JCI - Earnings call transcript Q3 2019 | Johnson Controls International plc

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Operator

Welcome to Johnson Controls Third Quarter 2019 Earnings Call.

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

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

Antonella Franzen

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

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

will on ask are our address EBITA our of use EBIT the Website. reconciled release in that items. our certain special the measures integration as read and and items. and our exclude in In to and release, in press references the measures costs well call, of during press posted sections These discussing In you addition, to as the these that we margins our adjusted non-GAAP we results use and the presentation restructuring schedules adjusted to discussions, metrics non-GAAP are other attached appendix the through

was charge the continuing earnings these to items operations items of related share included share per for attributable Controls year for are of and was adjusted in call address Brian operations. which ordinary quarter. share focus his the prior operations a Power of from $X.XX non-GAAP this GAAP to diluted continuing reported special month Solutions per in on comments. $X.XX per as be shareholders results for discontinued continuing compared Johnson $X.XX Adjusting April The special the earnings will to net $X.XX quarter from will The operations.

me over let the call George. to turn Now

George R. Oliver

Thanks Antonella with highlights a good us joining beginning on X. Slide going Thank strategic everyone. for from morning and today's the on to I'm call. quarter start few you

results as encouraged ongoing results seen quarters. we delivered our We excellence talent backlog fundamentals for our by the whole innovation to driving another commitment $XXX free across of order reflect a the last commercial million remain over growth progress on on organic generate cash also the These management, and organization, at continued quarter delivered enhancing and focused we've and strong the in development, product quarter on our new underlying revenue, emphasis structure. adjusted optimizing flow. Looking the and several cost

made I strategically that am have our position. think are about to growth continue market As we we and future confident the I support to make reinvestments strengthening

in the more to to create our pursuit of that are smarter, we more buildings with quarter achieving digital providers, our the propositions integrators their missions. provided comprehensive and and coming with lead technology we focus In As examples our partnering developing is assist we sustainable customers, connected evolution of and solutions in you more and infrastructure in goals value attractive actively strategy highlighted last buildings day. to our every into objective efficient, customers

begins unique broad the analytics capabilities Our portfolio edge Johnson industry based in provide of as and this data competitive smart advantage cloud transition. connected the equipment devices, systems Controls

our the the alignment the focused Solutions of on April With sale portfolio will optimizing the longer-term end ongoing Power and of strategic vision of infrastructure. our connected with transformation portfolio around closing our buildings be at

to which within our to non-core. decision distribution air this quarter deemed was example, divest For the be business portfolio we made a

more and share debt the details the $XX.X successfully but later $X.X returning redeploy completing provide Lastly execution $X the our you within completing but of both pleased the in transaction Solutions am Power tender and on Brian capital the of we equity deployment between with come shareholders. billion call thirds proceeds progress the on the nearly that made will we I significant two the on billion from of down. extremely to teams of days the XX billion our More debt to tender. paid

to on to growth organic the growth range top returned last on orders mid in of Turning expected single-digit Slide X% the X, quarter X% with to order of high growth as year.

a mix attractive an profile projects. with robust and remains pipeline and small of balanced of order Our service large

performance bill order Security Our provide of see but most more in we from book to underlying and will up good a end markets by cycle Brian quarter. the HVAC our & regions. high to growth short was our segment [ph] details level Fire across ratio in core on slightly continue

we revenue share. QX the the prior supports gain to which also Although provide healthy macro uncertainty versus year end X% visibility remain quarter XXXX. better generally well ended monitor our our Backlog positioned to assumptions markets are are up we at into $X and billion organically to continue and continuing the

headwind X% Adjusted by results on the a to with on an sales profit Slide organic as organic quarter. solid segment now for recap X% an well a provide me Turning of in lower basis basis X, in grew grew solid across growth of reported FX growth $X.X million a on Adjusted quarter, financial four the million billion EBIT quick segments. which as $XXX corporate all of from the let $XX of XX% expense. driven EBIT basis increased X% includes approximately

business. color provide will margins margins expanded note mix North would bit in North the in Overall call. provide on EBIT updated underlying of sale. the utilization I expecting what proceeds top the and XX capital the segment America due Power I basis related the our excluding year well more points year-over-year performance of to as the driven that of America came by we $X.XX quarter from as will Solution initial were in EPS solid benefits guidance later and FX a EBITR actions Brian prior below in impact the over M&A. line increased XX% deployment from to Adjusted the

free free us nearly over over cash year-to-date $XXX discuss that year. million and to Brian Adjusted on the million With it to performance to our in detail. track I brings keeping of flow cash our reach targeted to represents the turn will quarter flow conversion for our XXX% just in conversion XX% of more $XXX

Brian J. Stief

Thanks George morning and good everyone.

