What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-05-07 compared with 2025-02-05 · 118 added, 94 removed, 220 unchanged (49% of the section changed)

8 unchanged sentences

The Company cautions that these statements are subject to numerous important risks, uncertainties, assumptions and other factors, some of which are beyond the Company’s control, that could cause the Company’s actual results to differ materially from those expressed or implied by such forward-looking statements, including, among others, risks related to:

the ability to manage macroeconomic and geopolitical volatility, including changes to laws or policies governing foreign trade, including tariffs, economic sanctions, foreign exchange and capital controls, import/export controls or other trade restrictions as well as supply chain disruptions;

the ability to manage general economic, business and capital market conditions, including the impacts of trade restrictions, recessions, economic downturns and global price inflation;

the Company's ability to develop or acquire new products and technologies that achieve market acceptance and meet applicable quality and regulatory requirements;

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the Company's ability to successfully execute and complete portfolio simplification, including the completion of the divestiture of the Residential and Light Commercial business, as well as the possibility that the expected benefits of such actions will not be realized or will not be realized within the expected time frame;

the ability to hire and retain senior management and other key personnel, including successfully executing the Company's Chief Executive Officer succession plan;

the ability to hire and retain senior management and other key personnel, including successfully completing the Company's Chief Executive Officer transition;

the ability to innovate and adapt to emerging technologies, ideas and trends in the marketplace, including the incorporation of technologies such as artificial intelligence;

the ability to manage general economic, business and capital market conditions, including the impact of recessions, economic downturns and global price inflation;

fluctuations in the cost and availability of public and private financing for the Company's customers;

the ability to manage macroeconomic and geopolitical volatility, including supply chain shortages, restrictive trade measures and the conflict between Russia and Ukraine and the ongoing conflicts in the Middle East;

the ability to manage disruptions caused by international conflicts, including Russia and Ukraine and the ongoing conflicts in the Middle East;

managing the risks and impacts of potential and actual security breaches, cyberattacks, privacy breaches or data breaches, maintaining and improving the capacity, reliability and security of the Company's enterprise information technology infrastructure;

the ability to manage the lifecycle cybersecurity risk in the development, deployment and operation of the Company's digital platforms and services;

changes to laws or policies governing foreign trade, including economic sanctions, tariffs, foreign exchange and capital controls, import/export controls or other trade restrictions;

fluctuations in currency exchange rates;

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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 year ended September 30, 2024 filed with the United States Securities and Exchange Commission ("SEC") on November 19, 2024, which is available at www.sec.gov and www.johnsoncontrols.com under the "Investors" tab.

The description of certain of these risks is supplemented in Item 1A of Part II of Johnson Controls subsequently filed Quarterly Reports on Form 10-Q.

The forward-looking statements included in this document 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 document.

Johnson Controls International plc, headquartered in Cork, Ireland, is a global leader in smart, healthy and sustainable buildings, serving a wide range of customers around the globe.

The Company’s products, services, systems and solutions advance the safety, comfort and intelligence of spaces to serve people, places and the planet.

Johnson Controls International plc, headquartered in Cork, Ireland, is a global leader in smart, safe, healthy and sustainable buildings, serving a wide range of customers around the globe.

The Company’s products, services, systems and solutions

advance the safety, comfort and intelligence of spaces to serve people, places and the planet.

The Company is committed to helping its customers win and creating greater value for all of its stakeholders through its strategic focus on buildings.

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The Company partners with customers by leveraging its broad product portfolio and digital capabilities, together with its direct channel service and solutions capabilities, to deliver outcome-based solutions across the lifecycle of a building that address customers’ needs to improve energy efficiency, enhance security, create healthy environments and reduce greenhouse gas emissions.

On April 1, 2025, the Company, as part of ongoing initiatives to drive simplification, accelerate growth, better reflect its organizational and operational structure and align with the manner in which the Company's chief operating decision maker assesses performance and makes decisions regarding the allocation of resources following portfolio simplification actions, realigned into three reportable segments (Americas, EMEA and APAC) from four reportable segments (Global Products, Building Solutions North America, Building Solutions EMEA/LA and Building Solutions APAC).

The Company will begin reporting under this segment structure when it reports its quarterly results for the fiscal third quarter ending June 30, 2025.

