Johnson Controls International (JCI) 3 Nov 202020 Q4 Earnings call transcript

Good morning. Welcome to Johnson Controls Fourth 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.

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

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

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

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

$X.XX quarter year-end was to year attributable the including and pension Johnson earnings share operations per Additionally, for are to charge a items, mark-to-market a net special GAAP basis. shareholders ordinary from all on adjustments. of included comparisons to continuing related prior ops Controls continuing $X.XX

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

Now to turn let call the George. me over

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

are your hope healthy continuing minds, As still are fresh our in and the effects you and and safe. impacts families I to of COVID stay

officially started have to in wanted prepared team. today opportunity Many is we had to Olivier and our remarks, Olivier already welcome speak participating with of him time the be to briefly call discussion our with the any look me you a at guidance not, Before weeks. the perspective, Q&A. September. you I over in with actively will that to the of organization get the next of in couldn't the and first positive better. to be already few take conferences investor weeks. a clear it's his going several early And And on in to having we XX if Olivier many impact forward the From the speaking my transition is on

I As can't XX-K time like a the of me of also several you've Brian all we over assume just enough of for the the his last has said take of integration four-plus to release the the the following in that thank been formally for Brian all announcement, vital you a immediately I'd Olivier merger over CFO past years. done. in of role incredible and of role and, ally his our course, opportunity partner success days. few this at an played these will for thank contributions years. to

way. decision team of unwavering Slide back is the this values let's without we XXXX that together goes year team, with our I have you tested Brian, the and underpinned culture, The get of at experiences on have for that, retirement. and and think individuals. happy fiscal as way long came year reliance incredibly the organization X. I'm of all which speak as core With with and whole entire one agility unprecedented our year an likely of every the started of past resilience, It resolve I the in us proud wishing made we look challenges. along on a a a saying

the In fulfill onset employees these perspective, our second, protect my developing we made facilities. our solutions their two years, our the a customer few safety infrastructure the of the over critical said crisis, the in continued health fundamentals foundation of remain and proactively pandemic. execution been of to navigate have our of Improving we of goal the we goals strong our As year, continue been and and was promise the of a and through pattern amount today. and have significant twofold: since to enormous the functionality and consistent the strategy. ability delivering we and demonstrate spite and to of to to families; by our and has last have first to ensure our on their essential continuous progress as company foremost, Those markets integration execute to this commitments. established critical has place of in From transformation business achieving our our volatility

invest a profile refinanced issued had in rates to billion We at Although we COVID-XX, debt We merger. returned with portion the systems, had filled nearly the ended to buybacks bond, sheet capital opportunistically in our and our and sustainability. further shareholders we early our continued arguably to mitigate businesses, dividends. our liquidity green since leadership operating and impact healthiest key the balance in first XXXX to strengthened $X significant commitment year through further and from to share of and pivot underscoring attractive roles leadership we've our very strongest the

market the We offense competitively conditions recovery the Company normalize. on downturn, this have remained course throughout of positioning as the for

year launched HVAC this unitary we our commercial impressive systems. light new of products expanded of fleet For including example, an number

acquisitions proven the enhances the we year, course capabilities. cloud-based remaining of delivering of addition, minority a in in a market, smart over which completed In stake our products solutions, Qolsys, digital security the intrusion disruptor including building the and further bolt-on number innovation technology

the attention course, down growth launch doubled of we of enter going of OpenBlue, the as of as on us we opportunities of in more also discuss the come later turn to be this growth evolution next more strategy about front finally, I and gaining form Johnson our call forward. to digitally And our will Controls, and will announced detail. which And, We excited all couldn't stage of connected I on the share. of the access in back service accelerating systems. in the

to our general We to to the quick by of our progress many Overall, I'll declining impacts trends X% teams for quarter sharp said, well of sequentially quarter. experience in XX% summary were the in the Turning fourth X%, pandemic. the X. provide the recovery activity current sales material decline into we including the demand Slide the in declined environment. with the lines, many all very our almost quarter positive sequential That the rebounds than a Products product parts with continued as our businesses from and portfolio. momentum organically, business are the of coming improvement, date, showed of continued year Global across strongest executed sales encouraged financials of projecting HVAC portfolio. our the improve ended better we while as to residential

normal spending on XX%. to Install Service to as of mitigation our decrementals adjusted We income. margin continued in commitment cash site in free to strong for at but billion, showing relative strong year-over-year, on last quarter, cash resiliency, billion, down remain flat led on revenues more declined full with bringing despite the discretionary the XX% vigilant planned conversion execution, although the XX% and XX.X% improve, to we continued down by $X.X our X% the efforts in declined our somewhat restrained. sales best-in-class of EBIT direct result decline. base. X% quarter of remains volume Our our $X aggregate contractual improved more flow delivering the delivered with quarter's in at access $X.XX, again, outperform, year service XXX% came net quarter, cost strength continued Adjusted holding year-over-year compared at pressure, revenues significantly field a X% EPS

