JCI - Earnings call transcript Q2 2022 | Johnson Controls International plc

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Operator

Welcome to Johnson Controls' Second Quarter 2022 Earnings Call. [Operator instructions] This conference is being recorded.

If you have any objections, you may disconnect at this time. I will now turn the call over to Ryan Edelman, Vice President, Investor Relations.

Ryan Edelman

Good morning and thank you for joining our conference call to discuss Johnson Controls' second quarter fiscal 2022 results. portion all the issued can conference on Investor and as this be release at the as website well call Relations press related earlier tables morning found johnsoncontrols.com. The our of slide presentation

Joining Chairman Chief me our Financial Executive Controls' Leonetti. and and Officer, Oliver; on Olivier today George Johnson call Chief the are Officer,

and information. a read included today's will be we reminder today's of call, review cautionary forward-looking before As the there. you certain through we We forward-looking informational course press we've that begin, release during the that ask providing statements

non-GAAP exclude metrics, These In the release flow, reconciled results in of on addition, we and during to adjusted the website. our use attached of special share, will use well free you the together the our address discussions, presentation certain that we call, non-GAAP sections to with as references in read these measures EBIT other that cash appendix through per measures sales to ask and in earnings items. are the our and schedules and discussing are as items. posted restructuring EBITDA, release press our the and organic our In press

are on Additionally, all to continuing the prior ops basis. comparisons a year

turn Now George. call the let me to over

George Oliver

you Thanks, on overview Slide call Thank And to Ryan. good on with morning, a brief X. for the get us joining everyone. today. started I'm going

enabled we advance Digitization an The delivered of job sales our energy demand those continue have orders to Our increasingly leading results for to equipment secular digitally emerging reinvestments continues points teams sales the is expectations develop as OpenBlue trends. and end delivering capitalizing the in deliver the in strategies efficiency, of on company, accelerating of and differentiated the realization and for enablement solid strong are contributing the We're at remains capitalize robust every the sustainability demand. results. we us over the to our solve are and solutions strategic our and high services and the execution plus second vision to allowing center digital quarter nearly products backlog industry made provided on we line price day. offerings also seeing line at benefit we've and overall the is discipline growth quarter. reflect we solutions, accelerate, for instilled that our last organic years, revenue outstanding and six pricing of to doing two guidance in in with top that capabilities our the

cycle see clearly that but our cycle most of longer also in in field shorter You it's businesses. global accelerating products business, our

industry time, by gain of million and and to economy on our adoption the we the to supported same policies And $XXX productivity optimize growth. environments ensure year. associations. our by deliver efforts governments remain efficiency of are to the we indoor cost track accelerating; At continue to continue traction also both the on this to new accelerate savings actions in structure. Global of decarbonize key of health We vectors

than in billion in and $X capital $X.X over year-to-date, deployed in over repurchase share $XXX have We more including dividends. billion cash million

incredibly Our opportunities us vectors our active the of we allow with to strategic made M&A to proud would achieving growth. support a objectives towards continues pipeline that of build our progress I'm number have of year-to-date.

the secular the developing in the designed challenges we global to to it are past, among when our industry. ability the integrated truly with said best-in-class As we associated address trends, to solutions fully deliver comes we across the have believe

We disruptions. heightened are in chain operating with very a supply dynamic environment

is anticipated happening, slower chain happening our improvement And to the supply expectations. Second pace. at quarter profit under is reformed, it relative while a

up orders America North for Slide X we're strong what to segment. more seeing the on with in turn XX%. Demand detail Let's remains

Our to record a billion. backlog XX% grew $X.X

in healthy to and our priorities the needs accelerate of as by customers. sustainability of growth parts we Just addressing strategic organization, building our the advancing are other

Going specifically, inadequate into relative and of margin in we the to components, supply controls our by chips conversion semiconductor to the backlog be supply and on our and The but More can quarter, availability. anticipated products. related absorption chain of material base. explained largely under lower disruptions continued performance mix expectations pace challenges resulting cost

on our and suppliers are As supply quarter about typically own you customer In in labor we to last coordination. given install of we addition and XX,XXX projects amount in shortages, projects of requires these material any and the constraints magnifies executing our to slippage. environment, managing a service. call described through on any Each our significant across current chain

the backlog Additionally, were would not make able point we quarter. on to the we maintained been have plan, on and investment have service orders, With given and our of revenue in have I we the mix last reinvestment cover conversion we timing. of in sales and building, higher technicians. this The headcount, below cost seen is the our pace fully

initial Our a we January recovery through conditions supply chain QX. progress late as modest in forecast assumed in

the $XX America. there coincided ramp peak season our seasonal slower of in the improvements two Net-net, into these the March. during in was accounted for million the were quarter, recovery with North Although some profit issues month a which to impact materialize,

solutions. with differentiated X. to more Slide driving to of XXXX. second our Despite we primary these to turn year. contributor core the as pace slower our strategy is half, Please we margins outlook growth a confident continue improvement of the for to think to which turning, accretive throughout digitize remains backlog ahead the our the to OpenBlue is lower challenges, the expect enable We revenue are outcome-based higher portfolio

in serve our new a emissions X Gateway, Zero weeks commercialized journey a and cost-effective, the launching we their device manage several the will achieve next including will connection exciting several net help quarter, that to customers as and easy-to-install enabler Advisor the accelerate X the installed OpenBlue Net to OpenBlue key offerings, base. During within will be Scope Scope of zero.

