JCI - Earnings call transcript Q1 2020 | Johnson Controls International plc

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Operator

Good morning. Welcome to the Johnson Controls’ First Quarter 2020 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. the Investor to Relations turn President Franzen, now Chief and and will call Antonella over Vice I Communications Officer. begin. may you Ma’am,

Antonella Franzen

Good website well quarter found Relations for discuss you related can tables press morning be conference this all at conference and to morning portion call earlier call presentation as release joining and Investor Johnson the XXXX of on fiscal our first johnsoncontrols.com. the issued our results. as The Controls’ thank slide

Chief and Officer, Chairman Officer, Controls’ Johnson are today Chairman Financial me and Oliver Chief Vice Brian Executive our With George and Stief.

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

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

excluding the Power to comparisons a of prior ops year results all the basis, on Additionally, are Solutions. continuing

items, will Controls’ in shareholders quarter included of and GAAP to $X.XX charge earnings continuing the which for address per was a $X.XX to Brian from comments. attributable special ordinary share his operations net Johnson related

per per compared items, in prior to share was continuing quarter. non-GAAP operations from special share these year adjusted $X.XX the diluted earnings Excluding $X.XX

turn me to the let call George. Now, over

George Oliver

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

few XXXX. provide to we get like I of the rest fiscal details we a into of the ahead quarter, as thoughts to the would Before look

good saw growth, year. see resulted this our costs, across and service with execution, momentum of a the expansion points continue from performance metrics basis Slide providing on to in QX reduction We driving key of XX the accelerated project innovation. gross This a improved to expansion margins Starting structural in we X, quarter. margin majority start strong

All will as go key points for focal of these forward. we initiatives remain us

We XXX% have also basis, management improving have cash better do working but cash pleased important towards of have sustainable capital I work to made progress our free and our still significant on trade profile to-date. a around discipline the progress made generation to in continued spending. bring up am to steps extremely We more conversion we CapEx with with

in discuss acceleration slide, the we given were see the quarter, our continued but flat pipeline QX. am in we As orders next will I strength will confident see the we in on

Fire building Our each end controls, in markets, leaders primary are as HVAC, healthy remained & market. Security and positioned we commercial well

We over course have future significantly opportunities. to last flexibility months it the deployment capital comes strengthened ample our with sheet X the when of balance

intently remain times said couple drive we a performance to Finally, in strong in as and culture the these performance over of on shareholder focused have last many calls years, maximize execution value. I building sustained

in be in into ‘XX. in price in ‘XX. were resulted increases price increases of a a flat pull-forward October, accelerate late year on comparisons details businesses Last prior Turning QX effective the tough to orders announced in year Field which quarter with the increases. faced Orders in effective we we announced January, into of for resulted Slide to X. price as our for some starting QX which our announced fiscal fiscal our were given the This timing year, aggregate pull-forward

projects. pipeline order remains large profile of of service mix attractive and our a small balanced and robust forward, Looking an with

range single-digit order quarter XXXX. at expect our a QX sequential X% and the full We growth ended in provides to visibility prior on basis remain Backlog single-digit up $X year versus mid in which very up the target be quarter low year. growth confident through in high for and billion, the mid X% we organically to the

Turning now recap $X.X the X financial to quick increased of Slide on of for organic billion the sales basis. quarter, a in results X% an

Within top year. prior the businesses, single-digit total service X% on mid in in quarter Field the revenues the grew of growth

and little provides Our than service in or Field revenue revenues $X our a stream. billion over profitable, of resilient very more revenue us a business represents with XX% base

expanding Danaher joined been global Ramaswamy service As our will our key dedicated our our and with team infrastructure recently a improved to service of strategic investments offering fundamentals and has growing leverage drive regional global work and on across from priorities. execute and the appointed Ganesh direct leader. closely a leaders priority, consistency we channel,

our strength With depth of have we a strengthen service core deploying the capabilities. while digital new opportunity our and our business, portfolio, service tremendous solutions leveraging and to building

the million with segment the Solutions an free line contribution in of pattern, excluding quarter growth but cash outflow and of prior continued organic seasonal in XX% normal increased over a an EBIT by on performance significant year EPS X years. over driven underlying on XX year-over-year $XXX expanded corporate our significant XX% the Overall, and under grew in with related points solid million operational basis from XX $X.XX headwind basis $XXX sale. the the point focus last Adjusted solid of basis of FX. to was EBIT profit expense. improvement deployment reducing margins a a Adjusted Power X% proceeds from a Adjusted

more discuss our will With in detail. Brian that, I turn to it over to performance