was of line Slide was fiscal to $X.XX on look talked starting about at which contributed additions contributed XX% a have in below quarters. X sales take offset XXXX performance our up $X.XX year-over-year investments run year-on-year. continued save force Other rate results operational a by of bridge, product So the let's which including items net and in we $X.XX EPS prior the productivity synergy QX partially $X.XX our

of X Moving in X.X on increased let's by segment X% consolidated growth basis. billion a results to and Slide Sales X% field products X% growth led review in businesses. our our

service and our and we tempered EMEA/LA by growth growth growth growth quarter Overall solid X% up project solid and installation in in the revenue backlog regions. QX across saw North was service to APAC. in continued with convert led X% America During we all

driven mix is synergy volume and save synergy mentioned. across and XX.X% in businesses as mix margin points EBITDA America field XX as XX leveraged Segment EBIT by a global businesses, our George XXX QX basis offset North products, by X% and save. partially related productivity favorable to of and million points products that in volume basis to headwind provided leverage segment productivity as well our from grew

As offset investments. waterfall, points run you operational can partially underlying see improvement rate and basis force in contributed continued which our margin XX product was by sales

which continued so more each a Now the at look saw sales HVAC controls detail, in strength and sales. double-digit X, X% respectively. Slide growth increase on were in driven as installed up we growth of let's by X% strong was single-digit service led in starting X% Applied segments and high our both in businesses North QX America take applied and by with group Equipment

grew businesses Security to year Fire service tough on a prior Our X%. compared & low single-digits and installed

performance high business single-digits Our in quarter. the solutions declined

Adjusted platforms unfavorable synergy year-over-year well and were our EBITDA productivity additions. points basis sales margin volume of rate save by the and and than XX as impact X% offset XX.X%. as mix declined within from more EBITDA leverage force the individual Benefits to run decreased

just the we North margin a So as mix American primary driver comment in headwind was to this on saw quarter. of the

year You very America from businesses a our business. growing a at a QX pace last result segment. HVAC that & we may North This of favorable benefited faster mix our in was in than higher Security remember margin Fire

retailers. within by Additionally Fire year high box a retail shipments business had & margin Security last very our big several to large QX strong driven

business. at double-digits a in headwind grow quarter install than year's than & service XX this this America's addition our very also were Fire for America strong mix to margin growing Equipment X%. as by HVAC aided Applied points expected the also up compare. In higher businesses were North saw North was faster an a total our in orders quarter we year year-over-year to margin in In in faster rebound low was basis increasing equipment prior Security but rate Orders easier rate, a on strong

increased in of Security order You up increases of due primarily North timing in the backlog Fire were performance flat saw solutions XX%. are orders American of field double-digits. had while decline most relatively price equipment Year-to-date orders a years. our billion equipment the QX we may & the growth recall impact year-over-year. to over X.X between HVAC in quarter orders business X%

grew in in X% by Security lines grow we led and to accounts positive We and in industrial as growth across with businesses saw high revenues Orders and two most with in up increased saw Europe teens a Fire X% of IR another and turn for regions Sales Security. solid mid in Fire in well refrigeration & growth strong being growth high spot East quarter HVAC. in let's in service XX%. only of as the Now business single-digits region install and thirds HVAC. Europe our the which [indiscernible]. X soft by Middle strong demand strong from Slide & mid double-digit led single-digits Growth was up our and low most single-digit

margins HVAC Orders underlying favorable single-digits was as led growth XX.X% in revenues to increased strong Fire expanded basis basis the backlog X% softness increased this strength Latin a at in double-digits up to and more in save both quarters EMEA/LA East ended Similar in includes Security. service by sales few XX service & America force points EMEA/LA Middle In points basis than America past headwind mid billion installation installations Latin revenues and synergy offset XX% volume $X.X the lead EMEA/LA in Adjusted strength EBITDA XX productivity as by and the and EBITDA more modest than quarter low margin foreign by offset and and points continued XX the XX%. in increased across Europe currency. additions. in and activity declined from increased a in project

on by sales and led APAC activity project with mid installations in core by X% which single-digits. sales XX, to grew quarter. Slide demand Moving grew in platforms for led continued China in Sales X% strength the HVAC our we at XX.X% for rate sales China. Install now included increased force up higher was leverage core BMS service the high additions. offset run mix quarter X% which grew offerings favorable the X% Adjusted higher single-digit EBITDA by and growth margins in with partially in as saw volume install our

