Johnson Controls International (JCI) 30 Jan 242024 Q1 Earnings call transcript

Good morning, and welcome to the Johnson Controls First Quarter 2024 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' first quarter fiscal 2024 results.

Relations related as were presentation the found the and morning earlier can release website on well our as conference Investor press tables issued that this be at The johnsoncontrols.com. of portion call slide

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

obligation materially. differ discussion presentation materially begin, risks and no and Before we those actual variety Actual remind change today, our Please we if me during refer the statements. even uncertainties, a in will let to of these addition assume forward-looking filings we forward-looking limitations statements. update results detailed uncertainties. by that forward-looking may from to to indicated of our such to that statements forward-looking make you statements, Please due note a expectations results or inherent risks future SEC these for of

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

turn will I now to George. the call over

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

Now let's begin Slide with X.

exit we quarter. momentum first gaining the are as We

in occurred been has quarter. early which team unbelievable Our the disruption, the in through cyber managing recent

While we as back are quantify it we recovered overall challenging is on to the incident, comprehensively from the impact track. business

continues customers, It from with confidence products resonate, their cyber and believe the many and our last in relationships and and proposition services. incident, connected strengthening to customers have our their since solidifying Johnson over days strong the the of course Controls. value that clear fact, already In of in feedback is our key trust we XXX

enter year, the we calendar seeing positive we signs. As new are

The headwinds forecast. residential with HVAC and our cyber EPS business call. strong, results details of in first ongoing specifically for discuss face China. fundamentals weakness as generally are the from in disruption, of expectations the quarter, the we adjusted our we quarter the in significant solid delivered and later the in will met of Olivier During financials slowing line our margins in more global sales,

Looking and expect to forward, environment be XXXX to fiscal in businesses prior return with saw recent normalized and line disruptions. chain what we in seasonality supply operating the to pandemic we more to our the more

our pleased a Applied serve Our especially digital building to with platform and we position market. core strength solutions building are of the to center fast-growing data of as strategy, leading our the we be continues business, HVAC

by updating XXXX the China. fiscal full reflecting are growing EPS in adjusted $X.XX, our today, year We reducing guidance range headwinds

backlog, of Our to record commercially-focused cycle addition gives long improvement our in businesses, XXXX us fiscal and more clarity progresses. as backlog-driven portfolio

Before the for chapter thank internal our the to we that implemented informed the is very the over Vandiepenbeeck that plan, best him luck I pleased next Olivier role succession Marc I he was the role continue, a CFO. would last company, Olivier me outside time of years, his When taking career. like of wish few and we to the am his of and in take partnership assuming

year, new for operating continue that Mark our in we on global as of Building will Controls been has finance to and to I of already responsibility an expertise and North role into moved CFO place, markets Mark with look in knowledge. and am Solutions role. understanding forward increasing of in deep the confident foundations brings his customers, Johnson years, build we I operational partnering finance including EMEALA. with President Mark Last roles, nearly XX Mark with America.

Controls the creation and strong Slide Now I'd framework. to at to highlight Johnson our X. of value excellence like turning foundation operational

are trends sustainable We buildings. healthy and the capturing secular across

We part our to as right shareholders. our place to in disciplined opportunities. And commitment operating value for have to deploying system the remain of focused create strategy the on capital resources right and allocation, we

Our last is rates. been a to creating the addition retaining X made years, us customers our investments higher, increased FM:Systems recurring enabler. enabler model, their services and key supporting great strong to progress workplace improve a has and sustainable as revenue, customers team service gave growth of environment. in have our serve creating The capabilities digital Digital they a

game options service, our contractor from Within mechanical creating to the customers. for deploying a we changing multiple are

We are increasing creating size, job improving margins scalable solutions. and

and our maximizing creation across domains. digitally-enabled entitlements solutions all value cycle through of accelerating our In are life addition, offerings we

Our will team's we the to accelerate of model has and a continue strong pace change. foundation

same cost to capitalize on the the an we be of more on removed but have the incredible work successfully know is layers We many across to done. in and is us organization, there we of time, it us. At front serve market, opportunities

portfolio. We and will our across simplify to continue standardize

assessing focus always to advance transformation to the solutions buildings. company, simplifying comprehensive commercial opportunities a for we continue we provider As on are into our

stages in the the objective alternatives of with part of are line portfolio, our of As of our continuous to value maximize our strategic early our pursuing noncommercial we shareholders. to evaluation in product lines,

to way. our excited our margin possible expansion, flow, the We cash customers are consistent and very serving in are while best we are on future portfolio, our the path deliver confident simplify about right drive

go will the to Olivier I details through call quarter. the to turn over of Olivier? now financial the