Slide to Turning X.

quarter, monthly orders three-month our a related business chart highlights end look at tend Similar orders they shipped. Products order to and the of last trends September Global quarter. be field for Let's this our booked our excludes on and to to through basis trailing as the

Fire HVAC & challenged, applied businesses North Security and may continuing basis. sequential By our XX% for quarter retail install of to our high-single-digit the with sequential remained overall, than expectation a APAC. decline. growth quarter business; declined positive for quarter the than quarter better a orders little less global line service these substantially the All we platform, in to and down by mid- business businesses in X%, last For improved our for a X%, a reported however, lows, Orders have on decline basis. America our on weakness including and to improved three in orders recover led rebounded segments

renewed patterns a Europe little see picking and seeing continue to will conservatively. so many over countries With and back many continue to are We we uneven our U.S. lockdowns and our detail. performance order of I to rates in it to Brian plan case across across more up, restrictions discuss regions, turn that, in the are

Thanks, George, and everyone. morning, good

year-over-year bridge Slide on So let's EPS get started with our X.

and see, mitigating again unfavorable cost pressure headwind. and the savings cost was headwind. benefited volume freights in net in we Despite productivity As COVID-XX. as mix, costs $XXX tailwind Ongoing actions net a QX was synergy $X.XX some continued you a of million during positive, total, response was to operations, save In mitigating cost from can anticipated, and were quarter. and actions, significant financing achieved approximately $X.XX an $X.XX

past given count, activity us share $X.XX. the the share XX repurchase significant over benefited lower Our months,

bridge Moving to Slide margin segment our X. on

pandemic, remain environment. very pressure mentioned, the price continued across due increasingly As segments volume an did I disciplined we all despite to on four competitive in

expansion, of XX.X%. As quarter to a strong points another we delivered XX up year-over-year margin basis gross result,

savings of and XX in decremental mitigation XX.X%. our to the planned, permanent to basis and run full level segment declined able EBITDA Overall, points organic the consolidated efforts, incremental rate EBIT the segment from margins we With EBITDA of cost were to benefits XX% cost an level. at margin hold the XX% on basis quarter as QX

focus our more Slide end-market included on will performance X. to let's results look So and that's a the segment X segment for detail, turn Slide comments my in at also on

requesting For health their We America, revenues declined and from and safety X%. the saw with enhance of customers particularly activity, service North enterprise X% to solutions down down our facilities. retrofit X%, strong install

$X.X HVAC points Security related declined However, Fire digits quarter. XX.X%, digits, digits XX demand under basis the Applied our mid-single margin down and pressure. remains & new slightly in grew installed of increased was low low mitigation mix single-digit conventional Solutions in billion internal in growth was to better-than-expected while performance. business applied Performance in Segment North headwind, year-over-year restructuring of double double and also our given construction net to America ahead orders softer orders line us with offset Overall, Cost year-over-year. HVAC, in benefited benefits, low & efforts flat in top QX. of X%, expectations, a Security. declined Fire Backlog by

EMEA/LA geography, pressure, down the high most only in the challenges while single America Moving outperform mid-single XX% end to mid-single continues the high By install and HVAC business. weakness where major declined down both Europe last & continued high East relative Fire down revenues digits digits. market, at Industrial digits, rate By teens declining we was in of to other quarter. and with across service with versus X%, high saw Security single-digit significant a the rates Middle declined applied quarter, regions. in continued down our teens to Latin markets, declined HVAC Refrigeration end quarter. X%. saw

efforts and Fire favorable deleverage. improved quarter to mix, EMEA/LA continued with strength in the a but by and, basis year-over-year weren't Orders offset of in as than better refrigeration in X% As extent, fixed $X.X offset in businesses, & and expected, margins monitoring cost was the security pressure our up our Security. to EBITDA mitigation volume declined sequentially, year-over-year. X% industrial our backlog EMEA/LA's HVAC lesser business absorption more declined billion cost XX enough points

do up during with continued and cost in seen actions So COVID-XX, XX.X% APAC. service sequential XX% to with volume X% APAC rest down install the we've X%. growth with, fluid Across margins the Backlog a were moving decline. improve, remain of in the benefit basis EBITDA XX% a Revenues of down positive of several XX orders months quarter. APAC than the to over past may orders mix the points the it increased year-over-year pace relates revenue and X% conditions to year-over-year. positive from offset strong note, that grew economic region, as billion moderate $X.X their in improved favorable as mitigation of recovery bit more China X%. QX, QX, On and XX% APAC the to down China steady only recent levels. a down

and total an clear demand So driven resi quarter. to dealer portfolios. was basis pent-up with our Global of the HVAC Residential declined quarter, HVAC the growth weather, in product favorable on in move revenue across Products, strong strong XX% grew conversion. standout, a let's the where America and X% our organic release North Security by