Asia some increased a Pacific APACs billion. timing X.X certain to single-digit service was backlog mid of strong to substantially increased installation offset of orders growth year-over-year in awards. due decline X%, XX% primarily by project X% orders the

year X% XX, a growth So the product sales moving overall quarter. strong global to prior of increased on X% in the Slide top

down grew take across in HVAC look North single-digits. all low businesses would HVAC the detection. increased realization continued volumes again grew a three single-digits and quarter. mid once Global the Let's strong the BMS negative America double-digits that residential fire on IR low controls, at from mid impact from in favorable mid the given and strength note mix. Sales the our quarter cooler security, platforms; and equipment HVAC weather. were benefiting single-digits with low grew a compare single-digits primarily residential revenue price across pieces. double-digit I

over our has been weather year. favorable, at channel the relatively business inventories July in just June and although last QX XX% of grew QX to end were more high Looking

our a high equipment business the year North against unitary double-digits our low single-digits. in grew prior applied up also low double-digits in Asia. business strong tough specialty reflecting fire declined single-digits with and America business single-digits and commercial grew in for channels quarter our HVAC of North products single-digits strength in America in products in high IR compare indirect projects chillers high light equipment America. -- North And Our quarter particularly the grew on finally continued suppression demand mid

margin higher volumes, XXX of solid productivity XX% driven do of by product I leverage increased offset and a mix, investments a would positive expanded investments EBITDA benefit in synergies product EBITDA which level year-over-year cost, favorable in margin that segment will we quarter. the the higher basis Products and and expect QX point out impact compare. slightly by points and cost save price planned our

On benefits also but of XX% from expense reduce recent was synergy to from the down Slide early XX the XX the Power productivity taken primarily corporate actions we've driven save given divestiture. million costs Solutions and to

year of to XXX in the corporate now range expense we expect full XXX For million be to the million.

let's turn flow to free on So XX. cash Slide

Free flow basis adjusted million XXX and was XXX QX above on continuing reported from cash on ops for slightly basis. an a million

basis as year-over-year. of We trade continue which on points is a to capital working make good is down progress percentage XX sales

flow growth in track year-over-year cash HVAC was XXX expected and for we conversion. a XX% we for full Year-to-date XX% year up did free we which seasonal remain the nearly continued As inventory million the on adjusted our businesses. build supports see

turn let's Slide on XX. So the balance sheet to

you With It's the to range a two leverage in throughout on the that balance of you gross I'll do our we two net remind pieces more I let the will the there these of as the with quarter. and each would the remain to repurchases target half conserve cash our back debt arise $X should EBITDA we billion that on XXXX. of provide just move well like target in we quarter. flexibility. our sheet the that over debt Power $X I net detail closing intent Solutions our before completed repaid the fiscal gradually to lot multiple but net transaction debt balance share said our that more of in range times over of to notably Power EBITDA Having were billion Solutions we moving to maintain below need Most to to proceeds. of will deploy and

pay let walk down through you let's me debt our So turn to XX Slide and bridge.

started As XX.X XXXX we know you debt of gross with fiscal billion.

billion and During This short-term billion X.X the XXXX seasonal also our combination as of first we which increased a first as term million cash was a $XXX TP $X share supported loan. in higher a increase outflow half half by funded well repurchases. debt of our

billion in As debt tender X.X using sale. net we we X.X $X.X debt from portion repaid forward the down generate Power billion rate was $XX.X other million short-term committed proceeds included paid a interest planned savings and down to you This expected as debt a in securities. a of paid is in the a completed This go billion of billion and $XXX to basis. run in annual on

of in all $XXX We financial to originally million. debt the the to bit we have out the TSarl pay billion repaid for agreements secured million net earlier we financing repay early range we charges like $X.X to and TSarl I year XXXX mentioned in point planned. related down that the XXX be earlier I million did $XXX than addition In all now fiscal now having that obligations terminated a term to loan would expect

Slide repurchase a our activity. of XX share provides walk

successfully As you about $X XXX an back completed price million $XX.XX. early a million. $XXX the final market shares Shortly June billion. billion for purchased X.X completion tender of QX we tender X after at repurchase a know we the in total repurchased XXX two we the entered cost million open for now into of and Year-to-date an shares the shares in weeks of million of program incremental we've buying

with continue to the into stock. Looking we fiscal QX to moving XXXX repurchasing forward and ahead are our plan

flexibility billion leaves current an XXXX provides the X.X billion. for remaining plan for the Our $X and fiscal of throughout OMR

share calls we on as the our through continue update plans repurchase quarters. you to will several next move on future We

items back George Before over I for QX provide Slide in commentary special on on that the turn I it an outlined we that quarter some to the want to are XX. had update guidance on did significant

payments. reserve This which resulting with a the $XXX prior was year million. was related in a that start by historical of recorded no Let's ago quarter Tyco to was cash several resolved favorably indemnification release in reserve the years divestiture tax

continued a of the reviews million we impairment related a of sale non-cash our Secondly distribution in portfolio. portfolio as our to non-core recorded planned charge business part air $XXX

training this cash contamination is facility resulting comprehensive in impact Third, through party and facilities environmental from in environmental our environmental Wisconsin foams review charge the address led fire multiple Marinette, at a to cash The we be our firefighting use of environmental related by containing our of of after generation. PFAS charge normal to conducting expected $XXX years will reserve of will exposure million. to incur our funded recorded over costs annual compounds consultants Marinette. third remediation related This the of

tax The U.S. fourth newly of a tax on discrete item related XX, reform. XXXX enacted associated with charge relates XXXX the regulations to to $XXX June million

that debt this George charge then Power in on will in gain a ops future for the me we mentioned debt to sale. X.X the our charge from sale. which of the and expect over substantial related tender had to $X.X We million $XX billion will was turn it With on guidance. And years. proceeds portion a we earlier connection Power back a result not that Solution I dis extinguishment that early of funded cash taxes Since pretax Solution be with in let finally [ph] the recorded with billion a basis paid