Brian Stief

morning Thanks, everyone. George good and

So, on year-over-year bridge Slide look let’s EPS our with at get X. a started

XX% Deployment added including year-over-year operational Other $X.XX. up $X.XX, Power our productivity EPS financing the of the first benefit quarter synergies proceeds were items performance charges roughly in both You that our year-on-year. This Solutions save count net can adjusted net $X.XX contributed and respectively. and $X.XX see share and $X.XX. of first results in quarter which

leverage basis. by increased our productivity X% volume the X% a products synergies. and and businesses billion in $XXX $X.X X% Field price by Sales led EBITDA in Segment Slide our look our save organically let’s cost continued move driven and at in strong from So to global growth grew products. and results businesses of realization organically Field, X of segment X% on costs million consolidated

margin EBITDA basis expanded segment XX.X%. QX points to Lastly, XX

If XX headwind basis other This in you offset look America. XX retail this at items the business point underlying to margin waterfall, in related and improvement included basis the our partially North to points was by bps contributed operational quarter. XX a related

a install with on look led at activity. take led grew single-digits America mid in North install starting America. more so X, detail, and Security, service growth in was let’s Fire Slide Now, & both sales by North segment activity. each by Growth X% organically quarter higher balanced in which the grew

a Our quarter low of HVAC quarter to low due increased in primarily Solutions double-digits and growth over prior in applied Performance year the the given businesses year. compare this single-digits XX%. equipment declined control tough double-digit last

our to was project And we Orders on increases As X which and saves and headwind margin a prior expected, retail increase as QX and in adjusted applied related EBITDA timing to headwind benefits volume our see by mentioned with in the HVAC quarter as at to were offset in a point to X% from did Favorable in line our call, expected primarily XX%. the we declined XX leverage margin increased year mentioned synergy business. in continued retail of basis this George EBITDA provide the and the revenue. point percentage price we business due mix change given was headwind. productivity

QX but North off the start America strong bit year to to America, up current given Backlog accelerate will remained orders in range activity. billion, a expected in in we at single-digit slower $X.X pipeline year-over-year. confident that We are X% North mid

Refrigeration. install XX% was on and positive and organically service with grew Controls, all Fire the across & Slide HVAC Turning up across Growth up to sales and EMEA Security and regions X% X, X%. Industrial

in growth. HVAC prior with the in America. service. spot in Industrial in subscriber remains growth and that shorter by grew single-digit mid single-digits a easier growth Controls Refrigeration by our Latin particularly region from the all spot benefiting saw high regions in in business which through Our solid low mid was led we bright Fire for controls across in back strong mid-teens XXXX Middle helped activity growth service and of and install in the solid and business but cycle Growth was in and in our also both business. which Europe compare, which install high-teens soft single-digits ‘XX order & and the was Europe up grew both increased quarter Security predominantly half East in was double-digits with strength fiscal a year part

and EBITDA margin XX% XXX X.X%. increased to EBITDA basis Adjusted points expanded

improving continued in project leverage volume as to reducing continue We business. from structural and well efforts our around benefit costs this as favorable execution

up continued Controls in Latin Orders compare orders up ended prior on led the platform, particularly This and Our year-on-year. billion, Europe year X%. our X% was increased $X.X by were a backlog in slightly in tough at EMEA/LA quarter America. strength in

sales a improved by So, Security, leverage, of let’s project installations, up saves X% higher strength of continued grew mix XX% sales about partially as in productivity points to APAC Fire install on flat low demand XX service remaining margins overall. offset was saw quarter. APAC. which led the Adjusted year-over-year. represents basis of to were higher which in move execution represents APAC synergy APAC grew the by volume organically you with and Slide X% for Favorable of increased and EBITDA sales which Controls relatively XX XX% versus XX.X%. quarter. X% HVAC single-digits know, & and

up to trend Backlog we increased were the X% over consistent APAC orders billion. $X.X year several X% tough compare last Asia-Pac against year-over-year have X% in the prior seen with quarters. the

conditions competitive in just remain out and that areas in the APAC the some I point economic uncertain. environment remains

We in closely. which dispute overhangs APAC coronavirus situations in the That are Hong are fundamentals the being in we the some as the but our macro monitoring ongoing seeing said, Asia, as headwinds we unrest related in in experience key and markets Kong. our businesses, of ongoing including continue well in the nice very underlying improvement are now China to trade

our as residential declined I’d Canada well to decline platforms. serve markets better single-digit as in and we North have single-digits in low driven growth. point resi individual and Total HVAC commercial in Global light American also residential double-digit our channels Products and HVAC XX, APAC driven sales prior So, let’s X% by sales in saw business. primarily Global compare turn high Products led Security equipment grow in BMS year flat in refrigeration the across price quarter this a to increased strength was with mixed strong our Slide organically to the single-digit our us despite was that business recently We mid high quarter in and out decline the a low by restructured this the performance accelerate our realization. a allow single-digits distribution Products. to business.

go me bit in detail. Let through more that a

last Japan. our detailed pressure we we business, continued the to for As quarter, primarily conditions you softer expected due in in APAC market residential

impacted restructuring degree days the North the than due Our the in by heating expected previously to mentioned negatively furnace lower I and as quarter Canadian our was lower the distribution as American in well business shipments in quarter. business

the prior in year compare low this to into Given grew accounts we due our in commercial Light continue on flat quarter. unitary weakness with expect compare, business. sales year America prior low-teens low second North single-digits to double-digit weakness national the a

