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Emerson Reports Fourth Quarter and Full Year 2022 Results; Provides Initial 2023 Outlook

EMR

  • Fourth quarter net sales were $5.4 billion, up 8 percent from the year prior; underlying sales1 were up 12 percent
  • Full year net sales were $19.6 billion, up 8 percent from the year prior; underlying sales were up 9 percent
  • Fourth quarter GAAP EPS was $1.24, up 12 percent from the year prior; adjusted EPS2 was $1.53, up 16 percent
  • Full year GAAP EPS was $5.41, up 42 percent from the year prior; adjusted EPS was $5.25, up 16 percent
  • InSinkErator divestiture expected to close today
  • Completed 66th year of consecutive increased quarterly dividends per share; declared increase of quarterly cash dividend to $0.52 per share of common stock payable December 9, 2022 to stockholders of record November 11, 2022

Emerson (NYSE: EMR) today reported results for its fourth quarter and fiscal year ended September 30, 2022.

Fourth quarter net sales were up 8 percent and underlying sales were up 12 percent. The Americas were up 17 percent, Europe was up 3 percent, and Asia, Middle East & Africa was up 7 percent. China was up 9 percent. Full year net sales were up 8 percent and underlying sales were up 9 percent. The Americas were up 14 percent, Europe was up 2 percent, and Asia, Middle East & Africa was up 5 percent. China was up 7 percent.

Fourth quarter pretax margin of 16.9 percent was up 20 basis points. Adjusted EBITA margin3 was 23.3 percent, up 260 basis points. Full year pretax margin of 20.8 percent was up 480 basis points. Adjusted EBITA margin was 21.6 percent, up 180 basis points.

Fourth quarter earnings per share were $1.24, up 12 percent. Adjusted earnings per share were $1.53, up 16 percent. Full year earnings per share were $5.41, up 42 percent. Adjusted earnings per share were $5.25, up 16 percent.

Fourth quarter operating cash flow was $1.2 billion, up 42 percent, and free cash flow was $1.0 billion, up 63 percent. Full year operating cash flow was $2.9 billion, down 18 percent, and free cash flow was $2.4 billion, down 20 percent. Full year cash flow results reflected higher working capital due to increased sales and supply chain constraints throughout the year, and $153 million of tax payments on divestiture gains.

“Fiscal 2022 was a transformational year for Emerson. We made significant progress on our portfolio and culture transformation while maintaining our world-class operational execution,” said Emerson President and Chief Executive Officer Lal Karsanbhai. “Today's announcement to divest the Climate Technologies business is a critical milestone in positioning Emerson to be a global pure-play automation leader. We are energized by the growth and value creation opportunities enabled by our leading capabilities in intelligent devices, control systems and software.”

“Emerson closed out a strong 2022 with 9 percent growth in underlying sales and a 16 percent increase in adjusted earnings per share,” Karsanbhai continued. “Continued strength in automation demand and our robust backlog give us confidence in our 2023 sales guidance. Our operational execution will also lead to strong margins and cash flow conversion. Finally, I would like to thank our global employees for their hard work throughout 2022 and I look forward to future success as a global automation leader.”

Business Platform Results

Automation Solutions4September trailing three-month underlying orders5 were up 6 percent and backlog of $5.8 billion was up 14 percent versus the prior year.

Fourth quarter net sales were up 7 percent, with underlying sales up 13 percent. The Americas were up 21 percent, Europe was flat and Asia, Middle East & Africa was up 10 percent. China was up 14 percent. Full year net sales were up 4 percent, with underlying sales up 7 percent. The Americas were up 14 percent, Europe was down 1 percent and Asia, Middle East & Africa was up 5 percent. China was up 11 percent.

Fourth quarter segment EBIT margin increased 290 basis points to 22.3 percent and adjusted segment EBITA6 margin increased 190 basis points to 24.6 percent. Full year segment EBIT margin increased 270 basis points to 20.0 percent and adjusted segment EBITA margin increased 190 basis points to 22.2 percent.

Commercial & Residential Solutions September trailing three-month underlying orders were up 7 percent and backlog of $1.2 billion was up 16 percent versus the prior year.

