Rockwell Automation, Inc. ($ROK)

Good morning. My name is Andrew Obin. I'm BofA's U.S. Multi-Industrial Analyst. And our next presenter is the management team from Rockwell. We have Christian Rothe, Senior Vice President and CFO; Matt Fordenwalt, Senior Vice President of Lifecycle Services; and Aijana Zellner, VP, Investor Relations and Market Strategy. And Christian is going to start out with some prepared remarks and slides, and then we're going to go to a fireside chat. Thank you so much for being here.

Thanks, Andrew, and thanks for having us. Good morning, everyone. Let's see if the clicker works for me. All right. So normal safe harbor statement. A couple of quick comments on Rockwell overall. So last year, a little bit over $8 billion in sales. We're headquartered in Milwaukee, Wisconsin in the United States. You can see that we have a pretty good exposure around the globe, but in particular, we are more concentrated in North America. North America is a good spot to be right now because that is where a lot of the volume growth is happening and that is going to be our fastest growing market in 2026 as well. We have 3 reportable segments. The Lifecycle Services segment, which is represented by Matt Fordenwalt here today, he runs that business for us. Intelligent Devices is our largest segment, $3.7 billion. And our Software & Control segment at $2.4 billion, 26,000 employees for Rockwell around the globe. In November of 2023, we initiated a long-term growth algorithm as well as some segment margin targets. I'll talk about the segment margin targets in a moment. But this long-term growth algorithm is made up of multiple components. The first is faster secular growth. So think of this as GDP plus because we have exposure to a number of end markets that are growing faster than that. And so we have a really strong exposure to those markets. I'll hit that on the next slide. The next part, and that we look at 3% to 5% for that share growth and expanded markets. That is we're looking to, of course, gain share but we also have more ways to win, and we've done that via acquisition over the last several years. And then ARR, annual recurring revenue. It's about 10% of our business today, growing at a faster clip than the overall business. This year, our guide is for high single-digit growth for ARR. So we expect that, that is going to add 1 point of growth to our overall growth algorithm, that 5% to 8% organic. Now our guide for this year, the midpoint of the guide is 4%. The range that we have in place for the guide is 2% to 6%. We initiated that at the end of our fourth quarter. And we just recently -- or 1.5 months ago, we reported our first quarter. We typically do not update our guide after the end of the first quarter just because, obviously, it's 1 quarter in. There are lots of unknowns. But know that with that range, that 2% to 6% range that is in our guide, of course, that we -- at the high end of that, if things develop nicely, and we did have a really good first quarter, double-digit top line growth. But if we get to that 6%, of course, that takes us into that range for our long-term growth algorithm. And then on top of that, we have acquisitions. We've been on pause on acquisitions for the last couple of years as we digest transactions that we've done in the past before that. That has come together really nicely for us. We are now starting to build the pipeline on M&A. On the faster secular growth, that 3% to 5%, I mentioned this earlier. But this is a new slide for us that we brought out at our Investor Day last November. And so it shows kind of Rockwell's share. Of course, these are all management estimates and then what we think the CAGR is going to be for these markets that we serve over the next 5 years. So you can see that we have really good exposure to a lot of different market segments, which is outstanding, areas where we have really strong market share and a really good historical base, things like consumer packaged goods. Those are a little bit slower growing, but they're a lot more predictable as well. And other areas that are a lot faster growing, we have opportunities to continue to gain share. And then from a margin expansion perspective, we, again, we put these in place in November of 2023, and we've been working towards that goal. We expanded our operating margins overall for the company by 110 basis points last year. Our expectation is we're going to be able to do that again in that ballpark again this year, and that's what's in our guide. Lifecycle Services, which Matt runs is actually already inside the corridor that we put for a target, that 13% to 15%. Software & Control has touched it during certain quarters in the recent past. But it's not -- it hasn't put together a full year yet, but getting closer. And then Intelligent Devices, that 22% to 24%, that's the one that's farthest away. We've got opportunities to continue to go after with things like operational excellence programs. Overall, for the company, that target is 23.5% for the total company. This year, our guide is at 21.5%. So we're a couple of points away from that target number right now. And part of what we're doing right now is also we're thinking about the future and going beyond that 23.5%. And we're doing that by making investments today that is going to have a yield for us over the long term. And so part of those investments that we're making is we're transitioning as an organization from what historically has been an asset-light organization to have a little bit more asset intensity, investing in ourselves, doing a lot more things for ourselves. So this is capital, it's digital transformation for our organization, it's investment in talent as well. We announced -- last year, we announced a $2 billion investment cycle for us over the next 5 years. So it's a really exciting time to be at Rockwell. So with that, we can start the chat.