George, and everyone. morning, Thanks, good

Slide Let summary on X. me with start the

the declines year-over-year, global mid-single-digit in flat provided accelerated offset more our did continued at the organic to discussed guidance in quarter George in down HVAC service disruptions beginning the experienced while and The responding in of weakness month. than cyber Applied continued sales incident. incredible team we and of factored in-store China's were business the last as X% revenue residential growth the call, HVAC. job during was we Total an As were billion growth into $X.X

exceeded environment. tough China $X.XX line, to coupled Products net in trends. ongoing and The seasonality. interest our in XX.X%, normalized Global macro points in Segment we higher margins historical declined weakness $X.XX XX business, of we as to to with basis China's charges was the to comps accelerated by more guidance Products and of line EPS momentum lost $X.XX financing tough shorter-cycle impacted return quarter our due from in the Global comps impacted increased incident, by headwinds saw rates Below in debt with weakness our from business. levels, cyber Adjusted

improved within first debt and improvement of balance we the free to of cash the target net we year. elevated On as X long-term progress impacts which mitigate ended cash, through range to a our sheet, and X.Xx. anticipate million potential direct the cyber cash cash billion in to incident $XXX we action $X.X year-over-year, further with available flow quarter is increased of X.Xx, the The on the was result position flow. positive fiscal Adjusted approximately

X% Let's Global results sales segment declined Products digits Organic grew discuss double in business declines X. Global in HVAC, detail low after with now ago. year comparable strength offsetting more X in in growing the commercial digits Slide our Slide continued single price. Products low our on volume through X Beginning year-over-year, which period X. saw in

share deploying return business tough more last HVAC that calendar the should attractive our business opportunities, the in We bottomed gains XXXX. see low been further investing in years, Security and a growth of in couple the single in XXXX. & comparisons to to to calendar we the Fire resources We Applied majority and align digits. out, for shorter resulting of declined in believe direct year-over-year cycle have

to second year. Rest challenges market in America XX% growing improving Industrial the by decline World. see had half building. we of over EMEALA. a Refrigeration of growth by the low have continues strong We're we than our in with industry driven quarter quarter, single digits, Residential America greater more North the softness, before to driven offset which share more Global begins North face in another XX%, than declined see believe growth market and North and X high momentum single-digit America, these

Despite ongoing growth Rest European pump market, Japan. from in the World weaknesses of strong in benefited heat

with $X.X declined last to third-party the year. the XX% book-to-bill EBITA points proceeds XXX and Products as backlog times, period Adjusted year from Global segment margins fire improved our Our from normalize to insurance XX.X%, warehouse benefited in continues basis billion. to a decreased lead we from comparable prior business

Global better absorption rest are the margins We fiscal to cost year. and beginning to the of Products throughout in improve expect factory our see

X discuss EMEALA and Building America Slide Solutions more APAC, offset North which was result of increased in China-installed growth to order performance. business. a Moving the to mid-single-digit greater Orders the was by of X% decline deterioration than in as further primarily XX% than

we and estate strategy real to have China mixed, the we the market become in weaken our begun pursue. more go-to-market to outlook the optimize have continues selective As and business remains

more accelerated record declined and levels, growth double-digit weakness a year China Organic mid-single margins service. in comparison install at prior sales digits as in declined quarter in the growing in offset low $XX.X backlog were year-over-year. to against offset quarter. mix Segment billion. Service X% remains tougher backlog X% quarter. points flat and is in the Solutions mid-single-digit flat grew growth positive backlog basis Install the of XX Building than

region data sectors. HVAC Let's in Orders to high the on heightened year X%, was and America comparative Solutions platform, digits, care, across Building & demand see single Slide our growing Overall, a demand ago. discuss X. government education broad-based Controls the performance there increased North health as our in by growth continue in strong we period following center,

construction new X% retrofit. orders low HVAC with in Controls year-over-year, up and up were platform, with North growth year-over-year. both & Sales growth in organically, Install X% strong America across our increased solid teens

X% quarter, momentum single-digit benefiting year-over-year. up our recurring Our continued grew grew in install X%, from XX% service business over the contracts. revenue in construction in with high Organic in growth sales new

XX higher-margin higher-margin XX.X%, basis the XX% backlog of quarter to $X.X billion, strength up by driven and execution in Total business. at the Segment expanded our margins year-over-year year-over-year. ended continued service backlog points

driven with XX%. had public orders up and Sales our single-digit shorter-cycle growing led strength quarter, in transactional gained greater institutional EMEALA EMEALA, growth. Demand the continued our single-digit In than with high in Europe. in strong up growth contracts double-digit from another Refrigeration with organically, high XX% growth year-over-year, X% grew strong Industrial in service, in service, in were projects by in growth business. momentum by XX% quarter, X%, recurring

install by was Applied quarter. We remainder the margin of remained of margin X.X% the flat Fire Commercial fiscal margins XX% strong backlog. $X.X offset expansion conversion anticipate Backlog Security Segment to up service of was the grew year-over-year the within single in as EBITA in growth and billion. lower through EMEALA year. digits HVAC & the low