our increasing the AI. full into which intelligence believe first OpenBlue building will that be systems, we of operate, Lastly, systems building will how be legacy disruptive change Connected by OpenBlue controls infusing will fundamentally automation a Metasys offering Controls integration of the

Importantly, this to plug-and-play into will reach compelling solution. mid-market further offering our us extend a with allow the

turn to X. Slide Let's

higher $X continue and is This business, to expected to levels a higher further XXXX. on as rates achieve revenue through in us service of connectivity those the leveraging offerings, of OpenBlue progress a that We transformation We're growth our in algorithm attach growth drive digital assets, of installed our to increase sales rates. our drive a base, above-market flywheel make of to customer service and service helps capabilities. lower result attrition differentiate level of the on per path then, differentiated billion generate over clear our

this process, orders core by still we up from augmented services, Although service business, up the stages early X% in are XX%. digital overall, early were our Sales of well performed with results the quarter. in

another points track improved X% Digital XXX point the to attach quarter, XXX XXX to target points achieve to us our rate Our quarter. for basis over year-to-date, well basis increased in bringing Services the XXX year. in the basis on basis points full

of increased public gain decarbonizing contribute decarbonize The XX% global prices sectors. and to was without supply momentum, planet's decarbonize of recognition which are shocks the security Slide also that greenhouse private in continues energy uses to attractive. risk energy The and to risks economies sources and cannot combination fuel. forcing to emissions. economies Rising reconsider X. paybacks buildings, many making of higher are gas now both the There prices truly potential commitment of much and governments Turning more the

from and that moves continue corporations to buildings. of reduction commitments see policy We the carbon support

to on uniquely deep understanding Our these capitalize of us building the trends. positions ecosystem

During our capabilities. completed we net the the commercialization full quarter, of zero

Our as delivering Infrastructure, extensive by portfolio delivers holistic The an of guaranteed a organization network presence, savings installed depths and the of subject products experts. experience global solutions, zero. decades breadth Performance now Infrastructure into achieve refer by evolved business to of solution to of our net matter of supported our backed has field Sustainability we an digital customers a for and base, industry-leading

has EPA. And make now increasingly the were billion. exceeds of our We in unfactored building Slide Infrastructure Sustainability it with improvements $X recent continue value House customers initiative see only and long-term orders, COVID progress. by Continuing of our pipeline growth Year-to-date, over We in buildings. $XXX related healthy to White the our the the and million X, to it in is business encouraged on agencies nor booked Both resiliency. is just on not by launched and health government investing K-XX, response. and vectors focused

healthy on We well building trends. to positioned are of adoption the strategically capitalize

new longer more term, We asset offerings proposition value develop management. on deploy to and continue the with shifting focus to strategic a

During our pipelines to XX% up continue were quarter, healthy than buildings $XXX our and million, build. orders more to the

X. Slide on Finally,

sustainability to continue ESG. in demonstrate We and leadership our

corporate into remain be need Officer, excited remain to vectors. on We sustainable Sustainability growth Top laser Chief out of in difficult as strategic We I To world. Woman are recently focused such in have are Sustainability our healthy own key with outcomes a to pleased more more extremely the the future. most And our perhaps being we proud McGinty, customers prepared and a my environment. path the way the named remarks advancements our delivering made couldn't I relative executing in our the continued on our close teams about commitments the Katie

products path backdrop, navigating forward. solid. is business increased challenging in environment within confident macro cycle are the I we a through with Although regarding short more our our Momentum uncertainty am

backlog profile inflecting is order is the margin Our we as year strong and intake. [indiscernible]

that us of outlook. and you on call and update over to for turn to the financial All to With sets in I quarter XXXX Olivier details well beyond. walk the going Olivier? through the up which am you our

