Johnson Controls International (JCI) 12 Dec 232023 Q4 Earnings call transcript

Good morning, and welcome to the Johnson Controls Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note today's event is being recorded. I would now like to turn the conference over to Jim Lucas, Vice President, Investor Relations. Please go ahead.

Good morning, and thank you for joining our conference call to discuss Johnson Controls' Fourth Quarter fiscal 2023 Results. The press release and all related tables that were issued earlier this morning as well as the conference call slide presentation can be found on the Investor Relations portion of our website at johnsoncontrols.com.

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

our current our many differ expectations. make beyond begin, risks today, are These cautioned and subject uncertainties we let cause generally materially and carefully risks remind from to the the XX-K are cautionary our Form statements that advise of Before and difficult certain factors uncertainties, Johnson predict me that Controls. Form these we which statements. forward-looking during will to review Listeners We of are actual can today's to most listeners and control results release. you presentation XX-Q, and risk statements recent in to

reference in of to Reconciliations this the also appendix will website. I section the these GAAP are of measures. will and non-GAAP to Johnson most Controls' presentation, the of on attached can turn contained certain release the George. Relations measures schedules press measures call be Investor in comparable now found directly which the to over both our non-GAAP to We

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

and September. a quarter agile of of fourth results, our to the XXXX cyber take to response discussing Before employees for wanted the in moment week last I all thank quick to fiscal our their incident beginning

and We greatly we patience our us remediation to and quickly as responded have We our the everyone's worked diligently the to appreciate back teams are efforts. incident incident. impact customers Our to through normal. the to minimize from operations work shareholders suppliers, behind now from

the XXXX, important in incident. X. lose We let's strong of of our results impact not Now to on fiscal the year from quarter sight we fourth with feel it cyber the Slide is had regardless begin

business our full saw large are points sales in maximizing growth strength XX%. in as XX% our segment year, to basis We of we organically installed continued adjusted to fruition. XX the delivered our grew service efforts expanded margins X%, and base EPS For coming

the ending service solid grew year. we momentum with year XX% order fact, fiscal In for the

backlog in Our our strong XX% to flow billion offerings. Commercial we $X.X free billion demand remains total as represented In cash grew fiscal Building generated conversion. which across X% XXXX, Solutions $XX.X

to year, we and via returned dividends the During $X.X billion repurchases. shareholders share

Our capital our XXX% targeting dividends and to cash repurchases. through remains strategy allocation unchanged, to of return shareholders free share flow

backlog cash We're provide of mid-single-digit initiating will in call, and approximately conversion slower but the respectively, fiscal continued headwinds highest objective. toward to our to continue accordingly believe We the over lead resilient Building into capital color quarter. and additional are prioritize and with business. our conviction growth, are flow for for have in Overall, fiscal EPS ever Olivier fiscal that in will adjusted following Solutions, year strong we for XXXX seasonally the macro-driven fiscal and sales execution a first guidance free allocating despite show the improvement positioned with our and we XX%. approximately strategy on pleased heading service XXXX we'll well later XXXX guidance that

around occupant Now and energy X. that as Slide emissions our turning with accelerating are improving reduce we our is for while applied outcomes save to customers the to the Demand deliver solutions Solutions overall Building developing globe experience.

solutions. starts customer each build solutions, We and is and make and and The cycle but Johnson expertise the we not with achieve operations, platform, underpin service industry-leading This security able our smarter Controls as-a-service as detection drives solutions and customers maintenance, offerings helps life all OpenBlue. OpenBlue, HVAC that solutions decarbonization. offering. that digital systems by complementary components our deploy peak achieve and cost. an our and buildings our operating protection through This leading outcomes in conditions, with applied solutions investments unique which protect are smarter our on make achieve domain offering value fire of digitize to efficiency, digital our of lowest through smart to our world-class our design, through only sustainability our turnkey other journey enable these through enabled buildings also Controls total proposition &

work of the and digital to Our goals. honored build Insights equipment hard building leading The interoperable sustainability commitment excellence buildings leaderboard comprehensive meet testament We were regardless scale. and #X ecosystem silos of to systems connected continued to to recently is energy can a be a solutions break service ranked of assessment resiliency down recognition clients and commitment helping underscores for It and companies. in efficiency. connect on Guidehouse sustainability them and on an OEM our to make our global their

Moving on life Fiscal in X. XXXX to strong saw install the the orders, strength creates a over equipment. service which Slide continued of opportunity

digital over domains, installed over and that through data. With create improved utilizing our including advance base, our are fiscal customer our more visits organization than X.X professionals operations service assets service more gathering segment our business. strong we proactive continued pipeline, million for runway intelligence across industry-leading a strategy, annually. better XX,XXX to allows data effectively needs all long growth of see make of As large This our connected we us year, we offerings during doubling and more our the of

to Slide Turning X.

believe truly growth, OpenBlue of to expansion. Our continued We to drive well across drive solutions increased unchanged. healthy creation delivering framework we positioned adoption leveraging while margin buildings, remains sustainable the are value and

business strong realize remains Solutions our as to Building pipeline line we Our top continue growth. longer-cycle in