as Pacific, grew high In low single-digit due of more orders single growth Overall, select. to Asia being declined are set mentioned orders APAC strategic we I the we of in deals by transactional business. and XX% our driven in deterioration the Install business, China digits, earlier, further shorter-term

by primarily impacted the Sales weakness Pacific accelerated as the Asia installation was in XX%, in declined China. business

business grew our declined & $X.X XX%. service Backlog mix in The across the Our quarter. and Segment EBITA down install margins with as overall positive in declined in business of XXX and Controls China's broad-based down HVAC service was the weakness China offset weakness Fire XX% X% in X.X% business. billion to portfolio, points basis high-teens year-over-year. Security

like call Marc year discuss now second to fiscal would over XXXX the guidance. and to to I quarter Marc? turn our

you, Thank Olivier, everyone. and good morning,

on X, guidance am say comprehensive our the we a buildings. simplify Johnson how George want into discuss Slide for I with commercial provider excited for partner I and solution opportunity to transform as I Controls to Before

We with the entered at exited quarter start and strong us we We levels, healthy quarter opportunities the business. our lost incident of recovered. at with and in that our of the behind remains historical service a momentum pipeline backlog year the momentum the a second cyber has industry-leading first

flat introducing and approximately of global HVAC. quarter guidance which are second China year-on-year, continued We in assume weakness residential sales

strong contribution North that, again, We business. by resilient our and from expect America once service EMEALA

more global the with has challenging we in quarter more to As patterns, half. seasonality before in product return one stabilizing historical line second

expect we range $X.XX. XX.X% adjusted to segment to approximately be be quarter, margin $X.XX EPS second of the in EBITA the to For and

a China. in led mid-single in the further cautious in full and outlook stronger year, Global stabilization North performance improvement For digit, we growth of line the on by continue EMEALA, America, top expect to Products

segment expand basis mix to full the for year, XX expect EBITA price XX We remain positive to as margin throughout continue improve costs the approximately and to year.

conversion call, $X.XX. $X.XX to of given return overall outlook normal the to As we half China, mentioned a to stabilization seasonality, a range updating in earlier second Global Solutions. our Products adjusted guidance of in macro in are weakening The backlog guide approximately EPS the assume George higher-margin and Building

improvement year adjusted of expect free working are the year. the cash to continue gaining approximately demonstrate The conversion XX% start the flow cash We we improvement flow momentum. for saw our full of capital that in for

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

today's Scott And with first from Research. Melius Instructions] [Operator question comes Davis

-- levels you quarters. it's can get backwards. couple call term been What normalized to tough when dare to your step the down want what you a the this a X, margin take you we growth cash X road long don't a of think dream, portfolio, is do kind -- I of years in is think vision environment? the of what rate the and Maybe if George, it think I and generation, but more where X,

Yes.

bring differentiated So on let in just transform the we to solutions a into significant our customers we by buildings. as you model we've our And as to business commercial how me focus start, here the know, provider that, commercial continue that, through space. and for we part Scott, saying solutions do comprehensive then becoming -- of transformation a how how been

look well significant in healthy the solutions space, our and you we've been buildings. building what capabilities. so are out We've we smart to trends, sustainable and been lead capitalizing on building And the as doing, allocating invest overall at buildings, positioned secular resources

at a we're industry. those what making that content enabled platform of Building leadership the to we the how our we and OpenBlue believe for product, we product, continued a but lead deploying now you only service. that through and solutions, to digitally within And Solutions it's the the product commercial not into leadership applied in When serve, that's differentiate and also through the customers all investment is going with engineered of converting do change is we the the now products with outcomes converting the solutions we that how that look

trends So from services, getting we And forward, capitalizing you cycle margin of install our getting on overall ultimately the on the a from as then within project differentiation. secular services, performance the the services. revenue believe are well-above we'll a market standpoint, at profile, higher when we life not much through margin a focused we approach right look engineering the with a higher with a software-enabled from proposition when structure growth margin go demanding to the forward, that we'll the more differentiation going have much only the to you be the content with recurring value

we're the deliver relative to proposition an then very And cash at now when more to being we proposition you getting cash the much overall ultimately, from getting value return, on flow. strong look value for and conversion to cash, free upfront bring, we're able that

believe So and mix cash of the of teens continued I would do of is say well-above higher the market flow growth, what customers. for we kind content to expansion very predictable margins to then with what we mid- our of

margin growth company? and so mentioned? change That's when do it KPIs profile think simplifying some sales is or kind but of -- more helpful, nuance of clearly, on there's themselves execute about and And can asset portfolios the is function the the it sales, George. you you of just you asset a here, that those Or the

reflect me that. on Let

the with resources comprehensive kind transformation going we of in that a of provider then been are and to the our priorities. transformation sure the through, buildings, evaluating we've that where highest are commercial continuously portfolio, the being been we've On making deployed solutions

as the an more now opportunity here. strategy now to we at look you -- for able excellent Because are we shareholders go-forward and are create lines, good they with pursuing at the they When that's our now are as to these be businesses, the they alternatives. term? the with alternatives value why product noncommercial businesses longer there's these look even consistent And do the necessarily not over businesses, are but

