JCI - Earnings call transcript Q2 2018 | Johnson Controls International plc

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Welcome to the Johnson Controls second quarter 2018 Earnings Call.

Your lines have been placed on listen-only until the question-and-answer session. This conference is being recorded.

If you have any objections, please disconnect at this time. I will now turn the call over to Antonella Franzen, Vice-President and Chief Investor Relations and Communications Officer.

Antonella Franzen

you. Thank thank second our quarter and discuss call for Controls Johnson fiscal you morning, conference joining to Good XXXX results. and as slide release morning portion of on press all at issued Relations tables The johnsoncontrols.com. website earlier the as Investor well can the presentation call our conference be found related this Executive Johnson Financial Chief Officer Stief. are Controls Executive today and and me Chief George Vice-President Officer With Chairman Oliver and our Brian

we I would review course like to be that information. you forward-looking the call, and today's read you begin, remind of through cautionary during We today's have we the we that included will release that certain providing forward-looking Before ask statements there. informational press

operations share to in the costs. continuing to was included from our $X.XX items. per per adjusted year through for will quarter. In these call, on $X.XX presentation press Adjusting continuing our compared to as non-GAAP exclude our special from and charge items. to and of ordinary items, the press to our and net relate special release adjusted well integration use in that $X.XX a special integration adjusted as items in address measures schedules prior non-GAAP read earnings attached discussing are These non-GAAP diluted measures per the costs items. are Controls margins website. sections EBITA release certain earnings and operations the and metrics during addition, our results to primarily GAAP the to was these share appendix of we in we reconciled discussions, the In for posted the special and attributable Johnson restructuring shareholders share references quarter you other ask EBIT that These related $X.XX

George. Now turn to over let the call me

George R. Oliver

of will quarter I'm discussed morning's synergy everyone. strategic for consistent to Based results quarters, organization. review have from confident portfolio. we and you would past quarter to we cash you traction the pay quarter, the second in we hear as couple the have you will off. the with X, over Starting to organization, the we and should sales the intently optimizing for A and quarters. the couple call more this for investments We next call. this beginning momentum that Antonella, have morning, driving slide the the on well theme good we begin made that highlights quick flow saw expect improving are as capacity. been tone across our benefits, building even on of transforming is of set as on us like the sales which with what steps productivity are us today's of taken another Thanks, joining over increasing focused morning today the Thank respect I growth, reinvesting conversion, and have free our on strong of a

In XXX fact, we our of the have attrition. add achieved of target to quarter, the salespeople already by end net

to contributed from in better improvement expected with of ads in an along on sales has the The and new to force seeing are initiatives we productivity margins pricing sales increased sales secured Additionally, which than resulted have improve orders. orders discipline our resegmentation backlog. our

launch in segment have years past areas The sales X% commercial engineering, our momentum new select growth to significant field to continue to capital strengthening growth increasing plan and several our significant and XX and has the margins last into Based year-over-year. increased points to our and technician we Solutions, start growth, operations as deployed year-over-year, regions the quarter, than continue orders second aftermarket the quarter. We North to Global discussed compares quarter. heading the we we point by basis the I we America sales to which a in in in date we Consistent to Power to in fiscal organic and convert progress products add better and the XXXX, such investments we made capacity first the businesses. Products continue example, basis service business. increased made expanding XXX softer capacity. position experienced progress our encouraged expect market. year, Products the For increased on Building distribution while am made into the as approximately planned with into capabilities on in although In quarter, new us new Global team R&D, have securing improvement footprint progress and higher over booked technology to the X% OE

in the line deliver solid see volume wins beginning top strong, business underlying to will fundamentals half the extremely growth the Power help X-plus which benefits of as percent. Solutions as those within second accelerates. will are The growth accelerates We leverage

incremental the an the Another had of in good date, very productivity quarter Year-over-year, half. synergies that area we in and we year front. increase the and to will $X.XX on second continue progress savings $X.XX is to see and

$XXX or XXXX. incremental We expect of to $X.XX million continue fiscal savings in

controls the one the in In continue convention This the mega-resort wins. just as installation two luxury halls from products to Asia as is In addition side, benefit cross-selling efforts include approach. a were joint project hotels. our we team the which of we for to example one fire for well sizable awarded and quarter, of cost and new as as everyday multi-function will a well our

but free million the one year. past the have first the some is as cash approximately seeing prior Brian will I in conversion, fiscal you We also to Clearly conversion over building as adjusted cash XXXX, improvement discuss on more in committed of versus later of improving significant during half are We of flow bit work priorities. there quarters, generated a top a call. couple our cash momentum ahead, $XXX the is

long-term a with strong Power OE both with franchise strong Battery proven customers aftermarket globe. is and on to positions wanted Solutions around technologies review comment Power strategic I of in Lastly, our ongoing very the relationships with Solutions. advanced

continue our external advisors, We closely work to making we are good with and progress.