Fire stabilizing improved margins our Converting & shorter-cycle in progresses. new our priority. top line the global Products, residential year fiscal top growth Our businesses into are strong parts and primarily is cash flow Global as and HVAC Security of

key margins a area as is continues gross to we backlog Within are and in mix lessen. as are margins chain our for focus disruptions see We Solutions, stronger of favorable accelerate, us. service Cash see improve beginning to seeing also our continue supply well. to we should Building as flow record

capacity collection are installed our are associated with HVAC demand the in to we normalize, business. the in strong adding our front, historically our times cycle receivables reduce meet as Inventories to businesses the continue business. On applied and making short-cycle longer improving progress in we lead

you quarter. now details see, can turn will about to to the over financial Olivier? the Olivier the of excited the call very are opportunity we through As go ahead. I

George, good and morning, everyone. Thanks,

the Let positive, cyber me $X.X target which for delivered our start productivity and Price/cost organically. with year. business, EBITDA with the summary $XXX strong margins with flat declining a points and achieving while from Adjusted increased our the basis sales to million X% X. billion, headwind in XX%. was was X% quarter we on Slide sales was X% quarter. service segment to X% grew year-over-year The incident XX grew organic another savings strong Total

increased Turning from quarter, positive X. the and X% lower and to our $X.XX in benefiting our headwind COGS saw EPS from the noncontrolling ongoing count. price/cost of line, of year-over-year actions. interest Adjusted Slide share incident. EPS and $X.XX include a a SG&A Below from growth Operations and the contributed cyber bridge on favorability the $X.XX we

driven rest another times had price materially strong ago. quarter, Global North discuss Slide our as backlog and segment results Commercial extended growing were In upsetting in excluding security in grew working detail digits X. Commercial leading incident shorter-cycle from world. as were volume. anticipated. XX% rebalanced single year-over-year with America Europe, headwind last year-over-year. now fiscal of Demand continued the Client a heat strong Industrial Beginning by market HVAC, flat over than XX% single through was in X% digits a America experienced cyber in Let's North strength out Refrigeration declined more EMEALA. further than our high XXXX. lead a in Global from a challenging decline low lower the high-teens, on sales high position X the single-digit declined business, year-over-year on our Organic after decline Products decline Slides in in improved comparisons in remained the as saw pump driven greater HVAC mid-teens by X comparable inventory residential which further growing still fiscal of Products growth overall we and year in Global period faced year. XX.

our to declined a sequentially. productivity Adjusted comparison basis to price XX margins as cost with and tough weakness from remained billion prior XX% times, book-to-bill third-party $X.X backlog and improved global decreased savings. against normalize to As segment in offset global EBITDA lead continued flat products, business positive points begins the our year residential

One of in performance costs the Products margin Global residential global factor impacting biggest lower to our is absorption business. due

headwind grew Service as our driven in Moving to Solutions the the X% Organic transformation by double-digit The XX%, discuss momentum. orders in X% service backlog North to X%. with remained XX% And against of backlog higher-margin grew equipment billion. orders X% savings Order increased and productivity organization in-store Adjusted Building grew increased a declined positive gains growth. installed tough orders America into sales X% a from in important quarter. X% quarter momentum a for service and was sales grew offset in incident Strong growing margins contributor in of initiatives. Solutions Service record X%, and China increased remains points equipment XX% mix revenue. backlog $XX.X are year-over-year. a XX an price/cost to as recurring by year Slide growth strong X%, comparison. cyber Install installations service-led higher full XX and X% basis while segment the future strong organically and weakness EMEALA. to EBITDA performance. our Building led at levels,

in the orders Solutions broad-based our our by platform, America Sales X% new office, Orders organically there continued Install with HVAC performance Building up data across portfolio. the growth increased North Controls & year-over-year. XX% America with strength robust Overall, in demand in discuss Let's solid center, manufacturing X% across over year-over-year XX. Slide increased health in on with and region sectors. was were XX% government care, growth North construction. up

industrial both In driven by the ended business result ongoing higher-margin year-over-year. XX.X%, transactional while business. at Commercial the the efforts X% execution billion, year-over-year. from X% orders declined across Segment cycle by platform orders & was having in Pacific, driven Refrigeration Asia execution both driven & shorter in to growth sector performance year-over-year and by in in business growth continued in XXX By driven transactional driven in XX% up HVAC points & flat. in Sales X% of gain sector. and construction, single backlog. increased is by saw China. low direct our X% orders Demand year, of XX growth the primarily X% up In double-digit growth momentum XX% were teens and year-over-year by the quarter. a Backlog across Asia by to XX% the in to and X.X% high growing offerings weakness in our and the XX% lower our strong up Pacific as contracts platform. grew applied security continued base. large remained the HVAC a mid-teen Security recurring in EMEALA quarter Sales Industrial we backlog jobs strength declined Overall, of up Segment of growth as our grew service Fire across by year-over-year, & to shorter-term Security margin store. the installed margins with with from Controls grew with Europe contributions service within double-digit the organically, Controls HVAC service Total XX% in our and expanded digits healthy higher-margin EBITA by Sales year-over-year Organic points service X% strong in in quarter basis productivity solid grew primarily business. full broad-based. commercial was $X.X which installation region, across business EMEALA, $X.X & led new was Controls and other over grew XX% billion. over HVAC served benefits, Fire impacted momentum, backlog strong, in our grew institutional was within with margins growing growth for the HVAC continue Our customer and sales decarbonization basis our demand XX%. X%

productivity grew Security HVAC to the XX% Segment positive in continued for momentum savings year-over-year. billion single EBITDA declined and digits, flat digits. business and of is & basis increasing quarter year. XX% growth, Overall, full of Fire service the as mid-single price/cost. Backlog the high China in & XX.X% weakness $X.X ongoing while XX declined Controls double-digit margins offset Our points

which cash approximately Slide declined in quarter is with our balance net flow XX. X.Xx, ended of sheet to long-term and the range available We than on and our X Turning $XXX target million debt cash fourth X.Xx. lower to to