We we much deliver our expansion, the margin going be cash the differentiating driving the that the the to and with that right drive can is value important more most fundamental opportunities future the on We're have we're to bring really is we to that growth. we're continue towards. the now that path consistent portfolio, flow, very about simplify customers, believe to prospects while excited which proposition to

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

could XX.X% get great you And would a how sequential them? this answer if talk Marc target, the do the and on have segments? this But And a what to of out basis? for about be maybe various It expect you second then follow-up. year-over-year question. margin can And operating I just you quarter,

Steve. Thanks, Yes.

cautious change in guidance, So to impact the first, Since our guide. our the December, business the want issued a on in I environment initial have outlook China guidance address economic in And originally right? the we deteriorated. has of fairly in factored we in China

outlook that further has worsened. However,

path that recovery the of it to We in as the organization in to the bottom backlog but second through out We refocused QX. a the and started tumultuous environment China. going year, well volume that in recovery of of half see

the have in that around backlog. clarity more We actions and the productivity we've on support and some cost taken that recovery of structure,

different Now business. on QX focusing on the

cyber business, us. And particularly the that If you service field-based had our mix. shorter-cycle look supporting businesses, now at disruption behind The is our loss the recovering Building we Solutions. and QX in momentum is really

If rate we America X on you able the North particularly, particularly during the in look backlog to at the margin be return volume businesses. as we last later in margin on us we're to but in that we've for but going the the the operations. taken confidence months, and of Global cost those seasonality over There's put early last marginally EMEALA, in and deliver of quarter, lot to first our year see there's those have Products benefit actions providing year, also a the more business gives

attainable, see confidence that think margin you If I combine all being that, of with Steve. we

this strategy your what with what And the then for commentary of this consider momentum? And drove basically that on timing momentum I to It's negative announcement hard just, strategic Do you George, alternatives? you, of kind guess. secondly, in evaluating growth the -- organic Okay. quarter. was positive on the then reconcile

I it's like to anything you official not announce. lined really here, mean have up

there why of on on the We we straightforward over answer a of of pursuing don't last a years couple of kind kind So are those. where versus throwing this the of out verbiage. strategy? maybe just kind same lot been both curious Just today you've need of

ability let quarter, able me to Marc of for like. did comment have far as the X impact momentum. the have significant quarter to the of on about disruption, that did our first just an momentum a and part as as our So be and We convert and weeks on said,

of addition to -- impact Global And adjustment year-on-year in a in the was we've in that's so that QX, Products. short-term more that had

the I'm As that far can Steve, approach assess our timing, deliver to as all had to Board the management sure team, a We the very the you appreciate, will and thoughtful that avenues strategy. shareholders. value we've

-- engineering be on digital recurring product, an depth really platform. strengths to a differentiated to able be transformation strategy combined services. ultimately our and value expertise from our be our And proposition we solutions take our from provider been to able revenue has standpoint through convert then have go-to-market comprehensive focused to of all standpoint, that to the our ability and and a Our the that and leveraging

our is focused model seeing the within momentum, while market. is the the which there we now models us talk accelerating the position we we're Building we when business. I that while we're able at We're noncommercial And value, how for businesses, progress the to beginning within serve this those look we've a business continued different to on really made to about growth, Solutions business businesses think convert. the relative be in And difference businesses allows creating as to

with Research. And from question our Vertical comes Sprague Jeff today next

business George, bit And looking I could kind more us review. outside even for know, is It's the portfolio a in. you you just it. of wonder specifically, drill running as complex complex day-to-day little the if we for more, the on into

So can you talking what us for assets? we're size just in noncommercial

talking total ballpark I are maybe sense give that put but across and an average or revenues we're the just I kind know don't that I consideration out profitability about there. think review the estimate of and that basket. under us of I'm if in some the not,

of of businesses, the revenues look you less portfolio. would these the overall be it at When than Yes. XX%

versus JCI? And how average stack of the the did margins up

Overall, when with would the you margins, in the of the look JCI. line mix it overall at be of

granular know, the this commercial I maybe just Okay. of debate back And can then. well together, maybe you tied extract of Applied this exit as you to kind resi on effort was business. there are your more and commercial coming Even think, a York, resi light point always larger then it from about, preceding you, kind undermines and that if legacy, you then

maybe resi on you factor in business, think provide to found Light on from -- any strategic Commercial separate you can And a can where So the can, but might and your business you thoughts additional you the that? Commercial particular, into how context way Light here? goes where

Sure.

