Johnson Controls International Plc Q1 FY2026 earnings call

• Strong start to the year with revenue growth, margin expansion, and broad-based strength. - Progress with proprietary business system, including GembaWalks and alignment of goals across the organization. - Momentum in data centers with new product launches like YDAM and YKHT chillers, and expanded digital service capabilities. - Business system pillars: simplify, accelerate (using lean methodologies), amplify (leveraging digital and AI). - Appointed Susan Hughes as APAC president; progress in APAC with stabilization in China and growth in other major economies. - Continued progress in mission-critical sectors like life science and advanced manufacturing.

Organic revenue grew 6% with broad-based contribution across the portfolio. Orders increased nearly 40%. Segment margins increased 70 basis points to 15.7%, and EBIT margin expanded 190 basis points to 12.4%. Adjusted EPS was $0.89, up nearly 40%. By region, Americas orders grew 56%, EMEA 8%, APAC 10%. Service grew 9% organically. Adjusted segment EBITDA margins: Americas improved 20 basis points to 16.4%, EMEA expanded 120 basis points to 13.5%, APAC expanded 290 basis points to 16.9%. Record backlog grew 20% to $18 billion.

• Anticipate organic sales growth of approximately 5% in Q2. - Full-year organic sales growth mid-single digits, operating leverage ~50%, adjusted EPS ~$4.70 per share (25% growth). - Expect ~100% free cash flow conversion for the year.

Q: Nigel Coe asked about the record orders and if there's a line of sight to high single-digit organic growth.

A: Joakim Weidemanis said organic growth will continue to strengthen over time, with larger orders not necessarily shippable in the near term but will keep updating on guidance.

Q: Amit Mehrotra followed up on order strength and non-data center growth.

A: Joakim Weidemanis mentioned growth is broad-based, including life science, with strong order entry in that sector.

Q: Steve Tusa asked about North America margin and data center lead times.

A: Marc Vandiepenbeeck noted North America margin potential is strong with some periodic small headwinds, and Joakim Weidemanis discussed progress in reducing lead times and operations team improvements.

Q: Scott Davis asked about CDU entrance and Asia Pac prospects.

A: Joakim Weidemanis talked about CDU bundling opportunities and stabilization in China with growth in other major economies in Asia Pac.

Q: Jeff Sprague asked about new products and portfolio review.

A: Joakim Weidemanis discussed reference designs, innovation collaboration with customers, and ongoing portfolio review with focus on creating shareholder value.

Q: Chris Snyder asked about gross margin opportunity and labor availability.

A: Joakim Weidemanis discussed gross margin improvement opportunities and labor productivity initiatives with service teams.

Q: Julian Mitchell asked about systems orders and products.

A: Marc Vandiepenbeeck said backlog supports mid-single-digit revenue guide with backlog content shippable in 12 months but dependent on customer acceptance.

Q: Andrew Obin asked about capacity and product introductions' impact.

A: Joakim Weidemanis discussed capacity expansion and lean work enabling better order handling, with product introductions having minor impact so far but more to come.

Q: Joe O'Dea asked about capacity expansion specifics.

A: Joakim Weidemanis said capacity expansion is across the board, fixed costs already in run rate, and leverages volume growth.

Q: Andy Kaplowitz asked about fire and security markets and scaling projects.

A: Joakim Weidemanis discussed operational improvements in fire and security and no major margin headwinds in scaling projects.

Q: Joe Ritchie asked about pipeline and data center customer shift.

A: Joakim Weidemanis talked about healthy pipeline and broadening data center business with mix of hyperscalers and local players changing over time.