As $X.X George XXXX, mentioned, shareholders returned billion and our during via we to share dividends repurchases.

updated our conversion flow than better cash XX% was free guidance. Our of

as extended our receivable On the business front, collection installation working critical has our our generate business capital service has to grown.

upfront cycle cash structural improve to the more our are business. collection changes We in installation making as payments such

due challenges elevated businesses sequentially improvement we days in levels, While fiscal our inventories in X fourth to improved primarily historical anticipate versus further saw quarter. XXXX. residential inventories remain We global entering the overall the

fundamentals We have in company to conversion be time. place over a the XXX% cash

growth will XXXX investments fiscal and continued be some However, restructuring headwinds year. the fiscal in further in

Now fiscal our and let's XX. on Slide discuss first XXXX quarter guidance

year our and momentum levels, approximately broad-based in seasonality. return guidance XXXX fiscal normalized at we first service When producing historical strong entering are sales We end business a with to demand as of industry-leading across markets. quarter flat year-over-year backlog

forecast as China. anticipated headwind continued weakness well X% incident Our as roughly from includes a cyber the in

comparable we the channels. were our quarter Global We year, resilient & through service faces and led especially certain tough business. backlogs residential as year-over-year in last elevated a and expect Fire Building continue, in Security direct comparison working HVAC Solutions Products momentum by to

For the weakness from margin quarter, impact XX% $X.XX in $X.XX. to range and expect of we cyber segment year incurred as expecting normalized anticipate more the of a and EPS EBITA negative incident we We're China. to slower in continued return approximately start the be seasonality, be to to first the adjusted a

For in higher-margin of normalize we backlog to the and Solutions its anticipate backlog. as stabilize full converts year, second to Global Products continues the Building XXXX half

points We organic throughout mix the representing XX range greater $X.XX, be of expect of sales mid-single grow digits growth, positive year. approximately margins, to the the Segment that in price/cost and particularly X% service. as approximately EBITA Building Solutions should Adjusted remains expect X% leading to to EPS $X.XX improved expand basis I approximately to in with or year-over-year. growth

cash normal the incremental impact For with incident. the first seasonal from anticipate our quarter, we usage cyber

expect the be XX% We cash full free flow year. conversion for to

and strategy in our enter our guidance enabled XXXX in results longer-cycle fiscal commercial great Building we strong business. With backlog Solutions questions. and digital, momentum our lines operator, reflect offering order advancing momentum service with Our open the up and progress that, by products record for

Vertical comes [Operator Instructions] Research. Sprague question first today's with And from Jeff

in just we A, incident, this the on recovery peculiar, from could much expect it do cash in you kind seems XX% Maybe XXXX? touch embedded a just more. Olivier. cyber kind And of also bit -- of how flow then

on year. sort in kind capital net financial of million million charges $XXX factoring there would something going in something Your to the that your are $XXX Is per delta or the last structure up guide that year-over-year? else going versus explain of

for you Jeff. your Thank question,

which the Regarding million. impact free had will we we $XXX cash an believe flow, about in the first quarter, be

at look opening George includes CapEx XX%, guide remarks. you and If in his for one, demand the 'XX at that in to applied support some mentioned strong also in investments elements; that business, our X the restructuring some

the going If reducing we payments Two reduce you more back improvement implemented look our your believe for the we also flow, and improved, our in to byproduct help interest at will free go supplier higher inventory have is resi. of receivables, we're upfront levers network, financing GPO. have we cash as further demand financing that inventory one, as able the see, charge rate. improve times To to lead and to of our net program we be across in

are some debt. We refinance going to

We have the some cost. is proportion be small higher well, have of papers as win priced which Factoring current commercial interest a the to rate. at

us more challenges this? the you the business Maybe obviously in or you've orders particular from looked -- on color of separately, ability a the quarter mean, your the as pretty as just could September just quarter. quarter? bit either kind the way I were this then the book there you little to any through Was orders, you impact in address and And work as give solid ended entered cyber what

Yes.

verticals. on then strong. we trends, for It to have, creating look a orders, pipeline creating the ducting state that in going the as strong a year capitalizing that key somewhat And government, that of think you on XX%. is they a That's And at would were when we're XX%. the business, strong. these it's around better. first at last EV then we think HVAC Solutions look Commercial Building prior bookings at order on the in bit equipment care, manufacturing, obviously, -- office commercial a growth our the And we're see So opportunity. think continue focused were look is all quarter strong that In growth week. data we you pretty our in ducting much sales at our tracking and when seeing the Jeff, and we look really starts. mainly But we're significant very level across And after pipeline And and service Building gaining elevated space, a health share say We manufacturing. our do orders bit continue I construction education. at was see to over industries. growth. we're out we're I industrial an is continued it's the local think outage, the with when of strong lot semiconductor our very focused that I base I cyber incident, when slowed I take with clear which booking our Solutions, resi, a about pipeline, installed standpoint, And in from little then now up nice into centers, applied we up

