Company: ROK
Filing Date: 2025-02-10
Form Type: 10-Q
Source: 0001024478-25-000010
Chunk: 9

Company: ROCKWELL AUTOMATION, INC
Filing Date: 2025-02-10
Form: 10-Q
Item: Part I, Item 1
Chunk 9
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 excess earnings method. The relief from royalty method calculates value based on hypothetical payments that would be saved by owning an asset rather than licensing it. The multi-period excess earnings method is the isolation of cash flows from a single intangible asset and measures fair value by discounting them to present value. These values are considered level 3 measurements under the U.S. GAAP fair value hierarchy. Refer to Note 9 for further information regarding levels in the fair value hierarchy. The key assumption requiring the use of judgement in the valuation of the technology asset was the obsolescence factor, where we estimated a phase out over 12 years; other assumptions included forecasted revenue growth rates and margin and the discount rate. The key assumption requiring the use of judgement in the valuation of the trademarks asset was the weighted average royalty rate of 2.05 percent; other assumptions included forecasted revenue growth rates and the discount rate.The purchase price included up to $50 million in contingent consideration that can be earned by sellers if Clearpath achieves revenue targets that it had established prior to the acquisition in two performance periods ending February 29, 2024, and February 28, 2025. We developed various risk-based scenarios and a probability outcome model to measure the fair value of the contingent consideration, which is considered a level 3 measurement under the U.S. GAAP fair value hierarchy. We determined the fair value to be $43 million as of the acquisition date and as of December 31, 2023. We updated the fair value measures during the second quarter of 2024 to reflect actual contingent consideration earned during the first performance period. In the fourth quarter of 2024 and first quarter of 2025, we assessed the probability outcome model for the second performance period and determined that the fair value was $5 million as of both September 30, 2024, and December 31, 2024.The following table presents the fair value of the contingent consideration in the Consolidated Balance Sheet (in millions):Period ended February 29, 2024Period ended February 28, 2025TotalContingent consideration as of December 31, 2023$17 $26 $43 Adjustment for earnout achieved for first performance period(7)— (7)Adjustment to fair value— (21)(21)Payment of earnout achieved for first performance period(10)— (10)Contingent consideration as of September 30, 2024, and December 31,