Good morning and welcome to Emerson Third Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. Please note that this event is being recorded. Now I'd like to turn the conference over to Colleen Mettler, Vice President of Investor Relations. Please go ahead..

Good morning and thank you for joining us for Emerson's third quarter fiscal 2023 earnings conference call. Today, I am joined by President and Chief Executive Officer, Lal Karsanbhai; Chief Financial Officer, Mike Baughman and Chief Operating Officer, Ram Krishnan.

As always, I encourage everyone to follow along with the slide presentation, which is available on our website. Please join me on Slide two. This presentation may include forward-looking statements, which contain a degree of business risks and uncertainty. Please take time to read the safe harbor statement and note on non-GAAP measures.

I will now pass the call over to Emerson President and CEO, Lal Karsanbhai, for his opening remarks..

a lithium refining project and cathode production facility in Texas. DeltaV was chosen for both projects due to its robust software architecture and ability to bring together previous islands of automation.

As the customer continues to grow operations globally with numerous expansions in new operations, Emerson is well positioned to be the supplier of choice given the unique nature and value of the capabilities that we can deliver.

Emerson was also recently awarded a large project with a leading German EV manufacturer to help automate the battery cell assembly process. As we look at future opportunities, NI has a leadership position with many of the largest EV and battery manufacturers in the world.

And I've differentiated hardware and software solutions help customers with the R&D, testing and validation of batteries and vehicles, and we look forward to leveraging those relationships to expand our current factory automation business and build upon our recent successes.

As you can tell, we are energized by these projects and our relevance with customers. We will share our progress as Emerson continues to partner with leading EV manufacturers around the world and benefit from the strength and differentiation of our portfolio of assets. I'll now turn the call over to Mike Baughman..

Thanks, Lal, and good morning, everyone. Please turn to Slide 11. Our third quarter financial results were outstanding. And before talking about that, I want to thank our global teams for their hard work and execution.

Our Emerson management system is driving value as evidenced by our continued sales growth, margin expansion, earnings growth and free cash flow performance. Turning to the results, underlying sales growth exceeded our expectations at 14%. GAAP sales were also up 14% for the quarter and price contributed approximately five points of growth.

Backlog of $6.9 billion, remained flat quarter-over-quarter. Software and control performed better than we expected, growing underlying sales 19% due to increased availability of electronic components and our ability to convert more of the backlog in this business.

Intelligent Devices grew 13%, led by process and hybrid exposed businesses, mainly measurement and analytical and final control. These two businesses are leaders in later cycle markets and have a large installed base, which, along with the continued backlog conversion, contributed to strong growth in the quarter.

From an industry perspective, process and hybrid remained healthy with double-digit growth in the quarter. As Lal mentioned, discrete activity has continued to slow, but still exhibited mid-single-digit sales growth due to backlog conversion. Emerson adjusted segment EBITDA margin improved 370 basis points to 26.9%.

Leverage, excluding AspenTech was 59%. Strong sales growth, margin accretive price costs and favorable product and project mix, all reflect the excellent execution by our operations teams and contributed to the margin improvement. Adjusted EPS grew 40% to $1.29, and I will discuss the details of that growth on the next chart.

Lastly, free cash flow of $769 million, was up 83% versus the prior year quarter. For the quarter, free cash flow conversion of adjusted earnings was 97%. The strong earnings growth and working capital improvement helped contribute to the free cash flow growth. Please turn to Slide 11 for the details of adjusted EPS and bridge from the prior year.

Most importantly, the strong 14% underlying sales growth and 59% segment level operating leverage contributed $0.29 of EPS growth year-over-year. Stock compensation was a $0.06 headwind due to lower stock comp expense in the prior year, but that was more than offset by other corporate items and tax, which were an $0.08 tailwind.

The reduced share count resulting from the $2 billion share repurchase completed in the first quarter contributed $0.04 to adjusted EPS. Lastly, now that the copeland transaction has closed, we are including the interest from the Copeland note receivable and adjusted results and guidance moving forward.

The Copeland note interest contributed $0.02 to adjusted EPS in the third quarter, and it is important to note this was not included in our May guidance. Overall, adjusted EPS grew 40% year-over-year to $1.29. Turning to Slide 12. And as we look ahead to the rest of the year, I'd like to highlight a few key things.

In general, end markets remain resilient. We have increased our expectations for process to double-digit sales growth with meaningful contribution from secular growth segments, energy transition and energy security. With continued strength in life sciences and metals and mining, we now expect hybrid to grow low double digits in 2023.

