Johnson Controls reports solid third quarter results and raises full year guidance

CORK, Ireland, July 30, 2021 /PRNewswire/ -- Johnson Controls International plc (NYSE: JCI), the global leader for smart, healthy and sustainable buildings, today reported fiscal third quarter 2021 GAAP earnings per share ("EPS") from continuing operations, including special items, of $0.80. Excluding these items, adjusted EPS from continuing operations was $0.83, up 24% versus the prior year period (see attached footnotes for non-GAAP reconciliation).

Sales of $6.3 billion increased 19% compared to the prior year on an as reported basis, and up 15% organically. GAAP net income from continuing operations was $574 million. Adjusted net income from continuing operations of $598 million increased 19% versus the prior year. Earnings before interest and taxes ("EBIT") was $825 million and EBIT margin was 13.0%. Adjusted EBIT was $848 million and adjusted EBIT margin was 13.4%, an increase of 20 basis points versus prior year results.

"We delivered another strong quarter of growth, profitability and cash flow in the third quarter," said George Oliver, chairman and CEO. "We remain committed to executing both on our core operating fundamentals and on the strategic actions underway to accelerate growth, deliver on sustainability, expand our digital and service offerings, and strengthen future profitability.  Additionally, we welcomed the Silent-Aire family into Johnson Controls, increasing our focus on the very attractive data center vertical," Oliver said. 

"Overall demand patterns continue to improve, including our longer cycle project installations, and most of our businesses are back to operating at or near pre-pandemic levels. We continue to proactively manage short-term challenges related to global supply chain disruptions, inflation and regional COVID resurgences and our team has remained laser focused on meeting our customer needs. Looking ahead, we are confident that the strength in orders, resilient backlog, and actions we've taken over the last year position us well to deliver on our commitments," Oliver added.  

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 third fiscal quarter of 2020.

Organic sales, adjusted sales, total segment EBITA, adjusted segment EBITA, adjusted corporate expense, EBIT, adjusted EBIT, adjusted net income from continuing operations, adjusted EPS from continuing operations and free cash flow are non-GAAP financial measures. For a reconciliation of these non-GAAP measures and detail of the special items, refer to the attached footnotes. 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 $2.2 billion increased 10% versus the prior year. Organic sales increased 8% over the prior year, with growth in both service and project installations, driven by double digit growth in Fire & Security and Performance Contracting and to a lesser extent growth in HVAC & Controls.         

Orders in the quarter, excluding M&A and adjusted for foreign currency, increased 18% year-over-year. Backlog at the end of the quarter of $6.2 billion increased 6% compared to the prior year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $326 million, up 5% versus the prior year. Adjusted segment EBITA margin of 14.7% declined 70 basis points versus the prior year as the benefit of volume leverage and the SG&A actions taken this year were more than offset by the significant temporary cost mitigation actions taken in the prior year. 

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

Sales in the quarter of $962 million increased 27% versus the prior year. Organic sales grew 17% versus the prior year led by a sharp rebound in project installation activity.  Additionally, service revenues grew double digits organically. Strength was broad based across our businesses, led by Fire & Security and Industrial Refrigeration. By region, Europe experienced strong growth, while growth in Latin America was more modest and the Middle East remained under pressure.          

Orders in the quarter, excluding M&A and adjusted for foreign currency, increased 22% year-over-year. Backlog at the end of the quarter of $2.0 billion increased 9% year-over-year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $103 million, up 66% versus the prior year. Adjusted segment EBITA margin of 10.7% expanded 250 basis points over the prior year driven by volume leverage and the benefit of SG&A actions taken this year.    

Building Solutions Asia Pacific

Sales in the quarter of $712 million increased 21% versus the prior year. Organic sales grew 14% versus the prior year with solid growth in both service and project installations, driven by strong growth in Commercial Applied HVAC & Controls. China remains the primary source of growth, with the rest of Asia mixed due to ongoing lockdown restrictions in many regions.       

Orders in the quarter, excluding M&A and adjusted for foreign currency, increased 14% year-over-year, led by continued strong demand for Commercial HVAC in China and recovery in the Controls business in Japan. Backlog at the end of the quarter of $1.8 billion increased 5% year-over-year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $84 million, down 9% versus the prior year. Adjusted segment EBITA margin of 11.8% declined 380 basis points versus the prior year including a 20 basis point headwind related to foreign currency.  The benefit of volume leverage and the SG&A actions taken this year were more than offset by the significant temporary cost mitigation actions taken in the prior year and geographic mix. 

Global Products

Sales in the quarter of $2.5 billion increased 24% versus the prior year. Organic sales grew 21% versus the prior year driven by strong growth across Commercial and Residential HVAC and Fire & Security products. 

Adjusted segment EBITA was $514 million, up 34% versus the prior year. Adjusted segment EBITA margin of 20.9% expanded 140 basis points versus the prior year as volume leverage, positive mix, increased equity income and the benefit of SG&A actions taken this year more than offset the significant temporary cost mitigation actions taken in the prior year as well as price cost pressure.    

Corporate

Adjusted Corporate expense was $70 million in the quarter, an increase of 46% compared to the prior year, driven primarily by the non-recurrence of the significant temporary cost mitigation actions taken in the prior year. 