We conditioning primarily result new a air in earlier and heat categories this also share, product as the continue to gain of year. launches pump our

the America light a quarter and to traction in choice business to quarter. transition being Asia to order well demand. replacements channels are typically is products inventories. momentum, handling channel new remain platforms & QX, elevated under converting and gain channel new of chiller strong share as revenues directly decline Japan strong declined as similar replacement that trailing XX.X% a indirect for air more due price/cost unit being see unprecedented particularly season, with on by verticals absorption by we very and mid-single with in from many products to globally APAC and pressure, channel Pacific, are demand. this and incentives seeing low continue mitigating Fire was good continue market, program as offset growth upcoming double-digit and we we in as our benefiting still related light more offset Security HVAC digits to commercial a to and aimed In both America benefit challenging our our residential Commercial delays Security growth margins in Sales to for trends North As in restocking project basis, driven cost Hitachi equipment in intrusion story That applied North and declines revenues as support for our at as X%, these in the than said, EBIT strong X%, our the with volume products building mix. grew declined the in XX-month down XXX well our markets digits, by double India. negative commercial markets rooftop declined heating continued we select clauses. Taiwan due unitary, business actions points healthy The the despite our pandemic. of service as we in integrate positive with struggling year-over-year and basis

save as ongoing to synergy actions, down we to significantly let's year-over-year expense the Power $XX So divestiture. cost and Corporate turn benefit the to cost related to Solutions Slide from XX. was continue mitigation million reductions and productivity

'XX, corporate As year's the we cost begin to $XXX 'XX. in a over reminder, million will expect that this of benefits fiscal to of the reinstate our reductions expense increase fiscal some of to a million from range as $XXX course temporary

XX. balance to Slide our sheet Moving on

included rates. significant $XXX to underscores one QX, very issuance industrial interest the XX-year do debt, in made liquidity sustainability. refinance be debt During into our to of projects, raised to favorable which few we sheet well took will grade below at target finance the remains our longer-dated of our and This very our companies was April green still a advantage leverage billion maturities short-term strong improvements note approximately bond, used so our balance our which profile. environment X.Xx, rate attractive of that with XXXX, commitment $X.X We million range. to at to net some of further first eligible of a Overall,

our our cash position planned given $XXX completing share strong quarter, billion last and you remaining the to generation, QX, million mentioned for the we flow 'XX. of resumed As fiscal balance $X.X in sheet repurchases

on Slide free XX. Moving cash flow to

with flow extremely see cash billion. strong QX adjusted Reported flow Company. of the $XXX cash $X We free across performance continue flow million, cash in to was free

was it of prior well free tax billion cash strategy. of an our and flow update XXX%, cash turn to over the to you to primarily conversion above $X.X adjusted George benefits. that, representing With For the year, aggressive full go-forward management due year, CapEx over provide on COVID-related I'll

Thanks, Brian. Slide Please turn XX. to

full leadership year work the end the point and transformation, our of difficult complete. largely at now period, have changes internal are come is portfolio around where our we now to we original As a integration rationalization

an to opportunities of this of in work excited the front is we size, are organization us. do very growth there always in about While more

with including sustainability buildings very in aligned is efficiency, portfolio urbanization the energy and infrastructure. smarter Our well safer secular and trends, and strong

positioned with portfolio uniquely the product the are enable comprehensive most channel these holistic a in approach direct serve to and industry, We advantages. leverages trends extensive with combined base installed go-to-market to that the largest broadest footprint

from and spaces years the merger and building this more five lead vision systems evolution connected intelligent, to traditional ultimately becoming provider, places. Our outcome-based for was an solutions managing supporting ago

years, over Given our we competitive our well are fundamentals and the advantages. accelerate few positioned and unique leverage the operational last improvement in growth very to

As some respects I three service share, introductions enabled over OpenBlue, have driving driving performance, four and cost priorities, the last margin gaining product we rates and will developed calibrated we At higher attachment we growth years. same sales structure have mentioned designed priorities, and new growth. attacking around remain earlier, same the accelerating time, with all intensity in scaling focused by the improved growth on the these

Slide the generation pursue balanced next to our strengthen we've a now journey. With to our position to we've balance XX. the position of in the Please stage OpenBlue a improvements sheet capital the more but are allocation last years in better made taken over steps plan. we and The disciplined the capabilities, cash and liquidity launch turn two to represents

a Worldwide, of customers manage still everything and creating connect momentum venues multiple security, is most a enhanced it respected across have customers developers sustainability experiences. early, we and achieved environments. for compelling to very in OpenBlue of immediately the and saw plan series estate Although partners. This range addresses Asia the success for world wide a of real to looking space we with from is and one significant platform in solutions and sports between. of in to customers engagement variety largest of a with variety

engagements universities. Kent at University Stanford, look let's OpenBlue others. Brown, began Tulane, State, and example, Arkansas For at We of

with applications with BEA technology perspective, Our new laboratory Microsoft. such the the creating National next of work Accenture, portfolio of built World Johnson living technology work our of fueling collaboration some breed unifying including also begun customizable, a the projects Intel. deep OpenBlue. We've a with mentioned and I technology as in contact-free ambitious the a most Cisco of for Singapore collaboration Microsoft, with a OpenBlue University Cup. is suite, From Controls' digital our demonstrates also and companies new world on