George R. Oliver

Thanks Brian.

provide line on up EPS Before questions our you let update the Slide an our guidance with XX. XXXX we walk me on for open starting

no you in operations, to additions. benefit what investments changes force of last is Just with the a EPS from we sales and shared versus synergies, couple quarter, change there

share and charges on capital count. the can see financing You impact our of deployment net

net last benefit primarily interest the income interest rates our to paid is our activity range. at of relates in favorable significant of less quarter. EPS charges midpoint the expense given due and to This additional a during Compared to benefit there the down debt financing quarter $X.XX guidance range

to corporate sale the from right As well of resulting Power costs a Solutions. as start size

As range a before of includes an a EPS $X.XX. range result high This to EPS year-over-year. end items of and to the expect growth $X.XX we in to QX the of special to $X.XX of are tightening expected previous $X.XX our our XX% now to EPS XX% EPS the range guidance a representing be adjusted

outlook year-to-date as Slide reflect XX, have operational line some Turning of and our performance assumptions current the to below our items QX. as we the updated to well for

For is of at range end our previous to expected year high now growth X% up the come X%. in the full organic to

Given America the North the mix the higher now be margin expected revenues with expansion is in to coupled XX year. QX segment our basis points expected EBITR approximately for

to As businesses top me focus fundamentals the remains a line questions. earlier it perspective. the both I With the mentioned see and and that let operator line turn for are driving to momentum cash open from over continuing we across our on P&L to our

Operator

Instructions]. [Operator

from Jeff comes Our Sprague with Research Vertical first question Partners.

is Your open. line

Jeffrey Sprague

Hey, thank you, good morning everyone.

Antonella Franzen

Good morning Jeff.

Jeffrey Sprague

morning. Good

it bit X back Brian little term cash, particular do or color see macro a the Just some so for of like used are see you're on preserve kind standpoint, can and a billion if the on actually a need of of kind you the in worrisome holding like use give here? your on keeping clearly just something back reason outlook that, what you're from we to more pocket cash you're thinking, you there looks and the repo

Brian J. Stief

billion got what we've XXXX. plan gets was there simply trying is make fiscal Jeff for now to that program and think during I formal that communicate I executed our to X.X right sure a No, was

a billion of repo year As very the that line we back well M&A we to going just from we the there standpoint both out macro things in half are use share as be play maintain through product look other might move or and flexibility well. how of could at we want that other we gap year some to fillers a next to see also bit but as for $X move

didn't entire kind of move X.X the fiscal fully to right will updated X.X XXXX. on we're but So $X going we billion throughout do as to keep the just commit and now remaining the you want we

Jeffrey Sprague

front, that on anything that on up follow pipeline, thinking you a George, you pipeline? as maybe are bolt have on then active the what an through moving M&A And

George R. Oliver

reinvesting me strategic our Yeah, our and supplementing ons look continuing our That M&A at execution, to relative delivering by we're that delivering we continue to let being start making on that as with Jeff we're organic saying with all commitments to on. bolt focus communicated bolt performance reinvestments with said sure as we're we've results. we're

in out the So there a are so build been as continuing working, we a our to and digital pursue acquisitions. building we've pipeline lot management systems capabilities is is that within our of we solutions, that

we're now said still markets. we our we believe to the the do that to And Brian only across to the continuing see a pretty pipeline As good on as capitalize environment, environment orders that very not we're orders much but converting grow.

to we're in going we're track we as and execution, to that strengthen what sure we're relative focused doing also want make so M&A we're the keeping happening on to stay continue to forward going And to what's go we organically.

Jeffrey Sprague

you. thank Great,

Operator

Our next Andrew question Citi. Kaplowitz with comes from

open. Your line is

Andrew Kaplowitz

Hey, good guys. morning

Antonella Franzen

Andy. morning Good

Andrew Kaplowitz

had a in Building you significant mix about America. George, issue you North Solutions that talked we know relatively

& more than You HVAC bit QX Controls versus did Fire in slower little growing but a slow QX. mentioned down & is Security it

on expect improve economy the and store of little in mentioned in would you the retail ahead? U.S. headwind the any much this to but difficult mix You slower a growth how a quarters quarter business basis points a comparison retailers of on XX