Solutions the Commercial within within of out driving the installed So Building ultimately our our strong. is portfolio commercial that And business. Commercial base -- playing HVAC is what's

Sachs. Joe And our next Ritchie Goldman at question today from comes

from exceeded seems growth mix. service impact your on $XXX Can has versus was to And this install mix business Business quarter. farly the surprised also little business this impact the see quarter? like start it I because a just million we see Solutions

and to within expected that driving negative Business in going that's mix is exactly reverse on Solutions is what So XXXX?

look sales the you if the in today, end So our market. high at particularly equipment of

services This Joe, very are of the us of for $X a of including a digital. typically the generate Services This We for is share. of is average also, solutions, we And $X by another enabled in strong today, because reminder, And as the $X market. attractive gaining fast, over of the have of profit life company. business hardware, cycle equipment services. we saw the services twice you is clearly part growing momentum. the is of

which would upon ] the annuity. So sales, [ this mix with profit is based generate attractive service solution UTM equipment and

And question then my Got Okay. would maybe XQ. one Understood. on be guess follow-on I it.

And it's quarter. we're so to clearly look, into the December XX, well

organic a given You've fairly confidence guess trying on be that can insurance just it to range that, that Number the any help things. narrow for the despite first adjust the the secondly, quarter. flat give report expected results. from a settlement I the will in year, first range when seems this you for then quarter you just one, even And like large understand you sales if bridge. I'm decline year. relatively last X Because

see So order if continuing. momentum a you at QX, strong we look

look the at, you of to have covenants, quarter. now go before we of a the days end course, If few the

that by So itself question. answer to the

Global If digital momentum going solution as QX, comes resi. We fast. you service, our weaknesses look our Products powered in see it is by strong Building have Solutions at in is happening what division, from particularly in we business,

last and seasonality dimensionalize years to some the of now a a impact. about X% about have EPS. impact few is China. GP also supply going line, impact cyber, not is but least, top it's we in normalized the exactly of of We of difficult chain which And after more through Also, have $X.XX

question today next Scott from Davis Melius comes Research. of And our

commentary data business, give of the of really center have about guys think many you guys meaningful certainly, we've always It folks, in data centers. understand don't kind seems obviously us and you heard JCI but from Can help the bullish a materiality us presence.

size help that for you can us? So

Scott, me one. let take Yes, that

in be on growth As we applied we have over able portfolio look at capitalize be all see decade. incredible here to data product the what obviously, our to to centers, we've reinvesting been to the full of

those center, That so that a typical the chillers. big in We're can customers. take air-cooled look investments that's XX,XXX be the XXX-megawatt served. data tons you now, to that where made capabilities seeing requires at that set leader on in centers, roughly we're the being about is of and Right trend cooling. able space when with of a significant the growth serving And data deliver we've and let's

cooled it water so be air or either And can cooled.

cooled we're about tons strong roughly water XX,XXX a in course, of so Of cooling. position,

XX So look amount when needs. we're at will market to 'XX, X cooling to about at you gigawatts, the projecting which of XX tons somewhere

portfolio $X -- volume believe say, let's of we're Now position we these, to the than of would the technology strong because positioned which full going our half greater our of with that overall be to volume. serve forward, get, billion.

for at of And of is that has position center. this engineering developments our of so lot because strength. made us, we've multigenerational a our been incredible A

positioned had Just as making in their over a at that we're customers, our with achieve we've on customers XX% of representing that, with long-term we're just the we're center XX applications our laying needs. last comment technology out -- sure we've GDP ultimately the U.S. days, because the plans

it then is that so which cycle for installed, over Scott. installation. will of a then we're top we very that strong unit life getting get be the growth that, attractive And service on a service very And of from us, once standpoint, space

higher And that because margin the center, you're AI a, -- of so B, kind when scale margin is higher just just That's is if higher of think servicing it into George. the is, getting you margin? facility? helpful, and content that complexity is heat-intensive because putting a a of much or it is about But margin, higher more data that

was interrupted our what able and be was data Certainly, the not at technology relative all manage secure both. None with a the and that conditions. incident. to we operate it's think can the that ultimately the that the from -- we ability cyber delivers And data that deliver. work of done mean I applications that how cloud-based the I then around standpoint, we we making of there. criticality provide do absolutely those that sure within and OpenBlue outcomes to then the we've to Yes, we're

that So opportunity a in operated equipment high-margin level, environment. then it's that their data all of the equipment of enhance believe but at actually use with service to lot the of how we the is is, not only

question comes And today Tusa JPMorgan. our from with Steve next

impact kind more Can the kind all what of bit cyber mechanics in the attack? around quarter. million think of said but late I reconcile of the it the like mean, detail impacted I you're then you $XXX missed. think I it said just those cash, the I the then in not in thing? provide might saying And And numbers. fourth clarify which you of in from then particular, sure just just but I can a little quarter, earnings, quarter, in first you businesses $X.XX was the $X.XX fourth I'm have

a just impact the maybe So the mechanical cyber on of little detail attack. more

And me be let it going QX, line some the that go have the QX. would about EPS will of lose give In in a I in you what have That's of you impact going same Steve, Yes. What on the in why QX, you on, X%. on. some it the to numbers was in the top QX, you impact second numbers. those right? you we recover is believe