Over OpenBlue. have under numerous the last several we releases months, had

For example, and Secured solutions in in the hardware, of Healthy dashboards OpenBlue assisting under remain risk. earned Certification, and highly Buildings software-based coveted together analytics as proud We by intelligent, the instilling August, building digital Development applications we suite aimed ISA, confidence focused best patents, COVID-XX we world's launched XXX in in security. our product well management as and mobile Life on standard comprehensive creating of Cycle accelerating occupancy received connected we at label, the that technologies over the highest Assurance the bringing

to Let's Slide now turn XX.

mentioned attachment by late as few unique have a analytics. service to launched last over X service capabilities you This service months, benefits as flexible very a should offering to individual biggest predictive around on per service offerings lead one our accelerate revenue real-time platform based In sustainably percentage of which needs. with be OpenBlue, increases profile. September, the the average rate our monitoring margin of to over new increases X time, attractive and to ability our we of user; points enhances powered well and their remote growth by tiered our we As improves many rates; generation; will tailor customers OpenBlue

And uptick since healthy key Slide building have customers for turning area. Demand remain interest the beginning indoor air Lastly, seen to we of significant and the in our focus pandemic. XX. a from solutions quality

YORK For XX example, up year-over-year. filters XXX% over year-to-date MERV sales of are our

one up are enough these but Our the weakness XX% we partially dollars second most of products individually have of in some been to aggregate, half the residential cases, smaller, were for indoor in are seeing. air products revenue And any offset quality year-over-year.

to rapidly innovation that always product products different buildings. innovated offerings I are some but listed why to for introductions. represents accelerating we our believe collection customer or won't several these targeted of focus each on we on have page, the one spend one is customized positioned our core markets, served we redeveloped needs of This uniquely fulfill facet addition goal have In regarding new on new time healthy also this this to applications.

over Over provide the XXX and share would with fiscal next in years, products fiscal to his and things that, our I With now launch you impressions we to gain expect Olivier like over initial nice 'XX turn alone. to three plan to to thoughts on 'XX. new

inclusion through was role asked I And at drawn of with before Brian do Controls good I've to XX finance today, thought I've myself perspective, office might to with George, how you, you part things organization. immersed Thank and is understanding team, part the an the team. for of call opportunities thrilled fully on and enough have the I personnel matters. outlook. his and I with Johnson a be morning, to front From of alliance been with pleased my be business incredibly number transition. and the we you me. some Controls? our to the impressions reasons. wanted about I us culture, you, why guidance would I this everyone. were of by diversity as and now I'm I to quickly I'm learning standpoint, you, a be and in an cannot weeks help and of and tell for Brian forward in into in the initial we important organization have thank there strength been share get and of I the Johnson this

where am discipline recognize two environment is I achieved and team by growth cost the meritocracy be innovation. we also buildings over healthy model. done, what very operational there markets the smart, of years, I focused established. around structure I'm and people and strategic impressed are the about the and matters. opportunities our its last of business on positive the has developing around safe, product our to serve, the end the We particularly still has vision by digital that matters services, vision been optimizing work

I'm about to about we shows XX. Slide drive transition our install this natural ability growth with like our very depiction split to profile, the mentioned for and That products, each mix margins. I service. served excited a outlook, optimism our markets, above-market balanced and on a my Finally, I business seems best-in-class to point have starting one-third think revenue roughly of

one channel with of have to We the an leverage which can very largest service installed unmatched bases globally we generate of buildings attractive of both direct footprint, opportunities.

service, is OpenBlue, of mentioned, to attractive George expected As an by Company. powered for growth the be profitable vector

construction our we not our moderate new at remain and Looking include and challenged Product LC although that ongoing indirect retrofit, portfolio, through business solutions between the installed those and is pandemic, evenly portfolio This weakness booked of can shipped. equipment many in represents our revenue effects and sold building and new our will of activity retrofit parts our this the roughly business products channels direct is are the renovation through of build. by products short-cycle installation XX% at channel. split typically

economic as process. to outlook Turning be as barometer as an well the growth. construction portion new utilize on service for planning barometer market sales. is indicators provides for XX% tends a a to to the This in total our business exposure end-market installation about of North basis which of GDP America, our is year fiscal XX. the Construction our slide Slide we few input our

forecast As the global environment uncertain. indicate, the macro remains market

of our and very elements attractiveness However, our given discussed, confident George growth positioned go-forward our end markets. the the of are feel that we to portfolio we outgrow strategy

forecast 'XX to our of with a recovery turn half year. views market second and let's guidance. stronger our Current Now the XX suggests fiscal Slide QX of for