long-term for to and We positioning value. shareholder success optimizing Solutions are Power committed

growth for continues X environment. are macro geographic the remained hazardous slide end demand one protection American environment and a the construction markets key favorable fire led steadily, supported GDPs. our increased markets China construction to driving our turn unit look that China fastest across in non-residential at generally by quick to infrastructure, the overall weather North production remains institutional the sustained The East, and The verticals. regions, in Power, and rising most macroeconomic of budgetary digit growing globally. Global The Let's also HVAC is strong, global Controls products double on flat by shipments aftermarket ease and for demand particularly with is serve constraints in continued in commercial regions. & offset of date. U.S. highlighted and the declines strength North pressure across oil East, remained institutional, Non-residential industrial In moderate has by for the lower year put verticals. and the suppression our regional in growth order products commercial industry Middle America. Europe harsh by in demand. prices starts Middle auto to rebound weakened Asia, has

channels. market the both and continues to in China of outpace has a However, growth source been

months. of our throughout to half, fundamentals we the revenue geographies are of the new continued last As wins six the of XXXX. we remain we within and Overall, over levels growth expect the to business encouraged most supportive order production look momentum underlying back pace and key stabilize, fiscal by

with in year well quarter, average over including organically and all X% broad-based in growth again X% and Turning continued Underlying strong to Buildings strength compares XXXX digit as This domains as fiscal across the installation field X, year growth up low slide service. quarter. to regions order on orders last quoting activity. three accelerated was the single

provides Our backlog confidence continued growth improvement growth. in in revenue in

the in million, on we $XX share capacity to the headwind. lead. the basis XX basis savings. expanded basis Turning the X% increased $XXX let margins recap expected, in basis last quarter. the as Sales now $X.XX, from be than in price FX, Safety realization X% gross a products conversion were grew million. divestiture Scott lower the to North in incremental came on reported and the million a than divestiture, America we planned Adjusted our increases. backlog out at strong I anticipated better led quarter. service of organically in margin billion $XX X% those came respectively. excluding and pretty margins resulted quarter, $XX X% sales Safety from million in EBIT year-over-year to incremental Scott quarter framework The productivity over much closer a quarter, Between of played and in headwind points of line we X, the per headwinds anticipated by EBIT earnings $XX provided resulting impact less $XX by offset XX approximately Despite with actually slide and and a and spend the prior to margin investments, earlier, from expected on The grew as the million X% more cost We reported expected. we as and pressures synergy headwind. product year results came lower the X% million was which, for the and up and me in investments mentioned and than announced in of points you or we impact Adjusted $X.X Price/cost

$XXX approximately addition, flow cash million. the was quarter In free adjusted in

margin a discuss our resulted was bridge in growth Volume performance slide expected cumulative an investments. and synergy quarter. $X.XX other gross turn growth the for and Net $X.XX. incremental on sales growth EPS mix productivity to added the added in within mix offset the by driven savings Overall, to prior the Buildings EPS solid and With partially that, FX volume and products will I and to Turning segments. $X.XX with this year. of $X.XX see it can adding higher and to you by Brian service. X, and benefit over in The synergies adjusted benefit mix in in pressure additional

Brian J. Stief

morning. and George, good Thanks,

let's at take starting basis. of a on the a performance look Buildings So slide on consolidated X,

billion You service backlog growth and year-over-year quarter down offset on Field up project X% and conversion can Products X% by slower organically, of see saw X% the in sales than solid $X.X where installations. X% in with we increased more

point benefit margin decreased points. the Buildings Safety expanded year X% offset a Buildings from of X% a primarily a and basis, normalized million was line, the from of margin but of basis Scott $XXX EBITA was flat basis the headwind FX. prior versus divestiture divestiture but Safety, of FX Scott XX the this QX net points fully the year-over-year On the by consolidated in to excluding headwind basis the Safety. EBITA XX Scott XX.X%, Buildings a includes XX of solid divestiture to quarter. impact M&A, EBITA the top On up related

lower see combined expected you the and the headwinds backlog, mix QX quarter. benefit and productivity QX offset and margin pressure, expectations cost investments, XXX by capacity of you the sales all from As in margin line price/cost incremental for volume, conversion basis can from with synergy partially waterfall, savings, product basis point and generally XXX the related set was in last we points to

As up organic by X% mentioned, X% billion. to $X.X a backlog increased orders with field George year-over-year strong

Now detail. let's review each segment within Buildings more in

North we EBITA revenue Fire see digits grew of in you I We a the to by & of modest revenue to X% about basis X, installation America, & low single adjusted this million down did our up points Controls X% would point quarter. commercial organically America slide prior-year includes quarter. X% low in benefit but and to with Turning due that Overall our year-over-year grew XX.X%, Solutions in expanded talked driven business. businesses a service note single contract basis modestly. lost XX organically digit billion $X.X and business HVAC XX $XXX margins Security North that with EBITA the growth in our charge sales increased growth

backlog from that saw benefit, benefits year-over-year. conventional basis on and planned mix margins basis X% force those substantially our expanded & margin points our HVAC America both offset margin underlying point strong Orders and as and Security. productivity, XX of of investments. and organically, Backlog conversion well lower as the in Fire install we the by the increased headwind business increased in orders, were as and sales X% improved order North service $X.X volume, XX synergies intake Excluding including billion the