Light the Commercial commercial, picking America XX% So now resi was and resi quarter about in well on down up if really as you all up nice back mean double with look at with in growth as supported in I X%. had track. share, and businesses are resi, here a with business Commercial being digit, we've which was really North both Light

the performing positioning perform forward. are now So businesses to going --

the India. when some Europe you offsetting at where we in of On had side, we in JCH, Japan, saw weakness strength and it's the look dockless

to that excellent lines are understand at the I noncommercial it's important So think businesses. product you these go-to-market, when look

that But we're solutions our with the value over build we believe the there's although as what long -- some and that into an when you at you with managed bring the doing look put that rooftops, the that not customers, we going at be our structure so overlap the forward. can we out consistent term, when of with that go-to-market, place we with look proposition building applied they're

to it more the be to at an the our able but take growth. create positions and also look comprehensive any does erode asset think through value -- And in so solutions, I commercial incredible proposition not value when you business

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

review. on question another portfolio the So

talking just that very, commercial about release wanted press Friday assets. [indiscernible], just on I clear also highlighted light And very about here it U.S. to residential we're the residential, York. talk for the but make So

mention also there's But a ATT business the as of well.

here. more control the much are then of it because do seek flexibility the does So some [indiscernible] commercial any in feel majority of have terms businesses to of that you And Hitachi the Hitachi noncommercial assets side, obviously, asset? How color for business. on options like there XX% your

appreciate, think how with stage, stage at would transformation, at it. this any this affect Nigel, against the ongoing you'd I making I we will and caution assumptions

is I think are in the here pursuing communication we're today alternatives. that we strategic --

going to standardize continue So the to across simplify and we're portfolio.

But we're in with. the that any we assets early stages. And to at look this create relative the stage, comment potential would of to I'm not to going one value

say, Okay. look portfolio, billion you if With on do realignment to of George? deploy cash you if today, form the But we let's that would for door coming the in [indiscernible]. of assume how that, you had, execute strategic some $X

Yes.

we're, As we again, happen. on speculating I look at what mean, -- would

to I go-to-market to be within our we We'll think business, supporting at globe. continue look have we in and that bolt-ons as doing the what our able strengthen been the as we do commercial do bolt-ons. we technology across solutions comprehensive

And our divestiture would it'd have. make far the as might dilution and/or accretive be to our deployment whether bolt-ons to as that be any through it to intent shareholders offset back

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

Great.

shorter-term a one. First,

some out just of Can on in cycle. Fire did and the us You confidence give there? mention signs bottoming indicators you Security short more &

as field, backlog When product signals the to through we've the gone as adjustment some well whether business, relative be through are it'd the far at the Yes. demand the in as look strong, as or business. book-to-bill business, product coming the in you at level

opportunities really and we're at a that robust, this we we're businesses have our commercial to going to working and differentiating revenues these utilizing of solutions ultimately, you go-forward how then our basis, execute conversion -- see We and solutions. when and differentiating the pretty backlog On look now overall forward. pipeline is continue our into

to in continue based more be going to that we've the committing we're of we're but to adjustments some what market, pipeline have, able it's confident positioned to to. we're seen with here that support think the with the short I So term we be the growth on

question Okay. we tough the out frame comps. And that a I like in the Obviously, I'd to maybe years, next trends. through easier year there's market U.S. benefits, look year return secular mix it earlier, tailwinds asked ongoing last now refrigerant and transition, think the differently. to But some slightly certainly, as why went couple with of price volume was

both transition, have America heat And in then North you globally and pumps. towards the

seem for North and residential. to commercial concern at positive any from the globally some there be I think, same around prospects, So both America And there's, investors right, weakness. overarching time, non-res,

I perspective, market think from so seem ahead cute in a to is I this a because now And that context, necessarily inform a why that particularly question would cycle the guess the doesn't see same trends decision.

and about of talk this you maybe makes now? So kind for sense why to why us

Yes.

these businesses positioned that made across these we've as and has are disruptive I So significant progress to perform. said earlier, come through very businesses, a period, and been there's been

I reviewing assets understanding value shareholders. portfolio and constantly our as to be appreciate, able said can how earlier, we for so And the you we're to the as deliver manage

this assessing ultimately thoughtful deliver how very approach we're that to sure shareholders. a making taken avenues we our continuous and We've has strategy, to and all on the value been

that's out. been so And what's playing

to leading as comprehensive the acceleration solutions tied think commercial I commercial of that we of forward. think our becoming -- buildings, provider path about part this within is

those And to update consistent -- in to provide progress as shareholders, to updates these our potential continue we'll how we divestitures. with with we continue line make with continue

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

other The start your few Asia you times me because -- on and you prepared Congratulations referenced to just let the on see Olivier, with Marc, a we'll China side. comments.

