What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-06 compared with 2025-05-07 · 102 added, 117 removed, 221 unchanged (50% 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;

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the ability of the Company to execute on its operating model and drive organizational improvement;

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 completing the Company's Chief Executive Officer transition;

the Company's ability to successfully execute and complete portfolio simplification actions, 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 innovate and adapt to emerging technologies, ideas and trends in the marketplace, including the incorporation of technologies such as artificial intelligence;

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fluctuations in currency exchange rates;

the ability to hire and retain senior management and other key personnel;

changes or uncertainty in laws, regulations, rates, policies, or interpretations that impact the Company's business operations or tax status;

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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’s products 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.

The Company is a global leader in engineering, manufacturing, commissioning and retrofitting building products and systems, including residential and commercial heating, ventilating, air-conditioning ("HVAC") equipment, industrial refrigeration systems, controls, security systems, fire-detection systems and fire-suppression solutions.

The Company is a global leader in engineering, manufacturing, commissioning and retrofitting building products and systems, including commercial heating, ventilating, air-conditioning ("HVAC") equipment, industrial refrigeration systems, controls, security systems, fire-detection systems and fire-suppression solutions.

The Company further serves customers by providing technical services, including maintenance, management, repair, retrofit and replacement of equipment (in the HVAC, industrial refrigeration, controls, security and fire-protection space) and energy-management consulting.

The Company's OpenBlue digital software platform enables enterprises to better manage their physical spaces by combining the Company's building products and services with cutting-edge technology and digital capabilities to enable data-driven “smart building” services and solutions.

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 Company began reporting under this segment structure on April 1, 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," "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.

References in the following discussion and analysis to "Three Months," "Third Quarter" or similar language refer to the three months ended June 30, 2025 compared to the three months ended June 30, 2024, while "Year-to-Date" refers to nine months ended June 30, 2025 compared to the nine months ended June 30, 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.

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.

The Company maintains global operations.

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.

Although the Company has been largely able to mitigate the impact of tariffs that have been enacted to date, if additional tariffs and reciprocal tariffs are implemented (whether as currently proposed or otherwise), such actions could negatively impact the Company's 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 net effect of these events will continue to depend on the Company’s ability to successfully mitigate and offset their impact.

The Company is 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.

These actions have largely been successful mitigating the impacts of the current macroeconomic environment, however, it is uncertain as to whether the actions taken or contemplated to be taken by the Company will be effective in continuing to mitigate 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.

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In addition, currency exposure from the translation of non-U.S.

dollar functional currency subsidiaries cannot be hedged.

dollar functional currency subsidiaries

cannot be hedged.

Exchange rates can be volatile and a substantial weakening or strengthening of foreign currencies against the U.S.

dollar could increase or reduce the Company’s profit margin, respectively, and impact the comparability of results from period to period .

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

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.

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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.

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.

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.

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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.

Certain of these risk factors have been updated and supplemented in the Company's Quarterly Reports on Form 10-Q for the quarters ended December 31, 2024 and March 31, 2025, filed on February 5, 2025 and May 7, 2025, respectively.

Portfolio Simplification Transactions

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.

The R&LC HVAC business includes the Company's North America Ducted business and Johnson Controls-Hitachi Air Conditioning Holding (UK) Ltd., the Company’s global residential joint venture with Hitachi Global Life Solutions, Inc.

(“Hitachi”), of which the Company owns 60% and Hitachi owns 40%.

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 second half of fiscal 2025.

On July 31, 2025, the Company completed the divestiture of its Residential and Light Commercial ("R&LC") HVAC business to Robert Bosch GmbH (“Bosch”) for net cash proceeds of approximately $5.0 billion after tax and transaction-related expenses.

The R&LC HVAC business included the Company's North America Ducted business and Johnson Controls-Hitachi Air Conditioning Holding (UK) Ltd., the Company’s global residential joint venture with Hitachi Global Life Solutions, Inc.

Restructuring and Cost Optimization Initiatives

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It is expected that one-time restructuring costs, including severance and other employee termination benefits, contract termination costs, and certain other related cash and non-cash charges, of approximately $400 million will be incurred over the course of fiscal 2025, 2026 and 2027, resulting in expected annual cost savings of approximately $500 million upon full completion of the plan.