VRF applied HVAC primarily APAC. single-digits single-digits pressures growing mid our to outperform due Our to declined the business while continues in mid equipment

relatively the America. quarter, for in see compare. to mid prior strong helped continue easy North grew chillers replacement in We IR very a single-digits demand by equipment year

was grew by solid margin ongoing America. under-absorption points synergies increased demand Product as Specialty particularly the suppression on segment’s low and North the on XX offset X% products, positive and more in EBITDA of EBITDA cost Products fire expanded volumes price basis costs the for and than productivity. lower benefit Finally, single-digits

driven actions move to XX So, productivity of down expense. divestiture. Slide benefits cost continued structure well Solutions our as given was ongoing the corporate save, year-over-year million Corporate primarily Power to by XX% reduce let’s as expense synergy the and to in $XX our

cash just $XXX reported free cash free flow, XX, Slide million. was flow QX On under

was of a capital cash one-time the in the outflows quarter, primarily declined of continued tax million management which is improvement little we a This received working percentage points. to less to $XXX $XXX last $XXX in we than trade working was an million integration improvement outflow more year. and free as refund due XX sales that as saw basis than cash related $XXX in capital Excluding adjusted million versus million

$XXX to and flow of continue We in conversion the related expect free cash primarily million one-time the excluding million adjusted cash tax outflows $XXX refund. integration XX%

deploy was debt seasonally balance quarter. XX. continue Net let towards So cash as sheet to turn we cash our me on to QX being up share Slide slightly despite the generation weak repurchases

the for full $XXX see year. that million in the repurchases expect line with were quarter we cadence roughly in can share You the

to I on couple Before back turn his briefly remarks, Slide for mention a George closing XX. want to I’d it items of

our included the of that reflects guidance. of to merger restructuring in of that, charge cost a costs associated during cash The recorded about half to as is and divestiture. restructuring And current of ongoing we $XXX with the as final the JCI-Tyco half is in we’ll First, in the expect and about charge year the integration that Solutions the related impact is cash of impairment activities quarter, million, well reduction see the cash Power year non-cash.

then impact And in our of lastly, to Secondly in up also $XX of operating rate in gross non-current million standard assets other tax related non-current related balance adopted and the not new this a reform we for which liabilities stock the to non-cash a quarter, year. leases other our results will XX.X% accounting current and Swiss we recorded and sheet. charge a

So, to overall we are and great ‘XX a with earnings strong in improving cash fiscal and flow start margins. off

turn will to back I George. that, over it with And

George Oliver

Thanks, Brian.

per questions, Before which be of we that want earnings earnings the line to reiterate I to $X.XX, share the represents of continue to range fiscal XX% our to up we $X.XX XX%. open items expect to in before for growth special just XXXX

full previously the details to guidance the in provided the included our have We of as slides. appendix

improving to fundamentals year start our shareholder the to of value. execution well-positioned Our confident that to fiscal I commitment business. results continued first am underlying deliver reflect a into quarter we are solid a continued strong the long-term and

With that questions. operator, please for open up the lines

Operator

Wolfe your line Mr. open. you, Our with Thank question Research. sir. first Instructions] from Coe [Operator is Coe, is Nigel

Nigel Coe

Thanks. Good morning guys.

Antonella Franzen

morning, Good Nigel.

George Oliver

Nigel. morning, Good

Nigel Coe

are on margin Just the you especially see EMEA the expect leadership Asia-Pac challenges of the backlog of of in segments? have going segments, had and forward you mix the those Latin position Do nice you you to a some outlook do feel Asia-Pacific. margin based better from now America trends continue and two in kind in like to sort and

George Oliver

Nigel. Yes,

We have within Asia-Pac. made about talked the structure progress nice as within really margin Brian

being out delivered that’s faster this that XX unfavorable fundamentals the With I all And worked – we we to now are the have points we are that way that the and in we low within we we the continue of think a structure the our – growth the forward pricing with than growing fundamentals with quarter believe that are basis value, selling way to go is mix single-digits also but installed playing growth with going improve on year-on-year. service, basis.

Brian Stief

add we the probably I some in and would some I are to actions into of our were results charge seeing a Nigel, that, really think that in ‘XX now we that to you of ‘XX related XXXX. recall, businesses. restructuring European that XXXX, took taken benefit and the those just in of as And of

Nigel Coe

markets, winter, your comments the of follow-up function more that my then in quite the XQ, but And it’s reflection or you warm on challenges we are doing on is winter, Canada the a know in warm that continued a the is you. of market? very some thank all the restructuring with Great, more is a comments residential HVAC

George Oliver

that now are continuing. our bit in America, look market that’s of and Nigel, space both. been, single-digits a have of In it’s in the look down Japan. have mainly we would in at globally look strong with market And I our a you distribution taken we at in down and or we Canadian by When Japan, our here of restructuring we overall what are extremely performance driven say, been down that it’s our in line at which right performance high furnace channels. QX, is the channels, market you and is kind when North that too. the are is it’s When done market, we multiple what you lot

the playing be consolidated going second and now expanding accelerate and out be positioned have in first of to distribution be able able all region. points to here We a be to standpoint second from to and from quarter we in we That that that to are will there. half in be growth effectively much the pickup positioned better our growth is now to

Nigel Coe

Thanks, George. Thanks, Brian.