We are discussing nearing initiatives with more and more customers. This is not just a trend in the United States, and we see near and long-term benefits around the globe. For example, our team recently visited Australia and China where we spoke to customers about their plans to make investments in new markets like life sciences.

As a global leader for providing automation for this market, these customers are tapping Emerson to support their investments. Discrete demand is continuing to slow, especially in Europe, and we are beginning to see the impacts in the United States and Asia.

Sales growth expectations when combined with our Safety and Productivity commercial exposure, are in the low single-digit to mid-single-digit range as we have worked through backlog. The supply chain environment has continued to improve, allowing us to work through our backlog as we head into Q4.

Price cost has been a significant tailwind in 2023, a reflection of our commercial excellence. We expect price for the year to approach four points, and we will remain diligent on price as a key performance level. As we look to the future, we are excited by our growth opportunities.

Emerson is uniquely positioned to support our customers' investments in key areas we expect to grow double digits through the cycle. We've demonstrated our leadership in energy transition markets like LNG, nuclear, hydrogen, clean fuels, carbon capture and renewables. We are well positioned to capture the long-term investments driven by near shoring.

And finally, we have a leading and differentiated software portfolio that is expected to have double-digit ACV growth through the cycle. These are all trends we expect to continue to augment Emerson's growth for the foreseeable future. Please turn to Slide 13. As this chart shows, our performance this year has been exceptional.

We have successfully executed on our portfolio transformation while continuing to drive strong results across the business and exceed on our commitments. Strong operational performance, improved price/cost management and more favorable mix as we went through the year gave us the ability to increase our expectations throughout the year.

For 2023, underlying sales growth is now expected to be towards the top end of our previous 8.5% to 10% guidance range. We expect both intelligent devices and software and control to be on par with this overall updated guidance. As a reminder, AspenTech will begin rolling into our underlying sales in Q4 and as we lap a year of ownership.

We are also increasing our expectation for segment operating leverage based on the strong Q3 result, sales strength, favorable price cost and continued strong operational performance. We now expect segment operating leverage to be approximately 50%, excluding AspenTech.

Adjusted EPS has been raised to $4.40 to $4.45 and a 22% year-over-year increase at the midpoint. Please note this includes $0.06 of interest from the Copeland note receivable that we are now including in our adjusted results, $0.02 from Q3 and approximately $0.04 in Q4. AspenTech is still expected to contribute approximately $0.25 for the year.

Post Copeland transaction closed, please note we have now included an estimate for the Copeland equity loss in our GAAP guidance numbers which, in addition to the undeployed proceeds is being removed from our adjusted results and guidance. We have also adjusted our expected tax rate to approximately 22% for the year.

Free cash flow is expected to be $2.2 billion to $2.3 billion for the year, of which AspenTech is on approximately $300 million. Thanks for your attention. I will now turn back to Nick to open the call for questions..

[Operator Instructions] First question will be from Nigel Coe, Wolfe Research. Please go ahead..

Thanks. Good morning. Thanks for the question. I thought maybe just to set off on the obviously very strong operating performance, but margins were the real standouts.

So I'm just wondering, as we go into '24, I mean, is anything we should think about in terms of maybe some headwinds to margins? I'm thinking here, but measurement analytics very strong sequentially up 20%.

Are you confident that you can grow off these margins going forward?.

Nigel, yes, we're very excited about the leverage that we've had with 40%, 53% and then 59% in the quarter. You do see that operating leverage tipped down a little bit in the fourth quarter, and we're going to exit the year around 50%.

So yes, we feel good about the operating leverage, and we're not really in a position to talk about '24 at this point. But we certainly are pleased with the current year performance..

And I'll just add a little bit of color. Thanks, Mike. I do believe that the underlying work that we've been doing around price, cost management, thinking about how we bring our differentiated technology to market will be sustainable into -- through the cycle as we talked about.

And we look at the leverage targets as we go to '24, and we'll talk about that later in the fall. But I feel very good about the momentum in the business and the executional elements that are going to impact our ability to deliver differentiated margins on a go-forward basis..

That's great. And then my follow-up question is on the Control Systems organic growth in the high teens, that's a longer cycle business. And I don't really think about that as necessarily cycling up big or down big.

So mean how much of that is coming from sort of created backlog conversion with lead times, maybe some chip lead times coming down? And sort of how do we think about that going forward? Do you think you can maintain above-average growth rates in control systems and software?.