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 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 and transformation costs in fiscal 2025 have been material, with the resulting savings being realized in fiscal 2026 and 2027.

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

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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.

The Company will, as determined appropriate, notify impacted individuals and regulatory authorities.

The Company determined that certain data, primarily employee, job applicant and personal information and other related data, was impacted by the incident.

The Company has taken appropriate actions to notify individuals and regulatory authorities.

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 March 31, Six Months Ended March 31,

Three Months Ended June 30, Nine Months Ended June 30,

(in millions) 2025 2024 Change 2025 2024 Change

Net sales $ 6,052 $ 5,898 3 % $ 17,154 $ 16,704 3 %

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.

The increase in net sales for the three months ended June 30, 2025 was due to higher organic sales ($343 million) and the favorable impact of foreign currency translation ($55 million), partially offset by the net impact of acquisitions and divestitures ($244 million).

Excluding the impact of foreign currency translation and business acquisitions and divestitures, net sales increased 6% over the prior year, driven by growth in Services across all segments as well as growth in Products and Systems, led by the Americas.

The increase in net sales for the nine months ended June 30, 2025 was due to higher organic sales ($1,205 million), partially offset by the net impact of acquisitions and divestitures ($708 million) and the unfavorable impact of foreign currency translation ($47 million).

Excluding the impact of foreign currency translation and business acquisitions and divestitures, net sales increased 8% over the prior year, driven by growth in Services across all segments and growth in Products and Systems, led by the Americas.

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 March 31, Six Months Ended March 31,

Three Months Ended June 30, Nine Months Ended June 30,

(in millions) 2025 2024 Change 2025 2024 Change

2 unchanged sentences

% of sales 37.1 % 35.8 % 130 bp 36.4 % 34.8 % 160 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.

The increase in gross profit for the three and nine months ended June 30, 2025 was primarily due to margin improvements 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 March 31, Six Months Ended March 31,

Three Months Ended June 30, Nine Months Ended June 30,

(in millions) 2025 2024 Change 2025 2024 Change

1 unchanged sentence

% of sales 23.4 % 15.2 % 820 bp 24.7 % 25.7 % (100) 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).

For the three months ended June 30, 2025, the increase in SG&A was primarily due to the unfavorable impact of the prior year water systems AFFF insurance recoveries ($350 million), the unfavorable impact of prior year earn-out adjustments ($61 million) and higher transformation costs ($45 million).

For the nine months ended June 30, 2025, the decrease in SG&A was primarily due to the favorable net impact of the prior year water systems AFFF settlement agreement costs and insurance recoveries ($412 million), partially offset by higher transformation costs ($124 million), the unfavorable impact of prior year earn-out adjustments ($68 million) and the impact of net mark-to-market adjustments ($35 million).

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

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Restructuring and Impairment Costs

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

Three Months Ended June 30, Nine Months Ended June 30,

(in millions) 2025 2024 2025 2024

Goodwill and other intangible asset impairments $ — $ 21 $ 22 $ 251

Held for sale impairments — 35 — 35

Other impairments 2 10 2 10

Restructuring and related costs 49 37 122 81

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Net Financing Charges

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

Three Months Ended June 30, Nine Months Ended June 30,

(in millions) 2025 2024 2025 2024

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Refer to Note 8, "Debt and Financing Arrangements," of the notes to the consolidated financial statements for further disclosure related to the Company's debt.

Income Tax Provision (Benefit)

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

Income Tax Provision

Three Months Ended June 30, Nine Months Ended June 30,

(in millions) 2025 2024 2025 2024

Income tax provision (benefit) $ 26 $ (153) $ 73 $ (173)

Income tax provision $ 87 $ 174 $ 160 $ 1

Effective tax rate 12.3 % 17.0 % 9.9 % 0.1 %

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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 March 31, Six Months Ended March 31,

Three Months Ended June 30, Nine Months Ended June 30,

(in millions) 2025 2024 Change 2025 2024 Change

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

Building Solutions EMEA/LA 1,085 1,064 2 % 2,158 2,102 3 %

Building Solutions Asia Pacific 542 491 10 % 1,069 998 7 %

Global Products 1,133 1,303 (13 %) 2,215 2,480 (11 %)

Americas $ 4,042 $ 4,035 — % $ 11,506 $ 11,341 1 %

EMEA 1,273 1,177 8 % 3,631 3,440 6 %

APAC 737 686 7 % 2,017 1,923 5 %

$ 6,052 $ 5,898 3 % $ 17,154 $ 16,704 3 %

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.