costs tight continue timing the on normalize. temporary manage will cost the controls year, of We volumes amount to over reversals to course and the continue as of keeping

flow our on the the also return partially cost actions along benefits margin Regardless cost. a are a our focus election traditional to normal XX.X% and 'XX. We expected should to half, expansion. cadence, which back a our with the generated cash back reported ongoing our XX% flow approximate the fairly have for This, ability in cash Free confident of in higher-margin year temporary the from the revenue seasonality. permanent being with growth, maintain half, cash on outcome, offset carryover in fiscal basis result line full we follow we in of in rate will took majority very in the EBIT tax with will presidential the is of

the cash adjustments transitioning of now cash flow the an majority us, With we to behind are large metric. unadjusted being

of the deploy of from part Power expect to remaining capital billion we disciplined our proceeds allocation, As sale $X the repurchases. share Solutions to

for the our our X%. year the to off to $X.XX range points we operator, that, the range QX to decline focus start sales we can challenging X% XX Overall, line in With to continued Now margin expect in The on basis expand environment. guidance, side continued of organic the with and EPS the cost in us will strong allow EBIT $X.XX. be for of should XX questions. a open performance to

Sir, with from Capital line Thank Our Markets. [Operator Instructions] is Dray your first is open. you so question much. RBC Deane

conversion the suspended, off going we the still look to start to the free and us forward the into that keep cash and suspect to of but points and companies guidance, Just look enough are in an number. on data flow forward lot back you've EPS annual on a guidance given

officially? heightened bracket's framing I that of our the still just and want make that range. from a a I just like -- it make that's $X.XX keeping math sure to consensus. to guidance is uncertainty right, is to looks want Just we're just that want sure $X.XX right. to make point getting math And is you

before question. So let me give answer specifically you a bit your colors to to of

did to uncertain you about as believe we're this Company, navigate and call, the of environment from last have, sense we year. we very position to able going as We be the the confident

you as lot point happening alluded Now time, pandemic. is of at in there the what in this regarding to, was a uncertainty

particularly last Europe, We second and lockdown few U.S. have restrictions wave in we the weeks, additional have a over and in had,

believe have we context, a this So we solid in plan.

momentum we'll have be and agile. We building,

we have performance. our margin going strong that believe to we're cash you we very environment, deliver and As uncertain a be the expansion flow plan to and said, good EBIT able despite stress-tested a

let range. looking where low your bit in Now all a question at that upon and of current to answer is we that me the go, market were to digits specifically. mid-single organic revenue the Based growth known still would trajectory

institutions. Our heavily sales the data And and centers, targeting new verticals buildings indoor on in as and George in part of growth market, force today warehouse launches. and we're product LC focusing investing is such indicated, quality as

your today, Now we an if range not you look expectation. believe EPS at it's unrealistic

Great. helpful. on the then started for of might the on least HVAC look was -- at I I air hoping all us. That's new quantify on peers your the really could funnel have appreciate you indoor like. color A what number framework some OpenBlue. And quality real giving

looks gave but But up. starting bit would You it being give come I us what orders a as opportunity can to frame seeing business hope point data on a America through, the North for We're you funnel like? that today. you sense could the filtration of the a retrofit us of stands

we kind quality, and frame me of important how on just pipeline. let here frame is, it what we're see then within of indoor up up the kind doing I'll what Deane,

that our would this I clear center and engagement. it's saying start of all front So by is with customer

front that, virus, in of impact So and that around had quality certainly the been the that's that air center. has the mitigating and has education the impact

filtration, delivering controls. with occupancy And and critical isolation. and there's sensors Now also around combined humidity, It ventilation, it's many then temperature, to billing disinfection ultimately ties air. includes clean elements to

solutions help making we're delivery backed on powerful between on based as efficiency. uniquely operate outcomes. clean clean so of air customers recommendations recommendations. quality there's better strategy starting target. points safe based rate HVAC delivery is our rate customer and number balance buildings. enable finding services to on with product on well clean focused of a air air really And our hour. now position be align that ultimately our really has combination is their And It at right customer clean it's as one solutions air provide to no us to air to performing building changes and And science, our assessments not We're healthy And each been on built and more platforms which simply specific portfolio energy per to our ultimately, the software able do the application security

in XX,XXX globe, advantage. Deane, around we've which which Now the footprint, a strength service our to is over channel competitive size experts significant the of that, and got believe creates addition we direct

as on focus right striking efficiency so XXXX. ultimately the ventilation, energy filtration, million system of of disinfection and looking think assessments for and service proper air to at from look of we're I and we pipeline dollars couple right replacements a activity solutions. with between will deploying the capabilities, to other clean now emerging balance term, hundred longer activity, then increased today, this lead And this And a at all

be that's to a expanding partnering ours combine additional we penetration the over our think out combined bring unique look but solution drive companies market to with disinfection get highest we that that channel And where ultimately have not clean years, the that technology our we've partnerships and that with we a with of as only we universities, that's have position, then our solution. go-to-market. So believe we multibillions incremental And that few market. can we our strong that, can to with market. channel, itself is with And dollars partners ultimately the capabilities then able best air, in been attractive with the in accelerate our

from with Our Sprague Research. next Vertical question is Jeff

Your line is open, sir.