The following information should be read in conjunction with the September 30, 2024 consolidated financial statements and notes thereto, along with management’s discussion and analysis of financial condition and results of operations included in the Company's Annual Report on Form 10-K for the year ended September 30, 2024 filed with the SEC on November 19, 2024.

References in the following discussion and analysis to "Three Months," "First Quarter" or similar language refer to the three months ended December 31, 2024 compared to the three months ended December 31, 2023.

References in the following discussion and analysis to "Three Months," "Second Quarter" or similar language refer to the three months ended March 31, 2025 compared to the three months ended March 31, 2024, while "Year-to-Date" refers to six months ended March 31, 2025 compared to the six months ended March 31, 2024.

Macroeconomic Trends

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Positive or negative fluctuations in these dependencies could have a corresponding impact on the Company’s financial condition, results of operations and cash flows.

While economic conditions in China stabilized in the three months ended December 31, 2024, industrial growth remains tempered, impacting the performance of the Building Solutions Asia Pacific segment.

The Company expects economic conditions in China to continue to stabilize in fiscal 2025, however, if conditions do not stabilize, results of the Building Solutions Asia Pacific segment could be negatively impacted.

As a result of the Company’s global presence, a significant portion of its revenues and expenses is denominated in currencies other than the U.S.

The Company maintains operations worldwide.

Recently, the United States has announced tariffs and reciprocal tariffs on a wide range of products manufactured or produced worldwide, including Canada, China, the European Union, Japan and Mexico, among others.

Several countries have similarly announced reciprocal or other tariffs impacting products manufactured or produced in the United States.

In addition, the United States and other nations have, and may in the future, pause, reimpose, decrease or increase tariffs.

If the actual and potential tariffs and reciprocal tariffs are implemented as currently enacted or proposed, the Company expects that such actions will negatively impact its revenue growth and margins in future periods through decreased sales and increased cost of goods sold.

Further, the Company has experienced, and could again experience, increased material cost inflation and component shortages, as well as disruptions and delays in its supply chain, as a result of global macroeconomic trends including the imposition of tariffs and other restrictive trade measures, as well as geopolitical and economic tensions.

The net effect of these events will depend on the Company’s ability to successfully mitigate and offset their impact.

The Company is currently taking actions to mitigate the actual and anticipated impact of these events, including strengthening the Company's in region, for region manufacturing strategy, pivoting to local sourcing in its supply chain, accelerating pricing actions and asserting contractual rights through change orders.

The Company has historically taken a variety of actions to mitigate trade restrictions, supply chain disruptions and inflation, including through expanding and redistributing its supplier network, supplier financing, accelerated purchasing and productivity improvements.

These actions have historically been successful in offsetting some, but not all, of the impact of these trends, and it is uncertain as to whether the actions taken or contemplated to be taken by the Company will be effective in mitigating the impact of current and future trade restrictions and their related impacts.

The Company continues to actively monitor and evaluate the development and potential impacts of tariffs and other trade restrictions on its supply chain and results of operations.

As a result of the Company’s global presence, a significant portion of its revenues and expenses are denominated in currencies other than the U.S.

dollar, which results in non-U.S.

6 unchanged sentences

Revenue and profits were negatively impacted by movements in foreign exchange rates against the U.S.

dollar during the three months ended December 31, 2024.

dollar during the three and six months ended March 31, 2025.

The Company continues to observe trends demonstrating increased interest and demand for its products and services that enable smart, safe, efficient and sustainable buildings, which are driven in part by government tax incentives, building performance standards and other regulations designed to limit emissions and combat climate change.

In particular, legislative and regulatory initiatives such as the U.S.

Climate Smart Buildings Initiative, U.S.

In particular, legislative and regulatory initiatives such as the EU Energy Efficiency Directive, U.S.

Inflation Reduction Act and EU Energy Performance of Buildings Directive include provisions designed to fund and encourage investment in decarbonization and digital technologies for buildings.

This demand is supplemented by an increase in commitments in both the public and private sectors to reduce emissions and/or achieve net zero emissions.

Combined with its investment in digital and product capabilities, including its OpenBlue platform, the Company seeks to capitalize on these trends to enable delivery of sustainable, high-efficiency products and tailored services to enable customers to achieve their sustainability goals.