we're need in to million in immediately satisfy it, to in impacted something million, where and in impact lose My about could in if QX. collection. not lower the it, is be inventory, you you build everything QX That's that you able is will immediately if is The has you $X.XX. because collection need in that's impact mainly in X% don't have $XXX cash What we impact the not as delayed quarter demand the is have So then Steve. and the which in first that is short $XXX for about $X.XX revenue impact be. QX cycle, QX to EPS

you or Steve, significant event, just distraction days. X We -- X October. it part of look which was overall was X did the it It actually weeks, the internally. wasn't about better when at create

the put think to to overall impact, I number able in the quantify of it's we're while to So impact harder some October. a

although responded -- I weren't at we operations have remarkable. got and you the actually has But you full to operating teams that way we -- operations, As as maintained tell we would efficiency. our been necessarily back

just bit a that an and December, do so in momentum we tell overall October. of you, And standpoint, I I little we can gained momentum But believe, from back. lost in November

of sort detail. a Steve, final

a substantial of covered insurance. coverage insurance business cost, the our will including have by disruption and proportion large We be

Okay.

I recovery so I for -- That just And back of of But pretty maybe half comps get struggling seems year? year. that of are businesses. get some ] I those the the I'm in underlying the easier which an short-cycle are you [ the for just see bit I like assuming probably businesses to you're to in guess some the know, know products you hill. first I $X.XX from don't economic how base you operating recovery, quarter, in mean, like little the X.XX a assuming like a like steep true of kind seems And mean,

about during stabilizing GP resonating today our business. Global services, in that happening are see QX. digital we at is is earning What and more second Solutions normalized see Building what So growth Product talked We with by We equipment, to return enabled division. our momentum for our length, in in we growth QX customers. half the see

service strength look with digits If year, to theme the high service in the grow commercial at plus year. for strength, expected the single you

our And Barclays. Julian question with from comes next Mitchell today

moving just to we wanted easiest just year-on-year talk, as the XXXX. flow some parts again, understand maybe for cash thing dollars free is the of I

cash million So in I think million $XXX about about guiding growth XXXX. of flow you're growth, $XXX free of net income

cash, cash the you And So coming is free trying what's that coming how be the in free aware working impact to of I just million to year-on-year? if just well or of to sort down year $XXX maybe substantially? of the anything trying chain down cyber of I'm on understand know that factoring, understand in kind CapEx there's extra as much capital supply full of mentioned finance.

be to free key are you look working driver of the if So in around inventory. cash at going flow, capital, mainly they

If year we about supply be close inventory, flow. are days about of free you level chain in at at going We to of cash those about our at A of quite events before a look -- are about used to the lot XX XX. terms we worth is at inventory of inventory. day

improving to sheet to a inventory unchecked particular that declining is variable. are we line. going Receivables be way as be balance manage key would also So we the

able upfront to one demand more that cycle across satisfy payments upfront able payment final to as financing, our and year-on-year. of We're the Factoring improving been which are deploying Some be we would supply world. the demand We're include demand. to will will for has now products. flat be chain of acceleration

cyber headwind the $XXX of the cash a that $XXX Or in free balance year? assuming million whole? are QX, you like of cash is million the as most a recapture for in you of the And year flow that headwind in

It We'll would that timing be related. quarter. in up the second catch

my XXXX about of question in pace through what EPS is terms year XX% Historically, we of just would so then follow-up the think or the And the Is should seasonality? be year. recovery expect on roughly earnings. I full of the that QX for

performance go to as back what through supply of is we going seasonality to now chain terms a in recovered. EPS going We the had more are normalized

Those the the increase to themes contribution EPS GP the flow stabilizing at the growth across momentum look year. be profit an half. and you in then of indicated, would second Building If in earnings expected for QX, in have the EPS Solutions theme in going for in

next from Nigel our today Wolfe Research. comes Coe question And with

struggle in to gone segment margin. this we've know fair EBITDA XQ XX% and sales I the on I the guide, amount around really that down to Olivier, down But here. a get flat range One.

this So restructuring, Just any you I'm dial Julian's below below but seeing cost of on the to interest line is question, not social there? line flow, helpful. the did there cash there on corporate from are XXXX? the sure the for for in be quantify think action? or anything sort what timing, if the about you anything restruction that And should we Where savings help would free we payback then

product actually mainly resi normalizing going to points the have cash about of global or year we the what restructuring, those of elements. have, points the free cyber. conversion course, QX. end. an to due we to as the to in the actually the higher So actions if expect more flow, me to One about X our a some of we back center. chain are to X due and indicated go impact is CapEx improve in start what XX look, projects points normalized demand is you a momentum data profitability with and of have restructuring that. due session On the conversion we X our impact, have about the to That's conversion impact I in supply is of enterprise. in of payback On of restructuring, demand, of then, earlier Weakness product that's the I for comp in to below see the division global of And we Q&A Building Solutions, QX, few quite let

it's a like the It just on just CapEx. $XX Okay. increase. seems million And

struggling just that. segment. we orders down verify been Just long in -- I but dig The have we've insulation growth backlog, so this talk now. can can -- is quarter. the for But X% you EMEALA And wanted just got maybe margins installation into to and

just if and the some are just are? I'm talk could in So the that just fixes about wondering what maybe problems what region you of

of the is the due be positive region to do see positive turning margin have mainly see of in we the Nigel. no the digits. structural the way, in Clearly, to realization QX. so turn lower other And QX, margin for turning we revenue, into reasons in The to orders EMEALA that margin profile we margin the to work double expect we So region.