Operator

for you Thank your question.

with question Research. is open. Sprague Our from is Mr. Jeff Vertical next your Sprague, line

Jeff Sprague

of orders, the residential Thank you. up Good morning, on us. price pull but accommodate forward call you the pricing something to by orders? to think we appreciate applied all potentially everyone visibility and given not normally kind that affected projects, and been of nature kind thanks kind of George, for of the a kind your might company QX how timing pulling on kind speak of the your impact orders of that. on that of phenomenon, being of of broadly of larger would I kind kind have of just and commercial

George Oliver

– we over on price we couple have mean, I January. we historically, been our of a last Yes, have have increases lot cost in as the And we price working progress. made of years, had have

we those certainly in in same quarter XXXX, January. increase And When had and high-teens we because North effective growth of is with for we pulled behavior that we been in the year, benefited along And last fourth in planning year a being as being with our we coming – goes America October, a the that the made the announcements. because phenomenon. for last when North forward. announced decision price in the have instance to product last of in announcements at America, into year have of look you And so with pull there

tell would underlying I that What strong across you, increases. price our around behavior very is a board. activity Jeff, is the the there is So

single-digits. across single-digits much high are pretty mid – the board pipelines to high Our

able and growth quarter to order confidence year the to the single-digit projecting are very the for deliver my mid ultimately strong in positioned that revenue we here so in that correlates for the to being and be low And is year. total second

Antonella Franzen

just quantify on Field the Jeff, overall orders, of up as basis. to our be low they single-digits you you, that an at when And impact look for would underlying

Jeff Sprague

Okay, out be kind normalized to up thank kind growth that. expect we and this track from kind spend, of and revenue for here with called equation? the has will it you investment bridge, now on of maybe And initiatives in should just other of part the or of not pop just earnings

George Oliver

we the well as reinvestment couple percent of in the XXXX a reinvestment as the have now is in sales last and revenue over years, out beyond. channels of As our in committed products as flattening

And market happening the line is that Jeff what to so are in activity add with what’s we continuing be. to see we sales

So, expansion In being all have the obviously but reinvestment, and percent the that the are last are over the achieved. of with to a engineering maintaining now as continuing with are that we we revenue add done of of sales, but productivity the couple continuing R&D, overall getting years. to we dollars increase we that’s

are And we dollars the are market getting similarly the sure the to combining on introductions good footprint, product and are we are doing volumes those we we returns we on feel making so spending appropriate we we new that also productivity investments. that we to sure to bringing tracking and that the ultimately are make good are that getting that – are

Jeff Sprague

Great, thank you. Appreciate it.

Operator

question. for you Thank your

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

line Your sir. open is

Deane Dray

morning. you. Good Thank

Antonella Franzen

morning. Good

George Oliver

Deane. morning, Good

Deane Dray

price on be going follow-up increases costs just of to the timing I will decision customer around on George, price based and may more there behavior, forward? address pricing just dynamic are strategy just increases anticipating a upon clear, questions material of want we Jeff’s or but be will so

George Oliver

costs move be back of Yes. we had years we to – go the changes say, positioned with that. negative What market X to weren’t would to the ahead able price quickly I market and stay ago, you if Deane,

out We strategic significant have pricing businesses. our made our improvement across capability now building

the So, tracking it loss. is more markets, are our where are dynamic tracking we win we

value we of instead our and bringing value propositions making price to customers, increase. sure We are selling this that annual just are

more price markets what’s And that, that historically line that’s price actually in in progress very we that to be now are happened probably the to is as I will of with that our within a a there are last But serving. a result what’s we now had over much ‘XX we happening dynamic you the believe relative nice we are in positive and XXXX the headwind I year, in. driven saw industry with Now, ‘XX we continuing continued turned where cost. in estimate by point that’s top costs tailwind our of

Deane Dray

that impacts, and share sense a would I giving you. but as just steps anticipate does then going it’s are declared tracking, all are guidance how Thanks. of taking Just XXXX have your happening internally? would emergency, anything now follow-up And not know likely Thank global coronavirus Any the where you health be a helpful? you the shutdowns you on? they

George Oliver

What about I in would is revenue our saying by achieved of X% China. start

relatively full of our from got been certainly, where a is people EHS but very and working for safe totally facilities it leaders sure our get our we that We’ve Asia-Pac protecting update of a aligned, positioned them. We’ve overall, make the priority units are all security to of our us small. professionals, of top and are in daily significant, leader, our So, in scheme, China. the we’ve support but grand across that not teams only business got all all well

February holiday you or of significantly. that been mandatory have the curbed travel now As most and curbed now extension XX most provinces within China has know, through

could but monitoring will situation we activity. we some that assess everyone certainly, pulse this are a been and And our I difficult to hard so on What I very a say it’s happening mean, to could to disruptions. have what’s side minimal. supply it what – we of closely. have be keep to chain it deferral – stage, is supply the also have There fluid At assess, we some it’s Deane, assessing supply. are would updated. with To-date,