The Company seeks to capitalize on these trends to enable delivery of sustainable, high-efficiency products and tailored services to enable customers to achieve their sustainability goals.

The Company is leveraging its install base, together with data-driven products and services, to offer outcome-based solutions to customers with a focus on generating accelerated growth in services and recurring revenue.

The Compan y has experienced, and could again experience, increased material cost inflation and component shortages, as well as disruptions and delays in its supply chain, as a result of global macroeconomic trends, including increased global demand, the imposition of tariffs and other restrictive trade measures, geopolitical and economic tensions, including the conflict between Russia and Ukraine and Israel and Hamas, and labor shortages.

Recently, the United States has announced tariffs on products manufactured in several jurisdictions, including, Mexico, China and Canada, and has made announcements regarding the potential imposition of tariffs on other jurisdictions, such as the European Union.

The United States has and may in the future pause, reimpose or increase tariffs, and countries subject to such tariffs have and in the future may impose reciprocal tariffs or

other restrictive trade measures in response to the imposition of tariffs by the United States.

The Company is actively monitoring and evaluating the development and potential impacts of tariffs on its supply chain and results of operations.

The Company maintains operations worldwide, including the jurisdictions impacted by the recently announced and contemplated tariffs.

If the actual and potential tariffs and reciprocal tariffs are implemented as currently proposed, the Company expects that such actions will negatively impact its revenue growth and margins in future periods.

The net effect of these events will depend on the Company’s ability to successfully mitigate and offset their impact.

The Company has historically taken actions to mitigate trade restrictions, supply chain disruptions and inflation, including, price increases, expanding and redistributing its supplier network, supplier financing, accelerated purchasing and productivity improvements.

These actions have generally been successful in offsetting some, but not all, of the impact of these trends.

Recently, certain of our customers, including governmental and institutional customers, have exhibited increased uncertainty regarding future spending decisions due to various political and economic factors, including budget reductions, reprioritization of spending, interest rate fluctuation and economic uncertainty.

This uncertainty has and may in the future impact the Company's ability to predict and forecast the revenue and backlog associated with these customers.

The extent to which the Company’s results of operations and financial condition are impacted by these and other factors in the future will depend on developments that are highly uncertain and cannot be predicted.

See the section entitled "Risk Factors" in Johnson Controls' Annual Report on Form 10-K for the year ended September 30, 2024 filed with the United States Securities and Exchange Commission ("SEC") on November 19, 2024.

Certain of these risk factors have been updated and supplemented in the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2024 filed on February 5, 2025 and in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Portfolio Simplification Transactions

The Company has been engaged in an ongoing evaluation of its non-core product lines in connection with its objective to be a pure-play provider of comprehensive solutions for commercial buildings.

During the fourth quarter of fiscal 2024, the Company completed the sale of its Air Distribution Technologies business included within the Global Products segment.

The Company continues to engage in an ongoing evaluation of its non-core product lines in connection with its objective to be a pure-play provider of comprehensive solutions for commercial buildings.

During the fourth quarter of fiscal 2024, the Company entered into a definitive agreement to sell its Residential and Light Commercial ("R&LC") HVAC business to Robert Bosch GmbH (“Bosch”) for approximately $8.1 billion in cash with the Company's portion of the aggregate consideration being approximately $6.7 billion, inclusive of an upfront royalty payment for the licensing of the York tradename.

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The R&LC HVAC business, which was previously reported in the Global Products segment, meets the criteria to be classified as a discontinued operation and, as a result, its historical financial results are reflected in the consolidated financial statements as a discontinued operation, and assets and liabilities were reclassified as held for sale for all periods presented.

The Company expects that the sale of the R&LC HVAC business will close in the fourth quarter of fiscal 2025.

The Company expects that the sale of the R&LC HVAC business will close in the second half of fiscal 2025.

Restructuring and Cost Optimization Initiatives

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The Company’s ability to execute the most significant aspects of the restructuring plan will be dependent on the timing of the close of the R&LC HVAC business divestiture transaction.

Accordingly, the Company is unable to estimate the specific costs to be incurred and savings to be achieved in fiscal 2025;

however, depending on the timing of the closing of the transaction and the ability to execute more significant aspects of the planned restructuring actions, the impact of costs on net income could be material in fiscal 2025.