Olivier Leonetti

Thanks morning, everyone. George, good and

in guidance shorter up digit across We on me up nearly global of high-single saw summary portfolio Slide strong price the what XX%. the were with originally Let anticipated. X% contributing performance our with X our the we quarter points organically end products above original at Sales growth XX. for cycle start

well, and XX.X%. business growth field with with solid margin performed Our to service install. points basis up both XX X% EBITA longer-cycle Segment X% down increased in also

as higher the resulted from SG&A chain earlier. Free volume as working as with share descriptions basis chain the in price a George offset related profitability So of on benefited $X.XX benefit line, from well discussed cash the as within the COGS challenges the and our together year-over-year ongoing lower million EPS achieving XX% slightly count. supply negative of leverage in and COVID increased were over down and Despite benefiting flow programs cost higher margin needs in benefits. line and and XXX $XXX related headwind. was prior supply by quarter price was inflation lower points top

year, $X.XX and programs, productivity net benefit the Slide Turning to $X.XX prior our a XX. year-over-year. including EPS $X.XX segment and Bridge line from contributed Overall where SG&A versus COGS operations on a the tailwind our earnings

controls chain grew by in by year $XX.X increase supply basis. XX. businesses later descriptions, incremental Backlog and and trend and orders Excluding XX% on versus discipline in expect a prior XXXX. Orders backlog points cost our this continued where headwinds $X.X demand backlog for year systems. underlying our the we the improving converts business. these aggregate extra up a and into turn with sequentially. billion high-teens Install Service reflecting Please XX%. in as $XXX were to stack led margin XX% for margin and two-year to Secured the basis applied a million quarter driven pricing Slide in HVAC QX to primarily billion, short-term from is XX our up transactional growth rebound continue price approximately momentum field orders increased

which & basis volume low-single in Fire strong disruptions high volume from Orders our equipment unfavorable low continued America HVAC the Pacific ramp a results core and we grew our were orders North momentum low-double strength mid-teens XXX X% up single and XX with in by HVAC digits, commercial, residential a of driven up lower margin grew EMEALA detail continued with strength center conversion digits, XX% Products driven and as at as healthcare. XX. double-digit XX% were and equipment project our light driven projects. despite pace quarter quarter. digit apply our segment savings business, Refrigeration portfolio, Infrastructure strength investment low and were offset led organically up growth with points result continued billion, positive the Applied. in price/cost in QX, digits across in year-over-year. double-digit well, low-teens billion growth with up of mid-teens HVAC America strength demand across Production price/cost up with income. growth were Sales resi as our of Underlying in in primarily discuss continued on our another continued to fire realization. strong & in America by the growth up The nearly growth the XX% as from portfolio as sales with India growth XX%, backlog broad-based sales growth Segment verticals led our and sales driven as primarily Global Let's high-single well infrastructure cost perform project compare decreased business, School were HVAC. as up mix. like in digits key pipeline of Security for Hitachi described growth to margin led points the savings, XX% XX.X% strong in growth grew both and digits, up growth high-single demand the core up across our data center, Client of North Commercial aggregate, platform. up conversion industrial by with was K-XX were and increased Global driven at heat healthcare XX%, business of absorption in with strong continued Outside price by benefiting across pumps. industrial up business Applied, low-double digits. the platforms. pump strong security and headwind in several Fire Industrial in X% in backlog benefit broad-based more Taiwan. earlier. in resi Refrigeration and & product higher were System. across by Fire supply & led by Backlog Hitachi more margin were HVAC in mix booked strong grew in low-double-digit by offset aggregate. from was the headwinds parts and China by although Europe, in Mexico QX. by and services decline in HVAC was large geographic we Backlog to led was leverage, by George in data and security XX% X% X% verticals. to in in by and semiconductor grew to equipment with Slide HVAC large portfolio. Sustainability by ended digit primarily applied North vertical U.S. $X.X up in equity continued year-over-year. Petrochem, leverage the XXX double outperform more X% the the a strong high heat and energy well cost volume led Industrial of rate than China Public teens revenue with saw and in Security billion. Orders than the double-digit the XX% basis aggregate by $X.X were America, $X.X mid-teens at orders growth Sales VRF. Asia by growth demand performance double was driven to in facility lower strength up North contributed in strong performance growth up continues low in led security chain products grew entire new meaningfully and residential APAC, by double-digit resi applied, in

actions up were our expanded mid-teens as backlog margins productivity offset XX.X% official in equity points benefit price/cost. and orders $X basis headwinds Although higher third-party from than billion. EBITA exceeded volume the organically, not order Products more Global leverage, income our field to backlog, recorded and of XXX

cash flow our Slide and XX. to Turning on balance sheet

We capital percentage at our by to times, remains million X.X basis requirements, $XXX the of was driven flow tax prior of at Trade and cash X.X%. available end with times higher absence outflow in range working benefits. other primarily X XX and ended billion lower QX as in debt declined the Free $X.X and working of great points an Our the of capital X.X a COVID-related year-over-year still net sales in to quarter, period credits of higher CapEx shape. target balance sheet times. cash

cash shares are for first second the $X to with in fairly year. half, us the us in quarter, billion half, neutral normal on We we another seasonality. X which for just over just For brings line second first our million million the $XXX back half free repurchased bringing over flow,

of Now let's XX. discuss most on year-to-date. order have our seen Slide revised trends guidance of and continue by the Underlying we our across pace businesses demand improve, encouraged I'm to growth

of for the outlook driving is in remarks, his in backlog highlighted supply our pace chain George reduction in challenges impacting conversion mix rest the our ongoing a As the and of America North the year.