from next Kaplowitz Citigroup. with comes our Andy today question And

Building actually of and your as weaker. up in data in markets led orders Applied you little think, America. centers. And Solutions accelerated X%, leading I you for QX, a know So slightly as already strength indicators talked been such about know, non-res the North some But I by and have

for across here your throughout any your in 'XX? And I do So your 'XX? staying around be you color long-cycle up number would businesses do FY helpful. growth order billion businesses you backlog see that $XX.X see think incremental holding

we've differentiate win. where across we're to the all critical ultimately to resources deploy Yes, robust look to I -- generation and the a only regions, conversion across tracking we're of we when at markets and tracking Andy, pretty not and got positioning lead do, our

has build the discussed -- continued the on pipeline as opportunities in are generation I think projects business, that strong, the to new driving very line think what about previously new and segments be as to our service install. far it's and So with I when as And that. look that's you we at

not going and what that the installed the is and strong. been also been value getting seeing use base on side, our PSAs being get the forward service And connectivity, build So into with that significant longer-term data work of we've in there. contracts and with propositions. doing the able only pickup very base, the back getting bringing that has then We're we're seeing to new

be the you Building spite it Solutions, ability that customers economic strong, our our in service, you to going with hold to believe of in up. -- an -- look that's our whether should proposition decline, still So able installed, within when bringing value to -- be and to when continue segment I we that then we're to, even

the on growth end deploying way being starts where right At no we're you with look at metrics the weaker. so the even key same there's capitalize will positioned occur. with the we're ABI the all the resources, at, of the -- now, and little of look to dodge we day, how and metrics prioritized and a we bit that though And our our growth

heat second thinking how half, ends you quarter, market? the stabilizing destocking second for I Global on very helpful. the residential mentioned maybe positive the about in overall And markets, more That's your us little are a greater the you that second about your then think as see Do you in in you guys Products. color global as you give you European level segment mentioned? confidence half? expectations instance, for talk And the can pump maybe turns, but just could turning

resi. with start Let's

U.S. As the resi set look sales in both as at with in we XXXX, that as up market, resi obviously, units overall there the for challenges well recession. was

it's when now weaker work equipment, It's their reducing improvement for look and spending. going consumer think that, the home people cost spending. at I higher to it's reason back we

the that. changes, transition refrigerant So there here into that a get the with believe although refrigerant. more where launches, lot the more with we we to at because new that's demand will of do stabilization, certainly of price the I to going be refrigerant contributors as look less units,

portfolio changes we're a deliver refrigerant the time implementation think I to And in sales so of X. able for be now on well positioned January to our extremely basis, on

our to distributors We as months product or have pulled interactions that with restock we're time X giving ahead our new our X and rebalance much by their inventory sure working smooth XB enough ultimately as to from XXX ensure of products. distributors a our suppliers we refrigerant constituents with new all to the the to transition. to we're right have again, And partners make

that mainly we do pullback some Europe ultimately product were of mid-single are about about didn't pushed that X/X of that pumps. portfolio, pretty So here, pulled as efficiency an maybe pumps going pickup result, digits. stabilizes not the around America. And the the portfolio, it I the it's have HVAC, and on North the a like. in pumps, believe right believe that's significant we pushed in believe a the we've 'XX, although as to you the And that's forward heat a on represent and We around implementation normalizes $XXX a it's seen And and back within countries them. us. capitalizing incredible think question somewhat market. for then we heat to consumers creates we ultimately which forward. I Europe, date resi heat our do in opportunity have that's -- think just JCH kind billion And of our our sales a I that and believe, materialize it's our today, When across planning your assess bit. grown for

low watching will so come are GWP now understanding have we closely. -- on then months, that strength the with the that across and maybe some focus believe globally. We're on as positioned globally. do we're that pretty back capitalize our on uniquely positioned I a the We on portfolio. strong. capitalizing it's now a But markets we're back And side, over XX XX, commercial and of the being next portfolio. refrigerants with And pretty sustainability key significant we're And decarbonization that do that to much leading come

pumps. So think of that's an we assessment where I kind as about heat with are

Oppenheimer. Kaye comes Noah question next our today from And with

more ones and And on restructuring around it's really actually Nigel's gains. broadly, building productivity earlier of one

around time You've drive of to $XXX margin updated for productivity? play stronger the you target it profile got for productivity million path that? do into the XXXX. savings an Is what medium-term for and does much the forward how kind as And of business productivity see a

a believe, that we be have Noah, we fundamentally, incremental the So ability company. to XX%

X operations. ideas portfolio strong we in to centralizing improve enterprise. projects We through lever margin second And through as to as keep improve standardizing our is levers; operations. the and improve going our a will achieve see we improvement the we we OpEx of our one, as and profitability our be of And as mix margin we gross have,

don't our earlier, below typically, need X have indicated to I productivity programs. update those we We As projects think today year payback.