Accordingly, the Company is unable to estimate the specific costs to be

incurred and savings to be achieved in fiscal 2025;

however, depending on the finalization of the carve-out of the R&LC HVAC business, including post-closing separation obligations, the timing of the closing of the transaction and the ability to execute more significant aspects of the planned restructuring actions, the impact of costs on net income could be material in fiscal 2025.

Restructuring costs will be incurred across all segments and Corporate functions.

Cybersecurity Incident

During the weekend of September 23, 2023, the Company became aware of a cybersecurity incident impacting its internal information technology ("IT") infrastructure and applications.

The overall impact of the cybersecurity incident did not have a material impact on net income, net of insurance recoveries, or cash flows from operations in the first quarter of fiscal 2024.

A substantial portion of its direct costs incurred related to containing, investigating and remediating the incident, as well as business interruption losses, was reimbursed through insurance recoveries.

During the weekend of September 23, 2023, the Company experienced a cybersecurity incident impacting its internal information technology ("IT") infrastructure and applications.

The Company is completing its analysis of the impacted data and believes based on its assessment to date that certain data, including employee, job applicant, consultant and other third party personally identifiable information and other related data, was impacted by the incident.

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Based on the information reviewed to date, the Company has not observed evidence of any impact to its digital products, services and solutions, including OpenBlue and Metasys.

Three Months Ended December 31,

(in millions) 2024 2023 Change

Three Months Ended March 31, Six Months Ended March 31,

(in millions) 2025 2024 Change 2025 2024 Change

Net sales $ 5,676 $ 5,597 1 % $ 11,102 $ 10,806 3 %

The increase in net sales for the three months ended December 31, 2024 was due to higher organic sales ($480 million), partially offset by the net impact of acquisitions and divestitures ($230 million) and the unfavorable impact of foreign currency translation ($33 million).

Excluding the impact of foreign currency translation and business acquisitions and divestitures, net sales increased 10% over the prior year, driven by strong growth in Products and Systems in the Building Solutions North America and Global Products segments and growth in Services in all Building Solutions segments.

The increase in net sales for the three months ended March 31, 2025 was due to higher organic sales ($381 million), partially offset by the net impact of acquisitions and divestitures ($233 million) and the unfavorable impact of foreign currency translation ($69 million).

Excluding the impact of foreign currency translation and business acquisitions and divestitures, net sales increased 7% over the prior year, driven by strong growth in Products and Systems in the Building Solutions North America, Building Solutions Asia Pacific and Global Products segments and growth in Services in all Building Solutions segments.

The increase in net sales for the six months ended March 31, 2025 was due to higher organic sales ($861 million), partially offset by the net impact of acquisitions and divestitures ($463 million) and the unfavorable impact of foreign currency translation ($102 million).

Excluding the impact of foreign currency translation and business acquisitions and divestitures, net sales increased 8% over the prior year, driven by strong growth in Products and Systems in the Building Solutions North America, Building Solutions Asia Pacific and Global Products segments and growth in Services in all Building Solutions segments.

Refer to the "Segment Analysis" below within this Item 2 for a discussion of net sales by segment.

Cost of Sales / Gross Profit

Three Months Ended December 31,

(in millions) 2024 2023 Change

Three Months Ended March 31, Six Months Ended March 31,

(in millions) 2025 2024 Change 2025 2024 Change

Cost of sales $ 3,607 $ 3,675 (2 %) $ 7,107 $ 7,106 — %

Gross profit 2,069 1,922 8 % 3,995 3,700 8 %

% of sales 35.5 % 34.1 %

The increase in gross profit for the three months ended December 31, 2024 was primarily due to margin improvements in the Building Solutions segments as a result of strategically building backlog with long-term, higher margin Systems projects.

% of sales 36.5 % 34.3 % 220 bp 36.0 % 34.2 % 180 bp

The increase in gross profit for the three and six months ended March 31, 2025 was primarily due to margin improvements in the Building Solutions segments as a result of converting backlog with increased mix of long-term, higher margin Systems projects and optimized Services mix.

Refer to the "Segment Analysis" below within this Item 2 for a discussion of segment earnings before interest, taxes and amortization ("EBITA").