Fourth quarter net sales increased 2 percent, with underlying sales up 10 percent. The Americas were up 12 percent, Europe was up 12 percent and Asia, Middle East & Africa was down 2 percent. China was down 8 percent. Full year net sales increased 9 percent, with underlying sales up 13 percent. The Americas were up 15 percent, Europe was up 11 percent and Asia, Middle East & Africa was up 5 percent. China was down 7 percent.

Fourth quarter segment EBIT margin increased 230 basis points to 20.4 percent and adjusted segment EBITA margin increased 250 basis points to 21.9 percent. Full year segment EBIT margin decreased 60 basis points to 19.9 percent and adjusted segment EBITA margin decreased 70 basis points to 20.9 percent.

AspenTech7 fourth quarter net sales were $251 million. Segment EBIT margin was negative 15.2 percent, including $121 million of intangibles amortization, and adjusted segment EBITA margin was 32.9 percent. Full year net sales were $656 million. Segment EBIT margin was 1.9 percent and adjusted segment EBITA margin was 38.0 percent.

2023 Updated Outlook

Following the announcement of its Climate Technologies divestiture, Emerson will report financial results for Climate Technologies, InSinkErator and Therm-O-Disc as discontinued operations for all periods presented, beginning in 2023. The earnings from discontinued operations for 2023 are expected to be $10 billion to $11 billion, or $17 to $19 per share, including the net gains on 2023 divestitures.

The Company's 2023 continuing operations after the Climate Technologies divestiture (assumed to close March 31, 2023 for the purposes of guidance) will include interest income from the $2.25 billion note receivable from Climate Technologies and reflect the 45% common equity ownership in the income, or loss, of Climate Technologies. Emerson will not control Climate Technologies post-closing and is therefore unable to estimate the amount of its 45% share of Climate Technologies' post-close results. The Company will exclude the interest income from the note receivable from Climate Technologies and its share of Climate Technologies' operations in its calculation of 2023 adjusted earnings per share. Also excluded from adjusted earnings per share is the interest income on any undeployed net proceeds. The effect of Emerson's 45% share of Climate Technologies is expected to be immaterial to post-closing cash flows.

The 2023 outlook assumes approximately $1.2 billion of dividend payments and approximately $2 billion to be returned to shareholders through share repurchases.

The following tables summarize 2022 financials for continuing operations8 and fiscal year 2023 guidance framework for continuing operations8. Guidance figures are approximate.

2022 Results

2022 Q1
Reported

2022 Q1
Continuing
Operations8

2022
Reported

2022
Continuing
Operations
8

Net Sales

$4,473M

$3,156M

$19,629M

$13,804M

Earnings Per Share

$1.50

$1.25

$5.41

$3.16

Adjusted Earnings Per Share

$1.05

$0.79

$5.25

$3.64

2023 Guidance - Continuing Operations8

2023 Q1

2023

Net Sales Growth

6% - 8%

7% - 9%

Underlying Sales Growth

6% - 8%

6.5% - 8.5%

Earnings Per Share9

$0.67 - $0.71

$3.51 - $3.66

Restructuring / Related Costs

~$0.03

~$0.13

Amortization of Intangibles

~$0.15

~$0.61

Interest on Note Receivable From Climate Technologies

---

~($0.10)

Interest Income on Undeployed Proceeds

---

~($0.15)

Adjusted Earnings Per Share

$0.85 - $0.89

$4.00 - $4.15

Notes:

1 Underlying sales excludes the impact of currency translation, and acquisitions and divestitures completed through September 30, 2022 including Therm-O-Disc, heritage AspenTech and Emerson's businesses contributed to AspenTech.

2 Adjusted EPS excludes restructuring, a gain on subordinated interest, first year purchase accounting, transaction and AspenTech pre-closing costs and charges, a gain from the Therm-O-Disc divestiture, write-offs associated with Emerson's announced Russia exit, investment-related gains, an AspenTech Micromine purchase price hedge and intangibles amortization expense.

3 Adjusted EBITA margin excludes restructuring, a gain on subordinated interest, first year purchase accounting, transaction and AspenTech pre-closing costs and charges, a gain from the Therm-O-Disc divestiture, write-offs associated with Emerson's announced Russia exit, investment-related gains, an AspenTech Micromine purchase price hedge and intangibles amortization expense.