George R. Oliver

year execute very And retail. Fire which in are year-on-year HVAC what had very then was although so last we a look in Security that at Fire quarter, market and to said well. driven we & & it's place took within XXXX Yes, strong growth we mainly we're as because much in strong lower business third Security at outperforming it as than growth in you continuing very the our growth in

be for year. for see to mean the with going in And America so mix XX as basis fourth forward about points flat that's quarter. going year we And roughly the third now will quarter project North it through relatively the come I we in

and offsetting we're you very investments go suggests able on with the into well place, offsetting at fundamentals sales go XXXX. improved is force to it year basis as some And that headwind. as now a then leverage productivity that are achieving look that the in we're pension confident making improved volume we when the our the Now in synergies negative is mix. the way that we're to see we forward fundamentals we be of have driving as But the

Andrew Kaplowitz

that on segment products maybe are products George than the that, time, your about of that much you schedule on mentioned incrementals the follow-up in usual. business segment? We know improving are strong could talked costs the stronger in did QX you op pricing I if incrementals getting but but versus on the products in know up you were than in that in execution actually XX% investment actually I in usual ahead over have and quarter lower to investment you

George R. Oliver

is job had and Yeah, when as as is know year-on-year ultimately price headwinds positive come look where quarter cost well you done as through our around that you XX the has we price done to and of business as this basis that at well price we've commodity as nice product cost within the tariffs. driving a points. get significant We've lot about a productivity work

big been So a strength overall for that us. has

our as profile with what product launches. reinvestment it see year when some look But fourth the in timing With expected. the line of spread -- is said, additional not was it's it's and we investment through much our quarter pretty in we'll based on it leverage you at the Brian --

go that's businesses performance with the to fundamentals be the the with look at very continued adding executing we're margins getting a these well I to the to cost growth, driving to say through lift with able be and and forward which leverage overall fundamentals, we building margins. in we're The what with believe as we we're XX% is coming were On that will that position is making the a XX%. product. would be leverage the So growth, to price we're work reinvestments the the we're basis the going

Andrew Kaplowitz

pretty points basis being XX going that price see for the you stable And cost?

Brian J. Stief

happening -- on Yeah, of cost what's what's we from happen that I happening future tariffs, what feel to standpoint, a predict that mean but of in go a today taking account a good based -- on we're understanding you the now have pricing see I now pricing we're that I mean can't all confident from and what's going standpoint into forward a basis. with we

Andrew Kaplowitz

Thanks guys.

Operator

Tusa with Steve JPMorgan. from comes question next Our

Your line open. is

Stephen Tusa

Hey morning. guys, good

Antonella Franzen

Good morning.

Stephen Tusa

what talk you seeing you maybe in applied several China? Can pipeline your the on the order quarters looks like what global markets, for are about including next

George R. Oliver

Yeah, which markets are the what was to Steve? referring -- you

Stephen Tusa

equipment, Global applied. just pipeline there, order HVAC applied. Applied the

George R. Oliver

let look our you globally. up businesses overall HVAC me give orders our a perspective on our So, just you at globally. When performance are X%

Our and globe residential commercial at businesses. converted when revenues the pretty our our pipelines revenues to up continuing you across look at we build kind that X% in to are much we're both pipeline of mid high and single-digits

kind work that done see to by in break of well place. as we're applied mid that business high mid up rev of UPG at single-digits. and [ph] combination American up go in us XXXX. still and pipeline, setting we that's very as feel we're here so a business the that's as I able then look as North to are we're into the kind out feel and good forward you service businesses market. of then overall driven X% how single-digits [indiscernible] Steve converting commercial When up high Up we've the the and good putting base when and overall a how of result we're be growing been our about our about getting globally HVAC take that the very that you pipeline, in of you So single-digits advantage and installed And single-digits up with the that's we segmentation our

Stephen Tusa

China on HVAC? comments specific any China, and what commercial seeing in Okay, you're

George R. Oliver

single-digits, so Yeah, mid when we're seeing I better in perform. of seeing China in which continues you bit the mean single-digits. service look market high it kind we're the little is to China a orders at

we're So a presence watching but strong as this closely there. you we know have

on the a sure we've making We the growth strong we've right And capitalizing that's positions got market share a standpoint been occurring. product. that ultimately have and from we're

the have we're that important cycle we're any getting I we our or continuing to sure pipeline building which significant service very the in seen that make is said change and to as over the revenues. build So recurring we're not activity business the

Antonella Franzen

Steve very the orders was -- up orders were mix APAC install and specifically China really although add is between strong a that China would only thing X%. and service. it I was were

Stephen Tusa

guys. color the for thanks Great,

Operator

next Our Research. Nigel with Wolfe Coe question from comes

Your is line open.

