Blake D. Moret
Chairman & Chief Executive Officer at Rockwell Automation
Thanks, Jessica, and good morning, everyone. Thank you for joining us today. Before providing detail on second quarter results, which were below our expectations, I want to provide general comments on the business environment. Through the first half of our fiscal year, two themes stand out. The first is broad-based demand growth across industries, geographies and offerings. Substantial backlog in all three business segments, low cancellation rates and detailed component supply forecasts give us confidence that we will achieve double-digit revenue growth this fiscal year and reach $9 billion of profitable sales in the next couple of years. The second theme is persistent supply chain constraints and associated cost inflation, which put particular pressure on Q2 sales and earnings. Since our last earnings release in January, we've seen supplier push-outs and decommits for electronic component shipments, the impact of unexpected COVID-related shutdowns in China and Russia start a war in Ukraine. These have had an impact on our results and guidance. So let's get into the detail on our quarter, the outlook and what we are doing to maximize Rockwell's business performance and long-term value.
Our second quarter results are summarized on slide three. Total orders grew by 37%, once again reflecting very strong demand across our portfolio of core automation and digital transformation solutions. Total revenue grew 2% year-over-year in the quarter. Organic sales grew a little over 1% versus prior year, worse than our expectations due to the supply chain challenges. Through six months, Rockwell's organic top line has grown 9% year-over-year. Orders momentum was broad-based across all three business segments. However, product shipments and solutions with significant hardware content were limited by multiple component shortages. In the Intelligent Devices business segment, organic sales declined 3% versus prior year, a sharp reversal from the 25% growth in the first quarter, reflecting volatile components supply. Within this segment's motion business, sales of our Independent Cart Technology grew strong double digits, and our orders more than doubled from a year ago. Software & Control organic sales grew a little less than 1%, also reflecting component shortages. We continue to see strong order growth in this business, led by Logix and Visualization. In Lifecycle Services, organic sales increased 11% versus the prior year, led by 24% growth at Sensia.
Demand is broadly increasing in Lifecycle Services as demonstrated by a 1.34 book-to-bill. Information Solutions & Connected Services grew strong double digits in both orders and revenue. Industrial cybersecurity demand was strong in the quarter, with orders up 90% year-over-year as customers in life sciences, food and beverage, mining and many other end markets are increasingly relying on us to provide the robust network technology and real-time domain expertise to keep their critical operations secure and resilient. In the quarter, one of our Plex wins was with Reautomotive, an automotive technology company and EV platform maker, headquartered in the EMEA region, where our cloud-native Smart Manufacturing Platform will enable the plan with real-time production monitoring, inventory and quality management, creating an agile manufacturing system needed for customized electric vehicles. You will recall that globalizing market access for Plex' software was an important synergy to be realized through this deal. Last month, Plex also became available on Microsoft's Azure Cloud in Europe, and we're partnering with Microsoft to promote this new capability. At Fiix, we had another great quarter with ARR growing over 40%. We continue to win new logos, including our first wins in Asia.
Our partnership with PTC continues to grow. And in the quarter, we booked software subscriptions for Digital Performance Management, based on ThingWorx. This new solution helps identify, prioritize and act on debottlenecking opportunities that have the greatest potential P&L impact in manufacturing sites. We combine great technology and domain expertise to create a very strong value proposition for our customers. In the quarter, organic ARR grew by 17%. Let's turn to slide four. Our usual Q2 market performance slide is in the appendix. It's important to understand that this quarter, sales growth or decline in specific industry verticals is primarily based on the particular products being shipped into these verticals and the degree they were impacted by component shortages rather than underlying demand. Working left to right on the slide, auto and e-commerce, two very important verticals we serve within our Discrete Industry segment, were down in the quarter, with the resulting single-digit decline for the Discrete segment. The majority of sales to these verticals are in products, which were heavily impacted by component shortages that impacted our ability to ship to these customers. In contrast, orders for auto and e-commerce remain very strong.
We continue to see large competitive wins with our Independent Cart Technology for motion control and battery applications. And about 1/3 of our total auto business is expected to be for electric vehicle applications in the full year. We also had an important sustainability win this quarter at Electro Battery Materials, a leading provider of low-carbon and sustainable metals to the EV automotive sector. Rockwell was chosen to provide a turnkey solution for North America's first integrated and environmentally sustainable battery materials plant. In e-commerce and warehouse automation, we continue to win expansion projects with our flexible material handling technology and digital twin software. And in semiconductor, our offerings can be found in chip-making machinery, material handling equipment and building management systems at the largest semiconductor and semiconductor capital equipment companies in the world. It is clear we are playing a critical role in this industry's plans for multibillion dollar capacity expansion. We continue to see strong broad-based demand in food and beverage, with particular focus on digital transformation projects. Life sciences sales were up double digits as 2/3 of our life sciences business is in software solutions and services that are less dependent on electronic components.