4 Automation Solutions net sales, backlog, segment EBIT margin and adjusted segments EBITA margin does not include Emerson's businesses contributed to AspenTech, which have been reclassified to the AspenTech segment.

5 Trailing three-month underlying orders does not include Therm-O-Disc (divested and previously reported in Commercial & Residential Solutions) or Emerson's businesses contributed to AspenTech (previously reported in Automation Solutions).

6 Adjusted segment EBITA margin excludes restructuring and intangible amortization expense.

7 The AspenTech segment includes the full year results for Emerson's businesses contributed to AspenTech and the heritage AspenTech business as of May 16, 2022, the date upon which the Company acquired its majority equity ownership interest in AspenTech.

8 Following the announcement of its Climate Technologies divestiture, Emerson will report financial results for Climate Technologies, InSinkErator and Therm-O-Disc as discontinued operations for all periods presented, beginning in 2023. The earnings from discontinued operations for 2023 are expected to be $10 billion to $11 billion, or $17 to $19 per share, including the net gains on 2023 divestitures. The Company's 2023 continuing operations after the Climate Technologies divestiture (assumed to close March 31, 2023 for the purposes of guidance) will include interest income from the $2.25 billion note receivable from Climate Technologies and reflect the 45% common equity ownership in the income, or loss, of Climate Technologies. Emerson will not control Climate Technologies post-closing and is therefore unable to estimate the amount of its 45% share of Climate Technologies' post-close results. The Company will exclude the interest income from the note receivable from Climate Technologies and its share of Climate Technologies' operations in its calculation of 2023 adjusted earnings per share. Also excluded from adjusted earnings per share is the interest income on any undeployed net proceeds. The effect of Emerson's 45% share of Climate Technologies is expected to be immaterial to post-closing cash flows.

9 2023 earnings per share guidance from continuing operations excludes any potential impact from the 45% common equity ownership in Climate Technologies' income or loss post-close. Emerson will not control Climate Technologies post-closing and is therefore unable to estimate the probable significance or impact on our earnings per share results from the 45% share of Climate Technologies' post-close results. Emerson will exclude its 45% share of Climate Technologies' post-close operations from the calculation of its 2023 adjusted earnings per share.

Upcoming Investor Events

Today, beginning at 7:00 a.m. Central Time / 8:00 a.m. Eastern Time, Emerson management will discuss the fourth quarter results, fiscal year results and its Climate Technologies divestiture during an investor conference call. Participants can access a live webcast available at www.emerson.com/en-us/investors at the time of the call. A replay of the call will be available for 90 days. Conference call slides will be posted in advance of the call on the company website.

Emerson will hold an in-person and virtual investor conference on Tuesday, Nov. 29 in New York City. A live webcast of the investor conference will begin at 8:00 a.m. Central Time / 9:00 a.m. Eastern Time. A link to register and attend the webcast is available at www.emerson.com/en-us/investors. The webcast will remain available for 90 days.

Forward-Looking and Cautionary Statements

Statements in this press release that are not strictly historical may be “forward-looking” statements, which involve risks and uncertainties, and Emerson undertakes no obligation to update any such statements to reflect later developments. These risks and uncertainties include the Company's ability to successfully complete on the terms and conditions contemplated, and the financial impact of, the proposed Climate Technologies transaction, the proposed sale of its InSinkErator food waste disposal business, the scope, duration and ultimate impacts of the COVID-19 pandemic and the Russia-Ukraine conflict, as well as economic and currency conditions, market demand, including related to the pandemic and oil and gas price declines and volatility, pricing, protection of intellectual property, cybersecurity, tariffs, competitive and technological factors, inflation, among others, as set forth in the Company's most recent Annual Report on Form 10-K and subsequent reports filed with the SEC. The outlook contained herein represents the Company's expectation for its consolidated results, other than as noted herein.