Selling, General and Administrative Expenses

Three Months Ended December 31,

(in millions) 2024 2023 Change

Three Months Ended March 31, Six Months Ended March 31,

(in millions) 2025 2024 Change 2025 2024 Change

SG&A $ 1,427 $ 2,064 (31 %) $ 2,826 $ 3,398 (17 %)

% of sales 25.8 % 25.6 %

For the three months ended December 31, 2024, increases in SG&A were primarily due to transformation costs and transaction/separation costs.

% of sales 25.1 % 36.9 % (1,180) bp 25.5 % 31.4 % (590) bp

For the three months ended March 31, 2025, the decrease in SG&A was primarily due to the favorable impact of the prior year water systems AFFF settlement agreement costs ($750 million), partially offset by higher transformation costs ($46 million) and the impact of net mark-to-market adjustments ($28 million).

For the six months ended March 31, 2025, the decrease in SG&A was primarily due to the favorable impact of the prior year water systems AFFF settlement agreement costs ($750 million), partially offset by higher transformation costs ($79 million) and the impact of net mark-to-market adjustments ($51 million).

Refer to the "Segment Analysis" below within this Item 2 for a discussion of segment EBITA.

Refer to Note 18, "Commitments and Contingencies," of the notes to the consolidated financial statements for further disclosure related to the water systems AFFF settlement.

Restructuring and Impairment Costs

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

(in millions) 2025 2024 2025 2024

Goodwill and other intangible asset impairments $ 22 $ 230 $ 22 $ 230

Restructuring and related costs 40 9 73 44

Restructuring and impairment costs $ 62 $ 239 $ 95 $ 274

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Net Financing Charges

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

(in millions) 2025 2024 2025 2024

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Other financing charges 4 4 10 26

Interest income, net of foreign exchange results (3) (5)

Interest income (2) (5) (5) (10)

Net foreign exchange results for financing activities 22 (6) 38 (22)

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Income Tax Provision (Benefit)

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

(in millions) 2025 2024 2025 2024

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Management evaluates the performance of its segments primarily on segment earnings before interest, taxes and amortization ("EBITA"), which represents income from continuing operations before income taxes and noncontrolling interests, excluding corporate expenses, amortization of intangible assets, restructuring and impairment costs, the water systems AFFF settlement costs and insurance recoveries, net mark-to-market gains and losses related to pension and postretirement plans and restricted asbestos investments, and net financing charges.

Three Months Ended December 31,

(in millions) 2024 2023 Change

Three Months Ended March 31, Six Months Ended March 31,

(in millions) 2025 2024 Change 2025 2024 Change

Building Solutions North America $ 2,916 $ 2,739 6 % $ 5,660 $ 5,226 8 %

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$ 5,676 $ 5,597 1 % $ 11,102 $ 10,806 3 %

• The increase in Building Solutions North America was primarily due to organic growth ($260 million).

Sales growth was led by high teens growth in Applied HVAC and Controls.

Three Months:

• The increase in Building Solutions North America was primarily due to organic growth ($187 million), partially offset by the unfavorable impact of foreign currency translation ($10 million).

Excluding the impact of foreign currency translation, sales growth was led by continued strength across Applied HVAC and Controls.

Products and Systems sales increased 8% and Services increased 5%.

• The increase in Building Solutions EMEA/LA was primarily due to organic growth ($57 million), partially offset by the unfavorable impact of foreign currency translation ($25 million).

Excluding the impact of foreign currency translation, sales growth was primarily led by 10% growth in Services.

Fire and Security sales increased high single digits.

• The increase in Building Solutions Asia Pacific was primarily due to organic growth ($23 million).

Sales growth was led by 14% growth in Services.

• The decrease in Global Products was primarily due to the impact of business divestitures ($233 million), partially offset by organic growth ($140 million).

Excluding the impact of business divestitures and foreign currency, sales increased 15%, led by over 30% growth in Applied HVAC.

• The increase in Building Solutions EMEA/LA was primarily due to organic growth ($48 million) and incremental sales related to business acquisitions ($9 million), partially offset by the unfavorable impact of foreign currency translation ($36 million).

Excluding the impact of business acquisitions and foreign currency translation, sales growth was primarily led by 9% growth in Services.

• The increase in Building Solutions Asia Pacific was primarily due to organic growth ($62 million), partially offset by the unfavorable impact of foreign currency translation ($11 million).

Excluding the impact of foreign currency translation, sales growth was led by 15% growth in Services and 12% growth in Products and Systems.

