JCI - Earnings call transcript Q3 2018 | Johnson Controls International plc

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Operator

Welcome to Johnson Controls Third 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 turn the call over to Antonella Franzen, Vice President and Chief Investor Relations and Communications Officer.

Antonella Franzen

you. Thank thank third 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 Chief and Financial Brian Stief. are Controls Executive today President and me Chief George Vice Officer, With Chairman Oliver, and our Officer,

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

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

me let to call George. over the turn Now,

George R. Oliver

us the and Antonella, good joining call everyone. for you today. morning, on Thanks, Thank

Last the get slide quarter the review of started laying a foundation in based highlights on the of X. starting quarter level Let's we high on theme strategic momentum. with began building a

accelerate the I we made initiatives. about versus in our the of we sales first to channel of third to the incremental year-to-date XXX talent the think capacity, quarter, to adds additions This our hiring have sales our high I momentum pace brings the of continue quarter, expectation third sales professionals. attracting and to in the in with an performing the say previous XXX on As force XXX based Starting progress net indirect half, during success continues on key net each globally direct would about Building sales XXX our adds.

training management and Controls drives in turn, the and have new a growth. existing increase and sales growth as by with we experience and the expect which in organic are productivity Buildings as We onboarding adds. excellence significant our incentive leveraging That, organization, revenue to continued compensation and the coaching, customer an the attractive seen ongoing of evidenced improves orders acceleration throughout in structure, end the By proper the teams. as Johnson order the sales hallmarks commercial net designed year of XXX appropriately well programs models

Our improvement initiatives further orders in with margins and force bear to improved in fruit secured surrounding pricing discipline our continue sales backlog. on resegmentation

continued rising point saw to the difficult into I expanding have last actions execution past aggressive the QX. particularly call combat converting more deployed our a in XXX and top orders taken, pricing raw points engineering, and new to on Products margins outstanding other we point team basis compares substantial reflecting growth, example, the basis on which and footprint. America year investments increase comparison, XX distribution input in the For to in costs. our attention years saw QX material accelerate we line and basis XXX we the over North also year-over-year, Global over in increased capital prior should made to six increase Despite several months R&D

The remain expected. customers. aftermarket Controls. announced in intense commercial organic the I savings attributed with and in our price quarter benefiting our service platform Buildings you point I progress these have increasing $XX above pleased into quarter. revenue year-to-date, the focus can on fourth price say track. OE our strong had initiatives in modest the in nearly positioned performance into the wins our the I'm improvements increases the delivered strengthening to pleased in year-over-year across X% $X.XX technician success and On We team's We wins new million metrics relative very our extremely operational the well-weaved we once establishing shipments service price timing Cost ramping capacity. our inflation, to Johnson as the and levels organization. be solid growth we accelerated of free us processes of cash with levels synergies across earlier flow, drive we in and on of commitment channels, and both am to to positive would or on third assuming move had last expected. into Power are have the which partly to recovery we to on discussed achieved directly At serving fabric Power businesses and has enabled we average productivity to from new growth the particularly execution quarter, the a of than sound service price/cost with and of fundamental realization Solutions, are savings this incremental continued position the recent capabilities expanding given well the Based we execution first again while the our X% in compared half. experienced At globe, operations, quarter.

track We deliver XXXX. on our fiscal target savings million in are to $XXX

you Solutions provide me business. strategic the review our let on of update Lastly, an Power

sale portfolio. versus or it part retaining we As spin our of a analyzing previously multiple we a options, discussed, are as including

spin We to Board potential of the have and along quarter fourth to release are by a the parallel, have of decided analyzing these benefits business review conclude expect the in alternatives and, explore Management, discussing our Directors, of interested with business of been continue of the the the viability to sale with earnings. tax-efficient and parties. the

We been determination made. a will final communicate more has details when

the that in escalate. their By X most generally turn economic for China over look policy of months a seeing verticals. to construction the quick and and for Let's to accounts, institutional trade and pressures to growth fundamentals markets strengthen; GDP. Middle looking to strength in indicators, the our in key the continued are Trends serve investments the demand somewhat in that developed are increased modest orders, higher prices oil Despite growth next lower support we Europe across closely, the we rebound growth markets supportive the of continue East, at larger spending and products markets and geographic construction is potential the in macro led end slide components protection also European harsh macro to where fire monitoring forward pointing given environment. in environment with remain of U.S. to the inflationary economies rates continue an continue those remains in globally. area U.S. volatility, is XX for suppression for mixed FX macroeconomic favorable. and trade The countries are recent our regions. in disruptions the most concerns, recent non-residential few hazardous driving that a growth choppiness our economies, our sustained continues Eastern in with above Despite at by still remains invest

which continued in policies platform Although In commercial at Power, growth months. the China recently-announced aimed Europe, the start the fastest China's economic industrial has to weakness environment reviving the offset combined auto and somewhat, verticals, may remain position wins evidenced also growth remains electrification technologies. it The and non-residential continued within supportive as starts the over in take well in channels. stronger next shape remain in been with global government is the pushing of vehicles, verticals. supportive one slowed efficiency our of standards, demographics and revenue for China, with key Changing construction are remain and the increasing stabilizing, us growth regions geographies flat growth and market the by U.S. recent both a seeing source particularly to fundamentals order our Overall, has momentum. growth by overall, we of in production continues to and continued in a outpace battery infrastructure several favorable, underlying regulatory most still of share. growth of growth core gain are

our fiscal orders of notable most America over for quoting strong continued half. This X% growth slide and including Field the compares low-single-digit average across both X% order North first most year-over-year and core businesses Underlying was organically the Buildings XXXX up and in product to growth quarter, X, installation and service. in bookings accelerated EMEA/LA again our Turning domains, to strength with activity. average in in