Thanks so much. So look, I think if you -- if we take a look at the materials from your Analyst Day last fall and what you've been presenting, Rockwell is clearly executing on a broad transformative operational agenda. But strategically, when you go to the Board, what are the couple of top priorities for this management team, right? Like as you go down the list because as I said, if you dig in, it's a very broad and deep list. But what's at the very top?

Yes. I mean at the very top, obviously, as an organization, we want growth. Top line growth is really important for us. So it is about trying to make sure that we have a really strong new product development pipeline that we're continuing to invest in the markets that we want to go after. I obviously hit on a few of those there. And so we want to make sure that we are driving that top line as well as getting profitable growth. That is we're also driving the bottom line. We're doing it through operational excellence. So we do -- when we're talking to the Board, when we're having discussions even as a management team, a lot of those discussions are focused on how we're going to continue to use that Rockwell operating model, which is taking that faster growth and combining with operational excellence in order to get margin expansion. So it's -- you put those all together, and that's really -- that's where the emphasis is as a leadership team and also with the Board.

No, I would agree, profitable growth is the #1 objective. I think product development cycles are speeding up for us and the investment in the business in terms of driving productivity, doing things more efficiently, the combination of that expanded portfolio, the market exposure we have and doing things internally better will drive that.

And maybe as clearly faster secular growth is #1 on your list as well. Can we just -- can you give us an update on macro? What are you seeing? I think as we sort of dig into your model, your outlook doesn't really have much second half acceleration built in. How do you feel about that? That's a conservative outlook.

You want to start on the macro, Aijana? And then if I can jump in on the second half.

Sure. I mean we talked about, there is certainly some good indicators out there in terms of ISM, what we are hearing from our customers, our engagements with them. I mean Christian just spent some time with our Italian customers a few weeks ago. Matt just actually flew in from France, meeting with some of our global end users, a lot of activity with our customers. So that's positive, definitely. We continue to look at unemployment, and it has continued to stay relatively low, but we follow that as well. But there are a lot of different things that inform our forecast and our outlook. The biggest one is really our close engagement with our customers and the orders they put in on us. And as we mentioned on our Q1 earnings call, we did see some great orders and some great wins, some greenfields, a lot of brownfield, a lot of productivity. But we're not seeing -- at the time, we didn't see that broad-based kind of uptake. But overall, from a macro standpoint, uncertainty is still there. And we talked about the need for more stability on the trade front, on the geopolitical front so that these customers across many industries can actually start with those capital outlays.

And with regard to the second half, yes, as I said, we started out the year really well in the first quarter, double-digit top line growth, and that's against our guide that the midpoint is at 4%. Since we didn't and did not -- so traditionally, we don't update the guide, that outperformed in the first quarter, makes it look like that the second half is going to be a little bit more muted. Let's see, right? Let's see how it all develops, and we will be doing an update to our guide after the end of the second quarter. So it's a -- it was a good way to start the year.

Importantly, Andrew, it's not a deceleration in terms of sequentially. Nothing is getting worse, right? We expect moderate sequential improvement as the year progresses. But from a year-over-year standpoint, certainly, if we look at the math, the first half looks like it's a higher year-over-year growth from the second one.

So a strong start to the year model is what it is, stay tuned.

Yes.