to move EMEA/LA. slide let's So XX,

Middle East. given As backlog had XXXX Europe in installation HVAC. expected, organically we driven the primarily entering X% the declined and sales in lower revenue by $XXX the declined lower of in digits, single fiscal Industrial project and Refrigeration million Europe low

and the for single by Fire in Industrial growth in Refrigeration. a in the installation digits Latin led basis backlog offset by demand led EBITA did by were in Middle the cost declined increased to digits EMEA/LA revenues XX%, However EBITA as we of in and in America, X% driven Orders $XX strong savings business. X.X% In XX & up Latin margins productivity double million declined a Europe see East, billion. increased Adjusted revenues by points subscriber more with our volume QX, low synergies continental to than strength Security digit $X.X America while mid-single growth HVAC decline and by deleverage. our and led order declined very

XX Adjusted due point compare partially a $XX basis Moving costs synergies related reflecting a to $XXX but of XX% including a sales of growth offset additions. by in to and of to organically this sales margins currency. our high The declines associated single tough basis million save declined points with installation year. headwind increased with APAC, points, single expanding high in increased increase partially digit and XX service. was cost This activity, digit foreign favorable versus with mix EBITA ongoing million underlying basis X% X% XX offset was productivity related last margin force

order comment is Industrial increased X% orders XX%, one Refrigeration up The driven and billion. in excluding and up large was HVAC, solid I QX. XX% by that PAC and would X% increases service, it $X.X now secured our just was in Asia to backlog unusually also we

Building Products. X% Management organic and with & let's to Global teens Refrigeration Specialty So in in digit low XX growth sales through HVAC mid-single to growth slide and Products. turn and billion $X go increased Equipment Their

HVAC of detection, performance consolidated prior was American XX%, grew in compare in high year by the and includes in Taiwan with which the Let you Light commercial of in tough single through the quarter. board Japan plus with North & solid in on digits each despite HVAC In me bit saw very Refrigeration a HVAC residential North sales in across controls, residential digits Management, security. residential color America Building against prior-year tough In provide a mid-single our we a more Equipment, our these teens low JVs HVAC and the businesses. strong fire revenue growth operations increased team. Global Hitachi quarter. the up compare

but the XXX divestiture, APAC. million Middle was the increased a Safety digit driven declined EBITA was primarily by the quarter $XXX and we Refrigeration in East low ventures with in growth our as in the suppression business growth did for a VRF digit saw Asia unconsolidated growth Our decline in reflecting EBITA in had see single strong by double double America Low organic Segment joint Industrial of also points. North fire EMEA/LA. teens in Scott margins of growth applied Products Specialty strong North and impact with while demand related offset digit growth America quarter HVAC Hitachi modestly declining very X%, China. our distribution partially increased in in basis

margin the and basis related to XX Safety. more XX.X% XXX offset was synergies headwind channel to cost investments the benefits points volume the to XXX we've and segment basis planned about basis pressure includes as The price/cost this and and product points underlying leverage of expanded XX you Scott related points talked before. by basis productivity However, from point to than

organically X% and a as Power by mix So unit billion more Solutions. in technology than was offset $X.X favorable let's of XX, declined move slide shipments. Sales to price decline

quarter. line and QX battery aftermarket. Europe. declined global X%, auto OE is in overall in due production OE decline The the weather in with lower primarily X% impacts global shipments to shipments year-over-year declined declines U.S. Our shipments both the Aftermarket X% with in in and

includes XX underlying increase to basis Segment Powers mid-teens than of all with and lead. million the were launch XX%, a continue costs, to both units outperform the see another related China and $XXX and basis we China strong year-over-year did as but with would XX% with modest batteries of market by and OE continued headwind aftermarket. savings increase mix transportation up FX quarter strong shipments I declined in QX, and We declining in and also and growth that EMEA. in start-stop year-over-year in offset global margin and start-up Americas growth EBITA in more X% point margins favorable from XX investments, a again for and logistic productivity increased points points planned costs, the basis increased XX product this quarter. note

through in expected, back half as continue do and QX, significant declined headwind see while of we in we As higher quarter, to not to freight this moved costs the expect the year. we headwind the be this

a XX. and strong see benefits continue Corporate $XXX was to of year-over-year as million expense the slide XX% productivity we savings down to Let's synergy move to savings.

year, to corporate to range For continue million expense the we in expect million. $XXX full $XXX of the

free XX slide to cash flow, flow on approximately in free of Turning we the cash generated million $XXX quarter.

restructuring Excluding integration essentially Free $XXX in million the basis reflective was in generated $XXX primarily adjusted flow adjusted the of on XXXX. of between flat an million, basis. solid first cash quarters reported cash, a fiscal free $XXX million timing a cash was but on half