America Fire experienced North quarter over in highest two Our business bookings years. its

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

Between million, we reported year-over-year million, which cash organic $XXX came slide XX% Scott productivity billion in basis basis, in approximately in points in incremental on our organic the volume billion of $X.XX, adds X% free number Safety or XX offset up Adjusted synergy I the $X.X and growth the earlier. savings the the the investments excluding Scott of was which in reported at share spend we was in Overall, when and and with EBIT XX% a increased the Favorable and to Adjusted and of initially $X quarter X% a Power. adjusting sales on exchange earnings divestiture, for short impact north on came and now product into recap just cash of the XX% points $XXX and than into margins closer $X.X brings free billion $XX benefit sales organic million, Adjusted XX significant mix our added me impact investments, to the expanded X, planned million per financial Turning Sales year. the foreign first back $XX lead. EBIT flow approximately the grew prior of basis third incremental of results Safety quarter. let Buildings business. to flow, basis lead. account of us and divestiture, quarter cost for both a year-to-date. discussed basis reported X% FX to of capacity half when over and more to taking

year. mentioned synergy both and Turning savings an $X.XX benefit EPS as on bridge X, in by synergies our earlier, prior contributed $X.XX, was offset growth cumulative by and to Buildings incremental added driven to Power. The slide I and volume/mix solid of mix partially the Volume and productivity investments. additional

will turn Overall, FX benefit and offset the adjusted With below-the-line Lastly, by the segments. $X.XX over tax quarter. was I Brian it lower EPS in from the the within combined resulted items. performance to that, for discuss to this

Brian J. Stief

Thanks, George, morning, good and everyone.

in XX.X%, start So at let's led on a Buildings on but of strong growth quarter and EBITA to to divestiture a in billion versus solid sales point slide foreign FX to consolidated X% grew a $X.X points this margin divestiture, XX from headwind balanced across a Safety normalized up return On X% currency. reported the was Field and point cycle the expanded primarily take shorter a with performance related from expanded organically points installations. partially of Field service a and consolidated Products Safety point year benefit the the on increased organically X% with X% quarter. the million XX XX XX to by three of basis. all basis X% across look Buildings basis the geographies headwind includes a by growth up of Buildings Scott percentage quarter. X XX% and Total X%, our margin a prior a growth basis Buildings EBITA in M&A, project A in $XXX related of the businesses. offset the basis headwind basis, Scott Products and EBITA strong

of planned As see volume partially points mix investments. XX combined leverage you product by save, benefit synergy was in can from headwinds basis and capacity sales basis from and the and incremental productivity of offset XXX the margin points waterfall,

ended the increased pressures standing X% at lower quarter and we margin price variance. in significant billion. of now from third X%, Field were costs year-over-year backlog, positive fact, organically the with And conversion backlog cost gross mentioned, orders $X.X a up price as not in by with expected, QX. As margin George

X mid-single page Security to Sales let's growing segments & applied of Fire turn Now, with on organically Buildings grew individual & billion the each with growth digits. within each strong X% starting in of America. North our platforms Controls and $X.X and HVAC

leverage mid-single XX.X%. North We partially revenue of HVAC lower digits Orders revenue, a America Controls increased Fire increased saw well by in in activity adjusted America Our billion of favorable tough grew service. saw XX year-over-year. than and less Fire quarter the increase Service organically North being as organically, while of Controls & & Fire in team grew revenue led than great digit for offset grew & the North X% in both and quarter year-over-year force declined installation range led to project in X% America's also business, benefit margins North businesses, installation America which as Security. expanding and $XXX low represents mix the and basis XX% and EBITA Solutions by conventional strength by as in & XX% sales in another Security, volume and mid-single strong EBITA Security million in year investments the strength in we on prior with of higher single-digits including compare. bookings both Backlog conversion. our & residual our capacity synergies $X.X planned HVAC margin North American backlog project productivity points