Maybe just jumping around a little bit. Clearly, recently, AI and software has been at the top of the investor minds. Maybe I think when we talk to people about Rockwell, there seems to be a bit of confusion as to what it is you do and what your software capabilities really are. Can you just maybe spend some time talking about both your OT and IT software capabilities, where within the factory automation control pyramid you are? And then when I look at what's happening, I actually see opportunities. And what opportunities does agentic AI create for Rockwell given your dominant position in the machine control layer? Maybe that's where we can start.

Sure. I'll start. So when you think about Rockwell's technologies, we're really at Level 2 and Level 3. So our ability to design and operate machine control, the control system within the plant floor, the majority of our software is intimately connected to our hardware and the firmware that runs the machines in the plant.

But the hardware would be Level 1, Level 2, right?

Level 1, Level 2, mostly Level 2. So it is part and parcel of creating value for where we are applying AI is how you design the system, how you actually maintain the system. But in terms of the actual value creation, we're talking really at that machine level, how it's integrated. So for us, we see AI as a tremendous opportunity to continue to build intelligent machines that sense, that perceive, that act. So for us, at that level where the action is really happening, it's truly a differentiator compared to, I'll say, cloud-based AI. Now, we do have MES. But really straddles between Level 3 and Level 4. But our MES tends to be tightly integrated with the control on the floor using data from the plant floor itself. So when I think about our software portfolio and I think about sort of the hype in the market today, I think it's a huge opportunity for us to continue to elevate our portfolio as well as create more value for our customers.

If you look at what we do, just to add to that, we look at our customers in the production environment, and we help them across the entire life cycle. From designing the system, designing the whole plant, how the production is going to run to really production. That's the biggest part of their life cycle. And so running something without any unplanned downtime with a lot more AI-enabled process optimization, better quality, better throughput. And so this is what agentic AI is, and you're closing the loop, you're looking at, as Matt said, there is something that's sensing, we're making a decision. And it's the most valuable data that's flowing through our controllers, valuable data that's flowing through our MES. And so when you hear about some of that potential threat, this data is not available in the public domain, the most valuable data that's flowing through our hardware and through our software, the billions of transactions, this is proprietary. And we are using the data to continue to train our models and our agents throughout that. And so we absolutely view it as an enabler all the way from designing something and using natural language instructions and helping our customers get to production faster, right, accelerating time to market. We help them during the production phase across many different levels. We do have, of course, our intelligent devices, our autonomous mobile robots, we have sensors, of course, our PLC and then software throughout. And so -- and then of course, Matt's business, services is helping customers all the way from consulting and using AI to help them figure out the best use cases, what's the biggest bang for their buck, what's the best ROI, all the way through the process to upgrade, how do you do it seamlessly, how do you do it in prescriptive way.

And Matt, maybe what other ARR trends and if you can sort of break it down because, right, there is software ARR and then there's services ARR. You don't really disclose the difference between them. Can you just talk about maybe between the 2 because there is concern about slowing software ARR. What are you seeing there?

Our ARR is very balanced. So it's not materially different between software and service. Specifically on services, our services are to support our customers. So my project side of my business, our ecosystem or SIs create a large vast installed base. And with the labor shortage or skilled labor shortage out there, many customers do not have the talent and skills in-house to continuously maintain and get -- and optimize their investment in automation. So we have tens of thousands of contracts with customers across the globe where we are applying domain expertise remotely or through our AI investments to ensure that those systems are supported and they're optimized across the entire tech stack that we sell. So those contracts are highly valuable in terms of recurring revenue, the profitability is also very attractive. But most importantly, it's really about how we meet our customers where they're at, how we ensure that they're getting the most out of their automation investment, and we're taking them to the next level of performance through those contracts.

From a growth standpoint, you're right. I mean the last few quarters, we did see a slightly slower growth rate in ARR broadly, especially in services and the digital services part. We talked about in this kind CapEx environment that with a lot of delays, customers are being more watchful and they are deferring, delaying some of the services that are viewed more discretionary, meaning they're important services, but they're not urgent, right? And so we did see some of that. Now software ARR actually is growing above the overall ARR growth rate of high single-digit growth. But we do think it's temporary, but it's very much aligned with what we've seen broadly.

