New Strategic Growth Framework
Faster secular growth
Share growth and expanded market
ARR (Recurring Software & Services)
Acquisitions
TOTAL ANNUAL GROWTH THROUGH THE CYCLE
LONG-TERM
FINANCIAL FRAMEWORK
- 35% core earnings conversion
- EPS growth > sales growth
- FCF conversion ~100%
- FCF yield for acquisitions > (WACC + risk premium) by years 3-5
- ROIC > 20%
- Target 2x leverage
Margin Expansion
| Margin Growth Drivers | Long-term Range* | |
|---|---|---|
| Intelligent Devices |
|
22% - 24% |
| Software & Control |
|
31% - 34% |
| Lifecycle Services |
|
13% - 15% |
| Total ROK | Productivity | Supply chain improvement | Accelerated top line growth |
|---|
*Excludes impact of future acquisitions
Inorganic Investments
New inorganic
priorities
- Annual Recurring Revenue
- Market Access in Europe / Asia
- Application-specific Technology in Focus Industries
Prior inorganic
priorities
Process Expertise
Information Solutions / Connected Services
Market Access in Europe / Asia
Advanced Material Handling
Capital Deployment
Our strong balance sheet provides us with significant flexibility and capacity to deploy capital. Our capital deployment priorities have not changed: make investments to fund organic growth, drive a point or more per year of growth from strategic acquisitions, and return excess cash to shareowners through dividends and share repurchases.
ORGANIC INVESTMENTS
Operating Cash Flow
Capital Expenditures
~2 to 2.25% of Sales
Free Cash Flow
~100% of Adjusted Income
INORGANIC INVESTMENTS
Acquisitions
Target ~1 pt of growth per year
FCF yield > (WACC + risk premium) by years 3-5
EXCESS CASH RETURNED TO SHAREOWNERS
Dividends
Maintain “A” credit rating
Share Repurchases
Framework for Continued Superior Financial Returns
Our longer-term framework for financial performance starts with organic sales growth, which drives earnings conversion (incremental margins). Free cash flow conversion of 100% or more and a strong balance sheet provide significant capacity for strategic capital deployment, including acquisitions and share repurchases. As a result, we expect EPS growth to outpace revenue growth and ROIC to remain over 20%.
Building on a Strong Foundation
FY16 - FY23 Performance
- Emulate3D
- Sensia
- Kalypso
- ASEM
- Avnet
- Oylo
- Fiix
- Plex
- AVATA
- Cubic
- KnowledgeLens
- FactoryTalk Information Solutions
- Cybersecurity technology and expertise
- Connected Services
- Market expansion in Europe and Asia
- Expanding vertical focus
- FactoryTalk automation software
- New visualization offerings
- High-performance drives
- Independent cart technology
- Market expansion in Europe and Asia