• The decrease in Global Products was primarily due to the impact of business divestitures ($242 million) and the unfavorable impact of foreign currency translation ($12 million), partially offset by organic growth ($84 million).

Excluding the impact of business divestitures and foreign currency, sales increased 8%, led by positive price and volume growth.

Applied HVAC grew over 20%.

Year to Date:

• The increase in Building Solutions North America was primarily due to organic growth ($447 million), partially offset by the unfavorable impact of foreign currency translation ($13 million).

Excluding the impact of foreign currency translation, sales growth was led by growth in Applied HVAC and Controls.

• The increase in Building Solutions EMEA/LA was primarily due to organic growth ($105 million) and incremental sales related to business acquisitions ($12 million), partially offset by the unfavorable impact of foreign currency translation ($61 million).

Excluding the impact of business acquisitions and foreign currency translation, sales growth was primarily led by growth in Services.

• The increase in Building Solutions Asia Pacific was primarily due to organic growth ($85 million), partially offset by the unfavorable impact of foreign currency translation ($14 million).

Excluding the impact of foreign currency translation, sales growth was led by strong growth in Services as well as growth in Products and Systems.

• The decrease in Global Products was primarily due to the impact of business divestitures ($475 million) and the unfavorable impact of foreign currency translation ($14 million), partially offset by organic growth ($224 million).

Excluding the impact of business divestitures and foreign currency, sales growth was led by positive price and volume growth, including strong growth in Applied HVAC.

Segment EBITA

Three Months Ended December 31,

(in millions) 2024 2023 Change

Three Months Ended March 31, Six Months Ended March 31,

(in millions) 2025 2024 Change 2025 2024 Change

Building Solutions North America $ 390 $ 373 5 % $ 722 $ 658 10 %

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Global Products 341 290 18 % 667 557 20 %

• The increase in Building Solutions North America was primarily due to higher margin backlog conversion, partially offset by impacts from ongoing growth investments.

Three Months:

• The increase in Building Solutions North America was primarily due to higher margin backlog conversion and productivity improvements.

• The increase in Building Solutions EMEA/LA was primarily driven by productivity improvements and positive mix from the growth in Services.

• The increase in Building Solutions Asia Pacific was primarily driven by positive mix from the Service business.

• The increase in Global Products was primarily due to increased volumes and enhanced operational efficiencies.

• The increase in Building Solutions Asia Pacific was primarily driven by productivity improvements.

• The increase in Global Products was primarily due to improved operational efficiencies, which more than offset the impact of divestitures.

Year to Date:

• The increase in Building Solutions North America was primarily due to higher margin backlog conversion and productivity improvements, partially offset by impacts from ongoing growth investments.

• The increase in Building Solutions EMEA/LA was primarily driven by productivity improvements and positive mix from the growth in Services.

• The increase in Building Solutions Asia Pacific was primarily driven by productivity improvements.

• The increase in Global Products was primarily due to increased volumes and improved operational efficiencies, which more than offset the impact of divestitures.

Backlog and Orders

Backlog and orders are additional metrics that are meant to provide management with a deeper level of insight into the progress of specific strategic and growth initiatives.

Backlog is applicable to sales of products and systems and services and totaled $15.3 billion at December 31, 2024, including both the Building Solutions and Global Products segments.

Orders provide management with a signal of customer demand for the Company's products and services, as well as an indication of future

revenues and performance.

Backlog is applicable to sales of products and systems and services and totaled $16.0 billion at March 31, 2025, including both the Building Solutions and Global Products segments.

Orders provide management with a signal of customer demand for the Company's products and services, as well as an indication of future revenues and performance.

However, the timing and conversion of backlog and orders are subject to numerous uncertainties and risks and are not necessarily indicative of the amount of revenue to be earned in the upcoming fiscal year.

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Backlog Orders

(in billions) December 31, 2024 Year-over-Year Change (1)

Three months ended

December 31, 2024 Year-over-Year Change (1)

(in billions) March 31,

2025 Year-over-Year Change (1)

Three Months Ended March 31, 2025 Year-over-Year Change (1)

Building Solutions North America $ 9.8 11 % $ 3.4 4 %

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Total Building Solutions $ 14.0 12 % $ 5.2 5 %

(1) Change is compared to December 31, 2023 (backlog) and the three months ended December 31, 2023 (orders) and excludes the impact of mergers, acquisitions, dispositions and foreign currency.