And Matt, as long as we sort of -- as long as we sort of talk about Lifecycle Services, maybe we can pivot. If we look at the slide, your business has a nice green checkmark next to margins. It has been a great margin story. Given sort of Christian's drive for margins, what are you...

You noticed that?

Just a little bit. So what are you doing differently? And how much runway do you have, right? Because you've clearly been ahead of everybody else in terms of margins. What has driven the improvement? And as I said, how much run rate do you have?

And maybe as part of the answer, Matt, you can give a little bit more context, even going backwards to kind of where we started.

Sure. So we've successfully doubled the margins in my segment over the last several years.

Well, that's what the company is doing, right?

That's what the company is going to do.

You're the best. It's great being up here with you.

So specifically on Lifecycle Services, I think we are a little bit ahead of the rest of the company in terms of our focus on productivity and efficiency. So we've embraced technology. So a large part of our productivity has been driven by modernizing our systems, our business processes and enabling our workforce to do things more efficiently. So that's one part of that story. We've also focused on our joint venture, Sensia, and improving the profit margin there. Now we have announced that we will be dissolving Sensia, which will be somewhat accretive to my segment's margins and the company's margins. And last, we've also focused on our labor pyramid, the levels and skills that we have across the globe, and we are truly a global organization in terms of how we deliver projects and services to our customers. So we've really done a nice job, I think, of combating rising wage as well as rising material costs in the environment. So we're pricing much more efficiently, much more effectively. And I think what I'm most proud of is our ability to execute. We have done an extremely diligent job in mitigating technical or commercial risk. And, at the same time, delighting our customers to create installed base for Rockwell. So it's been a great story, and I look forward to seeing what the future will hold, which I think will be a lot more driven by the technology advancement that I have in my segment and become more and more focused on how we deliver a global scale across our capability centers that we've really invested in over the last several years.

And just talking about margin and just sort of going back to the corporate. How much of what happened in the Lifecycle Services are applicable to the rest of the company? Particularly Christian, when we talk, you really have this laser focus on that pricing for the company. How much of what has happened in this segment can be sort of expanded to broader Rockwell?

Yes, I think there's definitely some great learnings. And Matt has built maybe one of the items that you kind of talked about, but I'll hit on a little bit more. Matt has built a really good team that is laser focused, not on the pricing side of it, but also trying to make sure that they really understand the entire scope of the project, the time lines of the project and how exactly we're going to execute it. And doing that well in advance even before they get to a quotation on those projects. So they've kind of done it from a very holistic perspective, but they do it with a level of detail that is really important for that business. And so we may have had some of your folks go into the other parts of our business. So we're definitely taking some of that knowledge, and we're certainly transferring it elsewhere. The pricing side of it for Rockwell, yes, we have a renewed energy around pricing, pricing discipline and price realization was strong last year. It's going to come down slightly this year, but again, still really good opportunities to get price for us as an organization. And I think when you take that and you combine it with what we're doing on operational excellence, and I'm sure we'll talk about that more here in a moment. But when you combine getting price realization with operational excellence, that's where you get really strong margin expansion.

Yes. No, in all seriousness. Clearly, you have stated margin targets. But just talking about long-term margin opportunity for Rockwell. What are the biggest levers that you have operationally going forward? In the context here, you have achieved $110 million in savings in fiscal '24, $325 million in '25. You do have a comprehensive list of initiatives driving the margins. What have been the biggest drivers so far, i.e., what are couple of KPIs that have had a disproportionate impact and what's going to drive margins over the next 12 to 24 months?