are result, year-over-year. to range $X.XX EPS represents to year a XX% adjusted full XX% to we As $X.XX, revising which our growth

to points line, prior now contribute to seven inflation. expectation, six one top offsetting our the expect is points, fully up relative to Price organically. still an grow to On we additional expected X% XX% additional two to to

impact the still year, with For additional the flat come margin an reflecting margin factors in year. expected is to America. chain expect full to guide our to points, mix XXX in down basis top margin be nearly Segment basis prior headwind related with a on Combined, minimal the positive now price/cost. versus on slightly price we and two for now associated headwind XX line North relative results and the disruptions contribution prior to account the basis points in pressure to points XX supply these

updated the balance From precisely, although are China difficult some chain be supply year. conflict embedded monitoring expected is relates we incremental about in to lockdowns combined the year half, moderate first cash it developments is inventory nearly As the Full in the with the is prior guidance. surrounding buildup conversion, in the million for to the our contingency XX% to in account now daily. This guidance of have standpoint, segment creates to backlog a headwind year. a as free reflected $XXX additional and flow slower we the it conversion to the Ukraine, our ongoing the uncertainty for for margin planning

QX. to Turning

headwinds We related $X.XX, of slightly revenue to $X.XX expect and EPS basis of towards XXX the margin the a digits growth the in range decline more assumes skew single organic which quarter, segment be XX supply to to chain to of third high to with points. expected

issues, long-term Although our our I'm challenged supply chain in term backlog conversion near expected confident rates to are due outlook.

have We the trends accelerate next for with growth, buildings company the decade. strategically positioned aligned secular impacting competing to

to continue on our as Investor in progress to keeping on track we productivity the XXXX, Day good the XXXX We conversion targets normalize recover, With line make that, cost expected please fiscal for And program. provided questions. margins our backlog us last September. operator, are at for open

Operator

Thank [Operator you. from comes first Nigel of Instructions] Coe Wolfe Research. question Our

line Your open sir. is

Nigel Coe

caused Thanks this North this to through start some was morning. good Maybe suppliers something from the it just Or this – you And the Thanks pressure of the manifest? did about really more that issue? get March when a that for of question. did talk developed commitments quarter? in America? Was

George Oliver

is would Yes. in America, well we very Nigel, field-based I'd is with North remarks, start customers. on our our value our prepared as proposition What indicated particularly say, I businesses, of the with resonating

year our a a the stack, America. we're up significant saw of up and from across digital XX% in that's XX% But in We're the indoor, North demand our orders board, quality, strong environmental two growth capabilities. sustainability, vectors pickup seeing for and You services year-on-year. with

with much lot positioned how ultimately and also plan at the quarter, sure our our are And manufacturers working progress, be the for plans. you had the senior semiconductor does supply the their a a shortfall. align year. with levels, that material in we've in that what been last growth. And to redesign our chip of to that going suppliers personally long-term and things as includes at we're we've more understanding to resiliency having that myself forward. think supporting occur will and been CEOs, combination and recovery working look most I so plans And of We've We the made and chips making involved created have going where

certainly was continue the have build. to had And so at our at right. moved ramping improve we with same that up look we term, Nigel, we're that plans when but, short time They had, seasonal to the it the

our And usually into quarter third so to typically, plan XX% we're quarter. and as we for March, up fourth ultimately XX%

is what that so And ultimately happened.

the a margin at as And relates orders, high And weren't the in to orders when of we over is it our or backlog, lot good and so news look we were convert able controls-based to mix up controls. is our XX%. digital the businesses this our

significantly in of supply improving. And the so spite up backlogs our are chain

about have when field. in And it conversion impact this multiply so our the you field products a did disproportionate the And in margin. products, because revenue think of on high

So complete of not the support multiples only not only we we important but how project, once we a for product, service. we more the deliver get revenue how

into so impact our season convert about resulted quarter. that does XX% in peak the our in it's of about of we $XX ramp, as And in million revenue and going month, especially an last the

aligned year. are Now we our we is good strategy. the and for are last gone suppliers feel now to growth only and capacity, really additional sure, our committed commitment, what we I making with totally working We've certainly, as this that how not relative that but we've – because have positioned understand capacity, been in back the as

although the Global we're and to relative assess our $X backlog, play we've But revenue field-based businesses, and a we think up with we're you not as $X the we've bit second in agility completing a the of fourth can setting pricing. that - only quarter lag, quarter, for only that And – conversion, now seen get billion bill little high-digit have half. in that strong into we as the will done not be and fourth, set high have in XXXX, pricing, for on there's the book recovery same the this single-digit I tremendous capacity our with quarter Products start billion going at margin up XXXX. with in business, seeing When fourth we'd we accelerate a recovery to get with backlogs, our look in the that through so to we set we out billion half to setup and And take you ultimately the recovery. put I the additional as up recovery then but XXXX, to think into first for a we the about $X first think of

been what step do the we've working plan. experiencing. been that's and totally be sure and committed, the we're the long-term It's to a contacts I growth which believe to shape deliver way, with everyone and full So to Board, in aligned to suppliers ultimately of the every over going get volume making positioned good our growth our we're returns that we've