of then quarter? be you I'm continue? few the And weakness Was own saw selectivity? just this as trying deteriorating this we to next understand the quarters, how much should material expecting that the order about declines to your think versus of market you like kind

year, our recover were where from backlog I'll we wave COVID year, of take second China. the working in to last when at look we that, Joe. you were Last shutdowns

what As to the the economic believe we to with resources make and we organization continue entitlement. that environment we're maximize aligning streamlined has slowed, sure be market our to to our in our is China able

with services. we make we sure played we're very market, to see we achieve has America discipline and assess our pipeline which we which in successful We strong as out cycle with executing very very are converting. then what value have what a the been to be And life is North creation that for us. healthy do This

anticipating now are been and right. the slower ultimately, recovery projected the which of the We to backlog revenue, pushed a has

the go-to-market market, I'm And incredible ultimately, market. very to are factors and a the have on updating Joe, execute then being structure making but guidance we that so see be here, for those we what attractive really the sure to product still right have our confident able we

And I a of don't on know that want what specificity means. noncommercial ton Okay. to you provide

and I maybe Just I international old from well. assets, assets ATPs, remembering own think you my residential edification as still mean some Tyco had the

correct if Just I'm if wrong, you me don't.

of roughly just showing at is a And also then point X% of business The clarification. sales. light commercial

I the understand to a several bit, a been to think into last X%. closer Did shift of Just that Light seeing you it sales too. we've little Commercial quarters, Applied? the guys portion want

I down whole look business, said, business, our look what slightly Commercial, up like is XX%. we're then the was When is our very ducted mainly which within being commercial when you Light in business strong, ducted being at you resi mix and at XX%. our And up drives duct our

XXX been invested and recovery to basis -- has of points commercial market, this the be bringing share, in the so -- over the so. year increased that with we've Joe, the we've last market, product we've by do differentiated capacity been able to into about roughly And been the the getting it's

light been far as is commercial our as well. extremely that we've core performing and the So of business,

percentage lower a is total in it as was a So few showing the your last like re-class quarters? as sales business than was that it's there because

into takes account the It VRF.

the is Joe, prior math we in is exercise. difference it's just when the It's year 'XX year fiscal -- that, now fiscal forward, that is our X% that final. the a 'XX, now our versus a sales it's move

follow Yes. can doesn't but up well, that off-line. Actually, really math I tie

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

was because said of orders you and give color you're Solutions slowdown Building your Could slowdown QX order seeing? little as within Obviously, regarding you us the China. most the in more cadence what in of a in

think incident did your well the But of orders a of you the in structure your comp incentive and as for then I quarter. some changed cyber see in dip you salespeople improvement? because

going lot thinking are backlog here? you orders on. a about So How from and

Yes.

cyber lose because we did incident. of talked some we as the momentum So about,

And so did look week. you week, lengthen sales a it a quarter better than first the in about at cycle, conversion the when a little by bit

having you our remainder that when pipeline at through what expand QX the we in of prior to the the orders support year, were impact with and we acceleration the so line and in look does had. of continues to projecting And

with, -- to very we're convert and the we convert with pipeline we to back So the cycle able that with ability pipeline -- generation we're generation to with times our confident were. the then be where

year. to with for services services and that strong building success deliver combined then backlog in the get for pipelines to and also then services, being supporting continue our our high being And build single-digit ability ultimately, able to services, PSAs, convert to

Marc. in for EMEALA a be least might solutions at while. question I little this building know for you And ran

those began more projects margins forward? down give talk what more on to obviously, have margin holding better the continued you impact and institute there us is segment, ending changes color challenging. that to might be about have into going then they when and that Can you And segment? So maybe

question. great No,

So to very operating field enterprise right in we started work our few to similar North America a year, took years on did the away, last model. we implementing I what ago. when That's role

opportunity provides but on our that capabilities, talent are leverage engineering of complex, large that markets the when solutions. Controls the right product in important provide subsegment and us our remain focused Johnson operates level of to that disciplined and it's to that market you sizable But for face and market, very ample grow.

the And looking for value those our market provide subsegments we of that for are customers the most and the company. both

lot and of business, And As X becomes amplified. X that's operating leverage. we model really continue say, benefits get in on that adopt the a the I to would model what easier been last the the We field, simplify, in over the that and to get we've regions rationalize focused standardize months. to of

the of I that taken, very are that margin. be but confident and we the the our comparable work benefit level we've return seeing a EMEALA And still so great segment There's will improvement to I'm start done, actions other that profit see to as model in field book seeing.