Deane Dray

Understood. you. Thank

Operator

you question. for you Thank

Our next question is Research. Scott from Melius Davis with

open is line sir. Your

Scott Davis

guys. morning Hi, good

Antonella Franzen

Scott. morning, Good

George Oliver

Scott. Hey,

Scott Davis

beaten thing interesting I the that after a and with than some it’s because do pretty October generally too they the the to competitors were out price, these don’t impact were it to had been did quarter you do have but prices – all there – fixate perhaps? pulling been it’s years, same would volume whole higher death, that forward or in for want negative to your much competitors

George Oliver

we given the now that believe price occur I ahead. way are industry, increases the that Yes, within

that issue we we And with year first year, so very last had pulled forward, of have in of some how year. this we the And then you had last had Scott, a pipeline when fourth I that the our that and what quarter the therefore, and strong then look quarter benefit, would underlying tell we equipment because pipeline is you the it HVAC seen converts. at

We predictability usually good how very is single-digits. into convert percent. a – there pipeline. It’s high we pretty have We of strong

And have like are confidence mid second pipeline single-digit quarter the single-digits. order to of that so back strong and kind I get low growth said to deliver I in the to the year, mid we going to very for

we are we thought line where would overall, mean, with be. I So, we in

Scott Davis

yes. Okay,

the demand Just the are kind chiller, the follow-up North installed Is the chiller little sense bit tail how obvious, a sense to greater America long replacement out that when you have a mechanics there a – age just that on any sense the trying and the is but of is there just are there talking bigger seen a installed of base interesting. base long is of never that there is is? replacement market, efficiency, for of the tail on I chillers. of My about energy or a sense data the a just upgrading some there is of is get old replacement that

George Oliver

I it’s Yes. the mean, all above. of

able certainly a given drive is proposition reduce consumption chillers value big and there. to the I our new be to ability the with value there and think efficiency, energy proposition

And in at looked value. total so, it’s

not when typically So, their that current and you what consumption look to cost, a and cost maintain go the will we we only energy create reduce operating is improve at value energy. also in can but what their is proposition

in it look got So, cost. as you at to total

that new the now customers. we launch systems? operation equipment, our value as how we think real digital attractive I for overall bring we our so a there think products, with building of how optimize in And I is the capabilities proposition the integrates

there. a seeing nice are we pickup So,

Scott Davis

Okay, thanks. job Thank Helpful. Thanks. good Good this luck you. and year. guys

George Oliver

Scott. Thanks,

Operator

your you question. Thank for

Our with is John Credit question Walsh next Suisse. from

is line open sir. Your

John Walsh

morning. good Hi,

Antonella Franzen

morning. Good

John Walsh

I guess of called the the out around a now question quarters business the it last it’s in retail of kind you couple bridge.

lumpy, long you how as should it of can the it wondering to North we kind out relates expect America calling retail hear the be Just headwind to business?

George Oliver

Hey, John.

when size it’s Our $XXX about retail business, business, roughly million. you the

presence We have a globally.

shopping We value value we the during going the see proposition to retail inventory mean, change different because online the that the within we have business business, at believe the very to solutions, proliferation high a our lots has is continue overall that industry for there way been in offering, are be that And look are being going but industry occurred quarter. a mix But the the that with to loss I proposition more towards leader. digital of prevention a a insights. lot intelligence, installations customers. perform, It’s more aligned profitable it’s our traffic now as of all requiring the said, we given I business.

So, are we something watching that it’s carefully.

that closely what there is working that. given out the on we and is the support change but of be retail to lot be space, with looks able are are year each that’s how what’s very going through change customers and to one We year, to laying to retail we it their like our be are and able going customers that sure and capitalize to support to positioned happening are a make we the of within happening positioned

John Walsh

just wondering some you have AFFF, talked the Great. and the update about in if I then Thank kind past, around of that. And the any PFAS us you provide there? guess for you impact can

George Oliver

John, in our there is change position. no

And in Chemguard to Tyco You firefighting military government exacting PFAS make trace government amounts defense. Chemguard the they foam. used foam, is and purchase and which the is in chemicals. standards. made PFAS, life-saving the contain Tyco specified to of that of subject the The keep perspective. make foam blend is and and by have majority to foam firefighting compounds and to U.S their this the military not contract issue therefore And

fire used producing Tyco later. as And last few sites ability only when so, companies XXXXs, And since basis. only chemicals of we like years therefore, also until we as share PFAS at been start that the the didn’t other you accounts foam would in have I products responsibly mid this always scientific small historically firefighting confident products many foam military country. in have firefighting our to has and feel producing And and in these And such XXXXs over which acted used been that also these are very applications. firefighting a very foams foams. Chemgaurd percentage by specific a is these and facts. other at defend used for And in claims. But XX are studies look was intermittently recognized PFAS third-party predominantly then to

good what overall, So, changed. we updates. is have feel given very our been no position for has military We there certainly, and really done customers government additional

John Walsh

the thanks and for updates. quarter Good Great.