Yes. So any time you start down the road on a larger productivity program like the one that Rockwell has been going down, you have to have kind of short-term, medium-term and long-term objectives because the longer-term ones, they take time to execute, right? And so you need to have the ability to be able to get good yield, good savings and productivity in the early days, while also working on the things that are going to take longer to give that yield to it. And so the way we phase this program, we definitely had that, good, bad or otherwise, I mean, the early part of our savings and obviously, the larger part of the savings early for us was in head count reduction. So we went from 30,000 heads as an organization down to the 26,000 neighborhood, right? So there's real savings there. Then at the same time we were doing that, we were also doing a lot more around productivity. So that was, again, multilayered. Direct material negotiation and getting savings from our suppliers, that can happen really fast, and it did happen really fast for us. When you're going further down in things like in-sourcing and doing more things for ourselves. Well, that takes time to put it in place where you have to buy machinery, you have to buy -- you have to do some training. You have things -- put things in place. Sometimes you have to deplete the inventory of what you're buying from suppliers. So those are longer-term objectives. And so we're staging that such that we're going to continue to get a yield well into the future. That program, more than $400 million over an 18-month window, and that's structural cost savings. Those costs are now coming back into the organization. We're not done. So it did transition. It transitioned from what we call a -- what we were calling cost savings and margin expansion to now it's just productivity and it's actually built into our overall Rockwell operating model. So we're not spiking it out anymore. For sure, from an investor perspective, I understand that there was -- they like the visibility around what we're getting on yield on that every quarter. At the same time, I think we all can agree that organizations that constantly have a target around productivity every quarter that they're talking about. I'm sure in this conference or other discussions, you'd be saying, "Geez, it seems like Rockwell is always restructuring. They're always -- you always have these cost out things you're doing, what's going on there?" And the reality is continuous improvement, right? We want it to be part of our culture, part of everything, what we do every day. And so the result of that is that we're not going to be giving that level of visibility anymore, but know that it's definitely happening. We had really good yield in the first quarter. We're tracking very nicely for the second quarter, and we got a great plan for the second half of this year. And right now, we're building the funnel for 2027.

But generally, if and when volumes accelerate, you should have nice operating leverage given what you're doing?

We should. Yes, it will flow through nicely. And especially with our business, we've got -- gross margins are good for us. So we do have the ability to get some nice leverage when the volume starts flowing.

And the other thing, as you sort of -- what's interesting, you sort of talked about and you have these 2 metrics you're highlighting, cost to produce and ROI investment model. Can you expand on that? Because that's something new, a couple of years in. Can you just -- why these metrics and what does it mean operationally?

Yes. So this is -- again, we have a really strong culture at Rockwell. And so we want to continue to build off of that culture. One of the things that as we transition from a more asset-light organization to a more asset intensity organization, we had to give the right tools to the team so that they knew that there were bigger changes that were happening. So you can't go to more asset intensity and more investment in ourselves without really giving a really strong model for us to use across the organization. So that's how we developed a new ROI model, not to say that we weren't doing ROI models before. We were, but it was different. So Matt's business had ROI models. They were using, which was different than other segments, which was different than what was happening in our manufacturing side of our business. We now have the exact same model that's being used throughout the organization, which allows all of us to be in a position to be able to compare the returns on each of these investments. Now that's one aspect of it. And then you brought up the cost to produce. The cost to produce is we are a manufacturer. We have cost accounting like all manufacturers do, but cost accounting doesn't actually fully bring in all the cost that it takes to manufacture the product. That's really what we're doing is we're bringing in a much more holistic measure on everything it cost for us to produce that product. So think of it like cost accounting plus plus. And the most important part is that we wanted to put it in a rightsized way so that organizationally, our manufacturing team can -- the objective is, is that year-over-year, if we're making the exact same things as last year in the exact same quantities, we should be able to make it at the same cost or less. And so we had to have a model in place in order to actually be able to do that comparison. So we have it in place now broadly by each factory. The next objective is to continue to take it down further and further into the organization so you can do it at the cellular level and then down to product families. I don't know if we're going to be able to get to SKUs, but that will be the holy grail if we can get there.

You've clearly alluded sort of reinvesting in your manufacturing. So how is your manufacturing footprint evolving with more focused on production capabilities and high CapEx spending, right? You have new greenfield facility, you're sort of highlighting what's happening in Twinsburg and Singapore. And you do have this $2 billion investment framework that you've highlighted on the slide. Can you just bring it together for us?