Yes. Nigel, Ram here. Yes, I think this particular quarter end this year, I think in the second half, the lead times catching up and better supply chains and shipping backlog is what is driving the significant growth in our systems business. But with that said, the project funnel is very good. The KOB 3 is very good.

So our expectations are the momentum in that business should continue into 2024..

Next question will be from Andy Kaplowitz of Citigroup. Please go ahead..

Hey. Good morning, everyone. Well, so you reiterated your mid-single-digit order growth forecast for this year and you came in at 3% this quarter despite the discrete market slowdown, you obviously gave us the new funnel of opportunities. with mid-20% organic growth.

So does that mean that Emerson's orders could reaccelerate from here? Or how do you think about that given the markets that you laid out?.

Yes. Certainly, Andy, we feel confident in that mid-single-digit guide that we laid out a quarter ago and believe we'll exit the year in that rate.

The process in hybrid orders are in the high single digits as we exited the quarter, and that's where a significant amount of the momentum lies not just in the capital expansion but related to just everyday business activity. Of course, offset by the discrete markets that we talked about through the quarter.

We still feel very confident that we'll inch up from where we ended the quarter here slightly..

Lal, and then maybe I could ask you a more philosophical question on AspenTech. I know at this point, it announced its guidance for FY '24, low double-digit ACV growth and he agreed not to buy Micromine and announced a big repurchase.

Are there any lessons learned as you and Antonio have worked together now for a little over a year? And given AspenTech FY '24 guidance, do you see a nice uptick in APM's contribution to your EPS in '24?.

No. Look, we continue to deliver on the synergy plan. I think that's point number one, not just in terms of pursuit of business collaboration between the selling organizations. But most importantly, as I highlighted in the presentation around technology. And it's that technology tie-in that ultimately will differentiate our offerings in the marketplace.

Number two. Look, over the quarter, we did a lot of work together. I think I feel really good about the plan that AspenTech laid out, the way it was communicated yesterday. I thought it was very succinct and clear. And I think they'll execute very well as we go through the quarter.

There's a lot of collaboration ongoing between our joint teams and momentum continues to build a year into a little over a year into this..

Thanks a lot. I appreciate it..

Thank you. Next question will be from Josh Pokrzywinski of Morgan Stanley. Please go ahead..

Josh. So well, I'd love to kind of dig in a little bit on backlog here. So flat sequentially. You highlighted the funnel of activity growing pretty materially here. So presumably, the conversion rate starts to pick up a little bit here.

Do you think we're sort of in this backlog zone for a while? I think a lot of your other peers out there in multis are starting to dip into backlog with lead time normalization.

Just wondering whether you guys sit on that or anything you'd want to call out for the next few quarters?.

Josh, yes, we certainly expect the backlog to come down a few hundred million to the fourth quarter. And it's important to note that its year-over-year at the end of the year, we expect that to be up a little over double digits. So yes, the supply chain easing has certainly helped.

But as we look ahead, we see that backlog coming down a little bit in the fourth quarter..

Got it. That's helpful. And then just kind of going back to Nigel's question, maybe thinking about some of the factors, whether it's '24 or maybe more broadly than that on mix. It seems like with a lot of these large projects, we're going to see more KOB 1, which I think maybe in the older days of Emerson was a bigger mix headwind.

But how do you guys think about that now given the change in project composition, et cetera?.

Yes. I think first off, I think just to add to what we said related to Nigel, the KOB 3 business performance has been very strong. Right now, we're running at 65% plus KOB 3 rates with strong performance in North America. So that has really contributed to the outsized leverage we saw in the first three quarters.

And we don't expect that to materially change in the next two quarters. But you are right, as our project backlog has built up, and we see project shipments go into '24, that will throttle leverage down to the mid-30s or high 30s rates we've guided to you in the past. So that's really a dynamic you should look for in 2024..

Yes. I think you're absolutely right. I think we're -- there's a fixed handle on the MRO and replacement business. We don't expect that. I think you're absolutely right to change as we go through the year. There's a lot of positive activity there. So feel good about that mix despite a very robust capital project funnel..

Next question will be from Steve Tusa of JPMorgan. Please go ahead..

The incrementals getting back to Nigel's question, I guess, given what happened this year, is there any view on how you view kind of the long-term trajectory on those incrementals.

Can you just remind us of what your long-term view on that is and how that kind of plays out? And maybe how the mix may impact that over the next couple of years as perhaps the MRO stuff slows and the project stuff comes on..