the embedded think you in Noah. I guide, that see will being

And Noah, just that. on to comment

we we strengthen able incrementals ultimately globally, able going plus. to to hasn't have get it expand opportunities our and to to capitalize operating been be can continuing, that continue on significant As forward system XX% identified so margins

we're And we're so a work is on getting payback the that the doing year. that within

case? you two, of explain service was Yes. bit period service how about significantly didn't challenging more Appreciate and company? it. the that for install just the the for this impact I talk performed the One, can incident business. Maybe positively, IT kind that would surprised And during the say operations why infrastructure a little cyber

alone, as is not work I comment on a common ours our incident companies tell our this is incredible whole. phenomenon more it would plans. continuity was we certainly was learned what we're let you But me and business with team remarkable cyber unfortunate. there by like the just Noah, What across

focus. well, as incredible and so customers, impacted, and were we And continuing maintain operations on speed with teams staying our to focused responded work really

suppliers, communicated were to we how maintain that, with in very And proactive obviously employees customers, so we've operations. our with

be and make across continuing able data where what I -- maintain that So say that agility the set is that to we that did were were we to matters, where ultimately able on some the our that What to board. -- customers. the would be the saw able what to we're sure compromise, which to of focused is foundation of the proper We're stay we to for get serve we accomplish. delivering ability is able and and have

So which and even done that December. really we come October, back about work though we had seen forward, I momentum and the the of in a that little we've we've positioned us has going strong little believe bit talked a that bit disruption November earlier, of month in

And our comes next O'Dea question today from Fargo. Wells with Joe

to on inventory I channel just ask question, trends. wanted First

I I headwind meaningful think in believe see a quarter. first that quarter. you emerged a more to the third expected the headwind as in fourth

what type fourth kind quarter? what be of you headwind And size can of 'XX? saw within second or embedded quarter you the even then so of in the in would believe And sort quarter guide, first you of

starting with businesses certainly, in resi, our in saw that was more pullback really look versus depend book-to-bill there you a that globally, at we U.S. product on but the within so obviously a when and overall, global decline So resi was channel, resi.

relative -- be. a back in as our we where the the we inventories, we've when offset at for new look offset distributors. what working think I to you we're seen more the go-forward we've to what's to inventory it's so look basis channel relative track we obviously were historically And that with the the we getting -- our adjustment normalized when I book-to-bill, to get So and believe demand to been positioned think on

book-to-bill hold When our I'm you at so forward. & businesses, stabilizing look that's Security around that, Fire the rest of it's optimistic somewhat going and controls, mainly true the there. And same

the with also of through be. we're in inventory we of channel, adjustment the headwind we So to inventory line demand most that with the the in think forward-looking what adjusted our we've believe

we what that go course on base the a demand on now able orders through actually a our go-forward here the And revenue that starting board looking business-by-business, positioned at continue encouraged And of on as across be to are 'XX are. to happening, build which the we're real-time so that we to we're we basis, important build seeing be can is through that it's backlog to support reviews to back positioned we so basis.

fourth somewhat So is of that feel I in the that now growth. headwind the third, seeing some we're and I to second, mean that quarter, and we've optimistic, saw back -- we normalizing, we're

in just labor smoothness understand kind What seeing surprise. relates of of front, a a to availability. as the constraint? this it labor projects strength of of constraints you're across of I the whether availability on then to that point wanted lot operating still as would a just activity And at I come project remains bit does office then related, market, seen still think kind And of I for have XXXX projects, a supply chain mean,

anything so on you what And in that you're gains be think color share seeing additional might where kind North you any office, doing driving America there? of you're

we advantage chain as how that our time believing projects now extended we the Yes. significant on and certainly, month I'll with we is operational create execute got within operating we're field and -- look improvements we've about the you we've operations. standpoint, a across factories we time deployed, respond to Building we a as and from made our of the at what some look where projects. our and our we're was there our within cycle cycle ultimately can to today, within a were. able back talk supply bit globe, or being And at the When little system a disruption almost now where that where Solutions are competitive

going be strength confident I'm very critical ours. that's now So that, to a of

pretty both ultimately much project-based to factories, And to be relative going develop our retain is Your been business we not resources, very globe and to across recruit to across have to able in as question business. well critical being on then by and our recruit we've attractive have our delivering in constrained talent been capabilities. as our labor labor able the been service the critical

that feels good. So very

even there a though we're buildings, to maybe to it As that work going within be differentiating. buildings the thought relates a is pullback, is that building doing commercial is

we building so the as building. consuming company with data we now, the decarbonization. as go within as And are energy a into especially that's on There's savings no and much focus

get we we on And platform, what new data cases, so and because that, the building. actually in utilize consume and the all do a building, of do upgrades many technologies data the within can and of payback deploy our within

many building and space, so now but us And that, globe, in And really that focus only for decarbonization. here standards big believe with with a America opportunity our not the implemented focus. jurisdictions that we in across North on being in energy presents especially the is that

And next Deane comes our RBC Dray question today from Markets. Capital with

potential the on the business is a would interruption embedded be And recovery, fiscal 'XX timing that up follow to wanted of that Just event? the insurance, in your insurance guidance?

event. The 'XX timing would a be

be of elements cost our Some actually reimbursed, goal. will QX. That's we believe, in the

costs are when incurred claims. prepare are we to and So our depend able when the we

will So this some in of year. it certainly QX, come in

that's the Well, that you in -- if get first fast. pretty Okay. quarter, that's

a just that's So on second then And impressive. China. question

being what margin, of -- called a might at in the Solutions. was Just be as of in weakness, several color changing? terms times Building source Any there especially just out it