me. for Two Brian. luck, of Best

this up bit and your two you points about on to talking two OpenBlue saying George, talking now to a of little to about. one kind But three. picks were you sales And growth. adding First, were you're maybe what

already voice is morning, but too your we're level interesting in before this a higher number far thinking that you're confidence clear this. Your into

going. So around wonder that customer incremental I elaborate just conversations bit a if more could how your thinking the rate growth you and on little are

Yes.

platform. strength Let me about Jeff, by start, talking the our of OpenBlue

delivery are and buildings and it And that impactful And of with so and spaces with combine complete and experiences are cutting-edge does does safety places occupant safe transform to us, more and with sustainability, protected. our new expertise our enable solution enables that fundamentally the technology. suite the for security is ultimately experienced partners, of on everyone call, long-standing how a enhance and and that it connected customers along

with through now we that channel this this amplify can that footprint with equipment and direct service does new our do leveraging we what to truly do we allows is it that base of we differentiates connectivity the able it to solutions. what do data, significant installed building So us actually today and be we create and outcomes. combines that digital everything in through a And believe have

there's had we've engagement, about let I from start. right made. little Workplace, are with prepared including many the several progress talk the the we've service the offerings days, new quarter. XX under coming bit tiered So engagement as next in the OpenBlue release And said months, my going we've remarks, last significant first including OpenBlue And momentum a planned the OpenBlue, customer flexible many, that In me kept the over several more solutions, Enterprise. new five in of

about look very to Now at XX one customers. When example real Asia, I the in I let management. developers leader manage of of of deployed the our that now mean, who talked customers estate the you enterprise excited. that move facility helps manager across we're is me which was customer OpenBlue in They is largest one the wins, properties. software a Singapore. in their They've portfolios ultimately solution solution, buildings large selected

in go-to-market we're embedding everything we're our and making So the to OpenBlue we enhancements strategy. do

pipeline OpenBlue that built to. already now connected the at look -- you We when have is

So not at to complete have like we partner. And opportunity over would capabilities multiyear Intel. we integral, market. are to go on partnerships, asking And as lot that $X believe does core only and deliver with we Cisco in outcome-based And levels customers take when supported Accenture, you a I offer pipeline Microsoft, to ultimately many of they're look that a that a as our that say, these I OpenBlue solution for. billion when combines a you how but with then said, is with partnerships stand-alone, well our how we've what our

the wondering those permanent million on kind on Just explicit are I'm cost the QX and $XXX headwinds basically on if and the of very table $XXX tailwinds, call. all tail million numbers to chart the a you and same, gave answer how gave and or feather little whether these year? what guess no, the the I in a this bit over is us of yes us And out can of kind you on on you the give color course temporary. of

have by going full and believe sales We So opportunities And Jeff, And in the we margin environment management. rate last to opportunity in have our remarks we year-on-year the return despite it the important. but prepared we we before want point it's forward. at specific we have because the questions, from was improve answer your if growth year the of very business the margin the past, of believe on said both OpEx one about to improving that repeat look you remarkable. to Brian,

execution XX% says the we we an the that goal of about we believe and a believe lot said that the have that, incremental And modeling So for required We some and have done discipline lately. Company. achievable is the Company.

in still Brian costs half million the question, is to $XX mentioned to specifically net your valid. second would back that year. expect Now the the mainly of those before to answer come We

way costs. best the plan those it's to that for believe we So

come second at levers at However, us commit, this too costs we're early for the looking those stage. it's mitigate back but Jeff, in to half, still to to

Wolfe question is Nigel next Coe Our Research. from with

Your sir. open, line is

question Just come the wanted there. on to back of Jeff's

the the is temporary some the are of we obviously, more through coming guide? linear of towards coming the The in back year. through So that those in year? seeing structural costs the XQ costs, the -- Or end

So back. half come the fiscal will when half moment, headwind in Nigel. in benefit the QX permanent more we and look, net cost at temporary for quarter, a the the of and Nigel, have first to P&L second the you at the year, the And coming the

Great. the obviously, billion, I all line And acceleration have revenue is months, been built think remember and exactly any but the service that that funnel, And pipeline. in of of the mid-XXXX. the time I do think that I since also has of that kind on Is can't you the OpenBlue? billion service built encouraging launched you sort been really $X in $X it frame? seven time then to sort last soft indication acceleration? date, that was has

Yes.