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

by and mid-single-digits a Adjusted point our XX% margins basis including and suppression. Underlying driven EBITA margins expanded XX led increased synergy and regions Orders points increased basis productivity to EMEA/LA Fire with installation, Middle primarily all growth of strong EMEA/LA single-digits XXX across XX.X% however, in In service by mid-teens security East, service of $XXX by million lower Refrigeration XX in solid by with both strength IR $X.X increase in low business the primarily low strong low in save. year-over-year activity & the year organically started as installations. double-digit QX backlog project continued softness IR, we East. in expected, sales installation America driven single-digits both Europe backlogs Middle project did Latin flat offset by $XX ended billion in strength million fire organically. XX% and suppression fire demand currency. Industrial fiscal was by led and across Security. and headwind recurring orders businesses; the declined up Backlog were in in up in related substantially the as to project monitoring at Europe grew revenues in As our and points growth and foreign project driven in a HVAC X% in increased basis lower EBITA organically were revenues security. the and

organically, So led and and let's continued of XX partially million growth investments the mix, in by to of force. The the benefit EBITA of Fire with basis $XX margins sales and volume save over driven low related basis installation as reflects prior-year and to margin turn & includes by APAC. by grew favorable largely well single-digits and discuss headwind service XX a point Project points, slide XX Southeast Sales productivity of driven foreign expanding this double-digit currency. as and by improvement China $XXX IR. basis underlying million synergy points Security XX% Adjusted XXX offset primarily Asia. grew increased X% revenue low

fiscal to in Asia primarily but of margin Pacific also and I through quarter continued Backlog competitive China. X%, based region, today, increased see in reflective market XXXX. and the out orders did X% $X.X of dynamic a an that, QX would pressures in prior-year tough upon competitive X% we what especially the increasingly we move we decline billion. due expect point to as into comparison

controls, BMS, $X.X high-single-digit Management Specialty Products Equipment Building & X% and to we XX, & a our Products. In which in across security growth HVAC in growth high-single-digits billion, Refrigeration In slide global mid-single-digit Refrigeration detection, our strong include does organically Global Taiwan, strong Equipment, fire Japan sales by HVAC growth through Systems and increased the and led in in and HVAC, primarily Turning businesses. to consolidated quarter. residential JVs, on grew saw sales both Hitachi

despite demand, a the latter channel. in Based in grew revenue year. price replacement quarter the in the strong seeing favorable the are low-double-digit residential and the in America we continue drove led in part residential weather weather of on trends, compare realization Favorable HVAC the North on low-double-digits demand Our prior tough continued easy a we accounts. reflect commercial HVAC expect will North America Global QX. by America this quarter strong in mid-single-digits growth do does high-teens year prior growth strong relatively North light compare, market in grew in national our higher but

a headwind North Our Scott the a and synergy solid points by our product which growth, offset point, North related includes a and was and to growth by reported in ventures in of Scott growth VRF on tough XX% Specialty The solid EMEA/LA. modest with of joint higher was by quarter by Hitachi business high-single-digit leverage basis in the benefits to prior Safety. declined productivity led up year our compare. Products APAC, XX Underlying of partially margin China, with in with EBITA growth million partially equipment strong XX offset this cost Safety. $XXX and XX.X% double-digit EBITA segment impact partially investment. decline suppression continued a XX quarter growth decline but excluding basis Segment a and saw also exceptionally perform well. applied continue save in as high-single-digits by point XX points HVAC fire America, volume margins basis channel high-teens increased expanded to and the in of basis driven America in APAC for Mid-single-digit had strong IR grew was growth EMEA/LA business offset in demand unconsolidated

inflected earlier, quarter, mentioned have margin impact positive significant didn't in rates but a price the cost really QX. third the As in on

driven new several to several shipments up by aftermarket OE of we China with as technology business quarters. continue of X% as outpaced Sales growth price Solutions. well pull we the channel $X.X and year-over-year both Aftermarket over also prices expect favorable orders Global higher on the Power of in driven aftermarket next forward and Growth growth a began lead modest a battery primarily third higher demand increased XX slide shipments rise X%. in XX% shipping in to wins, billion The quarter. organically, shipments end to benefit in which increased was OE strong. the reflecting as mix. as market Europe, move X% unit customer let's by in the So began increased units shipments toward

and to as level; continue with underlying startup the in growth higher various basis offset up as favorable in mix save from of leverage, the Segment across Global points year-over-year Freight logistic the $XXX declined productivity investments, X% at batteries transportation We were includes Power's increased remain and productivity although, FX planned both organically. to these higher progress OE increased and and XX% as costs. costs of the a in initiatives we we do declined costs. XX% lead. well XXX technologies. pricing offset in with the our outperform than made XX fully margin not EBITA aftermarket Americas, volume China market units did by this in China points launch product costs and headwinds XX.X%, shipments continued and an further strong QX, more EMEA/LA. basis and but from and EBITA XXX-basis-point headwind million and margin start-stop elevated

Looking continued we to to Solutions. costs margin in QX, Power related pressure transportation expect

productivity million savings. to expense Corporate the see as to synergy to benefits the and XX, $XXX year-on-year continue down was XX% So turning we slide of

now of provided. Corporate year, expense approximately be expect previously end full the the low range below $XXX we million, we slightly the to For

flow quarter. flow cash generated turning So million the roughly slide cash in we to free of XX, $XXX on

million; million performance. billion, was as solid adjusted up and flow flow quarters Excluding well QX cash million $XXX now adjusted over tax as the free very cash flow back-to-back non-recurring integration cash a two of planned free approximately Year-to-date of cash year. approximately $XXX prior planned is $XXX restructuring payment, $X

cash QX the various our year, that clear is conversion making CapEx track net is has our adjusted our with excluding we've management capital are for It the flow the and on cash you. improvements deliver XX%-plus pleased discussed across initiatives now our one-time very are on previously We to spend. items and trade managing free enterprise working and aggressively traction progress office with