We see XX%-plus flow to cash conversion are clearly benefits for free the beginning on and to track office the the of are cash deliver year. management adjusted early the

in on sheet Moving position balance to XX, with the billion. slide down net quarter balance debt improve to to $XXX continues the our $XX.X sheet million another

target net our is and Our times now debt-to-cap XX.X%. EBITDA slightly range net to declined X.X within debt leverage our to of

million, normal million line we repurchased approximately quarter, our pattern. X.X the shares in during $XX with Finally, for

repurchase got building a an would share in now half in it comment For across as our businesses $XXX of clear we've and of was here the and all million XXXX. for momentum second quarter million of another each as originally from initiatives I the XXXX repurchased of half summary standpoint, back first million look our operational very the shares solid just perspective, our key fiscal of for that outlook around X.X and half, have planned. we $XXX we to from my fiscal assumes

So with me to back George. over that, it turn let

George R. Oliver

Brian. Thanks,

comments couple open related steel on slide price/cost. tariffs for I aluminum with March the aware, XX, seeing line Section to a of you and questions, of are enacted and on we in to tariffs make Starting as up are we XXX Before XXXX. were impact wanted tariffs what of the

an purchases aluminum in-country. supplied direct steel annual Our on All of sourced and steel million needs $XXX our XX% in-country totals are aluminum basis. buy of approximately and are

related direct are the aluminum fully impact steel will to such, tariffs As and be and nominal offset.

XXX reviewing are Section the proposed We tariffs.

Given the continue fluid are monitor update expect much Solutions impact components Power would and Buildings in our all motors which in business. We the nature of an to we electronic proposal, in the proposal various our analysis. of would impact our developments at not businesses. Included

our we this related mitigating material we the has actions, we The direct ongoing of actions relevant minimize part more inflation impact. level. done are simultaneously position. our analysis Based so have recent been raw already in on have down impact discussions on manageable As very exposure a assessment, mitigating to identifying the any from to tariff far to our worked price/cost and

inflation the earlier, million realization. on at by quarter, were outperformance price/cost million time. inflation quarter less with projecting we $XX material headwind higher to million a for based during than price/cost higher $XX achieving the driven $XX of second primarily exited As raw the quarter with price slightly the a headwind Despite I March the the material mentioned planning we entered of we

We a fiscal in of rounds have price end and categories across product increases markets. various so couple announced far XXXX

XX% front and material in a aware, many proactively you recent some equipment For American unitary in get the HVAC of of to of based are example, announced increase applied inflation. as X% North we to

year, of in the expect will yielding We have a this to half. far so course we price/cost the and price which progress the positive continue year, be in net made over good second position

that to year, in we year. As currently inflationary relative to we $XX our price rate, the factoring million outlook margin Translating our a half, tracking for full headwind expectations our for mapped headwinds a materials are roll roughly margin. headwind continued million realization back would a have the forward on the margin of Products the and price/cost guidance we gap XX and a equate Between point for ahead plan for opportunity the headwind $XX to our an point Global incremental actions XX and plan productivity, direct the road basis basis Buildings to even we in the consolidated to close have further. to pricing in

to full-year slide let to take XX, me it underlying a minute guidance. highlight to our a few as assumptions our Turning changes to relates

As on performance operating earlier, track. our I mentioned is

we half First momentum largely as anticipated, fundamentals and played underlying results the improve across building are continued organization. out to

sales and made to increased to in backlog The Buildings, strong a growing organizations order returned the helping to changes service growth has of and and more have have continues are the We and backlog to the we normal pipelines, levels. quality improve. service drive

confident are to a is on we back material to accelerate. the the of deliver back positioned and of should anticipated we new I and key see in Power, we have with half. strong products pricing wins flow we price/cost And said, continuing on the productivity to our to in the have half, all and activity secured in am second returns We through order are than well actions place positive in our variances we customer higher to inflation growth beginning and begin investments for year, although drive in commitments. ability are With start position full-year this our half. more fiscal commodity which the at In

in our tailwinds, expectations for additional to factoring organic We FX changes underlying expect the and the single have to assumptions adjusted range slightly year. for in our the digit continue growth No within year, consolidated overall but low segment. Buildings the revenue lead

our revenue in single updating pressures the impact associated we lead year. Power. the for we initial Given and organic rise track volume for digit sustained first growth the for our plan, on low half, the in Despite versus margin are are

ton. year metric adjusted average Given $XXXX of ton the metric prices we have our to the lead per continued year-over-year, rise lead per from the assumption for expected $XXXX in Power for

will know, top but increase line, dollars you per on our our cost. The share. earnings no a EBIT and prices in impact has lead minimal lead to is therefore impact As adjusted increase pass-through

rate. does points this basis put pressure margin XX Power However, Solutions on of incremental

some of we headwinds in transportation to XX related is the Power Additionally, the incremental basis first an points. in saw half

expect do we mentioned, performance. to second Brian half costs Solutions our in As transportation not impact a have significant Power on

we top earlier, a XXX line nicely. Power mentioned down grow expect the Solutions to percent to very of I to X-plus Solutions prices. which year-over-year, lever basis, again increased second Power reported the basis in As XXX flow-through we On half points organically margin be will expect primarily related to lead

are for adjusted share $X.XX our the full-year line X% earnings per represents questions. operator, We year-over-year. to guidance With range a increase $X.XX please which open to reaffirming of XX% that,

Operator

Mitchell And first is from Barclays. Julian our question from

Your line is open.

Julian Mitchell

Good Hi. morning.