Yes, absolutely. So this is -- again, what we do as an organization is automation. And we have the capability and the opportunity to actually bring a lot more automation into our own operations. It started in Singapore. Singapore was -- it's one of our locations that has a narrower SKU profile. I think compared to a lot of other companies, it still has a lot of SKUs. And so we're continuing to work on that. But it has a narrower SKU profile, which allows them to have more volume in each of those SKUs. The result is that, that's some of the easiest areas to at least go after automation first. So we did that in Singapore first. Think of that as a pilot. We took those learnings. We're now doing that in our Twinsburg, Ohio facility. And so we're starting to scale that up. Twinsburg is a much larger facility, has a lot more breadth of SKUs, and continue to learn from that. That will inform and continues to inform us as we think about our next opportunity, which is a greenfield facility that we announced in New Berlin, Wisconsin. That's going to be about a 1 million square foot facility that is going to be purpose-built for Rockwell and it is going to be purpose-built, not thinking automation only, but actually autonomy. We are trying to take our operations in Singapore, Twinsburg and then in New Berlin all the way to autonomous operations. Now are we going to be able to fully get there? That'd be great, but it's a journey for us. And some of the parts that I'm most excited about, I'm excited about, obviously, what it can do for us for the P&L and what it does for us for our employees. But I'm also really excited about what it does for us with our customers, taking our customers along on that journey and being able to show them that in higher cost locations. I didn't -- Singapore, Ohio, Wisconsin, these are not low-cost locations. And so that allows us to show folks that you can have world-class manufacturing in a higher cost and higher labor cost location and be able to do it efficiently and get a great margin for the organization.

And what's pricing like today? What's the pricing environment? How do you think about inflation?

So we have an annual price increase that's going through next month, and that is a little bit later than what we did last year. So we had actually pulled forward our pricing last year. It was done in February of 2025. We're doing it in April of 2026. And then our normal cadence before all this was actually in June. We'll probably get back to that cadence. So we're going to go through a couple of month trough here without any price change, but it will be fine, we're good because we have the ability to get good price realization. So we do have the ability to get price. We've been obviously getting tariff-based price ever since the tariff environment came into play. There are inflationary costs that are coming in that's built into our price change that we've got for April.

Excellent. And maybe just shifting a little bit to end market and growth vectors. Can we talk about your exposure to life sciences. I think it was one of the bubbles you sort of highlighted. What do you do there? What are you seeing in the market, lots to talk about potential reshoring in the U.S. We actually estimate it can be as big or bigger than semis, and you do have a lot more exposure on life sciences than you do in semis. What are you seeing just maybe even beyond GLP-1? You have some very large customers in the U.S. Maybe you can talk about that.

Yes. Life sciences is one of the growth verticals for us longer term, and we are well positioned there on many fronts. And actually, it's the one end market where we have the most concentration of software and services. If you look at where we play, it's really across the value chain. So you mentioned GLP-1 and beyond that, GLP-1 is a great growth driver for us right now with our customers. So you have the end users, you have the SIs, the contract manufacturers that support them that's trying and helping build out that and accelerate time to market to have that supply. We're working with med devices also that are very tightly coupled with that. We also support other parts, other growth factors. For example, CGT, cell and gene therapy, ATMP, a lot more personalized medicine, personalized therapies, which is really necessitating a lot more flexible, much more modular kind of manufacturing, which is perfect for our technology, including our Logix, our control platform. Our software, whether it's digital engineering, digital twin, MES, Manufacturing Execution Systems, quality, regulatory compliance. I mean that is what we excel at. And so digital is a big part of what we offer. Cybersecurity is key. It's an important part of every conversation with our customers. And we're working really with the global companies. It's a global pursuit. Now in Q1 for us, we did see some delays that were just more transitory on some projects, but we do -- we are very bullish on life sciences.

So those delays should get there in Q2, those come back?

Correct. We have not changed our guidance.