Yes. Look, we guided in November, Steve, at 35% through the cycle. Obviously, we're in a very positive point in the cycle at this moment in time. And look, as we look at our mix of business, our tech, geographical mix, as we go into November, we may assess that, but that's the guide that we put out last November.

Obviously, we're outperforming that number today..

And then what is the contribution from kind of price cost this year, just roughly?.

Yes. Well, on price in the quarter, we have nine points of volume and five points of price. Price will moderate as we go into the fourth, I think, for the year to 3.5, approaching four points of price in the full year guide of 10% underlying sales..

Next question will be from Andrew Obin, Bank of America. Please go ahead..

I guess the KOB terminology just refuses to die..

I'm trying to kill it..

I'm aware of that. So just a question on supply chain. Are you guys -- some of your competitors are talking about deflation or disinflation, are you seeing an opportunity to extract discounts from your supply chain? Just trying to understand, right, people are talking about inflation subsiding.

Are we going to see bottom line benefit for a company like Emerson over the next six to 12 months?.

Simple answer is yes, Andrew. And we look at, obviously, direct material, indirect material and logistics. So we are going to see deflation or positive NMI or favorable NMI. We are seeing that already in the second half of this year and should see that continue into next year. So it will be favorable for us.

What I will say, though, is if you go back to pre-COVID levels, logistics cost, for example, are already there. So we've seen a lot of the logistics benefit already come through on the direct material front, particularly castings, machine parts, electronics we will see deflation in '24 versus '23, but still not back to pre-COVID levels.

So maybe the opportunity there for us is continued deflation over the next several quarters as the market eases..

Excellent. And just a question on Aspen and Emerson. Can you just talk a little bit more about channel integration, because we're hearing that you guys are driving Aspen and Emerson closer together and the relationship is evolving.

Just trying to understand how much upside you think or how much margin of safety there is, given that historically, Emerson sales force has been very, very commercial. By incentivizing the salespeople seems like the relationship is going outside the initial channel. Just talk a little bit more about the opportunity..

Yes. So you are spot on. I think over the last year and certainly in the last six months, the collaboration and the refinement of our go-to-market or joint go-to-market approach, whether it's our project or the white spaces has certainly improved. Yes, you are correct.

In certain markets, China, for example, we're collaborating a lot more in terms of having the channels work together, incentive plans for both channels to support each other have been put in place, and that's really stimulating the right behavior, if you will, as both teams go out and pursue competitive displacement opportunities or Aspen, for example, selling on our DeltaV installed base.

So yes, I think we'll continue to evolve and progress that. We're being very careful and we're taking it market by market and doing what makes sense. I don't think there's a one-size-fits-all approach to every market. But certainly, the collaboration and the incentives for our sales organizations to collaborate have improved over the last six months..

Next question will be from Chris Snyder from UBS. Please go ahead..

And congrats on a strong quarter. I guess I wanted to follow up on some of the prior conversation and communication on margins. If our math right, the guide seems to imply a pretty material sequential decline in margins into the fourth quarter despite a step-up in revenue.

I guess, is that right? And what's driving that?.

Yes. We will see a decline in margin in the fourth quarter. And if you think about the third quarter that was driven by price and leverage, both of those things will be a little bit lower in the fourth quarter.

As we mentioned, the pricing for the full year will be about 4% relative to the five in the fourth quarter or in the third quarter rather, and the mix will also have an effect there as we close out the year..

I appreciate that. And then just maybe I was looking for some more color on the pipeline of big process projects. Are there some concern in the market that with oil and gas kind of commodities down pretty well off the high, and that includes LNG that there could be some slowdown or pressure on these projects seem to have really good momentum on there.

So can you just maybe talk about what you're seeing there and particularly on the traditional energy and the LNG side?.

Yes. I'll make a couple of comments, and if Rob wants to add color here. Look, the bulk of what we're seeing is gas. It's not oil where we do see activity in the oils around sustainability, conversions, carbon capture, et cetera, and emissions reduction. But it's the gas activity that I think is very relevant.

And that is entirely tied to Europe, to energy security and affordability. And we have not seen any slowdown in the activity, as a matter of fact, an acceleration through the quarter in terms of funding processes.

There are seven projects currently out of nine funded and moving forward aggressively and we've booked seven of the nine -- in seven of the nine already. So I haven't seen any evidence, and we have not felt within the business any evidence of any potential pullback in the gas infrastructure build-out or LNG infrastructure build-out.