Antonella Franzen

morning, Julian. Good

Julian Mitchell

morning. half/second items. first just firstly the bridge Maybe a half the on Good XX slide question with

just I year-on-year. in I roughly the So half right think, were it $X.XX, and double-check about about that gross to collectively margin wanted way. the thinking The we're investment pressures first

then get the that Is to in assume of sort extra $X.XX way as tailwind? a from headwind right $X.XX synergies? $X.XX sort you second or that the drastically those currency each that and extra and half we do an year-on-year shrink So to get of

George R. Oliver

second skewed I'll XX%/XX% are split look XX% performance, half, on our at and Yeah, second we we about the This half. bit year, that. you When half more a XX% to on the first the second are so, little typically Julian, half, half. first take

positive and half. we half, we're million, half the gross which the was were in a in We of and pressure the were second significant headwinds and half. of force first synergies, little also through added we as a to – turn $X.XX knew look we mainly the the investments with then we coming first weighted had channels. then bit that as Power, you into first about margins most going and half. of within capacity in those at sales product headwind account in the had year, about the weighted of the to all were backlog the the as half take headwinds the so And first conversion price/cost we that first and first half. you planned in the had our you had $XX The the on half, And productivity And lot when the net headwind second at sales transportation in we to in of look when that, investments

begin the benefit accelerate As growth, and year begin half, about we our convert pick with look when backlog, we we the the as strong it's – to out start you in play Power product business, accelerate significant $X.XX. overall we we continue second to our service in you up volume to at

is half net first so And of of delta to $X.XX. impact the half second about a

Julian Mitchell

free Understood. Power? Thank flow, particular you. better as flow even any of the Buildings performance color cash there terms well my QX cash And as two pretty were then in just was as follow-up, in that within free the in cash between across segments or the improvements

Brian J. Stief

really it But businesses. $XX pull-forward, nice some the might Power a our slight did in they the in evenly first across year. million between $XXX inventory CapEx we're the worth million as billion half, about. Solutions the of a be increase bit talked We spread we as of receivables, of would did collection in is pulled as would well. to Solutions lower we've terms payment the our job a say as volumes this really well. business The you I was well. Buildings and quarters as that strong a that there of half, on the receivable Buildings delta harmonization pretty was the between there second look the But $X.X of generally when for still timing of there I at going also And vendor Think spend of see say, a front the result is to forward is that we bit as reason on in well commented timing performance and receivables in little Power the

Julian Mitchell

you. Thank Great.

Operator

the And question you. UBS. from Winoker is next from Thank Steven

is Your open. line

Steven Winoker

Thanks. Good morning, all.

George R. Oliver

Good morning, Steve.

Steven Winoker

Hey.

cash So flow are shift. the I you timing a about, some across this JCI ability and to has on George, or cash maybe talk around a why conversion it's skepticism in able, on wanted lot I I'm kind talked there able the Again, sort I just front. of of addressed the the actions why I early but of into sustain And that improvement. see the time dynamic just sure on while not of little be investor major obviously, given about cultural you don't here, spend CapEx you now days wouldn't of sustained to the even been of improvements some to was – segments, the question. XXXX drive understand there's more that wouldn't if bit you be going And organization

George R. Oliver

my I that so as and our top front-and-center remarks, I comes for as a said topic as Steve, have deliverable in teams this across start, of every the priorities that the all is company, of for we the far is one meeting prepared in up would this, and businesses. Yeah, this

we've we're say I And and our business. of would what so put we've – making of that across cash, with the reinforced the the is accountability all incentives

that terms, made a sales of they're demand, are and in we're I can inventory of whether it pushing enabling matter and whether line that our our sourcing our what collect contract at This on front-and-center. production are receivables, across definitely production sales the cash, be making the progress. we've leaders with wherever element significant payables our no going tell balancing more sure looking we And with out it's teams you entitlements matching go through helping cultural whether to change. I So is and that globe,

And We've step And you the got progress. you the really tell we tell We've the making I got we've reinforcing engagement. good of way, every incentives would that place. got accountabilities in I are so that. would full

Steven Winoker

that's helpful. George, Okay.

Brian J. Stief

at the first $XXX for if you and CapEx the six our guide the on $X.X year months year, our And, CapEx, look was million, of about Steve, is billion.

And to that still few tell is probably full I a of billion. planned But that of $X.X guide to year, would to the what be going from year. still year a so spend delay bit the just you in half on have back projects half were the first the moved been there's $X.X level for the to the of but there billion be a closer has the

Steven Winoker

helpful. last margin of I mentioned initiatives. are Okay. some basis And due you the expansion about then you now? in That's think backlog Where quarter, points XX to you had

George R. Oliver

Steve. we're progress, good making Yeah,

was As We I the basis about million was that roughly margins was into booked points points where had said coming better. $X.X pressure a big focus about pressure, in year. the of America America. was which This about last XX $XX quarter, a That's billion. in North had basis we North XX backlog on

the so about quarter, increased backlog margin with first basis in points. that And had the we XX performance and

brought QX, in margin up This basis to quarter book about that basis XXX-plus we backlog able were points. the and points, XX margins about in

a the so turn basis. that, gives now that rate see lot go-forward a we these in margin, as us confidence a to in start the of pickup And going of to orders on project we're the margin

Steven Winoker

I'll go That's right. queue. back All helpful. Okay. Thanks. in

Antonella Franzen

Thanks.