(tables attached)

Table 1

EMERSON AND SUBSIDIARIES

CONSOLIDATED OPERATING RESULTS

(AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED)

Quarter Ended Sept 30

Percent

2021

2022

Change

Net sales

$4,947

$5,360

8%

Cost of sales

2,951

3,043

SG&A expenses

1,054

1,136

Gain on sale of business

(3)

Other deductions, net

75

227

Interest expense, net

39

53

Earnings before income taxes

828

904

9%

Income taxes

154

196

Net earnings

674

708

Less: Noncontrolling interests in subsidiaries

4

(32)

Net earnings common stockholders

$670

$740

10%

Diluted avg. shares outstanding

600.5

594.5

Diluted earnings per share common share

$1.11

$1.24

12%

Quarter Ended Sept 30

2021

2022

Other deductions, net

Amortization of intangibles

$77

$134

Restructuring costs

39

36

Other

(41)

57

Total

$75

$227

Table 2

EMERSON AND SUBSIDIARIES

CONSOLIDATED OPERATING RESULTS

(AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED)

Year Ended Sept 30

Percent

2021

2022

Change

Net sales

$18,236

$19,629

8%

Cost of sales

10,673

11,441

SG&A expenses

4,179

4,248

Gain on subordinated interest

(453)

Gain on sale of business

(486)

Other deductions, net

318

601

Interest expense, net

154

193

Earnings before income taxes

2,912

4,085

40%

Income taxes

585

855

Net earnings

2,327

3,230

Less: Noncontrolling interests in subsidiaries

24

(1)

Net earnings common stockholders

$2,303

$3,231

40%

Diluted avg. shares outstanding

601.8

596.3

Diluted earnings per share common share

$3.82

$5.41

42%

Year Ended Sept 30

2021

2022

Other deductions, net

Amortization of intangibles

$300

$357

Restructuring costs

150

86

Other

(132)

158

Total

$318

$601

Other for the year end September 30, 2022 includes a charge of $135 related to the Company exiting its business in Russia, acquisition/divestiture costs of $110 and a loss of $50 in the fourth quarter related to AspenTech’s Micromine purchase price hedge.

Table 3

EMERSON AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(DOLLARS IN MILLIONS, UNAUDITED)

Quarter Ended Sept 30

2021

2022

Assets

Cash and equivalents

$2,354

$1,804

Receivables, net

2,971

3,008

Inventories

2,050

2,191

Other current assets

1,057

1,503

Total current assets

8,432

8,506

Property, plant & equipment, net

3,738

3,361

Goodwill

7,723

14,662

Other intangible assets

2,877

6,724

Other

1,945

2,419

Total assets

$24,715

$35,672

Liabilities and equity

Short-term borrowings and current maturities of long-term debt

$872

$2,115

Accounts payable

2,108

2,028

Accrued expenses

3,266

3,634

Total current liabilities

6,246

7,777

Long-term debt

5,793

8,259

Other liabilities

2,753

3,320

Equity

Common stockholders' equity

9,883

10,364

Noncontrolling interests in subsidiaries

40

5,952

Total equity

9,923

16,316

Total liabilities and equity

$24,715

$35,672

Table 4

EMERSON AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN MILLIONS, UNAUDITED)

Year Ended Sept 30

2021

2022

Operating activities

Net earnings

$2,327

$3,230

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortization

969

1,039

Stock compensation

224

144

Pension expense

28

2

Pension funding

(41)

(43)

Changes in operating working capital

203

(515)

Gain on subordinated interest

(453)

Gain on sale of business

(486)

Other, net

(135)

4

Cash provided by operating activities

3,575

2,922

Investing activities

Capital expenditures

(581)

(531)

Purchases of businesses, net of cash and equivalents acquired

(1,611)

(5,702)

Divestitures of businesses

34

601

Proceeds from subordinated interest

438

Other, net

38

(140)

Cash used in investing activities

(2,120)

(5,334)

Financing activities

Net increase in short-term borrowings

(504)

1,241

Proceeds from short-term borrowings greater than three months

71

1,162

Payments of short-term borrowings greater than three months

(71)

(1,165)

Proceeds from long-term debt

2,975

Payments of long-term debt

(308)

(522)

Dividends paid

(1,210)

(1,223)

Purchases of common stock

(500)

(500)

Other, net

100

80

Cash provided by (used in) financing activities

(2,422)

2,048

Effect of exchange rate changes on cash and equivalents

6

(186)

Increase (Decrease) in cash and equivalents

(961)

(550)

Beginning cash and equivalents

3,315

2,354

Ending cash and equivalents

$2,354

$1,804

Table 5

EMERSON AND SUBSIDIARIES

SEGMENT SALES AND EARNINGS

(DOLLARS IN MILLIONS, UNAUDITED)