Ram?.

Yes. And just to add to that, as it relates to our traditional markets, outside of LNG, as Lal mentioned, Chemical is another area where we see continued momentum on projects, certainly in markets like the Middle East, U.S. and China.

In terms of our two traditional energy business, FPSO activity in Brazil, Guyana and Asia still continues to be good and moving forward. And then obviously, as we've said, activities in metals and mining, life sciences and nuclear continue to progress. So funnel is diversified.

That's what we like about the funnel, and it's not really dependent outside of LNG, not really dependent on one large market, and we feel very confident that on the LNG side, particularly in Qatar, and in the U.S. and East Africa, those projects will move forward..

Next question will be from Deane Dray, RBC Capital Markets. Please go ahead..

I appreciate the spotlight you put on the battery value chain, and we see this as linked to the whole array of these powerful mega projects that are going on now. In fact, battery is one of the biggest there.

But just can you give us -- and it's all tied to the reshoring, nearshoring phenomenon? Give us a sense of what kind of win rates you're seeing there within the battery, but also on other projects there's more than 50 different projects over $1 billion.

Just if you could cut across those, where else are you winning like in the semiconductor side, other automation projects and so forth?.

Yes. No, I'm happy to. So I'll start with LNG, which has been very important, we're winning at a rate higher than 50% so far. We feel really good about continued differentiation in the marketplace and really becoming a de facto automation supplier there. In the hydrogen space at 50% right now, in terms of win rate to the funnel.

And across the battery ecosystem, feel very, very strong that very, very confident that, that sits in the 45% to 55% range as well. in fields like life sciences, it's much higher. And that is due to the very strong position of Delta V and the various instrumentation technologies that we bring to bear.

So overall, I feel really good about the execution to the projects in the funnel. The pursuits are funded by internal teams. There's multi-vary calling points between engineering companies, end users and contractors. And it occurs at all levels within our organization from Ram and I, down into the card pairing salespeople..

Good to hear. And then second question would be for Mike. Just can you share with us some of the actions on the working capital side? There was really good free cash flow in the quarter. I would imagine you're still in this sort of interim period prior to NATI, where there's only so much you can do on the working capital side.

But just give us a sense of what actions near term, how that translates into free cash flow for the year and then into early '24..

Yes, Dean, we have been really focused on inventory with the supply chain challenges, and we've seen some improvement, and we expect to see some continued improvement as we move into the fourth quarter around inventory.

On receivables, with 14% growth, there's going to be a growth in receivables, and I'll tell you that DSOs have stayed flat, and the execution there has been really, really good.

If we look ahead, we're expecting for the fourth quarter operating cash flow around $800 million to $900 million and CapEx around $150 million, which should put us in around $2.2 billion to $2.3 billion for the year. So I feel good about the actions that we're taking.

There's been a strong focus on inventory with the backdrop of the supply chain moving around and settling, which is good, but that's been our focus. The past new performance has continued to come down on the receivables side, which has been really helpful as well..

Yes. But just let's be clear, a growth in accounts receivable is a high-quality problem..

That's true..

Next question will be from Jeff Sprague, Vertical Research. Please go ahead..

I apologize if this was addressed. I was on a little late. But Will, can you just give us I thought your updated thoughts on how we're progressing towards regulatory approvals on national instruments and I know your view on 2024 was more subdued than what -- the Street consensus was, but they did post some soft orders here in Q2.

So just any thoughts on maybe the trajectory of that business as you work towards close..

Yes, Jeff. Yes, I did cover it in my script, but I'll be happy to repeat the key points. So on the regulatory, we have HSR approval and all the filings have been made, some already obviously obtained. So we feel very confident on the time line to close in the first half of our fiscal 2024.

In terms of the business performance, look, it's largely playing out as we built into our model. Orders are down 17% end of the -- that's largely driven by weakness in semiconductor and discrete, but we expect that to improve as the calendar year goes on, and that's how we built into the business case.

Having said that, Jeff, had another record quarter. Their sales were up 5% year-over-year. The profitability continued to improve and is very strong, particularly with GPs at very high levels.

So we feel excellent about the execution in the business, and we'll continue to stay close on our collaboration to be in our integration planning so that we can hit the ground running on day 1..

Great. And then a few things I did here on the Q&A. It was a lot of discussion here on margin leverage, mix and et cetera, just kind of drilling in on price costs specifically. I would imagine we're maybe at or near kind of peak positive gap on that metric. I just wondered if you had opine on that.