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

for Maybe X, and to Marc. portfolio. on guidance sort Slide just Olivier, congrats existing And of thanks, the the

year. let's for sort at looking the you're So sales organic growth, of say, X%

include second So the China plus just Building And U.S. then to confirm, building second growth half and is plus growth that X, implied, about trying resi, in of guide up X. does How both X should we half and also HVAC think between that Products splitting Solutions? solutions? Global

Yes.

you. thank So

and we you Products, as Solutions in recovery Asia breakdown in look the half growth in of Global Pac segments the our So year. the between second a see Business at

So will turn positive. that

clog EMEALA to in second growth support digits mid-single way continue in getting you're the segment, North you of see almost on and BS&A see as to very can the And those all of at X we single continuing half year. balance strong offsetting the That the the slide. other and double-digit digit, to the the America seeing

an Products, it see we improvement in Global When continue to orders. comes to

we believe bottoming into slide. we that and of you As really see on quite and QX in into business, said, we the is the accelerating good stabilization that recovery the the and supporting QX, out number QX that see momentum

Got it.

second grow to GP So both rate Building half the and at each a Solutions other? similar in

right. That's

just too second can't And understand I a you then talk question. the about portfolio. much

about thinking items. some maybe So other

and factoring come the on in. sort times going that pillar Marc, in factoring unwound are of from terms wanted does And because lead on be here receivables X what to, get Just of will perspectives has to back approach normal? the now

the teens. to high about rate we should the moving medium-term think tax up So

Yes.

good that rate. there on the question with on in changes rate. some So starting headwinds Obviously, are tax last the there

and headwind to We longer But we'll assessing right, are you're continually there at a it, is the look it. rate. continue on term

when elevated avenue. When a to a Factory became times than methods always finance you to company. more we bit And logical it little the said, when were at got as inventory traditionally. factoring, comes difficult lead look different

the continue review of most made terms and We'll will it action appropriate commitment that profitability flow to you, with we We take company. free cash to make we've economical that ways both in against align to to the conversion. sure the program financial finance

question with Cowen. TD comes Khanna from next Gautam our today And

respect wondering verticals. various in have a if then was you you're the follow-up. I comment to pricing pricing could with I seeing power? on And What

Yes.

business to Solutions cost As towards product that model, simplification and ability solution. and on our part of benefit price, better that vertical of one more of better drive and Business comes focusing particularly accumulation the in, segments, lines our have businesses, we clarity our

price able but the the to have customer. less been end drive more we are sell market We market the is the than to historically, segments also competitiveness value of chasing where hard to to

the Building can So margin. Solutions on in as both see can you executed of our and great system, we see realization backlog but we the price the also part a command improvement, our price operating in market our

about a When end it the see always Global of commoditized as been on good the tried shy to businesses we where that for momentum momentum to Applied over that few differentiated have particularly standpoint. margin comes operating but continue to part thinking last back market, Products, from of the pricing, our quite away both tremendous from the have price margin see comes cost the We very and we've on that months parts strong at the HVAC well more actually as product.

you could evidence like? any there you or get pushback? any Are Is well? resi versus that as market commentary movement the of And the to repair Are you expand price? downs to replace on trade still able and seeing

No.

we've to As to these reinvestments able proper have that be pricing, we've been with continued get all of lead the to price that making that changes, regulatory said that positioned made the and to continues. we're sure previously, support

been how the the very relative of how ultimately, we're market. and pricing so us creating to maybe one And in the we're not proposition being disciplined value of in spite top players, we've

And Chris our UBS. today Snyder next comes from question at

you just for revenue, mid-single-digit the guys deal the the is can increase about years. seen up guiding drivers sharp the in about are sequentially, than XX% March typical good a into Maybe -- So which we've March this you most of ramp quarter? stronger that talk

like couple of understand cybersecurity but has I yet of points GP a sounds stabilize. to catch-up, there's maybe it

quarter, some so troughs the said March headwinds it I I there expect would in you remain. still think

in Yes. It's some coming, mentioned you your seasonality and to normal the question. year. There's versus I prior it return think

up, we flowing As a couple us can that lifting see points. that's through seasonality the of you and backlog, were picking

tailwind lost, created of had second momentum few cycle quarter. absolutely through that growth from team the the time of were you're cyber the created and commercial but quarter. in expanded were disruption right. in quarter. But There The in it we standpoint the a going the quarter that challenge first were the provides that a our very loss now And orders as

remember in one And it Was it point X know X guys you December I was called if point cyber -- in out quarter? quarter, again I the the correct. March from

how built points a it's was were that momentum we benefit we I market to the now to that time. It's look really at precision, at you. be are of believe the prescriptive, you, cyber measure tell don't with versus you in think we've I I the seeing. But few honest if much with would hard QX,

about lines commercial follow-up, and you light talk Got maybe on about you Are but Products, stabilization? resi, product it. within that, they my on Global normalcy? all guys seeing And the then & leading, any respective Are being that Security? talked for Fire Can any showing lagging stabilization.

you the last now at seeing inventory board. in When that we're book-to-bill, order the what and in -- through positive you revenue, products global our across look more and businesses the projecting now significant we at the went channel. coming in look When transactional a we're of our year adjustment rates

That for very projecting we're in orders as as XX%, still price, single down we year. go is But Again, we're across we're revenue will beyond in line to through improve down board, strong duct the the go with we resi seeing about digits. continue business, with the -- still what down that, forward.