OTHER ITEMS

• For the quarter, cash provided by operating activities from continuing operations was $0.9 billion and capital expenditures were $0.1 billion, resulting in free cash flow from continuing operations of $0.7 billion.
• During the quarter, the company repurchased approximately 5 million shares for $340 million.
• During the quarter, the company completed the acquisition of Silent-Aire in an all-cash transaction valued at up to $900 million, including an upfront payment of approximately $660 million and additional payments to be made subject to the achievement of post-closing earnout milestones. Revenue for fiscal year 2021 (May) was approximately $650 million.

FULL YEAR GUIDANCE

The company raised fiscal 2021 full year guidance:

• Organic revenue growth up mid-single digits year-over-year
• Adjusted segment EBITA margin expansion of 80 to 90 basis points, year-over-year
• Adjusted EPS before special items of $2.64 to $2.66; represents 18 to 19% growth year-over-year

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 888-324-9610 (in the United States) or 630-395-0255 (outside the United States), or via webcast. The passcode is "Johnson Controls". 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. 

With a history of more than 135 years of innovation, Johnson Controls delivers the blueprint of the future for industries such as healthcare, schools, data centers, airports, stadiums, manufacturing and beyond through its comprehensive digital offering OpenBlue. With a global team of 100,000 experts in more than 150 countries, Johnson Controls offers the world`s largest portfolio of building technology, software as well as service solutions with some of the most trusted names in the industry. For more information, visit www.johnsoncontrols.com or follow us @johnsoncontrols on Twitter.

JOHNSON CONTROLS CONTACTS:

Johnson Controls International plc Cautionary Statement Regarding Forward-Looking Statements

Johnson Controls International plc has made statements in this communication that are forward-looking and therefore are subject to risks and uncertainties. All statements in this document other than statements of historical fact are, or could be, "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In this communication, statements regarding Johnson Controls' future financial position, sales, costs, earnings, cash flows, other measures of results of operations, synergies and integration opportunities, capital expenditures and debt levels are forward-looking statements. Words such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "should," "forecast," "project" or "plan" and terms of similar meaning are also generally intended to identify forward-looking statements. However, the absence of these words does not mean that a statement is not forward-looking. Johnson Controls cautions that these statements are subject to numerous important risks, uncertainties, assumptions and other factors, some of which are beyond Johnson Controls' control, that could cause Johnson Controls' actual results to differ materially from those expressed or implied by such forward-looking statements, including, among others, risks related to: Johnson Controls' ability to manage general economic, business, capital market and geopolitical conditions, including global inflation; Johnson Controls' ability to manage the impacts of natural disasters, climate change, pandemics and outbreaks of contagious diseases and other adverse public health developments, such as the COVID-19 pandemic; the strength of the U.S. or other economies; changes or uncertainty in laws, regulations, rates, policies or interpretations that impact Johnson Controls' business operations or tax status; the ability to develop or acquire new products and technologies that achieve market acceptance; changes to laws or policies governing foreign trade, including increased tariffs or trade restrictions; maintaining the capacity, reliability and security of our enterprise and product information technology infrastructure; the risk of infringement or expiration of intellectual property rights; any delay or inability of Johnson Controls to realize the expected benefits and synergies of recent portfolio transactions such as its merger with Tyco and the disposition of the Power Solutions business;  the outcome of litigation and governmental proceedings; the ability to hire and retain key senior management; the tax treatment of recent portfolio transactions; significant transaction costs and/or unknown liabilities associated with such transactions; the availability of raw materials and component products; fluctuations in currency exchange rates; labor shortages, work stoppages, union negotiations, labor disputes and other matters associated with the labor force; the cancellation of or changes to commercial arrangements.  A detailed discussion of risks related to Johnson Controls' business is included in the section entitled "Risk Factors" in Johnson Controls' Annual Report on Form 10-K for the 2020 fiscal year filed with the SEC on November 16, 2020, which is available at www.sec.gov and www.johnsoncontrols.com under the "Investors" tab. Shareholders, potential investors and others should consider these factors in evaluating the forward-looking statements and should not place undue reliance on such statements. The forward-looking statements included in this communication are made only as of the date of this document, unless otherwise specified, and, except as required by law, Johnson Controls assumes no obligation, and disclaims any obligation, to update such statements to reflect events or circumstances occurring after the date of this communication.

Non-GAAP Financial Information
The Company's press release contains financial information regarding adjusted earnings per share, which is a non-GAAP performance measure. The adjusting items include restructuring and impairment costs, integration costs, net mark-to-market adjustments, Silent-Aire transaction costs and other nonrecurring costs, Power Solutions divestiture reserve adjustment and discrete tax items. Financial information regarding organic sales, adjusted sales, EBIT, EBIT margin, adjusted EBIT, adjusted EBIT margin, total segment EBITA, adjusted segment EBITA, adjusted segment EBITA margin, adjusted corporate expense, free cash flow, and adjusted net income (loss) from continuing operations are also presented, which are non-GAAP performance measures. Adjusted segment EBITA excludes special items such as integration costs, Silent-Aire transaction costs and other nonrecurring costs because these costs are not considered to be directly related to the underlying operating performance of its business units.  Management believes that, when considered together with unadjusted amounts, these non-GAAP measures are useful to investors in understanding period-over-period operating results and business trends of the Company. Management may also use these metrics as guides in forecasting, budgeting and long-term planning processes and for compensation purposes. These metrics should be considered in addition to, and not as replacements for, the most comparable GAAP measure.  For further information on the calculation of the non-GAAP measures and a reconciliation of these non-GAAP measures, refer to the attached footnotes.

SOURCE Johnson Controls International plc