Turning improve to the sheet balance balance debt continues to million, billion. net $XXX our with sheet on down $XX.X sequentially, XX, to position slide

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

over the and with in $XXX $XX line purchased pattern, to this million X.X our brings approximately we During our for repurchasing shares shares million quarter, X.X year-to-date just million, million. normal for

share slide full $XXX on QX XX, outlook another On original for of let will just our with which consistent touch around of million assumes plan. million, me Our year the items. bring to $XX a couple other repurchases,

to include beginning XX%. a do a results our At be the year, rate. effective lower QX from XXXX tax we favorable the impact Our expected of fiscal rate

a special well a QX QX expect XX% the excluded been from do year, previous also reported for Given result benefit we our planning tax will to a as the that point versus guidance. quarter and annual as only benefit in which I rate results the XX%. planned tax be tax XX%. $X.XX for resulted expect full additional our specific has for would be quarter. rate in versus benefit also This this as to our now out QX $X.XX We item XXXX, fiscal the to and QX in rate our of

significant. for Controls Buildings become impact Finally, this in the XXXX. a I Accounting of first Standard fiscal recognition wanted The to business that revenue effective is of touch new on not on will quarter our Johnson Standard

Johnson back a and regarding to EBITA quarterly quarter rate on will for provide the gross-up and by is sales contra beginning over be points. Solutions, revenue classification changes basis let that, versus a EBITA and of EBIT there With cost Again, related impact. Power an the included year XXX-plus impacting first although For material impact, and as of call core now next margin item, grossing to the the will be increase margin the reporting basis George. rate battery up no thereby returns sales turn we of effective Controls our will this disclosure sales me

George R. Oliver

Thanks, Brian.

the to for the quick with lines retaliatory of Starting regarding wanted Before questions, make related at Section up and on were Aluminum the full I outlook. to end Steel a tariffs provide our announced May. tariffs XXX update a few we comments year open and XX, slide

call, offset. last impact on fully steel As will be our mentioned and to direct I the aluminum are earnings and tariffs related nominal

of tariffs In first second Section July. the period. in phase of enacted phase was under XXX, terms early A currently comment is

Given we the to developments analysis. update Included changes, monitor the impact and businesses. valves, compressors, tariffs evolving electronics, which and our continue Buildings our motors are in

As I mentioned last quarter, we do not in expect much of Solutions. Power an impact at all

As identifying ongoing actions part of direct our any assessment, are minimize mitigating to we simultaneously impact.

in We minimal impact expect QX.

further our As supply well-positioned are and given we look ahead, we global sourcing and strategies. existing chain regional

Based actions, both and Additionally, worked within down a manageable managing mitigating level. we actively Chain done far related have on our to the are we have exposure externally. and very so the Supply to we already analysis price, this

to We will monitor continue developments.

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

$X.XX an earlier, performance expect mentioned related to As is incremental I operating our and momentum growth. gaining benefit revenue we higher

are our existing with from new about traction to investments previously we incremental our Given be gaining planned. productivity the our than adds and the $X.XX force, higher and sales will overall sales the force,

continue of costs recovery. an transportation net mentioned, to Brian pressure rise, incremental as of drives which Additionally, cost $X.XX

range takes are $X.XX. to items benefit. puts $X.XX the between last As column, you various and FX a which our midpoint can see net below-the-line the previous This of and there in takes

items our our been pleased $X.XX. in the before am for please momentum questions. to We full $X.XX with earnings for year open the improvement line the range I Again, guidance special per to are we achieve in this to share and the tightening Operator, able year. operations have fundamentals diluted underlying

Operator

Thank you.

Financial. from line comes UBS of Winoker, Our first question Steven the

Your line is now open.

Steven Winoker

Good very Thanks morning. much.

Antonella Franzen

Steve. morning, Good

George R. Oliver

Good morning, Steve.

Steven Winoker

in see to right, good math meetings. my flow, if up it's is it's you The dynamics like implied given fourth are step of some XX%-plus year, cash some I the about to you it's the I growth, but number, could in to in which same – in quarter. last think that think, this year. context fourth initiatives billion, also et how and last you that the free your George, are is quarter inventory, actions that, sounds the maybe most on of takes some that as hit the $X.X put started place. of And you focus those so What is Hey, want puts But around cetera, of said and fourth quarter? also, in I had

Brian J. Stief

having Last and you're Steve, the right. is fourth quarter, reduction was And in of QX Last also billion the the in last saw quarter related fourth for that build did we to we of the in based this XX%-plus $X.X a $X.X million the we year $XXX year year. fourth a Yeah, have inventory billion. quarter generated there implied benefit our last million also $XXX reduction year upon year, in receivables.

planned million CMO that in there's three for year $XX flushing growth in numbers, So line Solutions QX. probably just in we've billion this the million, inventory in income. another There's then, $X.X the round another that you that Power for bridge year. you. about could specific got going last of we've of really million $XXX got that $XXX million There's buckets argue very sight that comparable initiatives number is $XX to And really to There's quarter.

