Johnson Controls International Plc Q1 FY2025 earnings call

Management Statement and Operational Highlights

• CEO Transition: George Oliver announced Joakim Weidemanis will succeed him as CEO in March, with George remaining on the Board and as an adviser until December.
• First Quarter Performance: Strong revenue growth, margin expansion. Order momentum solid with 16% growth. Consistent progress across verticals including data centers, healthcare, manufacturing. Use of AI in services and products.
• Financials: Organic revenue grew 10%, segment margin expanded 200 basis points to 15%. Adjusted EPS $0.64, up nearly 40% YOY. Net debt 2.3 times, available cash $1.2 billion, adjusted free cash flow ~$600 million.

Segment Performance

• Global Products: Organic sales grew 15%, with Applied HVAC growing over 30%. Adjusted segment EBITDA margin expanded 740 basis points to 30.1%.
• Building Solutions: Orders grew 16% in the quarter. Organic sales increased 8%. In North America, orders increased 18% with over 20% growth in systems. EMEALA orders up 6%, Asia Pacific orders up 32% led by 40% growth in systems. Adjusted segment EBITDA margin for EMEALA expanded 240 basis points to 10.1%, North America up 60 basis points to 12.1%, APAC up 20 basis points to 9.3%. Building Solutions backlog at record levels, growing 11% to $13.2 billion.

Guidance

• Second Quarter: Anticipate organic sales growth mid-single digits, adjusted segment EBITDA margin expansion 150 basis points to ~16.5%, adjusted EPS $0.77-$0.79.
• Full Year: Raise guidance, anticipate organic sales growth mid-single digits, adjusted segment EBITDA margin expansion over 80 basis points, adjusted EPS $3.50-$3.60. Target 100% free cash flow return to shareholders via dividend and share repurchase.

Risks

• Tariffs: Uncertainty around tariffs affecting markets, impact on pricing and margin. Need to pass on costs and manage supply chain.
• Macro Factors: Volatility in orders due to macroeconomic and political uncertainties, affecting timing of orders.

Question and Answer

Q: Nigel Coe from Wolfe Research asked about mandates for Joakim.

A: George Oliver said Joakim brings customer orientation, innovation, efficiency from Danaher, suited for Johnson Controls' value creation journey.

Q: Nigel Coe also asked about free cash conversion.

A: Marc Vandiepenbeeck said $250 million restructuring cash in 90% conversion, focus on operating system and job acceptance to improve free cash flow.

Q: Steve Tusa from JPMorgan asked about concerns in the back half.

A: George Oliver said second half comps tougher, need clarity on tariffs and APAC rebound.

Q: Julian Mitchell from Barclays asked about tariff perspective.

A: George Oliver said manufacturing in region for region helps, but tariff landscape uncertain, working on supply chain resilience.

Q: Amit Mehrotra from UBS asked about margin outlook.

A: Marc Vandiepenbeeck said margin improvement in EMEA/LA, Global Products, APAC; long-term opportunity in operating model simplification and customer intimacy.