and customer segments. So that broad-based, to think about it in a different way, when you think about software, well, there's probably not going to be a prebuy on software. When you think about an outperform in EMEA and Asia Pacific, well, those are not the natural customers you would be thinking about as far as those that would try to get ahead of some sort of pricing change due to tariffs. When you think about the solutions side of it, well, these are projects that have been in place for quite a long time that we've been working on. And so those really didn't feel like there was a pre-buy around them. So I think generally, we felt like the -- now this was truly a broad-based demand environment, slight but uptick. And then looking at the remainder of the year, our expectation -- to be quite frank, right, we're talking about a negative 1% on the top line. And it's a tale of kind of two different halves of the year when we look at our comparables. In the prior year, in 2024, we were shipping out of backlog for the first half. The demand environment weakened in the second half. So we did see it kind of enhance again in -- as we went into Q1. But we're against some pretty tough comps. And so as we get into the second half of this year, some of those comps are going to get a little bit easier from that perspective. But we are really just sequentially looking for a gradual sequential kind of quarter-over-quarter increase both in the demand environment as well as in our shipments.

Great. Now that's a great answer. So maybe just near term and longer term, what verticals is Rockwell most excited about? As I said, if you can give sort of both near-term answer but also long term? What are the key market verticals and adjacencies that you are targeting over the next several years?

Do you want to take that one?

Sure. Before I talk about some of the growth area verticals, just want to remind people that our technology largely is horizontal, meaning what we -- our controllers, our software, our drives, what we do or we provide for automotive is the same for life science, it's the same for food and beverage and for energy, mining, et cetera. And it's an important point because what that means is we are able to focus and toggle between different industries and maybe add more commercial resources and focus or develop some application software for particular customers. But broadly, it's a very scalable portfolio. With that said, we talked about 4 or 5 areas that are really focused industries for us, where we have great share, great technology differentiation, great access, and we think they're going to outgrow the average. So right now, near term, we talk about e-commerce and warehouse automation as a bucket. Another two items there, there's the e-com market, and you see this -- we see this buildout of new fulfillment centers, and we are very well positioned to serve that market and the machine builders and system integrators that serve that space. And we're seeing that broader warehouse automation space. It's more of an application as it goes across many industries. A lot of customers in CPG, in logistics, they are looking to upgrade, modernize their existing facilities. They need to do that to offset labor cost, to get ahead of their competition, to get on top of their competition. And this is where we see a lot of differentiation. So there's -- we've seen that actually grow even last year. So e-commerce and warehouse automation is the only end market where we'll see actually tougher comps as the year progresses, yet we still expect to grow high single digits for the full year. And we expect this to continue for some time. If you look at longer term, we are still very well positioned in automotive. Longer-term, model changeovers account for half of our business in automotive, so model changeovers and MRO. And it will continue, whether it's traditional ICE, whether it's hybrid, whether it's EV, customers will continue to innovate, and we have a very strong presence there. Our near term is challenged, of course, trade and policy uncertainty and general consumer confidence and environment, but longer term, it's still an important market for us. If you look at life sciences, we do think we're well positioned today, and longer term, we're bullish on that end market. We have a very strong portfolio of software and services and it's a higher content of software services provided to that end market. And whether it's personalized medicines, cell and gene therapy, GLP-1 and obesity drugs, whatever that is, we're working with the leading customers in that space, and we're well positioned on the control side, given it is a hybrid end market. Food and beverage is important. There are parts of food and beverage that are going to be growth -- faster growth than others. As Christian mentioned, we're working with leading machine builders who are innovating. We're working together on their next-generation machines, next-generation platforms. And so we see growth there. And energy and mining is something we're very interested in and we are very focused on. And we have the right technology because it's modular and it's open, and especially with a lot of the renewables and decarbonization efforts. And this is where you need something modular from an architecture standpoint versus large monolithic DCS control systems that we usually use. So those are some of them. But like I said, we are prepared to serve many industries just given our portfolio and footprint.

And I guess, we are in Europe. Folks are excited about Europe. You just sort of highlighted the fact that EMEA and Asia Pac orders, surprise to the upside. What are your thoughts as to what you're seeing in Europe? And also there's sort of similar, this nascent recovery in China. And your exposure in China is different, like it's tires, it's aggregates, it's -- I get it. But just maybe a commentary on China and Europe as we finish up.

Sure. So from a China perspective, as you said, it's less than 5% of our sales today. So it hasn't been a huge factor for us, either the upside or downside in the more recent past. Overall, though, we are well positioned with the customers we want to serve there, which is really the higher end portion of the market. We feel like we have a really strong competitive offering which allows us to be really well differentiated and especially with the multinationals that are there and also with machine builders that are serving in the global market. It's a little bit of a similar story when we talk about Europe, right? There are opportunities for growth here. Where we think we're strongest, again, is more on the machine builder portion of the market. And there's been some really good activity. We're seeing some nice green shoots. I mentioned Italy with the food and beverage space, life sciences space. So we're feeling pretty good about overall positioning in this market. I don't know if you have anything? Okay.

Good. Right on time. All right. It was a pleasure.

Perfect. Andrew, thank you very much.