So billion really cash kind you free that expect bridges that to year to of XX%-plus us $X.X flow. the the we to this get

Steven Winoker

Okay. That's helpful.

issues – looking for bit levels maybe just on margin Solutions the conversion product to how current North get there in what of us? regime mentioned at pricing a backlog. kind America pricing approach? Building were pre trying of we of or little – gross dig or kind mean, kind I'm what into of through are I'm Are terms a for the far we front, sense that I'm new here, lower I the you cost – looking a at On

George R. Oliver

to backlog basis When projects in through that XX laid turn America. pricing year our in Steve, that, a we year, positive. of with able we And and in we George that about to North more how started Yeah, be laid we here. we'd disciplined points had we're the roughly much the here be out out pressure plan

an So through amounted that's the important XXX And quarter. that basis that some were to the to in $XX bit through What's quarter first more the And about of and booked in backlog. orders year third in basis million put We that of two was in is up would pressure XXXX. quarter of of felt impact up recently, that XX coming three-quarters in year, see we did note the have the the since points. have the we impact points we're year fourth we to about the into beginning little the a going that about quarters. –

this move we being the feel – so, that rates by we the good basis year booked – with also go position about mix backlog, we accrete incentive plan continue forward into on with mix, now able And or on good changed delivering line in but we with through to margins. the forward. a And we focused our about service very and will that put to booked making margin that not orders, the this for as XXXX, has only that year, sure this get as feel been on we're very revenue driven the

Steven Winoker

helpful. Okay. That's

it's well side one to on, things of how – little we it deal Maybe sounds the are with like been apart pick years as normally I give kind you of cost It the of have how thing. we're far go, is up. pass you an JCI, in more almost of to road closed map, how far see of of It's since that – us – a where terms assessment been we you kind say I revenue guess much stand Tyco before two kind so question, Just synergies. starting the into on George. just

George R. Oliver

we've focused our fundamentals to on pleased standpoint, operational you, all for made, Yeah. that front-end we on make tell only to going business. able really of that making And I to ability not was had capacity, has add We're we started Power, would had is team of knew and that And sure continued the able in We've overcome; positioned a playing the capacity. well. we've the margin been booked orders we progress to what businesses. getting but sure wins add then, What Power. headwinds with only this platform of year. out lots out the that an done the way very the productivity and this say not – new We and created the together but Steve, X% across work the improvement of we've in that's we when extremely to I be growth come machine year, that would and we're be needed Buildings; with transitional in from we're growth, that getting I'm

We've started go-forward made strategically, can we've on confident to In what only you on but integration going that I productivity be executed go-forward months. of well. half, going and is made growth. the to have a service lot results the of ahead well a because, knew we're going value accretive our put service the although growth, drive needed perform that drive able with lot on margin well. to focus thought going not we had customers, focus think we been see create basis. we able our on we on continue synergies, improvement a And pricing So we the over to to to of a believe We've of but the only the basis, for or would we we not we that Field that the cost pick extremely cost organization in achieve able be our although I'm deliver continue the a progress is we've room businesses, first fundamentals, council service And extremely at now created with big the the continue for that lot able been price on there. be structures progress merger. still to as base then, And achieve a shareholders here lot to we I headwind we're margin last to when we've to nine from a there's up that, as and and, installed we've a of rates. accelerate create, for and to

Steven Winoker

you. Thank

Operator

Thank you.

question next Nigel Research. the Coe, Wolfe Our from is of line

Your line is open. now

Nigel Coe

a and quarter. Good on good George, morning Thanks. congratulations,

Antonella Franzen

Thanks, Nigel.

Nigel Coe

Yeah.

about to talk on some reports So that (XX:XX) I this probably but – the been of there's portfolio, is to understand and maybe the for turn just just Brian. interest question call, on probably wanted maybe a

wondering spin got extent do that what this NOL a if that you and you that do against large can decide you asset, sale? to I'm sell might gain NOL or utilize think You've on to you any the realize

Brian J. Stief

not right, tax NOL be the at right meaningful unpack footnotes we'd specific the available referring I the be offset I not which to exists that's by to way think Yeah. that financials, to and we'd have to that The in the transaction, you're jurisdiction, on all to, major it's would now, – in assume so costs. would so disclosed look that. But NOL any used be the available today gain against a

Nigel Coe

Okay, or all Account with impact a the follow-on, margin Standard being looking XX% and for year, okay. for Power we is the sticking revenues, to contracts? are going business year, just margin then, to this the this Power, on still with XX% at so run guidance for maybe forward And where of think new things revised normalized a that next do equal? high-teens you rate Is then

Brian J. Stief

the margins? You're Solutions referring Power to

Nigel Coe

Yes.

Brian J. Stief

this in and points – about between revenue, impact fiscal a XXX XX% in that's and math standard Solutions new do minus. we XXXX, to the on be gross-up where it's will or mean, XXXX margins XXX to Power of expected expect that range. that fiscal points, plus the XX% be basis in basis year's you so would I off and of

Nigel Coe

you. thank Okay,

Operator

you. And question, Thank Research next Jeffrey Vertical our Partners. Sprague,

line now open. Your is

Jeffrey Todd Sprague

good you, Thank morning.