Nigel Coe

good morning. Thanks,

Antonella Franzen

morning. Good

Nigel Coe

go footprint the retail you headwinds, just to retail to of you that pace, like think it business and to [indiscernible] there in wondering can covered wanted this and the seems of does retail physical light exposure an just accelerated the transition in obviously to about have Just starting is but effect back America shrink recap forward online is occurring? already the be big North going you that feel how I'm that how

George R. Oliver

$X Globally was business. business about piece North as mainly security we we've shipments didn't been year. with year a of that growth had Overall the significant which we the last businesses as happened multiple got last year quarter as billion business business. there, retail Nigel know have the the well and in business America. obviously driven quarter significant this very in a is is What it It product a strong global in by digital traffic antitheft repeat some building you we

obviously had know a this performing fourth growth, this we've watch watching overall for slowdown seen out As going that impact pushed in year, a retail, a our of projects of we're seeing good some But last are we're of management quarter closely. some to We've the and you we the growth inventory is have lot had lot challenges in this as quarter. in but well as closely here businesses of which third the year those the business. with business, been Certainly well.

Nigel Coe

just and from the great bit quick a on that? line, business up just what's -- then it's what is Okay, I'm quite one driving wondering and prior NPI a guides your

George R. Oliver

performance up of perform because QX Hitachi to would going to into of strong of simply to they those Hitachi. -- businesses we're that own line continue even strong move we continue perform fiscal and XX% those very ventures XXXX QX and where So be that see the the NCI and and

Nigel Coe

Brian stack getting those just revenue then better out on up right and better that do is And margin cash JVs? where we now of quickly or

Brian J. Stief

saw you flow cash quarter our the as we big to quarter dividend attached we did get statement in the was look expected. that release if the you So a probably in at

mentioned I've receive -- so the past have I call of the certain third entities calendar dividend As related planned we the did quarter in business board news the we've is we got quarter than we in entity a each and on say large I as second had the Hitachi Hitachi at on getting meetings the year a think it's work dividend We'll this good when in years should prior the we larger in again level to in about go forward past or talked require continue on reinvestment is a and it as growth. the basis. to I've a have support of amount similar some out of may

of dividends the we on that one. forward basis the we the get go level venture to got in out of but a So Hitachi quarter large joint going just have a monitor we're to

Nigel Coe

Okay, thanks Brian.

Operator

next Mitchell comes Julian Our Barclays. with question from

line is open. Your

Julian Mitchell

thinking on corporate been progress about good go run good rate first very we've when XX very, of question the think think just sound figure forward closer right Hi, like or is the next million into expense, we the to I forward XXX reduction so there maybe run again. the another rate of Does year. sort that so about Maybe go morning. And that? sort million to

Brian J. Stief

taking full pleased our costs that be the will say to be heavy. out of run I taken say would of transition Yeah, going the million move to probably immediately out be out million cost we this would we after taken we with rate corporate XX million next during that very $XX if XXXX. took we Realistically out minimum course probably to through XX fiscal accelerate Power some that's a just say would into another the actions as year. then maybe take them the the that come give XX was would as sale might see you you assume I XX to And begin right million year and of going that I can we if pro-rata so year XXXX little that out. I million there's to size. team would

better to more So along number million probably to is XX work I think million a XX the with.

Julian Mitchell

And Q municipal can to obviously sure we quarter, as upcoming mark-to-market individual get thank helpful, triple give environmental on the specific watch That's you and noise at a issue S any Wisconsin actions, environmental you. maybe how but all up million in book quick then us that they and the just around just that in I'm events reserves total you XXX a for, not did should follow-up, JCI at reserves the on you and you pertain think that a points present where so of JCI? charge now cleaned sit the this mentioned in

Brian J. Stief

comment environmental me your regarding on let question reserve. Well first

and on K's $XXX appropriate are I for did issue and matter million. $XXX upon particular we we the we Incremental to for of the but the million next over all manage that less other is work we've There's want that will the matters one reserved in million in disclosure reserves reserve the Marinette several than I the quarter. believe say globally Marinette million based got this $XXX that between that $XX million. largest think a I at footnote in years. Q's XXX

an I think So feel comfortable where we are. standpoint with from research we environmental

George R. Oliver

let question the litigation. address the other Julian And of the part on civil me

the foam. then foam, the that we they need fighting purchased exacting military standards. make I think And PFAS is and perspective. chemicals. life fire which Tyco trace the They to compounds firefighting to to blend of this in made Chemguard amounts PFAS put contain make saving foam

Tyco at responsibly And and government by U.S. Chemguard producing acted very these always confident these we and military government foam to to foams ability in and specified So subject of and the and contractors issue the is feel defend clients. used firefighting defense. therefore have the our majority in

Julian Mitchell

Great, thank you

Operator

from with Pokrzywinski Stanley. comes Morgan question next Josh Our

is open. line Your

Joshua Pokrzywinski

guys. Hey, good morning

as channel softening How little quarter. to in So do are work about the you long made George seen then as inventories a well cooling in season? unitary bit if other along still the of inventory a at end system move to or being the comment the and the environment pushback half any of the back price down folks you high in some the the in just of you side trying earlier takes those just think it