Remaining performance obligations were $ 20.9 billion at December 31, 2024.

(1) Change is compared to March 31, 2024 (backlog) and the three months ended March 31, 2024 (orders) and excludes the impact of mergers, acquisitions, divestitures and foreign currency.

Remaining performance obligations were $ 22.0 billion at March 31, 2025.

Differences between the Company’s remaining performance obligations and backlog are primarily due to:

4 unchanged sentences

Working Capital

(in millions) December 31, 2024 September 30, 2024 Change

(in millions) March 31, 2025 September 30, 2024 Change

Current assets $ 11,350 $ 11,179

4 unchanged sentences

Accounts payable 3,254 3,389 (4) %

* Measure not meaningful

• The increase in working capital at December 31, 2024 as compared to September 30, 2024 was primarily due to an increase in cash and cash equivalents, a decrease in other current liabilities due to a payment related to the AFFF settlement agreement and a decrease in accounts payable due to timing, which were partially offset by a decrease in accounts receivable.

• The increase in working capital at March 31, 2025 as compared to September 30, 2024 was primarily due to a decrease in other current liabilities due to a payment related to the AFFF settlement agreement and an increase in current assets held for sale primarily due to seasonal increases in inventory related to the R&LC HVAC business, partially offset by higher short-term debt and the net impact of various other current assets and liabilities.

Cash Flows From Continuing Operations

Three Months Ended December 31,

Six Months Ended March 31,

(in millions) 2025 2024

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Cash used by investing activities (217) (196)

Cash provided by financing activities 201 1,236

• The increase in cash provided by operating activities was primarily due to decreases in accounts receivable and higher cash used for inventory in the first quarter of fiscal 2024, partially offset by the timing of accounts payable and accrued liabilities payments.

• The increase in cash used by investing activities was primarily due to increased capital expenditures.

• The decrease in cash provided by financing activities was primarily due to changes in net debt activity and higher share repurchases, which were temporarily halted in the first quarter of fiscal 2024.

Cash provided (used) by financing activities (474) 740

• The increase in cash provided by operating activities reflects higher net income, decreases in accounts receivable and higher cash used for inventory in fiscal 2024, partially offset by the timing of accounts payable and accrued liabilities payments.

• The increase in cash used by investing activities was due to various investment transactions.

• The increase in cash used by financing activities was primarily due to changes in net debt activity and higher share repurchases, which were temporarily halted in the first quarter of fiscal 2024.

Capitalization

(in millions) December 31, 2024 September 30, 2024

(in millions) March 31, 2025 September 30, 2024

Short-term debt $ 1,261 $ 953

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The Company believes the percentage of net debt to net capitalization is useful to understanding the Company’s financial condition as it provides a view of the extent to which the Company relies on external debt financing for its funding and is a measure of risk to its shareholders.

• As of December 31, 2024, approximately $1.4 billion remains available under the Company's share repurchase authorization, which does not have an expiration date and may be amended or terminated by the Board of Directors at any time without prior notice.

• As of March 31, 2025, approximately $1.1 billion remains available under the Company's share repurchase authorization, which does not have an expiration date and may be amended or terminated by the Board of Directors at any time without prior notice.

The Company expects to repurchase outstanding shares from time to time depending on market conditions, alternate uses of capital, liquidity, and the economic environment.

• The Company declared a dividend of $0.37 per common share in the quarter ended December 31, 2024 and intends to continue paying dividends throughout fiscal 2025.

• The Company expects to receive net cash proceeds related to the sale of its R&LC HVAC business of approximately $5.0 billion after tax and transaction-related expenses when the transaction closes, likely in the fourth quarter of fiscal 2025.

• The Company declared a dividend of $0.37 per common share in the quarter ended March 31, 2025 and intends to continue paying dividends throughout fiscal 2025.

Consistent with its capital allocation policy, the Company expects to use a portion of the proceeds to pay down debt to the extent required to retain its investment grade rating, with the remaining proceeds expected to be returned to shareholders through share repurchases.

• The Company believes its capital resources and liquidity position, including cash and cash equivalents of $1.2 billion at December 31, 2024, are adequate to fund operations and meet its cash obligations for the foreseeable future.