Antonella Franzen

morning. Good

George R. Oliver

Jeff. Good morning,

Jeffrey Todd Sprague

deal Should do just spin if thought to some moving at the the timeframe. Tyco, Power, Hey, we you've to here? forward make spin ability everybody. free, just and back found tax-free a way spin, is inversion there the for be to taxable a the could assume, nature or possibly a the five-year we the tax looking morning, possibility that you're with that like, of I Good precluded to it

Brian J. Stief

September potentially to well Power five-year would would the be very prior that you transactions be XXXX limitation be in a transaction of we associated beyond. the Jeff, There to upon that Solutions based order in straightforward a referring business were or when are So do of that spin structured a tax-efficient put that together time, would it allow and with but of to put nature, that spin tax complex structure. when a be that together very there could risk spin, could

doing be so, we're spin. with of a one And would our options that that things of evaluation the as risk also evaluating structured of is associated any tax part this

with we're that an on the options but it's in so, other table. the it option, line are evaluating And

Jeffrey Todd Sprague

that would I believe is outright the you're guess down I offer then the take that side on maybe not that to going appealing, path? the that sale fact

George R. Oliver

well. we business No. the said business performing right great pressured positioned I mean, transportation, I and as the position, long-term. a is of this the are, got share. industry continuing We've this here that market although gain to bit fundamentals start, we've because little year from is a Jeff, – here mean, a a We're are been strong for well

would have with announced in with I review. say strategic review the And at very so, this made that looked March, we progress this have we back we the and we're with pleased as significant business

it. at we're spin, versus As we retaining options: prepared multiple said sale looking remarks, in our

buyers. to tax-efficient our we've We have QX discussed, we'll able as more potential Brian discussing be made, release And been parallel, spin we that of here earnings. progress in do be with the definitive and, with evaluating, the a expect, by

further you I we the think specific team don't made. want I progress but comments the I'm to would until point, tell with determination has very so, pleased has that been And at make a this any made,

Brian J. Stief

wouldn't Jeff. I it, read into anything

look wouldn't into versus think we spin continue sale. options. the to I I anything all read at the

our QX. call that I conclude trying a in review we're at we'll to basis on look think and before everything detailed earnings some time

Jeffrey Todd Sprague

spending of could of Thanks. of for today, asset some information facilities I one, if interestingly even business? business think your give the a capabilities just do management, if morning, inside some those deal off do. that I of is expecting existing thing be EBITDA XX-XX that some of BMS. equipment capabilities to pulls comes on might a Fortive of have data – you for in of do but another of I'm unrelated, like. times And BMS; resident that and management, sort you this that would this perhaps, you Totally the little saw that off not ask type us might it color Fortive

George R. Oliver

Sure.

the growth we're we're to basis, tailor problem the able depending we're support on a building. to putting the because – in this making that integrated all the it multiple collect that able space, in that solutions set Management Systems. beginning incredible that to together, Jeff, now progress we able In together other of investments can have making it on that going be our all an in to high-single-digit have but put And to each going Management together. we the are seen collected of to growth we today systems, into systems platform, positioned had the of this data support, simplify Systems. of our achieving growth can solve. going Building able all Building putting all our the we've to accelerate go-forward we an as be businesses specific that the to revenue show being verticals customers we the to to incredible incorporating any we our Building building to so organically, as parallel systems those we want the As Management, within data businesses you've we're to We're And strong these extremely platforms, that, and be position to to in We're be not segment only platform. of the is that of a with off across positioned be in go-to-market strategy of that's well to up connect

Jeffrey Todd Sprague

Great. Thank you.

Operator

next from comes Our Barclays. of question from line Julian the Mitchell

open. line is now Your

Julian Mitchell

from had sort so, work the starting some business, do think the generate behind past the synergies forward issues morning. over you aside leaving margins with on the Buildings and entity price incremental now of Buildings transaction? around mix, margins to that with to cost on you've what Good such any clean-up when remaining can just of as but cost, has you Maybe or months Buildings with those you're Thanks. nine said, portfolio this grips do looking George, kind got gross you

George R. Oliver

a very our we're businesses, you is businesses and mix on that when – that our was up productivity pleased our achieving business the structure the strong nice When I'm leverage of Like with product look you we're I and growth at with the making. offsetting and getting reinvestment points said, net business; volume that. progress margin in significant at product basis look that about we're XX

focusing the making. technicians. we you out we're out in the service I been discussed, of And businesses, then incredible that And capacity only serve, see would we We've at we that the based look markets improved significantly as today, segmenting continuing reinvestments we year we our have sales Field where beginning building When the with on our we that not have, so, force, the progress. and made with our you, at field and we building the tell where started are businesses.

getting able the that will three none go on value XXX And as forward. the in rate, made in margins margin and piece projects installation a of of how the deploy booking across forward. here up board. to very making book execute backlog, is the and quarter. combination to able growth We're on we've with and services. the points at over projects ultimately and be have to first And the that about then, third higher installed booking we're that to other X% sure X%. accretion that we see we that's is service highlighted We that to I and we're in force ramped second higher was to the investments products, quarter the our the our attractive be that North technology on. the going continuing focused sales deliver in basis progress we've leverage The an in I The up in the with our we achieved – We base combine half America mine build the mix