Yes.

and of on and year we've business. the end We So opportunity. went to higher on to that the very as believe that there build able pickup built installed position base a leading be a they commercial a last service COVID, different in phases of we're through our that saw have capitalizing large market capitalize we

accelerating. concerns that to deteriorate, overall We the the slowdown continued leading of to concerned environment has macro are now

I our looking and studied as looking we think at not but are planning China. look region, at in now markets or for have trends, only macro prudently overall the these continued competitors. And we us, when working against we the at pressure verticals

So it guide. what's now, but bit suspect a really bit stronger hope we a maybe and we're wrong embedded little that's than we comes right our back in

question Andrew from today And comes of our Obin America. next with Bank

more think seems capital. as I CapEx, Can growth, we it more investment, more is working more just more inflation, JCI that so facing look

cash target conversion we a more inflationary growth in right? you How and we growthy are and that balance do forward growth versus think environment, more do investment conversion? about XXX% this opportunities going how cash and So

growth support the need So level to CapEx that growth we years. free cash your if high-end flow We investing in are we we the the flow prepared to at of in of business our free be coming parts in cash of our big are company what levers what said are be The company the be time level our the XXX% of you inventory, at believe see strong fundamentals you in the at improvement capital. see can a of just the And look inventory of we the there. we that cash. reduce flow trapped to I this support declining XX we Today, cash HVAC. over you remarks, we in believe of at are We collection worth also are point, remarks. 'XX will inventory, of to used math. days the inventory, to working allow level at XX to we big going few was is in at of be million about day mentioned at cycle. a end a as about it, are if we FY in to prepared around do There put inventory, look ability $XX inventory where to days some the

times As the faster. we're improving, able be value our we And demand now are some to of proposition we're to also our going collect because lead prepayments. able of to offering, are

those so levers. mentioned well. -- supply the I are some So as chain financing

what Andrew, the view is the to on a that's conversion path free company. flow cash over basically, So flow be, and explaining XXX% free time, cash

just I clarify I And you. got Got -- it just wrong. if

yes, charges, had impairments number? whether $XXX in million in impairments incremental you and think were that And if I what restructuring they?

question? Go correct. again, your Go charges, second part again the we had on impairment of

What assets do we impair?

some of blue with FM first acquisition. So associated all, we the system open assets had,

Some assets are FM part of of the portfolio. better. They those are

high This impairment have So we're business Those had by we is some are we impacted business in we going levers. an OpenBlue. charges. X what to associated had have the the key also and hyperinflation restructuring Argentina. with We in discontinue

our comes And question Linzey from Mizuho with Brett today next Americas.

price.cost. come to wanted back Just to

ability price 'XX. limit positive for how just just component cyber price said that pricing you Any You your this year? discuss thinking curious, you the way actions incremental And framework? ask? there? did disruptions in Could capture about are within the color to I'm any

keep to cost pricing price on to able the see half saw today, cost going in So year. we're of of be positive be we level price we believe the to the second we

our we you project customers see value drives when with product market. really the content that with the that value to margin. we're continue ultimately propositions see our value And -- that bring that we then full And building introductions, which to propositions to -- the we strong we we're pricing of and the the strong with solutions, we still year, record price digital on to new launches have that side, differentiation to bring the product in bringing

strong still pricing the portfolio. across we're So seeing

investment targeted Okay. a just And it Great. guess, simply Encouraging to maybe is to was? more bit data geographies? there what the capacity on size that any I little there context. follow-up a expansion. And way Is then on just just quick center? Are other hear,

Yes. let's that earned into with segment. the we that on segment was I there because strength the -- and that we big data products mean, have have targeted bringing position a It's centers -- of that here we're the that's

a that relationships the capitalize the earlier, line over now with see Scott years. demand we with we multiple I in have. customer as here to we're on talked next So that significant positioned

the with at sustainability, And when our overall across secular we so efficiency. when business, what's you trends commercial -- the look But board when around you HVAC going applied, is at to that's continue. look decarbonization, happened

to uniquely the technology end that optimized with develop and application equipment right sure market, technology. the are making in provide. that positioned We we the the we our that engineer is design from compressor for We way our

be As of a these verticals. base has us of that, able to trends now centers, broad-based, not that many across just a data on result other within capitalize but to the secular positioned broad

be we work well able the last position now to done on applied think that we going I very growth that as portfolio in our the that or economic so we've that we're a And X capitalize across the beyond that about have, above increased of we demand. because years a have believe to -- strong reinvest X over to position

it's So broad-based. pretty

concludes back for like conference over to this the session. George to question-and-answer I'd closing our And Oliver turn remarks. any

Thank interest you all Johnson and support for your Controls. continued and

offering. our And to business our flow enhance and our about results and execution. strong of shareholders service ability ahead, I foundation is am margin as generation global on we here we up through in stand we enter all build to value for as year we fiscal we and success deliver free continue today, look our It are set our customers opportunities growth for from through As to XXXX. profile, the cash as confident team's our digitization

operator, concludes our that, that call today. with So

you. today's Thank thank call, This we today's presentation. concludes all attending conference you and for

may You now disconnect your have lines. day. And wonderful a