Quarter Ended Sept 30

2021

2022

Sales

Measurement & Analytical Instrumentation

$860

$919

Valves, Actuators & Regulators

961

1,000

Industrial Solutions

610

660

Systems & Software

669

728

Automation Solutions

3,100

3,307

AspenTech

79

251

Climate Technologies

1,289

1,316

Tools & Home Products

486

487

Commercial & Residential Solutions

1,775

1,803

Eliminations

(7)

(1)

Net sales

$4,947

$5,360

Earnings

Automation Solutions

$601

$738

AspenTech

(6)

(39)

Climate Technologies

234

284

Tools & Home Products

88

85

Commercial & Residential Solutions

322

369

Stock compensation

(33)

(37)

Unallocated pension and postretirement costs

23

23

Corporate and other

(40)

(100)

Gain on sale of business

3

Interest expense, net

(39)

(53)

Earnings before income taxes

$828

$904

Restructuring costs

Automation Solutions

$29

$19

AspenTech

(1)

Climate Technologies

7

5

Tools & Home Products

3

10

Commercial & Residential Solutions

10

15

Corporate

3

Total

$39

$36

The table above does not include $27 and $17 of costs related to restructuring actions that were reported in cost of sales and selling, general and administrative expenses for the three months ended September 30, 2021 and 2022, respectively.

Depreciation and Amortization

Automation Solutions

$144

$131

AspenTech

24

123

Climate Technologies

47

41

Tools & Home Products

17

13

Commercial & Residential Solutions

64

54

Corporate and other

17

9

Total

$249

$317

Table 6

EMERSON AND SUBSIDIARIES

SEGMENT SALES AND EARNINGS

(DOLLARS IN MILLIONS, UNAUDITED)

Year Ended Sept 30

2021

2022

Sales

Measurement & Analytical Instrumentation

$3,071

$3,206

Valves, Actuators & Regulators

3,483

3,604

Industrial Solutions

2,266

2,403

Systems & Software

2,472

2,545

Automation Solutions

11,292

11,758

AspenTech

319

656

Climate Technologies

4,748

5,200

Tools & Home Products

1,905

2,033

Commercial & Residential Solutions

6,653

7,233

Eliminations

(28)

(18)

Net sales

$18,236

$19,629

Earnings

Automation Solutions

$1,955

$2,356

AspenTech

(7)

12

Climate Technologies

965

1,038

Tools & Home Products

399

402

Commercial & Residential Solutions

1,364

1,440

Stock compensation

(224)

(144)

Unallocated pension and postretirement costs

94

99

Corporate and other

(116)

(424)

Gain on subordinated interest

453

Gain on sale of business

486

Interest expense, net

(154)

(193)

Earnings before income taxes

$2,912

$4,085

Restructuring costs

Automation Solutions

$121

$52

AspenTech

2

Climate Technologies

15

10

Tools & Home Products

7

11

Commercial & Residential Solutions

22

21

Corporate

5

13

Total

$150

$86

The table above does not include $38 and $43 of costs related to restructuring actions that were reported in cost of sales and selling, general and administrative expenses for the twelve months ended September 30, 2021 and 2022, respectively.

Depreciation and Amortization

Automation Solutions

$537

$514

AspenTech

95

242

Climate Technologies

191

177

Tools & Home Products

76

71

Commercial & Residential Solutions

267

248

Corporate and other

70

35

Total

$969

$1,039

Table 7

EMERSON AND SUBSIDIARIES

ADJUSTED EBITA & EPS SUPPLEMENTAL

(AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED)

The following tables, which show results on an adjusted EBITA basis and diluted earnings per share on an adjusted basis, are intended to supplement the Company's discussion of its results of operations herein. The Company defines adjusted EBITA as earnings excluding interest expense, net, income taxes, intangibles amortization expense, restructuring expense, first year purchase accounting related items and transaction fees, and certain gains, losses or impairments. Adjusted earnings per share excludes intangibles amortization expense, restructuring expense, first year purchase accounting related items and transaction fees, and certain gains, losses or impairments. Adjusted EBITA, adjusted EBITA margin, and adjusted earnings per share are measures used by management and may be useful for investors to evaluate the Company's operational performance.