Julian Mitchell

within margin below much. the EMEA my last Building America heavy would region, get able you some just the requires margins a see you Solutions. of and that then, Do you should Latin as Thank The be are in there two anything to be regions way or just around it very question self-help and range the lifting to And other specifically. medium-term? second the and and lot mid-teens structural

George R. Oliver

Yeah.

incredible put very in businesses, and took restructure job as a we've EMEA/LA an year. last has them here the done the large over through we Our team together gone

demand and points backlog reported up sales although they're did – that's at look X% in quarter was was have Industrial Fire complete both lower basis If will XXX within you Refrigeration we the in up up look you strong I confidence ex-FX. service at organic our with with have in then, work a XX%, Install the and & flat, and when was XX The performance, points, although the up margins, Security. basis Refrigeration. they're because it's quarter, the overall HVAC that down and and orders continue. Industrial

we're to margin in done much business, more here volume respectable basis. get the and that work much able the be we've a with to beginning With be position a more to good going get rates to restructure through, come to to go-forward to leverage that's on the

months. last the feel over I the about we've nine so, very And made good progress

Julian Mitchell

Thank you very much.

Operator

from from Ritchie is question Goldman next Our Joe Sachs.

now Your is line open.

Joe Ritchie

everyone. morning, Good Thanks.

Antonella Franzen

Good morning.

George R. Oliver

Joe. morning, Good

Brian J. Stief

morning. Good

Joe Ritchie

continue sales you channel what side? obviously, the be plan XXXX. So on the the in can do and to see you you whether force in the acceleration really product or will invest, off. to be on nice think organic touch the investments paying George, growth it maybe Where incremental investment to

George R. Oliver

costs as so XXXX. of revenue, see as we're into percent these going a of go we leverage all to on to Yes, begin

the year we sales last recall, started were force. year, year flat in we relatively as our this So

had course the significant so, year. we've ramp a And of here the up through

up to from mix have that a new are lot momentum. seeing have a we speed. now of people We lot and sales leaders sales – of tremendous a standpoint, getting We're

not and we the in with segmentation sure the on the we're only footprint that productivity, we're line go-forward so, And now market growth we're expect. basis making we have standpoint, getting of markets the We're that have sales right adding from but serving. a a that we

progress a of this So year. lot we've made

that go-forward then able we'll place and So year this leverage to net cost incremental basis, put adds into some adding that to see be more and attrition on productivity on sales be much you'll that. get a and we've to offset sales

a here improvement on we So I basis, feel of lot that forward. go as

see, as side, over getting Products we've results the years. three made that the from you last On investments the we're can tremendous two or

be will reinvestment of as not And revenue, growth to percentage will the revenue as down. we're levered. a We're come so, – to revenue our and to percent I see, a continue of accelerate continue going incremental

heavily And we're we peak to beyond is the I believe we're than now we're at leverage see where or revenue adding that we're investments reinvesting start growing. that making. where more on our so,

Joe Ritchie

flow next to question, I as of think a follow of other for bunch year, that highlighted that well roughly obviously working XXXX? million to Okay. perspective How cash And guys $XXX kind on items there this you opportunities That's my number. in million about guess flow working capital are that good from as number from are the you're year, does And excluded are that cash step a one-time hear. down $XXX on you there XXXX? have

Brian J. Stief

Yes.

a quarter back billion, one make back recall which first to quarter we and spin were the fourth or the of billion was related XXXX of Adient as as So XXXX. $X.X couple or that tranches, XXXX, of in we get probably $X.X like going you we we'll in a did that that the to far of either knew payment get fiscal

– and order in refund there's $XXX because a needs approval committee range. million that million question And get to given that, the $XXX fourth size to that Johnson reason it to refund back Controls. the in release in of Assuming the that we that is special is on quarter the to get

of And so, in we into could think move it quarter we'll fourth the first XXXX. it get but quarter, the

that given to historically. that clearly and items the one-time relative our special favorable ongoing got cash should Given be we've where and integration, XXXX adjustments in for inflow been of restructuring we've

to cash the XXXX adjusted cash Adient fiscal tax the refund flow So in one-time the better our because should than adjust we get reported payment. we'll actually related flow, be out

Joe Ritchie

you. Thank it. Got

Operator

of Fargo. Kwas Wells Rich line comes next the Our from from question

open. now is line Your

Rich M. Kwas

all. Hi, good morning,

Antonella Franzen

Good morning.

Rich M. Kwas

ago, relative of was talked you George, about years million say has been much how revenue realized the point? on a at to that couple would $XXX to-date synergies this

George R. Oliver

we'd we're had teams, as have much started more as able together. we we're to be – tracking as $X.X we've structure Originally, that working we about it achieve. we when was $X well. I'd come billion say, time to integrated have the the billion identified a over businesses So seamless

over think we're to pretty result is in that at on pipeline teams together. I The up you across much opportunities, look We've capitalize into board. positioned serve and when are leads digit pipeline markets the And to our is now segmented double executing markets come central teams our of of a the the growth. process, working make this a the well. now appropriately sure to these the

working we're able because that segment be tell convert to able So it's into from to operating I to hard been create big base we're that a it's being you that to contributor pipeline but begin now to would seamlessly, orders. a development to

Rich M. Kwas

So is quoting the of way there's this the to combining backlog, your about function this in probably that that's teams, focus and current is but think staff much not etcetera. targeted a

to So less come as or yet – in yet the more backlog?

