Financial Data and Key Metrics Changes - Organic sales grew by 6% in Q3 2025, with segment margins expanding by 20 basis points to 17.6% [5][22] - Adjusted EPS increased by 11% year-over-year to $1.05, exceeding guidance [5][22] - Year-to-date adjusted free cash flow nearly doubled to $1.8 billion, with over 100% free cash flow conversion expected for the year [5][22] Business Line Data and Key Metrics Changes - Orders grew by 2%, with strength in The Americas offset by softness in China [6][23] - In the Americas, orders increased by 5%, while EMEA saw a 2% increase, and APAC experienced a decline [23][24] - Sales in the Americas rose by 7% organically, with EMEA growing by 4% and APAC by 6% [24][25] - The backlog grew by 11% to a record $14.6 billion, with both system and service backlogs increasing [6][26] Market Data and Key Metrics Changes - Orders in the Americas increased by 5%, while EMEA saw a 2% increase, and APAC orders declined [23][24] - The service business showed strong growth, particularly in EMEA with an 8% increase [24][25] - The data center market remains robust, contributing to healthy sales growth [94] Company Strategy and Development Direction - The company is focusing on customer centricity, operational efficiency, and innovation to drive growth [8][9] - A new business system is being implemented, emphasizing simplification, acceleration, and scaling through lean principles and digitization [12][13] - The company is evaluating its portfolio for potential acquisitions or exits to ensure sustainable growth [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the core vertical markets remaining healthy despite challenges in China [64] - The company anticipates low single-digit organic sales growth for Q4 and is raising its full-year guidance for adjusted EPS and free cash flow [27][28] - There is a focus on improving operational efficiency and addressing growth blockers identified in various business lines [15][16] Other Important Information - The sale of the residential and light commercial HVAC business to Bosch is expected to close in Q4, with most net proceeds returned to shareholders [28] - The company is committed to returning 100% of free cash flow to shareholders through dividends and share repurchases [27][28] Q&A Session Summary Question: Initial observations and KPIs focus - Management highlighted the importance of sharpening customer focus and driving growth through innovation and R&D investments [30][32] Question: Accelerating growth in Fire and Security - Management sees potential for growth in Fire and Security, with plans to apply new business system principles to improve performance [41][44] Question: Free cash flow opportunities - Management noted strong cash flow performance driven by improved accounts receivable management and ongoing lean transformation efforts [47][49] Question: Order trends and long-term outlook - Management acknowledged ongoing softness in China but expressed confidence in healthy pipelines and core vertical markets [62][64] Question: Framework for 2026 and Investor Day plans - Management is working on 2026 plans and aims to provide a clearer long-term outlook as the year progresses [71][73]

Summary of Johnson Controls International (JCI) FY Conference Company Overview - **Company**: Johnson Controls International (JCI) - **Event**: FY Conference held on May 21, 2025 Key Industry Insights - **Market Demand**: There is no significant decline in demand observed, with indications of stable pricing despite tariff pullbacks in China [2][3] - **Stock Performance**: JCI is among the top-performing stocks year-to-date, alongside GivaNova and 3M, highlighting the effectiveness of self-help strategies in the multi-industrial sector [4] Core Company Insights - **Leadership Transition**: The new CEO, Jochen Weidermannus, emphasizes the importance of customer and competitor orientation over internal focus, aiming to enhance operational efficiency [15][18] - **Technological Capabilities**: JCI possesses unique skills in HVAC product lines, particularly in high-performance chillers, which are seen as a competitive advantage [19][20] - **Customer Orientation**: The company aims to optimize internal processes to free up time for field teams, enhancing their capacity to serve customers effectively [18] Pricing Strategy - **Solutions Pricing**: The pricing dynamics in the Solutions business are complex, but JCI is improving its pricing processes to command better prices and sell more value [33][34] - **Market Focus**: JCI is shifting its commercial teams to focus on more attractive market segments, which allows for better pricing on differentiated products [34][35] Organizational Changes - **Reorganization**: JCI is moving from four segments to three, aiming for a more streamlined and efficient decision-making process that enhances customer experience [37][39] - **Holistic Market Approach**: The new structure encourages teams to view the market comprehensively, leading to better alignment with customer buying journeys [40][41] Installation and Labor Optimization - **Installation Practices**: JCI is evaluating its installation practices to determine their impact on win rates and margins, with a focus on optimizing where installation is necessary [47][50] - **Gross Margins**: JCI's gross margins are reportedly better than many peers, and the company is exploring ways to further enhance margins through operational efficiencies [52][77] Market Outlook - **Pipeline Health**: The company maintains a healthy pipeline and does not foresee significant softness in the market for the remainder of 2025, despite macroeconomic concerns [67][70] - **Vertical Market Performance**: Key verticals such as data centers, manufacturing, and healthcare are performing well, while Class A commercial real estate remains a strong market [70] Margin Improvement Strategies - **Lean Principles**: JCI plans to apply lean principles across its factories and field operations to eliminate waste and improve efficiency, which is expected to enhance margins over time [76][78] - **Long-term Goals**: The CEO expresses confidence in JCI's ability to catch up to competitors in terms of margins, with a focus on continuous improvement and strategic capital allocation [77][78] Conclusion - JCI is positioned to leverage its technological strengths and operational efficiencies to enhance customer service and improve financial performance. The company is actively working on strategic initiatives to optimize pricing, streamline operations, and focus on high-growth verticals, setting a positive outlook for future growth and profitability.