Brian J. Stief

down normal don't our pricing that in I think market QX think I a and the we it's see going inventory impact of bring all. should during to any at on have

the it's down I through quarter. seasonal So move think will that we here more as fourth come

George R. Oliver

and has last over some the and the like out impact been this weather managing managing And the of of played the inventory been we've appropriately. quarter as that we've

that as planned. are into positioned latter are We the the watching closely of get as have we part but we here season we

Joshua Pokrzywinski

piece knew is it, to I could be Got & in a I from. then tend Fire And just that's follow over lumpy came just are you there could the comp be Security where had several pipeline was have appreciate I past But there. didn't there -- a strong keep year, last retail about that outsized as up in specifically other guess the that that on that challenge? quarters over that thinking time, exposure should helpful. mix exactly does any mix that be mind the we

George R. Oliver

as of I've a the seasonality four look the because compares look at the of There different years, business part you projects the we executed do are of -- a profile quarters. of year-on-year I for the you when number business way the occasionally is to at have retailers. When at some look been business with

Certainly like. are don't seen. on their we I aligned retail to what pretty the unusual plans close based relative much we've are what of we think retailers the with their given big in have it and all the and staying So presence was investments we're anything to that

at don't this I So see unusual anything stage. that's significantly

Joshua Pokrzywinski

color. the for thanks Great,

Operator

Deane with Markets. comes Capital RBC Our next from question Dray

open. Your line is

Deane Dray

morning everyone. Thank you. Good

Antonella Franzen

Good morning.

Deane Dray

like anything as North kind some of on there's to project would in would you anxiety push construction, on America broader get that and along you've some that certainly? lines that uncertainty be seeing retail color seen, some those sector to just trends, specific macro the attributed is that or the releases the more non-res see clear are sectors to in and be retail you macro outs some just it weighing ones Hey, of is just

George R. Oliver

to So let there the environment. with me your start Deane first question relative

space we lot [ph] the institutional of I think of still play we overall all continued see and activity we the it a our when and be is industries that look forecast is where given what expansion. ABI, at it's Dodge whether in

at I share. some would picking so sales up you are stage we also we've force could think Now expanded this our our and footprint it suggest

orders. So grow, our to those two North are converting America pipelines are orders we're continuing

total HVAC -- was orders X% up in are but double-digits. We America up up North are

we at we're a creating And that we're feel term. -- high single-digits so in here see going and least well to the and that backlog we're performing confident continuing near

retailers, to of specific with go going the have especially visibility I a we each out. good large and and what monitor retail the is and that ultimately by specific. to at pretty As were base plans so it and retailers we have as played the look around said relates It's as as retail retail is what their mean we're project we to discussion I this project plans what customer forward. their our are,

Deane Dray

through bigger K then make guide, through typically like months verticals see some just X what's during going those you that XQ and as Great seeing project are you projects embedded summer implementations the in expected? colleges,

George R. Oliver

as Absolutely, And get suggested fourth a I grow that look going single-digits in will mean the mid X.X% we X% that's growth we're when X% you QX we look to to growth when to at us last compare total. our and at growth quarter. in organic over

that, pipeline on at of planned. that those So moving current are deliver all we're we our executing to projects forward as look

Deane Dray

Thank you.

Operator

from John Credit comes Suisse. Our with Walsh next question

open. is line Your

John Walsh

morning. good Hi,

Antonella Franzen

morning. Good

John Walsh

and and a seems couple pay growth lead around upgrade building metrics it product and bringing JCI we the you're release actually a owners we're additional of really that smart basically obviously not to can seen Honeywell so you some occupants. and but AI taking what that really X.X to for like integrators products, are point to you've you they were these control there to excited see Hi, about on to actually they put of management were and new this is going anything Is there's newer buildings enterprise product guys there me were services necessarily willing talking capability out other really had specific to offering? intimating been to good

George R. Oliver

be data doing to to customers. then company overall all create leading then for building in solutions our on our be on strategy data this about in our the to And digital top it's to Digital leading what management. is core our management create as top of and HVAC able equipment layer platforms, that a is you for building So able integrate think value this Vault, we're how to our to and of with portfolio create our of new

enterprise ultimately our And and execute deliver so and they enterprise the we which jump able things taking be see in. to for call you're management that to is referring management is controlled what our that John's what customers data that to all positioning value of data

our digital and other customers today we but we're so across the as can got supporting. now that deploying got solutions growth these that installed to we with we've installations service very able our that successfully able and that on And that to digital business we've about have a deployed service a number take of we're we not only number currently and think of base to be accelerate be add with that our solutions

value to to for So do capabilities our leverage you as then customers all that. strategy said our ultimately more create of digital the its we core and how

John Walsh

business that maybe Yeah any things software a component what you you like size the the either numbers of share? have around do follow pure on, if can as I guess your is,

George R. Oliver

software segment you our the embedded across the solutions that as a the as don't we today business We but know of to bring we our have market. lot in well revenues products as

at able doing look within of we're controls, for building our to what that, outcomes new integrating our create apps So as that and all is taking us create our be building fire within a security going platform, well to platform have and as that create now ultimately platform, to within be is data growth software us. that able we that when service to enables you

so management can forward that focus it but the at way our some we building that's making? and investments on go we with we're you can taking segment we how something forward as that how we'll is we look So the solutions track progress don't we're as we're create making that metrics something

John Walsh

Great, thank you.