Quarter Ended Sept 30

2021

2022

Pretax earnings

$828

$904

Percent of sales

16.7%

16.9%

Interest expense, net

39

53

Restructuring and related costs

66

52

Amortization of intangibles

85

174

Gain on sale of business

(3)

Russia business exit

19

Acquisition/divestiture costs

13

AspenTech Micromine purchase price hedge

50

Investment-related gains

(14)

OSI first year acquisition accounting charges

9

Adjusted EBITA

$1,027

$1,248

Percent of sales

20.7%

23.3%

Quarter Ended Sept 30

2021

2022

GAAP earnings per share

$1.11

$1.24

Restructuring and related costs

0.08

0.07

Amortization of intangibles

0.11

0.15

Russia business exit

0.03

Acquisition/divestiture costs and interest on AspenTech debt

0.02

AspenTech Micromine purchase price hedge

0.04

Investment-related gains

(0.02)

OSI first year acquisition accounting charges

0.02

Adjusted earnings per share

$1.32

$1.53

Table 8

EMERSON AND SUBSIDIARIES

ADJUSTED EBITA & EPS SUPPLEMENTAL

(AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED)

Year Ended Sept 30

2021

2022

Pretax earnings

$2,912

$4,085

Percent of sales

16.0%

20.8%

Interest expense, net

154

193

Restructuring and related costs

188

119

Amortization of intangibles

327

451

Gain on subordinated interest

(453)

Gain on sale of business

(486)

Russia business exit

181

Acquisition/divestiture costs

110

AspenTech Micromine purchase price hedge

50

Investment-related gains

(17)

(14)

OSI first year acquisition accounting charges and fees

50

Adjusted EBITA

$3,614

$4,236

Percent of sales

19.8%

21.6%

Year Ended Sept 30

2021

2022

GAAP earnings per share

$3.82

$5.41

Restructuring and related costs

0.24

0.15

Amortization of intangibles

0.41

0.48

Gain on subordinated interest

(0.60)

Gain on sale of business

(0.72)

Russia business exit

0.32

Acquisition/divestiture costs, AspenTech interest on debt

0.19

AspenTech Micromine purchase price hedge

0.04

Investment-related gains

(0.03)

(0.02)

OSI first year acquisition accounting charges and fees

0.07

Adjusted earnings per share

$4.51

$5.25

Table 9

EMERSON AND SUBSIDIARIES

SEGMENT EBITA

(DOLLARS IN MILLIONS, UNAUDITED)

Quarter Ended Sept 30

2021

2022

Automation Solutions

Automation Solutions EBIT

$601

$738

Percent of sales

19.4%

22.3%

Restructuring and related costs

52

35

Amortization of intangibles

50

42

Automation Solutions EBITA

$703

$815

Percent of sales

22.7%

24.6%

AspenTech

AspenTech EBIT

$(6)

$(39)

Percent of sales

(7.5%)

(15.2%)

Restructuring and related costs

(1)

Amortization of intangibles

22

121

AspenTech EBITA

$16

$81

Percent of sales

20.8%

32.9%

Commercial & Residential Solutions

Commercial & Residential Solutions EBIT

$322

$369

Percent of sales

18.1%

20.4%

Restructuring and related costs

11

16

Amortization of intangibles

13

11

Commercial & Residential Solutions EBITA

$346

$396

Percent of sales

19.4%

21.9%

Table 10

EMERSON AND SUBSIDIARIES

SEGMENT EBITA

(DOLLARS IN MILLIONS, UNAUDITED)

Year Ended Sept 30

2021

2022

Automation Solutions

Automation Solutions EBIT

$1,955

$2,356

Percent of sales

17.3%

20.0%

Restructuring and related costs

146

89

Amortization of intangibles

186

167

Automation Solutions EBITA

$2,287

$2,612

Percent of sales

20.3%

22.2%

AspenTech

AspenTech EBIT

$(7)

$12

Percent of sales

(2.3%)

1.9%

Restructuring and related costs

2

Amortization of intangibles

89

237

AspenTech EBITA

$84

$249

Percent of sales

26.2%

38.0%

Commercial & Residential Solutions

Commercial & Residential Solutions EBIT

$1,364

$1,440

Percent of sales

20.5%

19.9%

Restructuring and related costs

26

24

Amortization of intangibles

52

47

Commercial & Residential Solutions EBITA

$1,442

$1,511

Percent of sales

21.6%

20.9%

Reconciliations of Non-GAAP Financial Measures & Other

Table 11

Reconciliations of Non-GAAP measures (denoted by *) with the most directly comparable GAAP measure (dollars in millions, except per share amounts). See tables 7 through 10 for additional non-GAAP reconciliations.

