Johnson Controls (JCI) Q4 2025 Earnings Transcript

Core Insights - The company reported a 6% growth in sales, a 100 basis point expansion in segment margins, and a 17% increase in adjusted EPS, achieving a free cash flow conversion of 102% [1][22][23] - The backlog reached a record $15 billion, reflecting sustained demand for the company's solutions [1][24][27] - The proprietary business system is evolving as a growth engine, combining 80/20 and Lean principles with digital and AI approaches to enhance customer focus and operational efficiency [2][5][6] Financial Performance - Fiscal 2025 was marked by strong execution, with organic revenue growth of 4% and adjusted EPS of $1.26, a 14% year-over-year increase [22][23] - The company ended the quarter with $400 million in available cash and a net debt ratio of 2.4 times, within the long-term target range [23] - Adjusted free cash flow improved by approximately $700 million to $2.5 billion for the year [23] Segment Performance - Orders grew 6% in the quarter, with notable growth in The Americas (9%) and EMEA (3%), while APAC saw a slight decline of 1% [24][25] - The Americas experienced a 3% organic sales increase, while EMEA delivered 9% organic growth [25][27] - The backlog grew 13%, with system backlog increasing by 14% and service backlog by 9% [27] Strategic Initiatives - The company is updating its long-term growth algorithm to reflect improved mid-single-digit top-line growth and double-digit adjusted EPS growth [2][28] - The focus remains on investing in organic growth, returning capital to shareholders, and pursuing selective acquisitions [29] - The proprietary business system aims to identify and remove barriers to growth, with over 700 colleagues engaged in priority areas [6][9] Market Position and Innovations - The company is strengthening its leadership in advanced thermal management, particularly for data centers, with new product launches like the coolant distribution unit [13][14][15] - The transition to liquid cooling technologies is expected to enhance the company's competitive advantage in the data center vertical [14][15][56] - A significant project in Zurich will provide green heat to the city, showcasing the company's commitment to sustainable solutions [16][17][18] Future Outlook - The company anticipates organic sales growth of approximately 3% for the first quarter and mid-single-digit growth for the full year [30][31] - Adjusted EPS is expected to be approximately $4.55 per share, reflecting over 20% growth [30] - The guidance for fiscal 2026 includes a target of 50% operating leverage and approximately 100% free cash flow conversion [30][31]