• Americas net sales were flat as organic growth ($259 million) was offset by the impact of divestitures ($243 million) and the unfavorable impact of foreign currency translation ($9 million).

Excluding the impact of divestitures and foreign currency translation, sales increased 7%, led by continued strength across Applied HVAC and Controls.

Products and Systems sales increased 8% and Services increased 4%.

• 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).

• The increase in EMEA was primarily due to the favorable impact of foreign currency translation ($52 million) and organic growth ($45 million).

Excluding the impact of foreign currency translation, sales growth was primarily led by 8% growth in Services.

• The increase in APAC was primarily due to organic growth ($39 million) and the favorable impact of foreign currency translation ($12 million).

Excluding the impact of foreign currency translation, sales growth was led by 11% growth in Services and 3% 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.

• The increase in Americas was primarily due to organic growth ($919 million), partially offset by the impact of divestitures ($714 million) and the unfavorable impact of foreign currency translation ($40 million).

Excluding the impact of divestitures and foreign currency translation, sales increased 9%, led by growth in Applied HVAC and Controls.

• The increase in EMEA was primarily due to organic growth ($187 million) and incremental sales related to the net impact of business acquisitions and divestitures ($6 million), partially offset by the unfavorable foreign currency translation ($2 million).

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

• The increase in APAC was primarily due to organic growth ($99 million), partially offset by the unfavorable impact of foreign currency translation ($5 million).

Excluding the impact of foreign currency translation, sales growth was led by 13% growth in Services.

Segment EBITA

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

Three Months Ended June 30, Nine Months Ended June 30,

(in millions) 2025 2024 Change 2025 2024 Change

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

Building Solutions EMEA/LA 136 89 53 % 244 169 44 %

Building Solutions Asia Pacific 79 54 46 % 128 100 28 %

Global Products 341 290 18 % 667 557 20 %

Americas $ 742 $ 804 (8 %) $ 2,038 $ 1,853 10 %

EMEA 177 154 15 % 448 397 13 %

APAC 143 128 12 % 337 320 5 %

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 productivity improvements.

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

• The decrease in Americas was primarily due to the impact of divestitures, unfavorable mix and the impact of prior year earn-out adjustments, partially offset by higher margin backlog conversion and productivity improvements.

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

• The increase in APAC was primarily driven by productivity improvements.

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.

• The increase in Americas was primarily due to higher margin backlog conversion and productivity improvements, partially offset by the impact of divestitures, prior year earn-out adjustments and ongoing growth investments.

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

• The increase in APAC was primarily driven by productivity improvements.

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 $16.0 billion at March 31, 2025, including both the Building Solutions and Global Products segments.

Backlog is applicable to sales of products and systems and services and totaled $16.2 billion at June 30, 2025.

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.

The following table summarizes backlog and orders for the Building Solutions segments:

The following table summarizes backlog and orders by segment for the Systems and Services based businesses :

Backlog Orders

(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 %

Building Solutions EMEA/LA 2.7 10 % 1.2 10 %

Building Solutions Asia Pacific 1.5 21 % 0.6 — %

Total Building Solutions $ 14.0 12 % $ 5.2 5 %

(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.

(in billions) June 30, 2025 Year-over-Year Change (1)

Three Months Ended June 30, 2025 Year-over-Year Change (1)

$ 10.3 10 % $ 3.4 5 %

2.6 9 % 1.1 2 %

1.7 14 % 0.7 (8 %)

Total $ 14.6 11 % $ 5.2 2 %

(1) Change is compared to June 30, 2024 (backlog) and the three months ended June 30, 2024 (orders) and excludes the impact of mergers, acquisitions, divestitures and foreign currency.

Remaining performance obligations were $22.4 billion at June 30, 2025.