Nigel Coe

Okay, thanks that pricing clarify the want George. just turn I in maybe Olivier. high But clarify, backlog? maybe And just to to just you say point. did single-digit

basically, and like But is do more $X.XX consensus lockdowns FX coming China the how or any the a how much for forwards China Obviously, revision maybe in and of impacting on weak the American and do that's the XQ I'm an $X.XX XXXX? kind in versus guide, estate? And impact, impact. spill XQ. XQ. real little $X.XX into we XQ growth to I'm have have midpoints curious curious, is of out the bit XQ baked XQ So into North you

Olivier Leonetti

are of second year, today, look the you if the minimum the we amount are of guide at proposing improvement. a half So we planning for

ramping relative half We second the to first in volume. half are the in

price/cost business. million, disruptions by in in expect $XX we guide, second on going half be we but the about If to to our what still disaggregate positive is impact expect our you

more in have we also said in couldn't backlog. that we very watching due as happening We – in is have with the Nigel, billion backlog well, $XXX disruption. Again, – as year-on-year flow the And margin. caution. we're at worth watching we doing we happening start of it's our We're at value indicated about what's million a QX, what in next capacity in believe are pleased to and Obviously, manufacturing proposition we earlier, enhanced our will the as abundance build Europe. factored that But to – resonating also we're year of George be of is And supplies with capacity have customers. China. how the we not $X.X

you if are look indicators all at orders, If positive. services, empty very sustainability, look the you building, at

a to temporary conversion have face. today, we that So it's question

Nigel Coe

Okay, very thank you much.

Operator

Thank you. from of The Stanley. Josh comes Pokrzywinski Morgan next question

Your is line open.

Josh Pokrzywinski

Hi, good morning guys.

George Oliver

Josh. morning Yes,

Josh Pokrzywinski

to stuff on field much above hours so a with self-productive kind only you the simple other you can made think, the the supply follow chains guess the when up only last those how isn’t get do that, expect the I issue backlog Olivier, in like on as side. through stuff the can't sort force fast force underutilized on number is margins to margins sort I trying the be this point improve, they we able to when bandwidth think of install of and I if exits and of you be on normal on are sort out, incremental should just just that of the want some that day? of I’m I is field ultimately should the of can way there healthy. or mean that as product. kind is

Olivier Leonetti

Yes.

if right. So are you absolutely, look at – you

expect will year. backlog we half that issues in normalize largely So, the of the the first

today, today, pricing the digits. at look single we're you of price margin which at If high in we're we today, orders inflation pricing anticipating and

upon So based to flow set going have book the will at of those a revenue of And very year. orders the we start the believe we are healthy we now.

positioned a margin be capacity believe to the we're standpoint. well going and have we We from

our we of know good lot and reasons. on for I a time addition, In spend business

improvement. global Our division strong outperforming, really profit is product strong rate revenue growth and

see next our Josh, on. the of proposition half improvement going with value we So year, – first of half believe company, and significant very again, a pleased margin we second will

Josh Pokrzywinski

Got it. That's helpful.

George Oliver

understand just dynamic, add as I important to Olivier said. because, has think, it's Josh the there to pricing

very as getting we're the on in been With pricing, said, XX% growth, XX% book-and-bill I agile, and about pricing the business, embedded the we've with that's that.

of As forward able the inflation. field-based higher our to last basis began on within then accelerate levels forward-looking year, inflation a to to look business, to as be began we much

higher been putting the number inflation. of we've much last So backlog into quarters, over anticipated

And to now or turn what backlog. seeing much that through XXXX, look going the year to have in digit becomes price were But converting. be conversion in are prior So what more a last is single I to at that converting higher into early our mix for we're the projects that backlog important, we been in relative where then that's half. said priced the positioned get into we differently that's as putting year, we've backlog you're with – last as we still the and high that second

the with that place, the pricing. we've the been that around have in fundamentals last that and product confident that that we getting our – initiatives the have work with done we've So it's the demonstrated traction really we're very great it's in in doing we're over is work been years businesses, two But with place. the last

Josh Pokrzywinski

made obsolete I'm a there or on of kind kind that that I of been and then have helpful. of some stuff Got legacy thought OpenBlue OpenBlue I base of the of? altering Is bit And That's Is bit it. the would saw like by services, slower digital growing digital some a newer offerings faster. being that is the in that's something kind off missing things X% there would've just growth. kind maybe of base? that