Operator

the And next Steve Tusa from you. Thank JPMorgan. question is from

open. Your line is

Charles Stephen Tusa

Hey, guys. Good morning. How are you?

George R. Oliver

Hi, Steve. Good.

Charles Stephen Tusa

your were I Just applied think digits, revenue business kind low-single America applied the in roughly in business on the for the of America? mentioned quarter. orders was in What year-over-year? guess, North North you I

George R. Oliver

when at our channels achieved across across revenues you are up our so mid-single that our as digits applied X%, were base. the products, – Yeah, roughly well in the the globe. our we products orders And as track orders, look about

the we're very very in you into if includes second and of We when look applied are quarter, actually conversion projects. the revenue the chiller you all about And overall encouraging, chiller, at revenues with we're equipment you of achieved seeing new up launched and seeing, globally, know that look we've strong orders through applied that and technology HVAC what's demand. the all as that at our X%, our coming

of I'm that going with to that so and to we've regions. demand the success continue seeing projecting that's all seen the We're that's the strong across date. very most of – And

Charles Stephen Tusa

as far pricing all on doing in I as And obviously, in the well? are banking of Okay. offsetting means holding pricing commercial, a headwind good would assume job second commercial raw that half. reasonably mean, is up I material this guys you

George R. Oliver

Absolutely. Absolutely.

the we're a you tell we have of the those And sure rhythm full that the I with increases saw have You yield increases. regular what on price been getting not can I made, second making through going taken. we've confidence the we're half. we going, second is the that increases as only a very that me from that would price/cost tell that progressing in to And get price/cost half, we're standpoint positive have well. gives we're you

Charles Stephen Tusa

the slipping we one. an XQ unusual? EPS there rest anything should Seasonality either from performance Or that on normal XQ make Okay. of year, that's is assume of One and seasonally the are last that perspective? out and in quarter to

George R. Oliver

call, normal I through. with that say and that would we we coming volumes what No. Except have in for is headwinds discussed seasonality the tailwinds some of the earlier

a by good with & quarter. bringing increase the on Fire within strong. X% in The into products said, we're products. as X% we actually Security product very the We I'm market. are And launches seeing progress, the encouraged technology new was the a products, had and I note

And anticipation and made for be more mix. businesses, we looking a like. paying as in on up pick third to And normal are that fourth come investments at for and and the the That's next that customers, here that batteries where lot up the see to then a through the little on being are to we in within in so base, we'll better. being bit ability like installation that's the turn begin the time been been and create brought volumes X% But quarter going to our where the are we're here of and the Power, be start the to second we able continue season with to we're out. built, the in The half. service so the with and that's of we've to service behind X% our able drive field go to to date. value really the see through. service And margins the that the same backlog to replacement And importance growth is I'd backlog expand then

I well deliver you to the when we're the at year-on-year, we'll encouraged going commitments. and look to see that positioned to And on continue be am momentum, so

Antonella Franzen

terms have Hitachi add I for out as typically high that modeling is one the third higher non-controlling just so of in thing in in the interest mind you're a quarter. we would QX number Steve, QX the seasonal keep and QX,

Charles Stephen Tusa

guys. Okay. lot, Great. a Thanks

Operator

next question of is The Jeffrey Vertical from Research. you. Sprague Thank

line Your is open.

Jeffrey Todd Sprague

day, you. Thank everyone. Good

George R. Oliver

Jeff. Hi,

Antonella Franzen

Hi, Jeff.

Jeffrey Todd Sprague

idea back booked margins, organizations backlog, of has What margins. backlog experience of the been and but new on you've of on as lot booked a just pretty the been expected? execution new much experience to are George, actual you've expectation recently executing versus right? the got people playing Hey These projects. Has

George R. Oliver

Jeff. continue execution. always what the say when book down the been much with is better very to we Absolutely, of of conversion book, that do a cost than standpoint, especially of we in through doing we I bring from to What focused, We've what productivity be always headwinds we – the able would the some to we're project.

pretty This projects we've got the then actions we other sourcing execution that that inflationary continue to it through or not encouraged. margins so whether that the and better as be sure I'm with to other but we're we're through only execute grounded taking can of execution. seen, projecting pressure something And that we're going make we is into the have that deep these cost meet

we're remixing we I in backlog rate. So pressure, we now the and beginning I'm to starting is the trend as but see to the into encouraged margin Like some the pickup convert, that year, had said, now that continuing. went we're

Jeffrey Todd Sprague

should the in was to between the business, last order several in next sales bigger the we've of converting quarters? we an Do wondering, few projects? also the I sales disconnect and see couple Or think something seen growth say? elongated growth actual or orders you quarters, conversion. there let's next backlog kind the years that is of Or about nature how growth normalizing