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

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Working Capital

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

(in millions) June 30, 2025 September 30, 2024 Change

Current assets $ 11,849 $ 11,179

4 unchanged sentences

Accounts payable 3,421 3,389 1 %

• 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.

• The increase in working capital at June 30, 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 and increases in accounts receivable related to the R&LC HVAC business, partially offset by higher short-term debt, an increase in deferred revenue and the net impact of various other current assets and liabilities.

Cash Flows From Continuing Operations

Six Months Ended March 31,

Nine Months Ended June 30,

(in millions) 2025 2024

Cash provided (used) by operating activities $ 799 $ (437)

Cash provided by operating activities $ 1,586 $ 216

Cash used by investing activities (302) (286)

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.

Cash used by financing activities (1,111) (190)

• The increase in cash provided by operating activities reflects higher net income and decreases in accounts receivable and other assets, 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.

• The increase in cash used by financing activities was primarily due to changes in net debt activity.

Capitalization

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

(in millions) June 30, 2025

September 30, 2024

Short-term debt $ 1,277 $ 953

12 unchanged sentences

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 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.

• In June 2025, the Company's Board of Directors approved a $9.0 billion increase to the Company's share repurchase authorization, adding to the $1.1 billion remaining as of March 31, 2025 under the prior share repurchase authorization approved in 2021.

As of June 30, 2025, approximately $9.8 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 March 31, 2025 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 second half of 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 $0.8 billion at March 31, 2025, are adequate to fund operations and meet its cash obligations for the foreseeable future.

• The Company declared a dividend of $0.37 per common share in the quarter ended June 30, 2025 and intends to continue paying dividends throughout fiscal 2025.

• The Company received net cash proceeds related to the sale of its R&LC HVAC business of approximately $5.0 billion after tax and transaction-related expenses in connection with the close of the transaction on July 31, 2025.

Consistent with its capital allocation policy, the Company expects to return a portion of the net proceeds of the transaction to shareholders through the implementation of a $5.0 billion accelerated share repurchase program expected to commence in the coming weeks pursuant to its previously announced share repurchase authorization.

• The Company believes its capital resources and liquidity position, including cash and cash equivalents of $0.7 billion at June 30, 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 $673 million as of March 31, 2025 and $350 million as of September 30, 2024.

Commercial paper outstanding totaled $650 million as of June 30, 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.

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– 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 is scheduled to expire in December 2025.

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

There were no draws on the revolving credit facilities as of June 30, 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 March 31, 2025, the Company's credit ratings and outlook were as follows:

As of June 30, 2025, the Company's credit ratings and outlook were as follows:

Rating Agency Short-Term Rating Long-Term Rating Outlook

S&P A-2 BBB+ Stable

Moody's P-2 Baa2 Positive

Moody's P-2 Baa1 Stable

The security ratings set forth above are issued by unaffiliated third party rating agencies and are not a recommendation to buy, sell or hold securities.

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The revolving credit facility also limits the amount of debt secured by liens that may be incurred to a maximum aggregated amount of 10% of consolidated shareholders’ equity attributable to Johnson Controls for liens and pledges.

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 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.

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 June 30, 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.

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

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.

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.

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The bankruptcy, insolvency, administrative, debtor relief and other laws of Luxembourg or Ireland, as applicable, may be materially different from, or in conflict with, those of the United States, including in the areas of rights of creditors, priority of governmental and other creditors, ability to obtain post-petition interest and duration of the proceeding.

The application of these laws, or any conflict among them, could adversely affect noteholders’ ability to enforce their rights under the Notes in those jurisdictions or limit any amounts that they may receive.

The application of these laws, or any conflict

among them, could adversely affect noteholders’ ability to enforce their rights under the Notes in those jurisdictions or limit any amounts that they may receive.

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):

Six Months Ended March 31, 2025 Year Ended

September 30, 2024

Nine Months Ended June 30, 2025 Year Ended September 30, 2024

Net loss attributable to the Obligor Group $ (579) $ (609)

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Obligor Group Intercompany Balances

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

June 30, 2025 September 30, 2024 June 30, 2025 September 30, 2024

Current assets $ 28 $ 1,339 $ 841 $ 823

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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.

As of June 30, 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