George Oliver

products I our services. fundamentally when strengthening all think in becoming Josh all mean that our we when of you No, really digitalizing our do, it's it's embedded it's OpenBlue, and you – about

So look OpenBlue, connectivity. when the at you it's

that and differentiates ability we're leveraging contracts. increasing So the then the with new And connect. it's connectivity attach these be our that AI the rate It of data to the to to, data long-term we're with contracts, allows offerings, service the fundamentally offering. that service applying then us able to

advisory revenue And connectivity, reduce significantly in the allows in install committed connected. then the to launched the factor that whether then that going And now that's to Like we it we've making energy single services. and that launching gateway digit contributes And new us the that customer. service to services that it our when them you that to able in get we're all of So be quarter, you is with services all be new our incremental look the we're base and we have achieve. advisory it be And progress. when digital how per associated assets services, great just the to to attrition. connected, does here fundamental last that's growth high we're the at

a it's lot – of those healthy there's IAQ the well as revenue of the that per growing. as it's revenue additional our ultimately now drives is buildings as now part that price service, So service of additional significantly And per connectivity customer the customer. services with enabler

Josh Pokrzywinski

there. Thanks, color the Appreciate George.

Olivier Leonetti

those we OpenBlue those the comment Yes, capabilities building. which Josh, an when market all unique are devices connect speak and is easy in maybe about you believe of important. Most way getaway the in additional this is to

allows with unique also remotely, are And market. control for about ecosystem capabilities. OpenBlue capability you also which to connected the BMS, in those that's a our speak are unique edge game-changing If believe you building new. implementation building our a business to We FogHorn. now the Those

point inflection forward see to more start will an as of Josh. we well So,

Josh Pokrzywinski

color. you. Thank I That's helpful appreciate that.

Operator

Thank from J.P. will Tusa you. Morgan. question come The Steve next of

line is open, Your sir.

Steve Tusa

morning. Hi guys. Good

George Oliver

Hey, good morning, Steve.

Olivier Leonetti

morning. Good

Steve Tusa

the just a things maybe couple Olivia numbers. on

the quarter, what the can perspective, more are? viewing you're examples on what's going costs. in just the impacts margin give little a you headwinds And kind a to ground discreet picture like covering your the better these are assume I give us the of fixed you that not just of headwinds, as of, actually on a all, on the maybe a couple fundamental and from of on larger around amongst context quarter, had just First maybe

that So would financials in what half. what built the in next they contingency you give second have around precise us of year. you And two, assuming kind mentioned the some and more have the could companies you're some half of reverse to in happened year. Most then do second normally Maybe you supply, improvement number should some then are assuming?

You to you're work some all. us not of comps just are saying year. how detail at the into assuming clarify Maybe that kind with next help much financial understand

Olivier Leonetti

you. to talk to nice Steve, Absolutely,

an North example America. you give of me Let

order growth you is to our that's two-year X%, the we stack, most XX% precisely. at on our question North resonating what the growth But look trends, If orders growth, the which XX%, SE sustainability XX%. two-year stack, backdrop at business, value I look underlying proposition do services market a you XX% XX%, infrastructure important. sophisticated growth, Building will and America, your of in if is answer

is our The short tremendous have conversion. America today business. North demand for We challenge term a

world supply example. in our business. you amplified to give own need issues And all me this an Let and we orchestrate America, sophisticated our partners’ In customers’. facing being are our North one we of are chain, in the one the industrial of the

is that's your total have of impact indicated, To George on tremendous revenue The happening. will for America. So is as mainly controls, the answer a controls. for due And year? [indiscernible] reverse North with next revenue that yes. And a has to it's what question, you

the today year. for headwinds to about if basis XXX look sum company aggregate points the be you expect of for company, in full our going the are the We at for

year. than If XXX expect they points, by Steve. we through at that margin, flowing basis look underlying you to And increasing are next the be more

first So that's the part of question. your

we part are prudent, so year-end happening, operation Europe question, China, is what's in the parts in On see or which we September time in company, for largely have your in the we to are second of example, of less some lockdown. today being

have about as price more are as second half in indicated, that's said million believe manner, We some positive in the we XXX descriptions and I we the description, the prudent. We factored appropriate of risk cost. planning, see

to backlog expect be next convert very year supply a as approach we half we high margin. a staff first to prudent us at of So for positive chain and very

Steve Tusa

Right.

year, year. guiding you opposed so flow and be you'll or assume the have as guys margins, that next to is to expected, term, guide of kind of would above you when this easy, what incremental comp you that lack above through So, average next a better earnings very year, will the for

you when correct? the So guide people, that would all be out case,

Olivier Leonetti

absolutely That's the case.

Steve Tusa

Okay.