And maybe just jumping into e-commerce and warehouse automation. Those are relatively small but a big driver for your discrete business, right, I think, up 60% in the first quarter. Can you just tell us what's going on here? What products do we have here? And why is it up 60%?

Sure. I mean some of it is comps. We are guiding to 10% for the full year. So it's a great growth rate above company average.

The guide in the data center business is 10%, too. But yes.

Data center is a piece of that end market. And so we have e-commerce and warehouse automation, and then there's a portion of our data center business that also is in that bucket. And we're seeing growth across different types of customer segments. Clearly, the e-commerce players, and there is continued investment in automating those fulfillment centers, it's continuing. You see traditional retailers who have a lot of older warehouses that need to be updated, labor shortage and labor cost. It's a big impediment, it's a big challenge for our customers. And so they're looking at more autonomous ways to manage their facilities. Parcel companies, we had some of them at our Investor Day. They're reimagining the network of their sorting facilities. So again, what they're using is our software, Emulate3D, digital twin. They're using our core automation, our largest controllers, our drives, our HMIs. So it's really the full...

So it's basically, effectively, it's the comeback of fulfillment centers for e-commerce, which was on pause post-COVID and data center control center?

Data center as well as -- so what we see, the portion of our data center business that resides there is really that Cubic, our power distribution, think of module and motor control centers that help with that faster data center build out. We do think that a durable broader overall growth drivers is really just fulfillment. The flexibility, consumer needs for that, a lot more of that investment and scale to it.

And speaking about sort of warehouses. Can you just talk about progress on Clearpath and OTTO Motors acquisition, what are the key KPIs that you're focusing on?

Yes. So the Clearpath business has grown nicely. It's been a double-digit grower ever since we bought it. Our expectation is it's going to grow double digits again this year. Clearly, for us, from a KPI, that top line growth is really important. We're expecting that it's going to stick in that double digits for quite some time. We do think it's a really nice spot to be in. Another key KPI for us is also profitability. So this business, we were always -- from the day we acquired it, we knew that it was going to be a loss maker as we were focusing on growth and integrating it in our business until 2026. We're still planning on -- so we're staying in the same plan as we always had, which is that we're going to turn to profitability in the second half of this year.

But the growth has been in line with your plan?

Yes.

Okay. And maybe just sort of going back rather on the same thing on the control systems. I think battery, EV battery, that was a big focus. And then EVs didn't happen. But then what is happening is a lot of battery energy storage system. And I think when we're at PACK Expo like 6 months ago, the message was, "Hey, this EV battery business is holding up way better than we would have thought because there is this path to battery energy storage systems behind the meter." You talked about having control systems there. You benefit from, A, you have control system, I think, for the BESS and then you benefit from actually making the batteries. Can we talk about that? How big is that for you? What are you seeing? Are we back from the growth path there? Just expand there.

Sure. First of all, there's still investment in EV. Now it's not happening at the same clip that, of course, that it used to, but there's still investments. So we talked about Hyundai, Rivian and Lucid. What we're seeing with automotive with our brand owners is really investment in multi-energy powertrain, traditional ICE, hybrid and EV. Battery in terms of BESS, it's not really kind of a stand-alone project request that's coming in from our automotive customers, it's really more part of the broader story of energy management overall. And that's what we do in terms of what our software provides, our hardware, our solutions. It's integrated energy management, right? And so it's making sure that whether it's from the grid, it's on-site generation with other sources and making sure that there is a plant level of resilience and sustainability. And so for us, it's an additional driver. It's the same set of technologies. We don't need something additional to be able to serve that. So it's part of our overall proposition story. But right now, with what our customers are looking for is really more of a broader level.

But is it fair to say that there has been this handoff in the industry from the EV story to behind the meter energy storage system or it's just not enough?

It's some of that, but it's a lot less focused on just a standalone utility of storage and it's more how can you have a broader energy management and managing your cost volatility.

Excellent. We're right on time. Thanks so much. It's been great.

All right. Thank you. Thank you for having us.

Thank you.

Thank you.