Oil and gas sales were up double digits, led by improving trends in upstream and midstream. Our Sensia joint venture had strong orders and ships in the quarter and is expected to grow strong double digits for the year. In summary, multiyear capital investments across many end markets, coupled with higher automation and digital transformation intensity, have created high backlog and a continuing strong order funnel to support growth in each industry segment we serve. Turning now to slide five and our Q2 organic regional sales performance. North America organic sales declined by about 3% versus the prior year due to the higher mix of Intelligent Devices in this region. The Intelligent Devices segment was more heavily impacted by component shortages this quarter. We continue to expect more balanced sales growth across regions for the full year and expect North America to be the fastest-growing region in fiscal '22. Latin America sales were up 13%. EMEA sales increased 6% and Asia Pacific grew 9%, due in part to the higher solutions content in this region.
In China, we saw high single-digit growth, driven by strength in mass transit, life sciences, tyre and oil and gas. Let's turn to slide six, which is a new slide we thought would be helpful this quarter. The high backlog we've been building over the last few quarters and continued low cancellation rates set the stage for strong revenue growth in the second half of fiscal '22 and beyond. We do expect lead times and backlog to stabilize over the next year. And at that point, orders and shipment levels will begin to converge, which is a good thing. In the near term, the primary limiting factor to growth is component availability. So as we turn to slide seven, let's go a bit deeper into some of the actions we are taking to improve semiconductor, chip availability and our overall resiliency. We expect component shipments to increase in the coming quarters due to several factors. The first is improved material flow from key suppliers over the next couple of quarters. Where we are seeing improved flow from existing suppliers, several factors are contributing, such as the addition of incremental capacity, improved allocation percentages, opportunistic broker buys and some of these suppliers recovery from discrete events like fires and floods.
We have also reengineered certain products to utilize components with better supply resiliency. For example, the new series of PanoVu operator interface has enabled us to double the shipment quantity in the last two months. We have significantly accelerated our manufacturing capacity investments in our Twinsburg and Singapore facilities over the last year, which will benefit production and resiliency in the second half of fiscal '22. We continue to qualify new and additional semiconductor chip vendors to create redundant sources for individual components and to diversify our supplier base. And we expect to see the benefit in fiscal Q4. We continue to invest in diversifying our portfolio and see continued double-digit growth in our Information Solutions & Connected Services, which are less dependent on hardware supply chains. Price is also a meaningful contributor to our growth and our resiliency in mitigating inflation. We have very strong pricing power in the market, thanks to our highly differentiated offerings. We're seeing good price realization as annual customer agreements renew, and we are taking action to get quicker realization of future price increases.
In the last year, we have announced several price increases, totaling 17%, materially benefiting the latter portion of this fiscal year and even more so in fiscal '23. However, as you know, there are risks that cannot yet be accurately quantified, which is one of the reasons we have widened our range for growth expectations for the full year. These risks include the duration and potential escalation of the war in Ukraine. We have suspended the small amount of business we do in Russia and Belarus, less than half of 1% of total sales. We are seeing logistics cost increases due to higher energy costs as well as constrained and lengthened air freight lanes. Another source of risk is the widespread shutdown of businesses in China due to COVID infection outbreaks. Our plants have partially reopened due to the critical role our products and services play in industries such as semiconductor. But the bigger risk is from upstream suppliers with operations in the area. We have built in some risk for China shutdowns, but it is difficult to quantify this risk in the next two quarters. Let's now turn to slide eight to review highlights for the full-year outlook. Orders for the year are expected to approach $10 billion.
At some point, we expect orders to moderate as lead times for our products return to more normal levels. However, orders are expected to remain well above prepandemic levels, given the amount of capital projects underway in industries we serve. We continue to expect double-digit reported sales growth, but we've reduced the midpoint and widened the range, in part, given the volatility of component supply that we saw in the second quarter. April component supply and total sales are tracking well with our forecast. Acquisitions are expected to do well and contribute over two points of profitable growth. We continue to expect double-digit growth in both core automation as well as Information Solutions & Connected Services. We continue to expect another year of double-digit annual recurring revenue growth, which makes up over 8% of our total revenue. I'm pleased with the impact of both acquisitions and organic investments are having in these new lines of business. We have reduced our margin expectation and adjusted EPS target range for the year. The midpoint of the adjusted EPS range represents one point of increase over the prior year and a 13% increase without the impact of last year's lower tax rate and benefit from a one-time legal settlement. And as noted on the slide, the Board authorized an additional $1 billion of share repurchases.
Nick will now add detail to our Q2 results and our financial outlook for fiscal '22. Nick?
