Johnson Controls Reports Q4 and FY23 Results Highlighted by Strong Sales Growth and Margin Expansion; Initiates FY24 Guidance

• Q4 reported sales increased 3% versus prior year and up 2% organically; full year reported sales up 6% and increased 8% organically
• Q4 GAAP EPS of $0.80; Q4 Adjusted EPS of $1.05, including a $0.04 headwind from the cyber incident, up 6% versus prior year; full year GAAP EPS of $2.69; full year Adjusted EPS of $3.50, up 17% versus prior year. Results include a $0.04 headwind from the cyber incident.
• Q4 Orders +9% organically year-over year; full year orders +7% organically year-over-year
• Record backlog of $12.1 billion, increased 9% organically year-over-year

Johnson Controls International plc (NYSE: JCI), a global leader for smart, healthy and sustainable buildings, today reported fiscal fourth quarter 2023 GAAP earnings per share (“EPS”) from continuing operations of $0.80. Excluding special items, adjusted EPS from continuing operations was $1.05, up 6% versus the prior year period (see attached footnotes for non-GAAP reconciliation).

Sales in the quarter of $6.9 billion increased 3% compared to the prior year on an as reported basis and grew 2% organically. GAAP net income from continuing operations was $549 million. Adjusted net income from continuing operations of $719 million was up 5% versus the prior year. Earnings before interest and taxes (“EBIT”) was $587 million and EBIT margin was 8.5%. Adjusted EBIT was $936 million and adjusted EBIT margin was 13.6%, flat versus the prior year.

“Our fiscal 2023 results, highlighted by strong sales growth and margin expansion, further validate that our strategy of providing solutions that make buildings smarter, healthier, and more sustainable continues to gain momentum,” said Chairman and CEO George Oliver. “We made significant progress during the year advancing our service strategy, enabled by digital, and we continue to see strong order momentum and record backlog entering our new fiscal year.”

“Our resilient backlog continues to grow as we saw strong order growth in both our Install and Service businesses throughout the fiscal year,” said Chief Financial Officer Olivier Leonetti. “Our value proposition continues to resonate with our customers globally and we have plenty of runway for ongoing top line growth, margin expansion, and improving cash flow going forward.”

Income and EPS amounts attributable to Johnson Controls ordinary shareholders

($ millions, except per-share amounts)

The financial highlights presented in the tables below are in accordance with GAAP, unless otherwise indicated. All comparisons are to the fiscal fourth quarter of 2022.

Organic sales growth, total segment EBITA, adjusted segment EBITA, adjusted corporate expense, EBIT, adjusted EBIT, adjusted net income from continuing operations, adjusted EPS from continuing operations, cash provided by operating activities from continuing operations, excluding JC Capital, and free cash flow are non-GAAP financial measures. For a reconciliation of non-GAAP measures and detail of the special items, refer to the attached footnotes.

This press release includes forward-looking statements regarding organic revenue growth, adjusted segment EBITA margin improvement and adjusted EPS, which are non-GAAP financial measures. These non-GAAP financial measures are derived by excluding certain amounts from the corresponding financial measures determined in accordance with GAAP. The determination of the amounts excluded is a matter of management judgment and depends upon, among other factors, the nature of the underlying expense or income amounts recognized in a given period and the high variability of certain amounts, such as mark-to-market adjustments. Organic revenue growth excludes the effect of acquisitions, divestitures and foreign currency. We are unable to present a quantitative reconciliation of the aforementioned forward-looking non-GAAP financial measures to their most directly comparable forward-looking GAAP financial measures because such information is not available, and management cannot reliably predict the necessary components of such GAAP measures without unreasonable effort or expense. The unavailable information could have a significant impact on the Company’s fiscal 2024 first quarter and full year GAAP financial results.

A slide presentation to accompany the results can be found in the Investor Relations section of Johnson Controls’ website at http://investors.johnsoncontrols.com.

SEGMENT RESULTS

Building Solutions North America 

Sales in the quarter of $2.8 billion increased 8% versus the prior year. Organic sales increased 8% over the prior year with strong growth in both Service and Install, led by another strong quarter of double-digit growth in Applied HVAC & Controls.