Olivier Leonetti

all should next health No very If indicators our look above today margin of Steve, averages. question. business, the it's the strong. regarding increase significantly year the actually rate you And at

Steve Tusa

lot. Great. Thanks a

George Oliver

at build. we're our that to up continuing look to when you up year-on-year businesses note And field-based significantly it's were important and significantly. still, Steve, then our book-to-bill backlogs, both that's in our

a through fourth we’re third believe the begin going the quarter, right we now we’ve on that, recover. as digital of that’s to the one doing the with so the to of begin to components, and backlog the continues accelerate peak capacity this recovery getting that commitments especially next it with the built. we’re our be have quarter see in such have year, working and the we first in work we’re very that with we And to two, the strong, really and relates recovery to digital as our with we to demand beginning reflection that’s across the then OpenBlue the in we half And supply platform.

the and that to we should think into improved with I with ability tailwinds real then have year, able we confidence going good chain. So, to have in be an the stage we the this convert at margin supply backlog

Steve Tusa

Thanks, Great. guys.

Operator

you. Thank from next Cowen. of comes Gautam The question Khanna

open line is Your sir.

Gautam Khanna

XXXX be the actually the before do should [ph]? a fiscal as the first just to Yes. take entirety Thank mean, still I XXXX think Should were forward I two to take in ask, is you numbers go going are want in your is be to these want down to catch-up if up the we and other where you XXXX, the of kind I now. of were full you catch-up half? just clear. we guys. fiscal to in Olivier, sum words, Steve’s equal? there’s of XXXX – we into the in clarify today, – curve just answer sum – question from walked the to

Olivier Leonetti

Absolutely, the math is correct.

of recover very that and If if rate. of about feel you together, And look indicators we now have line and the years the at you orders we margin take top line we margin be convert, positive those we two you the and sum when years, take again, able two to the the would correct. top improvement today terms in

Gautam Khanna

Okay. And given... just

George Oliver

I to XXXX, chain, got that with impacting of some half mix of commitments because microchips a really think, Gautam, first recovery the semiconductors. point through. weighted continue but – of lot our the the is just the and this recovery and on digital They a on now the are supply we’ve of is

to be the our supply both completing. the get the and with the ability ultimately XXXX, So completion as of the is. with what able we’re to mix be, begin you as that’s projects we model, goal think to to it’s that would the tied leverage services about But and

Gautam Khanna

hold there’s me and delays any months, we’re I’m in [ph] can do orders seeing saying, to incoming "Hey, given on dampening are just off." But with Okay. have I you’re times. nine any dampening customers the order curious that, we if if appreciate to you that. And going impact maybe related conviction on place I’m spreadsheet impact now. these can’t, as to like orders? get the curious you if

George Oliver

ultimately opposite. Well, that relative our that Right healthy been overcommitting and demand to tell it’s services, automated on what course, I not we’ve you would trend to we’re the would is say digital, decarbonization, with But strategies buildings, the – I ability learning convert. this executing what buildings. based now, on we’re of our

We’re operating the focused the that CEO at a problems C-suite customers, on. much higher now level or within are is these because our

the in economic still the environment is that environment demand the so and strong. in coming even we’re And with in

we’re that feel the we that what line demanding. is the way our that are and achieve with ultimately in booking the way and so we we’re customers what can And committing business

building. field-based So the projects infrastructure, at these business, that digital look none, upfront delivering And quarter. especially becomes we financed. revenue after In stage, quarter, owners when so longer-cycled orders seen our cancellations. fundamental the look at And in now you this up their you the a or are as working And said, this low relatively short-cycle we’re backlog to our we where when is then And developers, our typically with look exceeded actually that within have with our business, you little – that businesses, at are of growth. year-on-year. the short-cycle very had – infrastructure OpenBlue, significantly and quarter XX% our I that’s at

we’re capabilities, think sit demand. even be high So slowdown, were today if given and here we to do as get we our importance what the I deploying it’s into going still a and we of to how

Gautam Khanna

Appreciated guys. you. Thank

Operator

Melius Research. of Davis Scott from comes question next The you. Thank

open line Your sir. is

Scott Davis

Good morning. Good you. everybody. Thank morning

George Oliver

Scott. morning, Good

Scott Davis

helpful, terms was that? by what House, around to White The have be spent that have in it Does versus on basically that just – versus there the upgrading get does to it get the have $XXX be Are it just million spent? how that to Does any year? mean released on any be next – I can would – spent George. color filtration – chores?