Operator

question. Thank for your you

I next with call is – sorry or Tusa Our JPMorgan. am question Steve from

Your sir. open, line is

Steve Tusa

guys. Hey, Good morning.

Antonella Franzen

Good morning, Steve.

George Oliver

Good morning, Steve.

Steve Tusa

do that solutions America North it so, one you business – in the stuff? think business, the I or in of is on like still was performance our think going I contracting something, guys businesses was a down, What’s that

George Oliver

on Yes, of the business, our be not it’s you to order pretty the the but about it’s given big but significant when talk variations pretty solutions quarter we swings some quarter, a some quarter-to-quarter. I have it of huge have the intake give can always flow business impact size of saw you mean, And we can and as part performance can particular contracts that business talked, can contracts Steve. then choppy the contract, that – our large those

Steve Tusa

Okay. whether on of level color in as orders kind just bit, of people, to results second for mentioned And you to anything far any – cash then we standout set abnormal a keep any – the as anything the need kind the business quarter? that anywhere, or second underlying expect pickup mind free on quarter, seasonality you do to

George Oliver

I’ll take that. Steve,

North year, so out, range of reiterated the X% and more the that basis earlier was to we top skewed When some know, that it as to look compare XX%. normal for pressure across the businesses you all you and be X%, here on mentioned, with typically segments. at X%. single-digits And XX first we QX the XX% through are organic guidance very overall products of on half, growth, and the the to compare of a in then line to as in Field second low half be Steve, that’s year break good guidance the of continue again in an half. year is expansion prior it’s will There guidance year. our but to EBITDA the resi, that’s XX% the and year, in expanding in And repo when this the for XX% low a EPS year $X.XX half, products see be, and go America the would share performance the points against to On the of and XX that’s bit I will first additional increase, little in because second the compare single-digit at consensus, we line. mid the looking we a a with feel year, but low to that within and $X.XX margins, is of will to as single-digits you line the continued Brian our still overall of seasonality

Steve Tusa

Wow, great.

Brian Stief

low that, expense to our add pretty Steve, I standpoint quarter. just a think corporate would from had I we

past, seen the be a the As you have second bit tends to little probably in higher. quarter

guidance continue It’s as still look looks – it we at flow, saw when cash cash we sits flow I expense. when sit in first And think we pretty quarter. our So improvement there I today. solid here for we corporate you to are out think the would some then – like see

good think all-in-all, I quarter. feel second So, we about the real

Steve Tusa

George. Hey,

progressing – one the grow business, but on view a one kind quick you structurally? these anybody view? companies How splits? the any obviously, follow-up strategic I of to asked on question, more imperative Just do your in lot general has more guys change strategic just their think Is don’t on of it the the yet, residential

George Oliver

results. been look place on we Steve, driving executing mean, you focused. for our have the getting ultimately fundamentals That’s commitments us delivering the have been we and XXXX. When our focused strategy, in and on in at I focus here

now committed, it amount strategy. returning lot digital to products, of the leadership what organization significant in our on a new momentum capital line we shareholders. ultimately are We we are upgrading a whether our across of fundamentals have our have with deploying And been launching underlying margin the be how we and we

products technology. at that’s look I investing the we our positions, investing that have have when spaces think we heavily residential one heavily new with you and So been in been that

and We is our card a critical how our it line of are seeing ultimately customers. we support because progress, element

stay so continue going what’s on delivering And and a within on on of on keeping commitments happening pulse to far as any the executing, as type we industry certainly the to focused are consolidation.

Steve Tusa

guys Great. always. for Appreciate the it. Thanks detail

Operator

Thank question. you for your

is question Mitchell with Julian next Our Barclays. from

open. is line Your

Julian Mitchell

morning. good Hi,

Antonella Franzen

Good Julian. morning,

Julian Mitchell

just piece and Good the sort a of lumpy? soft for you albeit sounded question think Middle that’s the how there? region, Africa, months been a EMEA/LA remarks on understand mainly past maybe And remind much prepared at scale the also today? morning. just the Africa applied in us you for better, I are the markets XX you East, around help in piece Middle your of us Maybe East competitors Brian, of of XX, of so just looking lot that pretty trends

George Oliver

Yes.

of overview give I’ll Julien, So, the EMEA/LA. you

HVAC a our look from at over in progress as our and years, We growth only service control of both when pretty sales high not footprint And Fire X%, single-digit the amount mid organic to quarter, and couple have was expanding standpoint Refrigeration compare, a EMEA/LA install up service, across up an & but in Industrial tremendous first high-teens. is single-digits, it said Brian and easy much the the last you from made of Security region. in – performance up

margin tremendous that, productivity we good We cost rate synergies. on And good leverage be seen – in progress. have have savings would with the volume the made

the kind extremely single-digits pipeline orders continue within converting are well overall, up even the expand of to with a executing backlog and we X%. we so mid And current environment, are we are seeing