George R. Oliver

of Security. if & to a with it. think see look the mid-single are Security, footprint Controls to the you & we're I board. beginning had Fire businesses would and tell we're result being Fire you that that digits able bring I strong we within across that customers in And Fire is at the this HVAC & serving Yeah, up & Security

suppression in had up low digits. the of you So Security kind growth create synergies high our we're strong digits. when but a getting And look up, able force still of up fire these – definitely detection is being we've sales to single that reflection at leads. and to in to That is very Fire mid-single products then, those in with

Rich M. Kwas

Okay.

is on improvement on into that here can going much see America about to Okay. eat the set to being. us to in And be then, sales. starting for XXXX? North percentage the How in your of just you're as Solutions you some going China, – think time on follow-up we headwind a Obviously, of a exposure Building margins quick that's level

George R. Oliver

with a our strong in we commercially with saying HVAC. partnerships. as by we residential strong both partnerships start have, And have extremely combined our I'd position our Yeah. that's well China, JV as that

some As little talked are Brian competitors. a bit new there about,

competitors. local are those of Some

market. also we're being We and are not designing serve with positioned with well chain products, only but the how our locally footprint manufacturing supply and to new able

projects that have to grow a continue well We are the we're positioned Short a that continue be at to but to systemic. that we're to we're said, to deliver margins, come – lower to cost be I have we're have, term, from to that's I able going I believe going believe we going invest, I through don't we're work to seen and be some structure to believe continuing to and to grow continue continue we profitably, and and like there. position invest. doing, able strong standpoint

Rich M. Kwas

you. thank Okay,

Operator

Dray, from RBC is question Next Capital Markets. Deane

Your line is now open.

Deane Dray

Thank morning, you. Good everyone.

Antonella Franzen

morning, Deane. Good

George R. Oliver

morning. Good

Deane Dray

color are these they laid you've out. investment what just new And they customers, specialty be going there a being for investments timeframe market? force. a middle some When about I'm curious this the to is start a hear about after bit they I'd Hey, discussion allocation the – more like Are that of maybe there typical then, lots And there's resources, do because sales? salesperson? of significant the productive? Is is new the generalists? sales in

George R. Oliver

Yeah.

we focus the line able leadership lead council. to in how made we our amount made understanding it serve sight a started and changes and with sales with we're now, then and out to then the to top we tremendous right markets sales So, of be making of sure of significant gate markets. Deane, see and our the that, growth. We've understand, structure year. serve this here. markets, that progress we've it starts adding, We've our was incredible We've where got doing right a This

adds it T&M the depends say, installed and projects, with projects or we've on be type enterprise so, let's And it typically made, service. whether versus,

that we we're skill be of So on capitalize the what level there's to as a varying recruiting sets biggest see able to opportunities.

of up sales speed, getting it the to salesperson that the or it a a be side doing. be time new to project service of years, the sales in we're two So on months depending can one can complexity cycle –

And our tell we out well getting performance I would metrics sales the on actually strong of onboarding of force sales that We're force. of that as veteran across out ahead and you, the have our the so, board. new is then we're metrics as getting our production

is where tell would be. you we I what based ahead thought are, so, we're the we on And where would that, actually where started year, of we we

Deane Dray

just this of but I Have retention – lost of I'll and you China, OEs Power. worth any is potential asking Are talent? making the against you? And seem with like – that can asking. it's inroads disposition your any one answer of use Power, them just feedback especially and the Doesn't competitors the from using of, in it up it's Great. is, or what period worth limbo follow but – on in on the the word, imagine you're is,

George R. Oliver

me across the – to do. The business. We're We're the aftermarket. has what let regions, business caused Not winning passionate of a as the proud within go the OE We've people and is start The in winning very across about the board. at back both winning gaining well. – We're the that great they well as all. mean, minimized this share. team executing business. distraction are I very in is business this

for to as minimize that like when and positioned very And you've very that so, process, want we a you disruption. go a understanding long passionate very is we committed this and are got term, leaders business this have are through well that

significant as attrition not So seen result. have a we

Deane Dray

Thank That's you. helpful.

Antonella Franzen

Thanks.

George R. Oliver

Deane. Thanks,

Antonella Franzen

for George turn over the Operator, I'd to comments. call closing like to some

George R. Oliver

Yeah.

I call Just to for joining to want wrap everyone thank this up the morning. today's call,

tremendous we've progress of our can confidence made fundamentals, look not we're but year, only you many to amount this soon. forward leading see, seeing you and improving As and certainly as simplicity of with a clarity,

So concludes call. operator, that our

Operator

Thank Thank conference you. That joining. concludes today's call. for all you

now may disconnect. You

Johnson Controls International (JCI) 31 Jul 182018 Q3 Earnings call transcript