pipeline. pipeline we're Let and our combining OpenBlue as when That with and ultimately back, our capabilities digital then installs is me deploying solution. core now and Nigel, with taking that capabilities go that do, as to the we doing a

then is ultimately from service, a that. digital base just services isn't with that will creating bigger that our that spin-off much So installed capabilities

blue that's when digital And with there talked the I so pipeline. what about

be able it build, to now ultimately And contracts. a ability get we're paid not of on for. that attach the core get do allows with as far differentiate to standpoint, allows our the be in capabilities us we per it of base will forward. services, And what making As utilizing what go to services, OpenBlue, able nice which we of only connected, continue with then then everything and optimize allows to as that we that's a revenue then services and on service improve adding to our service, of And our contractual to to immediately pickup new to service deliver we us us top data customer be top able that. starting enhances enhanced see services, to from to delivery of do. what ultimately OpenBlue new It and our value,

of mine only additional it's so basis. on really our a OpenBlue, a then expanding with And installed with that but to base services being base installed not combination able recurring

Just funnel this built correct? to the has clarify, been though year,

look the mean, we we what how now be to the we solutions I capabilities to we've service go life service to funnel, at offer the done, that The Yes. when and take is OpenBlue do market of our deploy then and market. what with go Nigel, the perform part with we but everything cycle pipeline, attach we we becomes how over that of only that and we install, able that to not also installation. differentiate

Tusa with from Morgan. Steve JP is next Our question

is open, sir. line Your

platform. has legacy above brand Fire and and Just how will, changed. But differentiator legacy, HVAC of over a & Security? you that least, you if is guys building curious, the control equipment having of kind your that the kind controls much controls system, peers, big the versus HVAC does at in much of is how Maybe the one the your Metasys differentiators of

an me secular enabling talking drivers align ultimately the with markets, commercial look about the long-term the equipment energy on to at let and and the us connectivity sustainability, be equipment importance opens the with and the additional and for ultimately, with Nigel, capabilities. trend healthy discussed much ability now, efficiency us a start then up able installed the both also digital indoor attractive able then When by digital not with our now on with services; base and capitalizing we And emerging these capabilities to as be well secular our trends very as air with opportunity larger that we buildings. Steve, quality just build of offerings. which Yes, core digital mine only of as they're but previously HVAC to in to

now every to these of with to holistic is every when delivering all the from able also to what not system plus priorities. software Metasys connect take do, our we a building, combination And solution look with industry-leading we're all able able to also other us well and core. positions with only reinvesting the within positioned -- that system the ultimately very offerings bring trends, our to the and device efficient it which, digital that then So what at complement customers' leadership the a and I be solution most being digital software our most building on automation been but of ability the best controls, that platforms, is standpoint, a be uniquely products equipment solution, building embedded and in, other we've

on to is So about basis. growth intelligence advantage. we a only we're differentiate what go the to platform create accelerate going And the is to to go-forward not how although able what we we being able new opportunity, which to but competitive ability the to on our also continue and service a that to service contributes edge, within to capitalizing one able intelligence install, outcomes push be to take be

Right.

we So said the wrong, I'm system you least guys flow at P&L I that any from on Was a Sometimes one gain there. -- other companies there any nitpicky correct JVs maybe And in activities then front? that? differently, P&L some one you guys the bought from cash -- on is any on book their ownership. me, was there had cover And if the impact a buy impact JV, P&L key. that they just just suggests -- and one, control were think, it in there statement,

interest Steve out, in XX% we quarter, a that shares. was And related majority remaining to the Qolsys, we bought those had already. Qualsys buyout of the of during the

that entity that you're activity to historically an we the So consolidated. was referring have

So there was no unique that. related P&L QX to in

Our with next question Gautam Cowen. from comes Khanna

is open, Your sir. line

questions, like if maybe you could George, aggregate. in $X had a it had about at to would billion talked on if couple I of billion Carrier you opportunity. $XX elaborate the agree that wondered I IAQ with assessment.

a what stakes sort operators, a is there draw when you maybe applied to commercial energy technology. you going the has these talk is new energy systems, because IAQ some whether been these which can like it between of and compelling becomes of Secondly, for about with seems of renew the building conflict table up solutions think the consumption drops some if case utilize you

think Do of topic? stakes? have kind we blip short-term table Just Do revert just that that. COVID your think you then on kind back a you of it's or how while it's frame you and maybe opinion you

Yes.

below Navigant space. being from environment, well quarter ultimately X.X indoor part air this would you've and where in now about quality what then and of purification today's a talk of numbers that, acceptable. so footage like perceived And that within air we be when is is So level the square of as as non-resi market, of about as trillion seen there's

And provide highest ventilation, element It right there key so, solution. maintaining about, or is filtration. of include I the level a the it the able or talked multiple capabilities, whether multiple as does to maximizing being be of domains bringing

includes it's It potential might then technologies, like disinfection and health and isolation. MERV it be today, moving XX. care, in towards So X MERV deploying

that not level that required hour only air the what that clean do air energy delivers purification, and ultimately so and a And delivery we that deliver to we ultimately call on we're rate, sure able which be optimizing solution with clean but best doing is to the of making also what outcome. the provide is changes per perform

customers. of bring And the can only what best you building solution our doing those that have on are and not in we be how higher get our ultimately working sustainability so, on required. amount we the a ultimately the And focused how of that's in that optimization multiple feverishly we We we're elements underway. delivering here, with still these we the while capabilities, with where to energy can at least that optimize but controls there's standard deploy you're had, believe technology much goals

question Deutsche Our next from is Nicole with DeBlase Bank.