Q4 2022 Underlying Sales Change

Auto Solns

Comm & Res
Solns

Emerson

Reported (GAAP)

7 %

2 %

8 %

(Favorable) / Unfavorable FX

6 %

3 %

5 %

Acquisitions

— %

— %

(3) %

Divestitures

— %

5 %

2 %

Underlying*

13 %

10 %

12 %

2022 Underlying Sales Change

Auto Solns

Comm & Res
Solns

Emerson

Reported (GAAP)

4 %

9 %

8 %

(Favorable) / Unfavorable FX

3 %

2 %

2 %

Acquisitions

— %

— %

(2) %

Divestitures

— %

2 %

1 %

Underlying*

7 %

13 %

9 %

2023E November Guidance Underlying Sales Change

Q1 FY23E

FY23E

Reported (GAAP)

6% - 8%

7% - 9%

(Favorable) / Unfavorable FX

~ 6%

~ 3.5%

(Acquisitions) / Divestitures

~ (6)%

~ (4)%

Underlying*

6% - 8%

6.5% - 8.5%

Q4 Earnings Per Share

Q4 FY21

Q4 FY22

Change

Earnings per share (GAAP)

$ 1.11

$ 1.24

12 %

Restructuring and related costs

0.08

0.07

(1) %

Amortization of intangibles

0.11

0.15

2 %

Russia business exit

0.03

2 %

Acquisition/divestiture costs

0.02

1 %

AspenTech Micromine purchase price hedge

0.04

2 %

Investment-related gains

(0.02)

(1) %

OSI purchase accounting items

0.02

(1) %

Adjusted earnings per share*

$ 1.32

$ 1.53

16 %

Earnings Per Share

FY21

FY22

Change

Earnings per share (GAAP)

$ 3.82

$ 5.41

42 %

Restructuring and related costs

0.24

0.15

(5) %

Amortization of intangibles

0.41

0.48

(2) %

Gain on subordinated interest

(0.60)

(13)%

Gain on sale of Therm-O-Disc

(0.72)

(16)%

Russia business exit

0.32

7 %

Acquisition/divestiture costs and interest on pre-acquisition AspenTech debt

0.19

4 %

AspenTech Micromine purchase price hedge

0.04

1 %

Investment-related gains

(0.03)

(0.02)

-%

OSI purchase accounting

0.07

(2) %

Adjusted earnings per share*

$ 4.51

$ 5.25

16 %

Earnings Per Share

FY23E

Q1 FY23E

Earnings per share (GAAP)

$3.51 - $3.66

$0.67 - $0.71

Restructuring and related costs

0.13

0.03

Amortization of intangibles

0.61

0.15

Interest on note receivable from Climate Technologies

(0.10)

Interest income on undeployed proceeds

(0.15)

Adjusted earnings per share*

$4.00 - $4.15

$0.85 - $0.89

EBITA Margin

Q4 FY21

Q4 FY22

Change

Pretax margin (GAAP)

16.7 %

16.9 %

20 bps

Interest expense, net

0.8 %

1.0 %

20 bps

Restructuring and related costs

1.2 %

1.0 %

(20) bps

Amortization of intangibles

1.7 %

3.2 %

150 bps

Gain on sale of Therm-O-Disc

— %

(0.1) %

(10) bps

Russia business exit

— %

0.3 %

30 bps

Acquisition/divestiture costs

— %

0.3 %

30 bps

AspenTech Micromine purchase price hedge

— %

1.0 %

100 bps

Investment-related gains

— %

(0.3) %

(30) bps

OSI purchase accounting items

0.3 %

— %

(30) bps

Adjusted EBITA margin*

20.7 %

23.3 %

260 bps

EBITA Margin

FY21

FY22

Change

Pretax margin (GAAP)