George R. Oliver

the that tell the there some you created we the has now that we I looked so with sales through orders get were Yeah, sales that were driven incentives. is I that have that projects backlog, larger there ultimately XXXX. – team tell as is last we as what segmenting the at would into year were businesses, longer our excellence would pressure proper the across you we're What cycle

the the getting of full projects. we're overall So mix

through you've excellence better much of longer-term you've you we've so you And term, you've got that the with long sight driving, tell projects been line putting that into getting that process to developments. what got I And the we're would have that is backlog. mix sales of got we're projects, transactional upgrades,

And is project so, therefore, on to basis you how a can going convert. that then backlog go-forward

to basis, tell will a I over that on start would So converge. two those you a cycle lines go-forward

Jeffrey Todd Sprague

seeing announcement, define making to avenues you're indicate? seeing or review Or if do to how combination really something you anything conceived? you then finally options strategic Obviously it but than originally Does more from progress. And me, just that mean hasn't you tax you're come an more the said have What that progress? conclusion you're do efficient? you'd does

George R. Oliver

all value. process, as the analysis, reach complete this working long-term all update of of by board. launch start, we able saying would I can to add working amount be Jeff, point. the how I through certainly, our this, we the in an of with provide the but more we said closely opportunities was finalized. we the do most But, this, to be advisors, and we Yeah, the also ultimately a When look we're shareholder there's with create are announced only When would middle position positioned when decision we'd at going we and right business we it, We're you. communicate not and to at update much process and not so to to

Jeffrey Todd Sprague

Thanks lot. Great. a

George R. Oliver

Jeff. Thanks,

Antonella Franzen

Thanks.

Operator

And Company. you. of from next question Thank the Cowen and is Gautam Khanna

Your line is open.

Gautam Khanna

Good guys. Thanks. morning, Yes.

Antonella Franzen

morning. Good

George R. Oliver

morning. Good

Gautam Khanna

the growth. what could just quarters, Hey. before you easy to the fairly the I will expand was Because and you curious when just considering X%, that you much like due thinking if the order net lift you order wondering plus just growth us was pricing, in comparisons actions even of couple if will. look next upon terms at the I'm about pricing have I volume? field field saw, better how

George R. Oliver

here I be in when when talk margins. how projects, our to not but second product on half, price/cost. the only going continuing What It's here be second is we Yeah, say would so we're get focusing pricing you in mainly pricing in ramping to businesses. a the lift up at have we're yielding to we what going we're in half, look also been

as on as we're within probably up achieving that secured, better we're X% we're orders picking and to sales that margins. the on better pricing real then, So as converting, X% And backlog. far executing

the orders. could impact X% be there could overall be X% overall pricing on – so booked And to side, the or

Gautam Khanna

it. Got

Okay. could And can anticipate we was wondering if then, versus flow it? what us remember on That's more I should QX free helpful. I moved granularity cash quantify next on year, payment some related QX. the recovery little but could in year tax for bit of next. Brian, if give of you you update the if you to this us and it timing Adient into a

Brian J. Stief

first million, Gautam, in Adient the So this year. know, as you payment, the fiscal received of quarter $XXX we tax

update quarter to quarter the received remaining $XXX in the goes that how fiscal fourth be an it and fiscal what expect the process portion, of either the million, really around There yet. We committee through depends first on really isn't on will timing XXXX or entail. of It XXXX.

going to the to it's we're by calendar of that that other, Given refund, from one the the but that one the quarter move end money size could of we're XXXX. confident get

get expect it QX outflow within out to to we half, As finish I cash QX, first free $XXX flow And flow. strongest be in would range $XXX QX. inflow half, million quarter our cash the to QX second cash the QX, then, cash conversion. cash flow relates had XX%-plus million it we of to is which flow, would cash always

Gautam Khanna

Good much. guys. Thank luck, very you

Antonella Franzen

Thanks.

George R. Oliver

Thanks.

Operator

question Thank Citigroup. of Kaplowitz is you. And from the Andrew next

is line open. Your

Andrew Kaplowitz

Good morning, guys.

Antonella Franzen

Good morning.

George R. Oliver

morning. Good Hey.

Andrew Kaplowitz

the we the think down. backlog. last the level But it the salesforce whether project the started the like noise some over has had last integration lower the in it obviously Building of couple about or to in business if be George, quarters, die margin couple years, seem does business it's noise,

the confidence in really the you you noise your really bigger have So good woods now quarters, in what's overall of and level in that of out can Buildings terms into is business? JCI going about on visibility talk

George R. Oliver

the of projects, we're here what from is service in the now as projects, and progress development, on all remarks, driving of improvement. we're making totally one pipeline that those significant that in the across that to the prepared on discussed service. the my service, starts as made organization orders, pipeline in I've sales and transactional conversion well tracking focused have contracts, orders, sure visible And right large understanding to system, ultimately segmentation we small of process as Yeah, are businesses getting through Q&A, fundamentals common