ma'am. open, line Your is

projecting I organic little on just similar quarter wanted revenue focus XQ. guidance. It first saw bit guys you in decline you to like the a are what to kind of looks

the that quarter of curious, throughout kind or organic if you stabilization the the if into Just did improvement reflects trends into later of in parts see and quarter October?

seeing a product global in for are gradual business we improvement Nicole, our segment. right, environment, So today, business our both field you're our and

QX we'll So, order is representative and at second. more the as for specificities of improvement give in velocity of order book And book, current business, the being look you our see now, an I'm we over about if a not revenue you QX. talking the

two we orders points relative book now, in-store or you is see our business, QX were what So And ago, we you our or quarters sequentially being about QX. at for take. which if velocity two field specifically, are by you business one recorded seeing -- orders give look our but saw better business have field the in is to

in in-store you still largely down. And acceleration this see offsetting service of because business of you business, what mentioned, which being George quarter, an the in installed. is happening So lag our as is this see,

our that's business. So field for

was that Fire look businesses. of Products, into we in in product Security see again, at we the commercial sell. move & product Global delay you we impact we we the the portfolio, are our our HVAC And of we're shares see gaining today because If you and And experiencing to decline and largely as remarks, QX, very QX -- And we opening in to satisfied demand the our a that QX due strong, QX in QX. and relative not saw Nicole, in what the today depressed but we slightly largely, is had. larger part to revenue happening, due

stack, at year this 'XX financial QX. be look you to X-year will similar if So, QX

and to we're a bottom of order our it's which improvement nevertheless, is to line you overall, the to standpoint, guide, the So going prudent in cautious an from an comparable in a we approach, be we believe revenue our protect level But as able, saw due to mitigation despite environment QX, cost believe velocity. activities.

XX quarter. and That's Got between about expected it. margin really any about? XX on Does talk helpful segments? just just of know think products into maybe about on that improvement, this you first quarter? to divergences follow-up think then can make When continue the a also we bps the we businesses some global the field should quarter. challenges faced we unique that sure the I anything And first

reasons: fixed two exception one, and into details, field for to standpoint. of negative improvement some its impact keeping momentum going will business our a without from that much believe our still and Global is We business too costs margin Products product we on mix

Scott Our Davis, Research. from last Melius is open. your come question line Mr. will Davis with

is in possibility on table couple -- George, as of M&A first, questions. just But the a still A XXXX? is

in We've very technology build Yes. from completed that enhance of leveraging I going past standpoint mean, have disciplined. the at and We've as as capabilities pursue to helped done blue, certainly, interactive broadly. we we look pursuing. some to our certainly we're Qolsys, done some going as the that been capability absolutely, open our and to us opportunities there's acquisition We in look be out to now positions we're year. an we're But of be some we and going has bolt-ons. which more technology

our -- going growth, we that's think part it's be as of deployment. So about to capital yes,

a Okay. breakeven questions, for that that? an that? Is SaaS time clarify. do a a over have And do then of on perhaps you charge amount OpenBlue, a think period to it? And upfront George, install, that and more pricing of ton of customization. a way imagine but expect period then there's to fair after been I and part I there's just you know about to the of Or profitable kind is When you

Yes.

to we we So today, you applied the an service. those with where Scott, life when We it configure attach installed about solutions. apply is deploy engineering. get We look install. And business ultimately, solutions think and business our then cycle

the that, attach that change customers, and a changes we we in the outcomes many And OpenBlue with on be the to with would upfront with contract, a -- revenue lot to where significantly and installations incur so basis. we have us, of and pursue ability OpenBlue, certainly ways, incremental propose able with What the service is that go-forward that before recurring then pursue get a take the get we can of solutions can what we engineering does level we today, paid do produce upfront it our with then really now ultimately that or And we for for that. that now engagement to historically continue contract to onto done

and how our outcomes does begin I we historically that's and can create projects with we look say been why truly able pipeline go-to-market we it And that projects, when haven't to when we ultimately at of deploy differentiate so achieve. OpenBlue those to

will over question. for back your to you some conference now Thank closing remarks. for the George turn I

Yes.

and how made the an pleased of continued speaking responded about safe, here, performance your teams I Just with hope and future and and incredibly thank organization, you many the for forward which with to remain wrap pandemic I'm we've everyone strong progress discussed global families I'm joining us today. want to soon. in up I morning. proud this opportunities, as very that our of that of extremely time excited to and you the the again our we look I

concludes operator, our So that call.

thank conference We participating. today's all call. conclude you for does This

may a now of rest have You day. disconnect great and your