Brian we we talked go-to-market as work beginning really play couple overall, is out. done about done of the to have restructuring the over have the a years last from So

represent the the project Brian, about are but I Now, tough say are mean, XX% revenue. competitively part of back. that whole of EMEA/LA the for lot to? – certainly a I come when work Last was we all some The doing obviously around year that, in an in last overall want service to years think does easier extremely us, we the are positioned I see you seeing have year. being East, I’d year tough comps. we with that XX% Middle in and beginning position. progress XXXX of said look at don’t couple we of it was overall, the you But a know, strong installations made region, good and of a

Brian Stief

I No, summarized you it think well.

were sure. are had positioned the I quarter year, pretty fourth today first the a ago the certainly than in think think fiscal or a we easy we comp we ‘XX current but that so better in quarter benefited of and I for year

Julian Mitchell

quarter, the cost, the costs corporate particularly then on XX, that terms and changed first out the cost you much stand And the whole, year performance but still divestment question of stranded the for confidence maybe reduction I come also, that highlight Thanks. has a just corporate is color past Slide so very in from on in in that range, just left Power good second to QX? that my a of in X quarter versus given light view as realized whether have in heard stranded second around months? And where we and cost since how today do

Brian Stief

up in lower $XX quarter. guide $XXX $XXX tends million first So, to million to million our That a corporate us. ended the quarter is year for expense be for the at and we

so And the and third be up is in a think quarter. I to second going there tick

So pretty I probably think to $XXX to number good million lower good but that’s now. end of a million number $XXX that that, think guide still of maybe I the is for use on a

$XX the portion There probably we delivered relates would million stranded saw were forward. $XX benefit We in first of ‘XX. in in was that And quarter. what to the expect full think the the that expect about year. a take Solutions, to would going As million a $XX the it communicated and about costs then we we Power million million to about out, here run-rate saw pro would of ‘XX be had XXXX million you see throughout we to in $XX that be course going $XX that I rata benefit have we

Julian Mitchell

you. Thank Great.

Operator

question. your for you Thank

is with open. next line Andrew Our Citi. Kaplowitz from question your Sir, is

Andrew Kaplowitz

morning, Good guys.

George Oliver

Good morning.

Andrew Kaplowitz

in ability XXXX? working XX%, about expectation in such your to as you help and are pension? but weakness? George to you than your helping improvement initiatives that or that slightly keep equity XXXX income from can our in to capital maybe nice see it JVs anymore to down was better you dividend seasonal how the collect and obviously cash, is When versus your we your Brian, payment XXXX cash adjusted thinking from you JVs look your trade tax GAAP see cash and at versus conversion your Did are dividends that normal going

Brian Stief

I So a improve saw percentage day the DSO, We trade in basis by as a points in the improvement side. X We DPO. inventory improvement XX day improvement capital in did as quarter-over-quarter. saw working mentioned day on days of a in sales hand

made the So progress key across all-in-all, three we really metrics.

contemplated we level out in that where quarter, of have in dividends cash for guidance. going is adjusted As that of of type in the you to have tax look was that tell got up is XX% we because JVs. got the the pension XX% gave income year we million first in cash as excess flow. then we at we year, we doesn’t still equity you Because to we the end that tend of come are situation I the flow of that reported from entire And would but know the $XXX improvement when refund this CapEx, short a of cash. we get terms of of XXX% don’t bit income that still converter, fact first the our this the the be with any our little our amount

Now, benefit. with that’s amortization offset some

longer So still we term, than we the the going that today, level, XXX% little to are a bit get sitting more tailwinds got. I are but think here have headwinds to

year. for good number is but targets XXX%, So are our think this I XX% a

Andrew Kaplowitz

Thanks, in we last headwind it Brian. but as in you that had you QX, inventory know destock quarter see APAC then situation HVAC do talked about was and resi last give more not into Taiwan, North into you was down I being can color impacting you Japan embedded but And the George, still us there, a situation some in go the not America still quarter QX headwinds QX? the

George Oliver

is asked what you unitary have Andrew that commercial The

Andrew Kaplowitz

on and like Japan might sort Japan quarters. a little head in that over QX couple because on you just and as you Yes go may said but looks next an be Taiwan getting the be your of comments better

George Oliver

bit we we points market QX have think we to and we so be our business so on your within a tailwind I to what you and market talk had in this bit through as talked significantly will is a term the softness a to the we back the itself which us to you in first about growth our think that then that soft where be get through we are little positioned little above here a about certainly we going our distribution headwind to strong forward lot that into of at out a that the a we of Yes market year little we continue get see look which that so see Brian does in a bit distribution get a to as furnace X% when hit factors down business a playing and but that’s quarter short we our you about of are turn did going bit will get second bit get going a increase are go different doing and little did Canadian the basis little restructuring together presence and

Antonella Franzen

we in fine start so specifically expected that side the out Taiwan as on be some pressure said complete and we the it last Japan as in A-Pac do expected expect into Japan we to to Andy continue to have And Taiwan to and residential QX business get our quarter was was quarter. flattening we second just we the stocking A-Pac our business in related Taiwan in as and did

Andrew Kaplowitz

you. Thank guys. helpful That’s

Operator

you your question. for Thank

Khanna question Gautam Cowen. with next from is Our

Your line is open.