And maybe more importantly, though, my question is your ability to kind of maintain a poling pricing cost as we kind of look forward here the next several quarters?.

Yes. Yes. Ram, why don't you give a....

I think we're very confident in maintaining price cost green going into next year. However, price/cost in terms of margin point contribution or the spread will be lower as we go forward. I mean we've had an exceptionally good year here in terms of price performance and obviously, NMI coming down in the second half. That will continue.

I mean we will be green price cost, but the margin point contribution from it will be lower in '24, which will have an impact on leverage rates..

Next question will be from Tommy Moll, Stephens Inc. Please go ahead..

Good morning and thanks for taking my questions. Well, I think it was a quarter ago maybe before you called out some of the softening on the discrete side. That was originally, I think, in Europe, primarily Germany, but then you highlighted some evolving trends in the U.S. and Asia as well.

Can you give us any more insight there?.

Yes. We saw that develop through the quarter, Tommy. You're absolutely right. A quarter ago, we talked about weakness that we began to see, particularly in automotive and in packaging OEMs, which, as you know, in Germany, not only serve the German market, but export throughout the world. That did spread into the United States and into parts of Asia.

And that developed through the quarter that drove more weakness in that discrete business, which again, makes sense from a cycle perspective for us, but that really developed over the last three months..

I appreciate it. Well, I also wanted to ask about culture. It's something that you've highlighted throughout your entire tenure as CEO. At the same time, pro forma for NATI, you'll have a much larger organization including pieces that had their own cultures before they were folded into Emerson.

So situate us on that journey and give us some insight into what the consolidated approach will be once your portfolio is more mature?.

Yes. No, I appreciate the question, Tom. As you know, that's pillar number one and continues to be pillar number one for the organization. We're very excited about the journey we're on. As you know, culture is not something that you change immediately, but as you have to journey. And there's been a lot done in -- across Emerson.

What I particularly am excited about is the culture that exists today at National Instruments. It is something that is familiar to us. It is a very attractive place to work, a culture based around learning, curiosity, and that is felt in every engagement that we've had with that team.

they have moved ahead in many of the dimensions that we are looking to do here at Emerson, and we're going to be learning from NI and applying a lot of their lessons to what we implement here in our company. So I think there's an accretion there. and an accelerator there from what they've done and.

But at the end of the day, it's a company of engineers, who are curious who lean forward, think about tech in differentiated ways, and that's essentially who we are today..

Thank you. I'll turn it back..

Thank you. Next question will be from Joe O'Dea of Wells Fargo. Please go ahead..

Hi. Thanks for taking my questions. I guess one more just related to the price cost dynamic, I think, pretty clear in terms of what you're seeing on the cost opportunity side. But just overall, how you think that filters through on the price side. So I appreciate that still a positive margin spread even if narrowing.

But in conversations you're having, are you seeing a little bit more discussion around that? Are you seeing areas where price is actually moving down?.

No, we expect price to remain positive. The magnitude of the price will be. Obviously, it's not as part -- if on the increases won't be as positive as we saw in the inflationary times of the last couple of years. But our automation business, we have a leadership position in all the markets we play in. We bring a lot of technology to our customers.

Obviously, KOB 3, which is the replacement cycle is 65% of our sales. So we'll be positive price going into 2024, even as we execute on the favorable deflation that we will see on purchases like electronics, castings, machine parts..

Got it. And then also wanted to circle back, a couple of comments on near-shoring and I think kind of a broadening out maybe of the trends there.

And so if you could expand on that a little bit and just touch on sort of the evolution of what you've seen, maybe kind of led in North America, but just sort of what inning you think we're on? Are you seeing any kind of stabilization in those trends in the U.S., but you're seeing kind of growth budding in other regions.

And so if you can touch on those regions and verticals a little bit more?.

I'll say a few comments and have asked Ram to add a little color as well. Look, I think we're in early innings, certainly early innings in terms of the infrastructure, chips, near-shoring activities, and it's broad-based.

it's driven clearly in the EV value chain that I've described in Life Sciences, semiconductor, which will benefit in National Instrument significantly as well. But it's Australia, it's Europe, it's the United States with very robust activity across all world areas.

But I have to say, based on just the pace of activity, I do believe there are many innings yet to be played here..

Thank you. This concludes our conference today. Thank you for attending this presentation. You may now disconnect..