• The Company believes its capital resources and liquidity position, including cash and cash equivalents of $0.8 billion at March 31, 2025, are adequate to fund operations and meet its cash obligations for the foreseeable future.

– The Company manages its short-term debt position in the U.S.

and euro commercial paper and bank loan markets.

Commercial paper outstanding totaled $309 million as of December 31, 2024 and $350 million as of September 30, 2024.

Commercial paper outstanding totaled $673 million as of March 31, 2025 and $350 million as of September 30, 2024.

– The Company maintains a shelf registration statement with the SEC under which it may issue additional debt securities, ordinary shares, preferred shares, depository shares, warrants, purchase contracts and units that may be offered in one or more offerings on terms to be determined at the time of the offering.

The Company anticipates that the proceeds of any offering would be used for general corporate purposes, including repayment of indebtedness, acquisitions, additions to working capital, repurchases of ordinary shares, dividends, capital expenditures and investments in the Company's subsidiaries.

– The Company also has the ability to draw on its $2.5 billion revolving credit facility which is scheduled to expire in December 2028 or its $0.5 billion revolving credit facility which was renewed in December 2024 and is now scheduled to expire in December 2025.

There were no draws on the revolving credit facilities as of December 31, 2024 and September 30, 2024.

There were no draws on the revolving credit facilities as of March 31, 2025 and September 30, 2024.

• The Company's ability to access the global capital markets and the related cost of financing is dependent upon, among other factors, the Company's credit ratings.

As of December 31, 2024, the Company's credit ratings and outlook were as follows:

As of March 31, 2025, the Company's credit ratings and outlook were as follows:

Rating Agency Short-Term Rating Long-Term Rating Outlook

6 unchanged sentences

For purposes of calculating these covenants, consolidated shareholders’ equity attributable to Johnson Controls is calculated without giving effect to (i) the application of Accounting Standards Codification ("ASC") 715-60, "Defined Benefit Plans - Other Postretirement," or (ii) the cumulative foreign currency translation adjustment.

As of December 31, 2024, the Company was in compliance with all covenants and other requirements set forth in its credit agreements and the indentures governing its notes, and expects to remain in compliance for the foreseeable future.

As of March 31, 2025, the Company was in compliance with all covenants and other requirements set forth in its credit agreements and the indentures governing its notes, and expects to remain in compliance for the foreseeable future.

None of the Company’s debt agreements limit access to stated borrowing levels or require accelerated repayment in the event of a decrease in the Company's credit rating.

14 unchanged sentences

cash, cash equivalents, short-term investments and cash flows from operations to continue to be sufficient to fund the Company’s non-U.S.

activities and cash commitments for investing activities, such as material capital expenditures, for at least the next twelve months and thereafter for the foreseeable future.

operating activities and cash commitments for investing activities, such as material capital expenditures, for at least the next twelve

months and thereafter for the foreseeable future.

Should the Company require more capital at its Luxembourg and Ireland holding and financing entities, other than amounts that can be provided in tax efficient methods, the Company could also elect to raise capital through debt or equity issuances.

22 unchanged sentences

The following table presents the net loss attributable to the Parent Company and TFSCA (collectively, the "Obligor Group") and the net income (loss) attributable to intercompany transactions between the Obligor Group and subsidiaries of the Parent Company other than TFSCA (collectively, the "Non-Obligor Subsidiaries") which are excluded from the Net loss attributable to the Obligor Group (in millions):

Three Months Ended December 31, 2024 Year Ended

Six Months Ended March 31, 2025 Year Ended

September 30, 2024

4 unchanged sentences

Obligor Group Intercompany Balances

December 31, 2024 September 30, 2024 December 31, 2024 September 30, 2024

March 31, 2025 September 30, 2024 March 31, 2025 September 30, 2024

Current assets $ 66 $ 1,339 $ 693 $ 823

12 unchanged sentences

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of December 31, 2024, the Company had not experienced any adverse changes in market risk exposures that materially affected the quantitative and qualitative disclosures presented in its Annual Report on Form 10-K for the year ended September 30, 2024.

As of March 31, 2025, the Company had not experienced any adverse changes in market risk exposures that materially affected the quantitative and qualitative disclosures presented in its Annual Report on Form 10-K for the year ended September 30, 2024.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis