Summary of Johnson Controls Conference Call Company Overview - **Company**: Johnson Controls - **Event**: Oppenheimer's 20th Annual Industrial Growth Conference Key Points Leadership Transition and Strategy - New CEO Joaquin has been proactive in his first two months, visiting eight countries and engaging with customers and factory operations [3][4] - Focus on lean initiatives and value creation opportunities, emphasizing a long-term journey rather than immediate results [4][6] - The company is redefining its strategy and portfolio, identifying areas for growth and potential divestitures [5][6] Operational Changes - Revised reporting structure aligns with industry peers, aiming for cost reduction and improved accountability [8][10] - The new structure aims to eliminate redundancy and improve customer focus, transitioning from a dual operating model to a unified approach [11][12] - Anticipated reduction in corporate costs, with guidance for Q3 at approximately $80 million, down from $130 million in Q2 [15][16] Financial Performance and Growth Targets - Long-term goal of double-digit earnings growth, leveraging existing cost structures and improving operational efficiency [21][25] - Gross margins are strong, but SG&A costs have historically been higher than competitors, indicating room for improvement [22][20] - Lean management initiatives expected to enhance gross margins and operational performance over the next few years [24][25] Service Revenue and Resilience - Service revenue is characterized as true recurring income, with multiyear contracts linked to sold systems [29][30] - Historical resilience during economic downturns, with a potential increase in service demand as maintenance is deferred [30][31] OpenBlue Technology Platform - OpenBlue is a differentiated offering with significant growth potential, currently under 1% penetration of the installed base [33][40] - The platform provides operational insights and efficiency improvements, with a compelling ROI of up to 55% over three years [32][33] Market Demand and Pipeline - Observed softness in certain verticals, but overall health in core markets remains strong [44][46] - Data centers and complex manufacturing are experiencing robust growth, while commercial real estate shows mixed signals [50][51] - Tariff impacts expected to affect revenues by about 2%, but the company has strategies in place to mitigate these effects [58][60] Cash Flow and Capital Structure - Achieved 100% free cash flow conversion, driven by improved supply chain and procurement practices [64][65] - Lean management expected to enhance inventory management and reduce capital intensity over time [66][67] Conclusion - Johnson Controls is undergoing significant transformation under new leadership, focusing on operational efficiency, customer-centric strategies, and leveraging technology for growth. The company is well-positioned to navigate market challenges while pursuing long-term financial goals.

Core Insights - Johnson Controls International plc (JCI) reported adjusted earnings of 82 cents per share for Q2 fiscal 2025, exceeding the Zacks Consensus Estimate of 79 cents, marking a 19% year-over-year increase [1] - Total revenues for continuing operations reached $5.68 billion, surpassing the consensus estimate of $5.64 billion, with a year-over-year increase of 1.4% and organic revenue growth of 7% [1] Segment Performance - **Building Solutions North America**: Revenues were $2.92 billion, up 6% year over year, with organic sales increasing 7%, driven by strong HVAC and controls performance. Adjusted EBITA rose 5% to $390 million [2] - **Building Solutions Europe, Middle East, Africa/Latin America**: Revenues totaled $1.09 billion, a 2% year-over-year increase, with organic sales climbing 5%. Adjusted EBITA surged 53% to $136 million [3] - **Building Solutions Asia Pacific**: Revenues increased 10% to $542 million, with organic sales growing 13%. Adjusted EBITA was $79 million, up 46% year over year [4] - **Global Products**: Revenues were $1.13 billion, down 13% year over year, but organic sales increased 8%. Adjusted EBITA rose 9% to $343 million [5] Financial Metrics - JCI's cost of sales decreased 1.9% year over year to approximately $3.6 billion, while gross profit increased 7.5% to $2.1 billion, resulting in a margin increase of 220 basis points to 36.5%. Selling, general and administrative expenses were $1.4 billion, down 30.9% year over year [6] - As of March 31, 2025, JCI had cash and cash equivalents of $795 million, up from $606 million at the end of fiscal 2024. Long-term debt increased to $8.2 billion from $8 billion [7] - In the first half of fiscal 2025, the company generated net cash of $799 million from operating activities, compared to a cash outflow of $437 million in the prior year. Free cash flow was $589 million, a significant improvement from a cash outflow of $647 million in the previous year [8] Future Guidance - For Q3, JCI anticipates mid-single-digit organic revenue growth and an adjusted segment EBITA margin of approximately 17.5%. Adjusted earnings are expected to be in the range of $0.97-$1.00 per share [9] - For the full fiscal year 2025, JCI expects organic revenue growth in the mid-single-digit range, an adjusted segment EBITA margin improvement of 90 basis points, and adjusted earnings of about $3.60 per share, with free cash flow conversion expected to be approximately 100% [11]

Financial Performance - Net sales for the three months ended March 31, 2025, were $5,597 million, a 1% decrease compared to $5,676 million in the same period of 2024[195]. - For the six months ended March 31, 2025, net sales increased by 3% to $11,102 million from $10,806 million in 2024[195]. - The increase in net sales for Q2 2025 was driven by higher organic sales of $381 million, offset by a net impact of acquisitions and divestitures of $233 million and unfavorable foreign currency translation of $69 million[195]. - Excluding foreign currency translation and business acquisitions/divestitures, net sales increased by 7% year-over-year, supported by strong growth in Products and Systems across various segments[195]. - Net sales for the six months ended March 31, 2025, increased by $861 million due to higher organic sales, with an 8% increase excluding foreign currency translation and acquisitions/divestitures[196]. Profitability and Expenses - Gross profit for the three months ended March 31, 2025, was $2,069 million, an 8% increase from $1,922 million in 2024, driven by margin improvements in Building Solutions segments[198]. - Selling, General and Administrative (SG&A) expenses decreased by 31% to $1,427 million for the three months ended March 31, 2025, primarily due to the prior year water systems AFFF settlement agreement costs[200]. - The effective tax rate for the six months ended March 31, 2025, was 8.0%, compared to 114.6% in the prior year, indicating a significant improvement[205]. - Net financing charges for the six months ended March 31, 2025, were $166 million, a decrease from $176 million in 2024[204]. Backlog and Segment Performance - The total backlog as of March 31, 2025, was $16.0 billion, with Building Solutions North America contributing $9.8 billion, reflecting an 11% year-over-year increase[215]. - Segment EBITA for Building Solutions North America increased by 10% to $722 million for the six months ended March 31, 2025, compared to $658 million in 2024[210]. - Global Products segment EBITA increased by 20% to $667 million for the six months ended March 31, 2025, compared to $557 million in 2024[210]. - The increase in Building Solutions Asia Pacific sales was primarily due to organic growth of $85 million, with a 21% increase in backlog year-over-year[213][216]. Cash Flow and Capital Structure - Cash provided by operating activities increased to $799 million for the six months ended March 31, 2025, compared to a cash used of $(437) million in the same period of 2024[219]. - The company reported a working capital of $(467) million as of March 31, 2025, a 40% improvement from $(776) million in September 2024[217]. - Total debt increased to $9.986 billion as of March 31, 2025, up from $9.493 billion as of September 30, 2024, with total debt as a percentage of total capitalization rising to 38.7%[220]. - The company maintains a $2.5 billion revolving credit facility expiring in December 2028, with no draws as of March 31, 2025[224]. Dividends and Shareholder Returns - The company declared a dividend of $0.37 per common share for the quarter ended March 31, 2025, and plans to continue paying dividends throughout fiscal 2025[222]. - The company has approximately $1.1 billion available under its share repurchase authorization, which may be utilized depending on market conditions[222]. Strategic Initiatives - The Company is undergoing a portfolio simplification, including the sale of its Residential and Light Commercial HVAC business to Bosch for approximately $8.1 billion, expected to close in the second half of fiscal 2025[189]. - A multi-year restructuring plan has been initiated, with expected one-time costs of approximately $400 million and anticipated annual savings of about $500 million upon completion[190]. - The company expects to receive approximately $5.0 billion in net cash proceeds from the sale of its R&LC HVAC business, anticipated to close in the second half of fiscal 2025[222]. Market Challenges - The Company is experiencing increased demand for products and services that promote smart, safe, and sustainable buildings, driven by government incentives and regulations[186]. - The Company has faced challenges due to geopolitical tensions and tariffs, which are expected to negatively impact revenue growth and margins[183]. - Currency exchange rate fluctuations have negatively impacted revenue and profits during the three and six months ended March 31, 2025[185]. Cybersecurity Incident - A cybersecurity incident occurred in September 2023, impacting internal IT infrastructure, but no evidence of impact on digital products and services has been observed[192][194]. Current Liabilities and Losses - Current liabilities for the Obligor Group increased to $8.379 billion as of March 31, 2025, from $6.726 billion as of September 30, 2024[229]. - The net loss attributable to the Obligor Group for the six months ended March 31, 2025, was $(374) million, compared to a net loss of $(609) million for the year ended September 30, 2024[227]. Credit Ratings - The company's credit ratings as of March 31, 2025, are S&P: A-2 (Short-Term), BBB+ (Long-Term) with a Stable outlook, and Moody's: P-2 (Short-Term), Baa2 (Long-Term) with a Positive outlook[223].

Core Insights - Johnson Controls reported revenue of $5.68 billion for the quarter ended March 2025, a decrease of 15.3% year-over-year, but exceeded the Zacks Consensus Estimate of $5.64 billion by 0.61% [1] - The company's EPS was $0.82, up from $0.78 in the same quarter last year, representing a surprise of 3.80% against the consensus estimate of $0.79 [1] Financial Performance - Net Sales for Building Solutions North America reached $2.92 billion, surpassing the average estimate of $2.84 billion, with a year-over-year increase of 6.5% [4] - Net Sales for Building Solutions Asia Pacific were $542 million, exceeding the average estimate of $514.05 million, reflecting a year-over-year growth of 10.4% [4] - Net Sales for Building Solutions EMEA/LA totaled $1.09 billion, slightly above the average estimate of $1.08 billion, with a year-over-year change of 2% [4] - Global Products reported Net Sales of $1.13 billion, below the average estimate of $1.25 billion, indicating a significant year-over-year decline of 52.9% [4] - Total Segment Adjusted EBITA for Global Products was $343 million, slightly below the average estimate of $348.77 million [4] - Total Segment Adjusted EBITA for Corporate Expense was -$135 million, worse than the average estimate of -$125 million [4] Stock Performance - Johnson Controls' shares have returned +24.8% over the past month, outperforming the Zacks S&P 500 composite's +10.6% change [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Financial Data and Key Metrics Changes - Organic sales grew 7%, segment margins expanded 180 basis points to 16.7%, and adjusted EPS increased 19% [4][16] - Adjusted EPS of $0.82 exceeded the high end of guidance [16] - Net debt decreased to 2.4 times, within the long-term target range of 2 to 2.5 times [16] - Adjusted free cash flow for the quarter was strong, resulting in an increase of approximately $1,100,000,000 year to date [16][23] Business Line Data and Key Metrics Changes - Building Solutions region saw orders grow 5%, with North America orders up 4%, EMEA orders up 10%, and Asia Pacific orders flat [17][18] - Organic sales in Building Solutions increased 7%, with high single-digit growth in both systems and service [19] - Global Products reported organic sales growth of 8%, with Applied HVAC growing more than 20% [21] Market Data and Key Metrics Changes - Orders in North America increased 4%, EMEA orders were up 10%, and Asia Pacific orders were flat [18] - Service orders in Asia Pacific grew nearly 20% [18] - Building Solutions backlog grew 12% to $14,000,000,000 [20] Company Strategy and Development Direction - The company is focusing on a new organizational model to enhance customer centricity and operational performance [10][11] - The strategy includes prioritizing customer needs and simplifying product offerings to improve operational efficiency [12][13] - The company aims to redefine building performance and drive the next era of smart, safe, sustainable, and autonomous buildings [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued growth due to strong performance in recent quarters and a record backlog [4][24] - The company is raising full-year guidance for margins, adjusted EPS, and free cash flow conversion [22][23] - Management acknowledged the impact of tariffs but emphasized strategies to mitigate risks [24] Other Important Information - The company is undergoing a pending sale of its residential and light commercial HVAC business [10] - The organizational model aims to improve customer intimacy and market reach while delivering profitable growth [11] Q&A Session Summary Question: How does the company plan to implement lean in such a large organization? - Management acknowledged that there are remnants of lean in some areas and expressed excitement about the opportunities for improvement [34][35] Question: What is the margin entitlement of the business? - Management believes there are significant opportunities for margin expansion and does not see a ceiling on margin growth compared to peers [44][45] Question: What is the outlook for free cash flow? - Management raised guidance to approximately 100% for the year and sees good signs for maintaining strong free cash flow conversion [50][51] Question: How does the company manage pricing in contracts amid inflation? - Management has implemented strong contractual terms to manage pricing and recover costs due to inflation [61][62] Question: What are the growth drivers in the Applied segment? - Management noted broad-based good growth across most verticals and does not see any slowdown in leading indicators [112]

FISCAL Q2 2025 Earnings Conference Call May 7, 2025 FORWARD-LOOKING AND CAUTIONARY STATEMENTS/NON-GAAP FINANCIAL INFORMATION Johnson Controls International plc cautionary statement regarding forward-looking statements Johnson Controls International plc has made statements in this communication that are forward-looking and therefore are subject to risks and uncertainties. All statements in this document other than statements of historical fact are, or could be, "forward-looking statements" within the meaning ...

Financial Performance - Q2 2025 GAAP earnings per share (EPS) was $0.71, with adjusted EPS at $0.82[1] - Net income attributable to Johnson Controls for Q2 2025 was $478 million, a significant recovery from a net loss of $277 million in Q2 2024[27] - Basic earnings per share for continuing operations in Q2 2025 was $0.72, compared to a loss of $0.47 in Q2 2024[27] - The company achieved a net income attributable to Johnson Controls of $545 million in Q1 2025, compared to a loss of $471 million in Q1 2024[48] - Net income attributable to JCI for the six months ended March 31, 2025, was $836 million, up from $19 million in 2024[50] - Diluted earnings per share increased to $1.26 in 2025 from $0.03 in 2024[50] Sales and Revenue Growth - Sales for the quarter reached $5.7 billion, a 1% increase year-over-year, with organic sales growth of 7%[2] - Net sales for Q2 2025 reached $5,676 million, a 1.4% increase from $5,597 million in Q2 2024[27] - Building Solutions backlog increased to $14.0 billion, reflecting a 12% organic growth year-over-year[5] - Orders in Q2 increased 5% organically compared to the previous year[5] - Building Solutions North America sales were $2.9 billion, up 6% year-over-year, with organic sales growth of 7%[6] - Building Solutions EMEA/LA sales increased 2% to $1.1 billion, with organic sales growth of 5%[8] - Building Solutions Asia Pacific sales rose 10% to $542 million, with organic sales growth of 13%[10] - Global Products segment sales declined 13% to $1.1 billion, but organic sales grew 8%[12] - Future net sales for 2025 are projected to reach $11,102 million, with a growth rate of 7% anticipated[42] Cash Flow and Financial Position - Cash provided by operating activities was $550 million, with free cash flow at $456 million[17] - Cash provided by operating activities from continuing operations for Q2 2025 was $550 million, a turnaround from cash used of $326 million in Q2 2024[31] - The company reported a decrease in cash and cash equivalents to $795 million as of March 31, 2025, down from $838 million at the end of Q2 2024[31] - Free cash flow for Q1 2025 was $456 million, a significant improvement from a negative $454 million in Q1 2024[46] - Adjusted free cash flow for the first half of 2025 was $1,066 million, compared to $7 million in the same period of 2024[47] Debt and Assets - Total assets as of March 31, 2025, were $42,367 million, slightly down from $42,695 million as of September 30, 2024[29] - Short-term debt increased to $1,261 million as of March 31, 2025, compared to $953 million as of September 30, 2024[29] - Total debt as of March 31, 2025, was $9,986 million, slightly down from $9,993 million at the end of 2024[52] - Net debt to income before income taxes improved to 3.6x in March 2025 from 5.4x in December 2024[52] Operational Metrics - Gross profit for Q2 2025 was $2,069 million, compared to $1,922 million in Q2 2024, reflecting a 7.7% increase[27] - Segment EBITA for Building Solutions North America increased to $390 million in Q1 2025, up from $373 million in Q1 2024[48] - Adjusted segment EBITA margin for Global Products was 30.3% in Q1 2025, up from 24.3% in Q1 2024[48] - Adjusted segment EBITA margin for Global Products improved to 30.2% in 2025 compared to 23.5% in 2024[49] - The company reported an operating cash flow conversion rate of 116% for Q1 2025, compared to 96% for the same period last year[46] Strategic Initiatives - The company is focusing on strategic growth initiatives and cost-saving opportunities as part of its transformation strategy[41] - Management emphasizes the importance of organic sales growth, which excludes the impact of acquisitions and divestitures, for understanding sales trends[35] - Johnson Controls signed an agreement in July 2024 to sell its Residential and Light Commercial HVAC business, which is classified as a discontinued operation[33] Restructuring and Costs - The company incurred restructuring and impairment costs, primarily related to goodwill and intangible asset write-downs[41] - Transformation costs for the six months ended March 31, 2025, totaled $79 million, compared to $0 in 2024[50] - Cash payments related to the water systems AFFF settlement and insurance recoveries were noted, impacting cash flow[38] Tax and Corporate Expenses - The effective tax rate for the six months ending March 31, 2025, was approximately 12.0%, slightly higher than 11.7% for the same period in 2024[54] - Corporate expenses (GAAP) for the six months ended March 31, 2025, were $357 million, up from $231 million in 2024[49]

Core Insights - Johnson Controls International plc reported fiscal Q2 2025 GAAP earnings per share (EPS) of $0.71 and adjusted EPS of $0.82, with sales of $5.7 billion, reflecting a 1% increase year-over-year and a 7% organic growth [2][7][21] - The company experienced strong demand for its solutions, leading to margin expansion and a record backlog of $14.0 billion, which increased 12% organically year-over-year [3][7] - The company raised its full-year fiscal 2025 guidance, indicating confidence in continued growth and operational improvements [21][17] Financial Performance - Q2 2025 sales were $5.7 billion, up 1% from the previous year, with organic sales growth of 7% [2][7] - GAAP income from continuing operations was $473 million, while adjusted income was $545 million [2][7] - The company generated $550 million in cash from operating activities and reported free cash flow of $456 million [20] Segment Results - **Building Solutions North America**: Sales increased by 6% to $2.9 billion, with a segment EBITA margin of 13.4%, down 20 basis points year-over-year [5][6] - **Building Solutions EMEA/LA**: Sales rose 2% to $1.1 billion, with a significant EBITA margin increase of 410 basis points to 12.5% [6][8] - **Building Solutions Asia Pacific**: Sales grew by 10% to $542 million, with an EBITA margin of 14.6%, up 360 basis points [10][11] - **Global Products**: Sales declined by 13% to $1.1 billion, but organic sales grew by 8%, driven by price and volume growth [12][13] Guidance and Future Outlook - The company initiated guidance for fiscal Q3 and raised full-year fiscal 2025 expectations, projecting organic sales growth in the mid-single digits and adjusted EPS of approximately $3.60 [21][17] - Adjusted segment EBITA margin improvement is expected to be around 90 basis points year-over-year [21] Corporate Developments - Corporate expenses increased by 102% year-over-year to $186 million, attributed to certain corporate accruals and stranded costs from the divestiture of the R&LC HVAC business [14][15] - The company continues to focus on operational efficiencies and strategic growth initiatives to enhance value for stakeholders [3][21]

Johnson Controls International plc JCI will release earnings results for the second quarter, before the opening bell on Wednesday, May 7. Let's have a look at how Benzinga's most-accurate analysts have rated the company in the recent period. Considering buying JCI stock? Here's what analysts think: Analysts expect the Cork, Ireland-based company to report quarterly earnings at 80 cents per share, up from 78 cents per share in the year-ago period. Johnson Controls International projects to report quarterly r ...

Core Viewpoint - Johnson Controls International plc (JCI) is set to release its second-quarter fiscal 2025 financial results on May 7, with expectations of a mixed performance in revenues and earnings compared to the previous year [1][5]. Revenue Estimates - The consensus estimate for JCI's revenues is $5.64 billion, reflecting a decrease of 15.8% from the same quarter last year [2]. - The Building Solutions North America segment is anticipated to benefit from strong demand for HVAC platforms in data centers [2]. - The Building Solutions Europe, the Middle East, Africa/Latin America segment is expected to see revenues of $1.1 billion, indicating a 0.5% increase year-over-year [3]. - The Building Solutions Asia Pacific segment is projected to experience a revenue decline of 14.3% year-over-year to $434.8 million [4]. - The Global Products segment is expected to see an 8.3% increase in revenues year-over-year to $531.5 million [4]. Earnings Estimates - The consensus estimate for adjusted earnings is set at 77 cents per share, a decrease of 1.3% from the previous year [2]. - JCI has consistently surpassed earnings estimates in the past four quarters, with an average surprise of 5.1% [1]. Key Factors Influencing Performance - Investments in digital offerings, such as the OpenBlue platform, are expected to drive revenue growth [5]. - However, rising selling, general and administrative (SG&A) expenses, particularly due to higher insurance recovery costs, may negatively impact margins [6]. - The company faces foreign currency headwinds due to its significant international operations, which could further affect profitability [6]. Earnings Prediction Model - JCI currently has an Earnings ESP of 0.00%, indicating no clear prediction for an earnings beat this time [8]. - The company holds a Zacks Rank of 4 (Sell), which suggests a less favorable outlook compared to higher-ranked peers [8].