And the Bank. with Deutsche DeBlase Nicole our question comes next from

ago. guess a weeks I'll pretty of I a and it is I to of ask keep gave just covered you guys just about in is, here. only we've guidance So ground reported thing the to wanted quarter, with earnings couple fourth question, obviously the late lot one last

you such take we by only a later China month cut $X.XX? have where a and by to did how we're surprise So guidance

question, type a the remarks, incidents following and exactly disruption prior really condition I and we had X mentioned which further. our flows worked We as type and it decide data selective we to also know to pace cautious came at the was And outlook pursue. educated us factored discussed the of the more opening cyber that China. as a ability slowed challenges have the a actually going current and down down the Yes. quarter pin it through the being organization. of that in weeks on fairly about we deal transaction the impact, from in about the more the the it's outlook But of to all has market quarter, smarter in combination on in

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

of and SG&A., standardizing to is on as a sizing your where next chapter? of In relates see and cost you've it the think kind both some and opportunities? I this across for out costs biggest simplifying little been about cost portfolio, reference some of COGS talk the to notable sort bit simplifying structure setting you you the any up those can Or of opportunities on the

Yes.

within So on lot of I been taking that. the reflect that transformation, a in of mean fundamentals major we've the set businesses through a of were a me lot let a variation the become operating now ultimately, to system. has standardized cost that That to board. business. much reducing is across that the more support required layers allowed us the We have and efficient,

the simplification. And processes the allowed That's be but good it's only able automation as not standardizing us supporting accelerated those so more now, within with and element. to continue which all then capitalize data, on now that is we has company, twofold one with a processes to IT

been standardize also drive a to our our driving be system resources there able to segmentation also. then as able operating that from we then we're market we're with pickup we've align in commercial, selling line and standpoint, commercial the to a around our with growth, significant seeing And the

So much more it's line how growth. much more elements agile cost more simple, pursue really with and we now across our the being board all of standard on in in

in at we trends when quarters, you talk at And trends looking region service low couple of of then orders those quarters, we've about demand in of by seeing could field? each whereas what order of the seeing sort order we're of mid-teens EMEALA, look side type single you're double-digit, in digit? service in growth growth the in last service differences America, in on So terms rates, of those North low terms been

Yes.

XX served. little Let to to rates. year, here, we're bit our XX%. much and we're assets Marc by This our And going talk me services, We're be up longer-term attrition -- XX,XXX. over going that percentage way services the well be to we're just orders. upper installed a our growth connecting mid- to touch rates upon and to able percentile. The can a up of we're PSA fundamentals lower the getting expand the about fundamentals, over able increasing our now we're getting when look get connected to then base you a attach at higher We're more

playing a That positioning strong growth service and single-digit is us for all year. again now high this out

driving strategy rates, we're all at order look one that of elements, the On any we across X as regions. consistently those

So comment? Marc, want you maybe to

on the commenting regions. X Yes,

unfortunately was and So impacted the business, by North service also our the America cyber most is largest disruption.

book bit orders you to and our able that in little lot transactional a automation QX. very of of on rapidly. that execute has be why that's So -- a see softness It's business revenue reliance business, to day-to-day a order system and

pickup the The second strong coming business. of the now fundamentals in I hasn't really quarter are recovery we seeing of the think that business in and balance a year, is in and changed, that the

long-term to businesses, Asia, cycle business at America growth look those what North EMEALA base double-digit part in model the those a business. enormous maturing amount after of and really in growth. opportunity touching comes but installed are when to continuously There's EMEALA of done getting our to you different in our service and first, mature on drive at If similarly it we've

subsegments our to of order for we is And market, refocus China, a maximize the us Pacific, market part service long-term strong focusing those of cycle really particularly in of for the the opportunities. profile in see on really life those whole on our Asia where business in

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

that or cash Regarding potential? divestitures, of resi. to terms in of flow What a level do working would down free capital. the of RemainCo expected the maybe to potential separation Just

your free change XXX% hit that cash target flow this of does conversion? Just ability to

also mean Yes. upfront in and that not cash only collect. Not solutions with to to have and line we've Products Deane. in be the ability business Global billing at our more be our the across building to then both improved, able been able significantly inventory, working our all, on flow revenue, get more of but and I the free fundamentals to

to we're So cash well as flow to free able far be target, that to commitment deliver as the target. be going on positioned our to

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

Yes.

have Just transformation progress as on up, journey we've for a here and a to and we've number years wrap been many made discussed today, incredible of had have successes.

fundamentals, leveraging and our strong our and building people we're customers better ultimately, While we're a way. serving in also portfolio better

to very built robust positioned the And as operating we've forward and we confident updating progress. I system you make well very to look of deliver across are be do to portfolio We're continue for to shareholders. all our a going

call. that operator, our concludes that, with So

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

day. have You may and now disconnect your a wonderful lines,