Operator

comes question with Kaye Noah next Oppenheimer. from Our

line is Your open.

Noah Kaye

Good morning, thanks.

install. about to outpacing going service Just you back China maybe talked

business thoughts one then on kind guess confidence for mix and drive you the of quoted? install reasons back, and coming I your there, your Just to price ability on any delays favorable and

George R. Oliver

the was do comment pipeline I overall we flat suggest the But got project the there be place on resources on service accelerate we've single-digit as off single-digits place the well in growth the with what And to low going orders that being when put Yeah, base standpoint look able you in mid as continuing as orders we're the that we're service going growth the in the we're as still somewhat order kind we to to installed were see bit our install of in overall side a from think service higher. in to to little there. both revenue. that a at

of a field revenue this so it's of overall XX% represents is in it's X% in our us -- field And the market business. our about business APAC the represents in for business it APAC about big for us, buildings and well XX% our in business -- about to

market So obviously us. a important for very

Noah Kaye

kind initiatives make the your a about obviously here recurring generally just should as the about on to recurring of not guess of more you your we just and just there of but total? talk comments greater percentage business are sticky for I growth not think tools -- generally And previous how APAC of to can generally software but revenues, some drive

George R. Oliver

sure So been better that a service markets which our enabling the have XX% we've we're making at progress service been deploying force company in And of our there our you a contract as grow solutions strategy and look software and that that sales the is year, by represents About the that last And incapability. of key footprint within when in than couple is year getting the overall of that expanding how to a And little the that you is globally. tremendous right over recurring as and get key XX% the total so driving right revenue. right leveraging the bit revenue. a we've with components force we supported then looking we of sales lot made know the half we're footprint. with we technology

a to We've rate it's to and the is but that's not of roughly So single-digits overtime to been at installed percentage a grow three. grow to recurring growing obviously continue we're also goal revenue. run mid combination same higher our been only of all rate with about get that able our

And So we the then the digital that's deploy we put becomes contract that's that the with more solutions place. into and longer-term XX% overall solutions strategy. more stickiness we that with recurring ultimately creating recurring that that's can that

Noah Kaye

Perfect, thanks George.

Operator

question comes from next with Wojs Baird. Our Tim

Your open. line is

Tim Wojs

good hi, morning Yeah, everybody.

now, Just years, -- year. right I out last we it should was question margins that had XX the kind we kind of as incurring of to maybe right think basis incremental think on investments just are level what's one you're that the the of point of of kind ongoing in investment headwind

kind I each incrementally half that this how that away think time of much can year? it's probably continue of much will and that How over kind of year. of closer go to

George R. Oliver

Well that there is elements that two drive reinvestment.

growth that's headwind coming and the two first last increase the been the for The is the of ahead adding were sales that years. we through actually

a is that revenue flattened that percent sustainable now a rate now We so of cost at are adding as the has out.

to our any see sales forward cost. additional going shouldn't headwind we So relative

We're revenues bucket as up and to a last percent the we reinvestment three big product we that we to new of get level ending is more other through that four maintain project be over able ramping as as should and year know reinvestment our forward in now flat. been products R&D you of we've The this in going years.

any there headwind see significant on forward a shouldn't go basis. we So

Tim Wojs

so Okay, you'd the of the XXXX last versus years actually be if kind think seen headwind? more would investments that basis into of year-over-year we couple you've a over a look kind flat that on

Brian J. Stief

correct. That's

George R. Oliver

the percent As the EPS on more have we won't spending revenue bridge. we'll a a of headwind dollars be percent but so of revenue as

Tim Wojs

And just now. on okay. -- debt debt cost of remaining what's pay just the the Brian average exactly, then the down right, Right,

Brian J. Stief

above About little XX% -- it's bit a the that's an of remaining of that fixed there's debt just and at rate X%. average

Tim Wojs

you. Thank great. Okay,

Antonella Franzen

Operator like I call comments. George to closing over turn to some would the for

George R. Oliver

want morning. our for to I call thank everyone So this joining again

we're in growth see pleased you backlog. momentum As orders our with and continued

earlier remaining many overall our to As we macro pipeline markets eye forward healthy are seeing of end order keeping I the look and but certainly mentioned And I environment a our on are soon. close robust. you

So operator that concludes our call.

Operator

today's your Thank you disconnect this for participation Please in conference. time. at

Johnson Controls International (JCI) 31 Jul 192019 Q3 Earnings call transcript