Gautam Khanna

Yes Good Couple morning thanks. guys. questions. of

set First on do potential the you I $X I acquisitions where know billion of for wondering if comment sort could you aside stand M&A was about pipeline talked we there?

George Oliver

We Gautam. are both constantly at looking

where businesses organically We to our got a have reinvest we have we pipeline looking are continuing gaps or at across technology products both.

stage portfolio to is our in strengthen but look make at product our this we that line to regional significant investments nothing So, making continuing the are place footprint the making. appropriate to there we sure at are and continuing for with organic

Gautam Khanna

move any for do And at potential we as divestments you the look you see portfolio Okay. as just incremental forward?

George Oliver

have and and continue been have significant to continue making continuing the a we process that Gautam. review that core where portfolio that there at reinvest we there again but the we board to non been don’t has want nothing that’s but across in constantly the portfolio businesses businesses looking are we small been divestures Yes

Brian Stief

anything almost you I the the there be look inflows look think fiscal in got but with the some make think that ‘XX. significant our relatively when and Hey, at we at to is the current be the activity would don’t our in close will current as Gautam. are probably year in year expect same we the we and will now going to activity I current outflows M&A that have right the can I I held other in you would say business sale think year just that for there investment

Gautam Khanna

Brian. for look think me just one the last do what That’s you ‘XX helpful, as at we fiscal the… One

George Oliver

the point confident that it for that and relates look XX the very to frame pipeline would of we improvement framework with Let savings the that our we of deployment I and are guidance year some here the from there I with XXXX me us relates that that across when on going achieve. to just of to have of a of you And year take little look capital the globe. building ultimately annual stand understand businesses gave buybacks on basis range we similar over in that that is be a we that’s well basis, so, to to that couple to the within $XX to what would restructuring have strong an sustain that normally, are ‘XX margins the in margin to last as in and is one positioned at we the that some gave as like now out seen these very a payback the across maybe more am be structure the XX, fundamentals in some it position on have of ultimately million we we addition going bit going maybe like that we what wanted productivity probably and year can with the to margin years rate continue go that place to forward relative

play are we are our the the and very feel to for incrementals the provided cost out we plus then achieving, incrementals. that I going that to have XXXX, now going that and that’s XX buybacks reducing are on to rates we debt is would we that I be deliver positioned work in margin what with with say have framework So the the confident to as relative positioned done we that how

rate to And we is originally on XX% we to continue to expansion XX%. which so that that said get be will somewhere longer position and the well could extremely to term margin us able margin deliver

Gautam Khanna

much you guys. Thank very

Antonella Franzen

Gautam. Thanks,

Operator

your Thank you question. for

from is Noah from Oppenheimer. question Kaye next Our

Your line is open, sir.

Noah Kaye

If what seeing talk look morning. the quoting about gives backlog? indicators, and and the you that Thanks. at in Can cycle the kind just of ABI indicators, confidence Dodge both project you growing are America, longer North business we Good sustainability we maybe can Momentum. on some of activity improving pace of

George Oliver

the mix X%, volume productivity but know North quarter, were the operationally only the the did XX Margins with deliver but the look much you and overall, look look of the margin there. offset if When we the you not organic $X.X cost was billion. mix at at and timed of America, we domains, a pretty the the a did points, that at basis pressure was some is that of talk I across retail growth look was to X% capabilities. all year-on-year rate backlog was price – because you up of increases. the When when orders, backlog with backlog, lot at you the X%, down about But orders flat,

top and when and here line both the is low So short look we as backlog at to the single-digit you projects of year, mid that are growth. mid long-term of mix for that project – we positioned kind

to We are we to the the positioned And positioned are orders mid we doing the mid XXXX. then to second to will able within quarter. to single-digit, mid year as those be positioned then are year, kind to low for be of orders of what convert those single-digits here deliver in mix for that this orders we continue similar

position absolutely look at we churn, I plan we and currently are as convert that we with the we how for what backlog confident we the cadence working support have are us the look XXXX. that we how we So that we that at this will going achieve year as XXXX build pipeline and to backlog well and for to feel for

Antonella Franzen

I that, And to closing operator, some it with to am comments. for George pass going over

George Oliver

off discussed, our So, start year, positioned thanks on to our everyone a strong to morning. this joining are we well to year the deliver commitments. call Again, we for as full

in to the overall of low that in And feel growth which do to growth soon. mid year. coming confident look I single-digit As to then ties guidance I very all for of you the order orders, sessions up, the QX, full of it relates single-digit to many seeing forward mid are with

that operator that call. concludes on So, our

Operator

Thank you everyone.

your for thank great and you We have day. disconnect. participating a now may rest of You

Johnson Controls International (JCI) 31 Jan 202020 Q1 Earnings call transcript