Johnson Controls Reports Solid Q1 Results; Updates FY24 Guidance

• Q1 reported sales were flat versus prior year and declined 1% organically
• Q1 GAAP EPS of $0.55; Q1 Adjusted EPS of $0.51
• Q1 Orders +1% organically year-over-year
• Building Solutions backlog of $12.1 billion, increased 7% organically year-over-year
• Updates FY24 Adjusted EPS before special items of ~$3.60 to $3.75 from
  prior range of ~$3.65 to $3.80
• Early stages of pursuing strategic alternatives for non-commercial businesses

Johnson Controls International plc (NYSE: JCI), a global leader for smart, healthy and sustainable buildings, today reported fiscal first quarter 2024 GAAP earnings per share (“EPS”) from continuing operations of $0.55. Excluding special items, adjusted EPS from continuing operations was $0.51 (see attached footnotes for non-GAAP reconciliation).

Sales in the quarter of $6.1 billion were flat compared to the prior year on an as reported basis and declined 1% organically. GAAP net income from continuing operations was $374 million. Adjusted net income from continuing operations was $350 million.

“We continued to position Johnson Controls for the future, delivering solid first quarter results and appointing Marc Vandiepenbeeck as CFO,” said Johnson Controls Chairman and CEO George Oliver. “Our value proposition of making buildings smarter, healthier and more sustainable is resonating with our customers and translating into record backlog. After managing through a temporary cyber disruption and the seasonality of the first quarter, we are entering the new calendar year with accelerating momentum.”

Mr. Oliver continued, “The management team continues to simplify and transform the company into a comprehensive solutions provider for commercial buildings. As part of the continuous evaluation of our portfolio, we are in the early stages of pursuing strategic alternatives of our non-commercial businesses, in line with our objective to maximize value to our shareholders.”

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 first quarter of 2023.

Organic sales growth, adjusted segment EBITA, adjusted corporate expense, adjusted net income from continuing operations, adjusted EPS from continuing operations, cash provided by operating activities from continuing operations, excluding JC Capital, and adjusted 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 second 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 $2.5 billion increased 5% versus the prior year. Organic sales increased 4% over the prior year led by double-digit growth in Applied HVAC & Controls.

Orders in the quarter, excluding M&A and adjusted for foreign currency, increased 6% year-over-year. Backlog at the end of the quarter of $8.4 billionincreased 11% compared to the prior year, excluding M&A and adjusted for foreign currency.

Segment EBITA was $285 million, up 7% versus the prior year. Segment EBITA margin of 11.5% expanded 20 basis points versus the prior year led by higher margin backlog conversion and continued growth in Services.

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

Sales in the quarter of $1.0 billion increased 6% versus the prior year. Organic sales grew 2% versus the prior year led by strength in Applied HVAC & Controls, Fire & Security, and high-single digit growth in Service.

Orders in the quarter, excluding M&A and adjusted for foreign currency, increased 5% year-over-year. Backlog at the end of the quarter of $2.4 billionincreased 10% year-over-year, excluding M&A and adjusted for foreign currency.

Segment EBITA was $80 million, up 7% versus the prior year. Segment EBITA margin of 7.7% was flat versus the prior year as the growth in Service was offset by the conversion of lower margin Install backlog.

Building Solutions Asia Pacific

Sales in the quarter of $507 million declined 22% versus the prior year. Organic sales declined 21% versus the prior year as mid single-digit Service growth was more than offset by accelerating weakness in China.

Orders in the quarter, excluding M&A and adjusted for foreign currency, declined 31% year-over-year.  Backlog at the end of the quarter of $1.3 billiondecreased 21% year-over-year, excluding M&A and adjusted for foreign currency.

Segment EBITA was $46 million, down 32% versus the prior year. Segment EBITA margin of 9.1% declined 140 basis points versus the prior year primarily related to declines in the Install business in China.

Global Products

Sales in the quarter of $2.1 billion declined 1% versus the prior year. Organic sales were down 1% versus the prior year as growth in Applied and Light Commercial HVAC was offset by declines in global Residential HVAC.

Segment EBITA was $369 million, down 3% versus the prior year. Segment EBITA margin of 17.9% declined 50 basis points versus the prior year as the result of unfavorable manufacturing absorption and mix. Adjusted segment EBITA in Q1 2023 excluded the impact of an uninsured loss associated with a fire at a leased warehouse facility.

Corporate

Corporate expense was $139 million in the quarter, an increase of 28% compared to the prior year. Adjusted Corporate expense in Q1 2024 excluded certain one-time cyber incident-related costs and in Q1 2023 excluded certain transaction/separation costs.

OTHER Q1 ITEMS

• Cash used by operating activities from continuing operations was $246 million, while cash used by operating activities from continuing operations, excluding JC Capital, was $158 million. Capital expenditures were $92 million, resulting in adjusted free cash flow from continuing operations of $(250) million. This was favorable by $180 million compared to Q1 2023.
• The Company paid dividends of approximately $252 million during Q1 2024.
• The Company recorded pre-tax restructuring and impairment costs of $39 million, primarily comprised of severance charges related to ongoing restructuring actions.
• The Company recorded a net discrete period tax benefit of $57 million related to benefits from Swiss cantonal tax reform partially offset by a provision related to a change in indefinite reinvestment assertion for certain subsidiaries.

SECOND QUARTER GUIDANCE

The Company initiated fiscal 2024 second quarter guidance:

• Organic revenue ~flat year-over-year
• Adjusted segment EBITA margin of ~14.5%
• Adjusted EPS before special items of ~$0.74 to $0.78

FULL YEAR GUIDANCE

The Company updated fiscal 2024 full year EPS guidance:

• Organic revenue growth up ~MSD year-over year
• Adjusted segment EBITA margin improvement of ~50 to 75 basis points, year-over-year (previously guided to ~25+ basis points improvement)
• Adjusted EPS before special items of ~$3.60 to $3.75 from prior range of ~$3.65 to $3.80

CONFERENCE CALL & WEBCAST INFO

Johnson Controls will host a conference call to discuss this quarter’s results at 8:30 a.m. ET today, which can be accessed by dialing 844-763-8274 (in the United States) or +1-412-717-9224 (outside the United States), or via webcast. A slide presentation will accompany the prepared remarks and has been posted on the investor relations section of the Johnson Controls website at https://investors.johnsoncontrols.com/news-and-events/events-and-presentations. A replay will be made available approximately two hours following the conclusion of the conference call.

About Johnson Controls

At Johnson Controls (NYSE:JCI), we transform the environments where people live, work, learn and play. As the global leader in smart, healthy and sustainable buildings, our mission is to reimagine the performance of buildings to serve people, places and the planet.

Building on a proud history of nearly 140 years of innovation, we deliver the blueprint of the future for industries such as healthcare, schools, data centers, airports, stadiums, manufacturing and beyond through OpenBlue, our comprehensive digital offering.

Today, with a global team of 100,000 experts in more than 150 countries, Johnson Controls offers the world`s largest portfolio of building technology and software as well as service solutions from some of the most trusted names in the industry.

Visit www.johnsoncontrols.com for more information and follow @Johnson Controls on social platforms.