16.0 %

20.8 %

480 bps

Interest expense, net

0.8 %

1.0 %

20 bps

Restructuring and related costs

1.0 %

0.6 %

(40) bps

Amortization of intangibles

1.8 %

2.3 %

50 bps

Gain on sale of Therm-O-Disc

— %

(2.5) %

(250) bps

Gain on subordinated interest

— %

(2.3) %

(230) bps

Russia business exit

— %

0.9 %

90 bps

Acquisition/divestiture costs

— %

0.6 %

60 bps

AspenTech Micromine purchase price hedge

— %

0.3 %

30 bps

Investment-related gains

(0.1) %

(0.1) %

- bps

OSI purchase accounting items

0.3 %

— %

(30) bps

Adjusted EBITA margin*

19.8 %

21.6 %

180 bps

Sales - Continuing Operations

FY22

Q1 FY22

Reported sales (GAAP)

$ 19,629

$ 4,473

Divested businesses

(5,825)

(1,317)

Continuing operations sales*

$ 13,804

$ 3,156

Earnings Per Share - Continuing Operations

FY22

Q1 FY22

Reported earnings per share (GAAP)

$ 5.41

$ 1.50

Divested businesses

(2.25)

(0.25)

Continuing operations earnings per share*

3.16

1.25

Restructuring and related costs

0.14

0.02

Amortization of intangibles

0.45

0.09

Gain on subordinated interest

(0.60)

(0.60)

Russia business exit

0.32

Acquisition/divestiture costs and pre-acquisition interest on AspenTech debt

0.15

0.03

AspenTech Micromine purchase price hedge

0.04

Investment-related gains

(0.02)

Adjusted earnings per share continuing operations*

$ 3.64

$ 0.79

Q4 Automation Solutions Segment EBIT Margin

Q4 FY21

Q4 FY22

Change

Automation Solutions Segment EBIT margin (GAAP)

19.4 %

22.3 %

290 bps

Restructuring and related costs

1.7 %

1.1 %

(60) bps

Amortization of intangibles impact

1.6 %

1.2 %

(40) bps

Automation Solutions Adjusted Segment EBITA margin*

22.7 %

24.6 %

190 bps

Automation Solutions Segment EBIT Margin

FY21

FY22

Change

Automation Solutions Segment EBIT margin (GAAP)

17.3 %

20.0 %

270 bps

Restructuring and related costs

1.3 %

0.8 %

(50) bps

Amortization of intangibles impact

1.7 %

1.4 %

(30) bps

Automation Solutions Adjusted Segment EBITA margin*

20.3 %

22.2 %

190 bps

Q4 Commercial & Residential Solutions EBIT Margin

Q4 FY21

Q4 FY22

Change

Commercial & Residential EBIT margin (GAAP)

18.1 %

20.4 %

230 bps

Restructuring and related costs

0.6 %

0.9 %

30 bps

Amortization of intangibles impact

0.7 %

0.6 %

(10) bps

Commercial & Residential Adjusted EBITA margin*

19.4 %

21.9 %

250 bps

Commercial & Residential Solutions EBIT Margin

FY21

FY22

Change

Commercial & Residential EBIT margin (GAAP)

20.5 %

19.9 %

(60) bps

Restructuring and related costs

0.3 %

0.3 %

- bps

Amortization of intangibles impact

0.8 %

0.7 %

(10) bps

Commercial & Residential Adjusted EBITA margin*

21.6 %

20.9 %

(70) bps

AspenTech EBIT Margin

FY22

Q4 FY22

AspenTech EBIT margin (GAAP)

1.9 %

(15.2) %

Restructuring and related costs

— %

(0.2) %

Amortization of intangibles impact

36.1 %

48.3 %

AspenTech Adjusted EBITA margin*

38.0 %

32.9 %

Q4 Cash Flow

Q4 FY21

Q4 FY22

Change

Operating cash flow (GAAP)

$ 855

$ 1,217

42 %

Capital expenditures

(231)

(196)

21 %

Free cash flow*

$ 600

$ 1,021

63 %

Year-To-Date Cash Flow

FY21

FY22

Change

Operating cash flow (GAAP)

$ 3,575

$ 2,922

(18) %

Capital expenditures

(581)

(531)

(2) %

Free cash flow*

$ 2,994

$ 2,391

(20) %

Note 1: Underlying sales and orders exclude the impact of acquisitions, divestitures and currency translation.

Note 2: All fiscal year 2023E figures are approximate, except where range is given.