Orders in the quarter, excluding M&A and adjusted for foreign currency, increased 8% year-over-year. Backlog at the end of the quarter of $8.3 billion increased 10% compared to the prior year, excluding M&A and adjusted for foreign currency.

Segment EBITA was $427 million, up 13% versus the prior year. Segment EBITA margin of 15.4% expanded 70 basis points versus the prior year led by higher margin backlog conversion and continued strong growth in Services.

Building Solutions EMEA/LA (Europe, Middle East, Africa/Latin America)

Sales in the quarter of $1.0 billion increased 7% versus the prior year. Organic sales grew 3% versus the prior year led by growth in Applied HVAC & Controls and Fire & Security. Service grew mid-teens in the quarter.

Orders in the quarter, excluding M&A and adjusted for foreign currency, increased 16% year-over-year. Backlog at the end of the quarter of $2.3 billion increased 10% year-over-year, excluding M&A and adjusted for foreign currency.

Segment EBITA of $82 million, declined 11% versus the prior year. Segment EBITA margin of 7.8% declined 160 basis points versus the prior year as lower margin backlog was converted, in addition to ongoing pension headwinds.

Building Solutions Asia Pacific

Sales in the quarter of $697 million declined 7% versus the prior year. Organic sales declined 6% versus the prior year as the Install business has been negatively impacted by weakness in China partially offset by double-digit growth in Service.

Orders in the quarter, excluding M&A and adjusted for foreign currency, increased 3% year-over-year.  Backlog at the end of the quarter of $1.5 billion decreased 2% year-over-year, excluding M&A and adjusted for foreign currency.

Segment EBITA was $94 million, down 11% versus the prior year. Segment EBITA margin of 13.5% declined 50 basis points versus the prior year owing primarily to weakness in the China Install business.

Global Products

Sales in the quarter of $2.4 billion declined 2% versus the prior year. Organic sales were down 2% versus the prior year as high single-digit growth in Commercial HVAC was not enough to offset declines in global Residential sales.

Adjusted segment EBITA was $502 million, down 6% versus the prior year. Adjusted segment EBITA margin of 21.0% declined 85 basis points versus the prior year as the result of lower manufacturing absorption and mix. Segment EBITA in Q4 2022 includes the unfavorable impact of certain environmental remediation and related reserve adjustments.

Corporate

Corporate expense was $70 million in the quarter, a decrease of 51% compared to the prior year. Adjusted Corporate expense excludes transaction/separation costs in both Q4 2022 and Q4 2023.

OTHER Q4 ITEMS

• Cash provided by operating activities from continuing operations was $1,390 million, while cash provided by operating activities from continuing operations, excluding JC Capital, was $1,446 million. Capital expenditures were $173 million, resulting in a free cash flow from continuing operations of $1,273 million.
• The Company repurchased 0.2 million shares for approximately $12 million. During fiscal year 2023, the Company repurchased 10.5 million shares for approximately $625 million.
• The Company completed a $105 million cash tender offer for a portion of its outstanding 5.125% Senior Notes due 2045.
• The Company recorded net pre-tax mark-to-market losses of $108 million related primarily to the remeasurement of the Company’s pension and postretirement benefit plans and restricted asbestos investments.
• The Company recorded pre-tax restructuring and impairment costs of $220 million.
• The Company recorded a discrete period net tax benefit of $121 million related to favorable valuation allowance adjustments on certain deferred tax assets.

FIRST QUARTER GUIDANCE

The Company initiated fiscal 2024 first quarter guidance:

• Organic revenue ~flat year-over-year
• Adjusted segment EBITA margin of ~13.0%
• Adjusted EPS before special items of ~$0.48 to $0.50

FULL YEAR GUIDANCE

The Company initiated fiscal 2024 full year EPS guidance:

• Organic revenue growth up ~MSD year-over year
• Adjusted segment EBITA margin improvement of ~25+ basis points, year-over-year
• Adjusted EPS before special items of ~$3.65 to $3.80

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