George Oliver

actively to So governments not tied biggest the only been U.S. involved the McGinty, resources involved; in but – they define myself. with get helping to been how in to Scott, to that, We’ve but bills actively globe, we’ve been impact. across and the biggest have the our the these is color with very these all on industry that that of Katie the get of deploy each

and energy active, get been have you we ultimately required pumps X:X the so just get you very the to pumps, an economics. older good of and pumps deploying with some get And opportunity replacing equipment a that and boilers and for instance, of like, capability with benefit heat significant by reduction the payback a upgrading heat purely and with heat with then

HVAC, And we the capabilities be energy to together, but so of is able tied It’s with the digital that air enable us Scott. all to that enhance of it’s reduction, do. significantly that all quality, mix not to there’s indoor upgrade a that only that high

air to two domain. we’re one here getting is the down It’s same So that deploy we’ve And and outputs of not output cooling because be lot the they’re more line heat But higher are reducing applied. any into achieve. to it’s we how significantly in defining how do standard of demand. that is been that resources but with the should ultimately indoor a applications what as in reduce a European quickly and the involved those put into heating district can trying to they work energy, actually, pumps actively U.S., with quality other only at governments, not time, broken the while, in

Scott Davis

be original do? then think you on how carbon? Okay. you That’s helpful. also a just consumption cataloging improve of that which clarify the what Or it? you advising and to would Thanks. bit, really actually are does – helpful. Or that I actually maybe was can are basically And part OpenBlue Zero Net little you energy Advisor, but Are – perhaps,

George Oliver

really other is building can all Yes. building. understand a you you what in OpenBlue And is applications, take then to of data can And AI and the the then idea optimize the The of making whole way building. with best Advisor autonomous. a

within not consumed, taking do only the of – the usage optimized then the based the on to being a the what building. how energy get so is most energy you factors account but into And what then how what you And advise current building. energy entitlement it all to takes

equipment, how but a HVAC outcome. you ultimately contribute the really help to to best of presence only not So get that and lot that factors the other

Scott, when look stock building equipment. where towards with all you still and well we full will zero offerings. an a get be take of can out with digital. building. commitments and as-built these in apply deploy And define zero, upgrade we with we their it’s can net We to solution been that able customers really best what so have one And is able this think able it, today XX% go net commitments to it then the the – taking zero about all to to into to achieve being is of of put work net our offering And XXXX ties our in, When intelligence be AI made. We the platform, being building, building a to do to operations.

go the upgrade, AI in they’ve so apply energy and digital, ultimately consume made. seeing commitments what the and the get data, solution then And is that demand high best to deploy to advise ultimately we’re to

we’re essence, in that’s, doing. Scott, So what

Scott Davis

thank for on. pass Very of this. it George. Best I I’ll cool. luck, you

George Oliver

Scott. All Thanks, right.

Operator

next you. of Thank Mitchell The question Barclays. from comes Julian

open. is line Your

Julian Mitchell

historically think, circle from as on operating XX%-plus half profit face post looks of the around that Maybe guide. did power not Hi, good – And you on Because point it, first that’s look leverage operating half. in second different the sort margin in half that to sequential second just a morning. wanted I it back of JCI that contingency the if, doesn’t sort it exit. versus what of need

right that not in previous second you’re from check, different that is wanted it to operating leverage the years is right? is that just math And roughly I So, assuming half?

Olivier Leonetti

originally Julian. trends. some we backlog anticipated to was ability beat to And we correct, the we What seasonal be had. flow those the able That’s have that increased had to of expected would we had

today, backlog For delayed we been by this reasons the increased conversion have be will of presenting quarters. two

Julian Mitchell

constraints? seasonal you possible I chain even is see. or supply trend the all think But a with normal of still probable

Olivier Leonetti

our not normal the able Absolutely. in The flow believe to trend. is today these meet Correct. that but increase recourses we we be happening, will in

Julian Mitchell

field Thank ramp highest into then business of the following specifically, it And has medium-term the maybe on a up the segments, North dialed that four margin America plan. that's you.

clearly it's So for crucial it.

rate that scale also change, business of terms today. the in but of the Just of

in a chain. I the costs before down were issue, row and supply have was the think of year-on-year now margins temporary it it's now there been quarters four those inflation kind

So quarters down maybe what in So the business on us of taking a field a we half state just margin then America question on and sort specifically? second second margins giving four that plan? of step I guess that confidence the in half And North the are update North give What's in should an straight. conviction that on plan? the back, expect there the for improvement aggregate America also then on margin field,

George Oliver

America is the actually have of more this of feel line North demand bottom the most signals, and all indicators in at put deck together the our the well we due North business healthy a we those, in So to – America business the slide this service, headwinds you if that our we the have and if in we slide you chain sophisticated customers; portfolio. America our the will one in at look And elsewhere building today with which improving add Net is of resonating at margin today, are margin sustainability, this supply having look the on complexity portfolio. company. that to are confident North actually is the underlying a we

issues temporary and today All amplified of Julian. those

Julian Mitchell

And is on half field back that in of the half half? operating as leverage in North well the America sort is XX%

George Oliver

bad The debt amount.

Julian Mitchell

you. Thank Perfect.

Ryan Edelman

Johnson Controls International (JCI) 4 May 222022 Q2 Earnings call transcript