From how to in across And as coming taking margin those line-of-sight a which, structure, result, we're businesses, market, strong accountability And we've the exactly had. standpoint, know how know get we so of proactive functional far to contributes a as getting the line-of-sight structure. bringing then we've now margins cash. exactly normally, in the as an very we with to we standpoint. what's to deliver increased productivity operations have taking our pricing every about, and strategic now to We're across so we to addition we're converting ultimately pressures then sales last talked on ultimately Brian now that the inflationary as initiatives. and the margin from And the been year-on-year. our that, of And offset very is through be actions throughout those businesses the conversion cash, able the organization we fundamentals each

is you the and that tell on able would made. in that the are visibility, us commitments we've place I the on position accountability, what be the deliver so And incentives deliver fundamentals those all to to

Andrew Kaplowitz

aftermarket mentioned second original the you Thanks inflect grow for much that, of help how in – Solutions the Power you half the George. in of X% quantify And year. ones will can that to and you new equipment

guys know, business difficult to forecast been you As lately. it's more a

much how How in to of going you new the do help is? be it And year? half visibility the second always business as the is these weather, the exposed wins what's So there? to

George R. Oliver

positioned so we're certainly very the across Yeah, we're globe with strong well positions.

OE base, pretty good what line-of-sight the a our as we have but in only serve not are We doing, customers to aftermarket. the also

be got depending we're through that on through. they're the then as sure to, to And achieve able go point do what they've plans. the do as come need on And we understanding so how inventory if sure we ability sales very planning, to make make to of to volumes pivot with and we need then what sale work that we executing, that closely we in their to projecting balance we

all I what what I the cycle. the as well the weather cycle, next suggests on tell would aftermarket, would to both early that, here, demand OE of with out demand saw that how we and some so of is plays converts of tell phase that through you depending is given you, softer customers, the And last that that that in this done our in as with all we've higher

on making service that make have we then the closely with so that our sure for customers the right the And positioned sales and are them. to ultimately of right to they working each to fulfill sure capitalize supply, opportunity that

Antonella Franzen

keep And, that in in Andy, started production thing that it's OE add is Antonella. I QX. last mind only year decline The would

we as get this fiscal starts So year, our into that of half to stabilize second well. as

Andrew Kaplowitz

quarter? to unusually it say Got called in fair this that it. And you why high an it's That's is amount out? got of kind wins you of the

George R. Oliver

Absolutely. That's correct.

Andrew Kaplowitz

Thanks, guys.

Antonella Franzen

Thanks.

Operator

Dray is Thank RBC Markets. you. And Deane from from the next Capital question

open. Your line is

Deane Dray

Thank you. Good morning, everyone.

Antonella Franzen

Good morning.

George R. Oliver

Good morning, Deane.

Deane Dray

is topic? Is this Hey. Could visibility that you nuances you just on that weather about Just we on does finer when on of a Power the Solutions some how point weather? How we get? degree-day And can a normal translate? stay and basis just talk George, put what precise versus the patterns? could

George R. Oliver

little is a two And what the do in of happened is then tighter. correlation severe is to cold. those the This to have there, have in didn't Yeah, severe you try have heat, cold. you normal Europe we you working big America, winter, what when would way And at cycle we a battery you cycles. bit makes cycles fails within you some what been fail. and But batteries three that have or there's North it have we've severe what tell I so a and look that's typically bases two year, the a and make therefore,

did volumes in And impact so our markets. it those therefore two key

the you, And typically failure and or is our and batteries to demand. what spells three of a cold ultimately I tell hot spell hope correlates the so would in winter, that we summer what two that always and nice have in then Deane, the to

Deane Dray

Well, it. York first looks to spell about is Got it like get New its hot week. this

just that bode a follow-up. well. And So may then

iterative terms better will the like what backlog, the I'm of in types regarding you in point potential traffic have enough reject. pricing, the to On this business internally are cop curious kind in an you'll aftermarket? on follow-through the on it process doing what Is projects But not what just, decision-making on pass does hey, just of it's projects hear on? you margins a or of

George R. Oliver

is Deane, Yeah, projects, and leverages to we customer our solution the get what the then make our would that technology is the our goal to not value. we're and we can is positioned paid so I that create that for say with right that ultimately value is reject capabilities that sure goal expecting,

of we levels technology. there's bring So different solutions market leveraging the our that into

the develop projects will a that ultimately discipline what would we their now to how I so ultimately lot that And need. is relative fulfill the tell more you serve there's and customer upfront

And at that product that, margin sales to so book a with got incentive we've to that and there's right ties making it sales ultimately from standpoint and the that right, teams incentives get that incentivizing upfront, solution, the we our that's right rate. sure that

to volume, higher walking and so And it's the that margins. we're proposal, sure pricing that it converting isn't that necessarily right secured proposal got from that away making ultimately then we've

Deane Dray

helpful. you. That's Thank

Antonella Franzen

going as Operator, comments. closing of George top pass the it we're for at to right. some hour, to All over the I'm

George R. Oliver

call everyone, our morning. again, Thanks right. All joining for this

I'll expect of very As are half forward flow, second I soon. momentum. a building said, strong to look many and do we you cash I earnings certainly and seeing

Antonella Franzen

our Operator, call. concludes that

Operator

Thank you, today's call. joining everyone, for conference

this You time. may at disconnect

Johnson Controls International (JCI) 1 May 182018 Q2 Earnings call transcript