What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-02-04 compared with 2025-08-06 · 108 added, 138 removed, 185 unchanged (57% of the section changed)

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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 any associated supply chain disruptions;

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

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;

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 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 execute on the Company's operating model and drive organizational improvement;

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

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

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

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

the 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;

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;

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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;

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

the ability to adapt to global climate change, climate change regulation and successfully meet the Company's public sustainability commitments;

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the risk of infringement or expiration of intellectual property rights;

the Company's ability to manage disruptions caused by catastrophic or geopolitical events, such as natural disasters, armed conflict, political change, climate change, pandemics and outbreaks of contagious diseases and other adverse public health developments;

the ability to manage disruptions caused by catastrophic or geopolitical events, such as natural disasters, armed conflict, political change, climate change, pandemics and outbreaks of contagious diseases and other adverse public health developments;

any delay or inability of the Company to realize the expected benefits and synergies of recent portfolio transactions;

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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, safe, healthy and sustainable buildings, serving a wide range of customers around the globe.

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.

Johnson Controls International plc, headquartered in Cork, Ireland, a global technology leader in energy efficiency, decarbonization, thermal management and mission-critical performance, helps customers use energy more productively, reduce carbon emissions, and operate with the precision and resilience required in rapidly expanding industries such as data centers, healthcare, pharmaceuticals, advanced manufacturing, and higher education.

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 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 began reporting under this segment structure on April 1, 2025.

The Company partners with customers by leveraging its broad product portfolio and digital capabilities, together with its direct channel capabilities, to deliver solutions and services addressing distinct and diverse operating environments and regulatory requirements that address customers’ needs in their core missions.

The following information should be read in conjunction with the September 30, 2025 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, 2025 filed with the SEC on November 14, 2025.

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.

References in the following discussion and analysis to "Three Months," "First Quarter" or similar language refer to the three months ended December 31, 2025 compared to the three months ended December 31, 2024.

Macroeconomic Trends

Much of the demand for the Company’s products and solutions is heavily dependent on general economic conditions, localized demand for real estate and the availability of credit, public funding or other financing sources.

Much of the demand for the Company’s products, services and solutions is driven by commercial, institutional, industrial, data center and governmental construction, industrial facility expansion, retrofit activity, maintenance projects and other capital investments in buildings within the sectors that the Company serves.

Construction and other capital investment projects are heavily dependent on general economic conditions, localized demand for real estate and availability of credit, public funding or other sources of financing.

In addition, most real estate developers rely heavily on project financing in order to initiate and complete projects.

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 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.

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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 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.

These actions have largely been successful in 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.

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 EU Energy Efficiency Directive, U.S.

The Company continues to observe trends demonstrating increased interest and demand for its products and services that enable smart, 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 EU Energy Efficiency Directive, EU Heat Transition, 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.

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.

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

In addition, the increased maturity and adoption of AI and high-performance computing is currently impacting the microchip and data center industry and driving technology innovation, which has led to increased demand for hyperscale and data center cooling solutions that deliver heat management and energy efficiency.

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

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.

This uncertainty has and may in the future impact on 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, 2025 filed with the United States Securities and Exchange Commission ("SEC") on November 14, 2025.

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.

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.

Certain of these risk factors have been updated and supplemented in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Restructuring and Cost Optimization Initiatives

During the fourth quarter of fiscal 2024, the Company committed to a multi-year restructuring plan to address stranded costs and further right-size its global operations as a result of previously announced portfolio simplification actions.

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.

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

During the fourth quarter of fiscal 2024, the Company committed to a multi-year restructuring plan to address stranded costs and further right-size global operations as a result of previously announced portfolio simplification actions.

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

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

Cybersecurity Incident

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

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 June 30, Nine Months Ended June 30,

(in millions) 2025 2024 Change 2025 2024 Change

Refer to Note 14, "Restructuring and Related Costs," for an update on the restructuring plan.

Three Months Ended December 31,

(in millions) 2025 2024 Change

Net sales $ 5,797 $ 5,426 7 %

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.

The increase in net sales for the three months ended December 31, 2025 was due to higher organic sales ($311 million) and the favorable impact of foreign currency translation ($72 million), partially offset by the net impact of acquisitions and divestitures ($12 million).

Excluding the impact of foreign currency translation and business acquisitions and divestitures, net sales increased 6% over the prior year, driven by growth across all segments, 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 June 30, Nine Months Ended June 30,

(in millions) 2025 2024 Change 2025 2024 Change

Three Months Ended December 31,

(in millions) 2025 2024 Change

Cost of sales $ 3,723 $ 3,500 6 %

Gross profit 2,074 1,926 8 %

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

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 June 30, Nine Months Ended June 30,

(in millions) 2025 2024 Change 2025 2024 Change

% of sales 35.8 % 35.5%

The increase in gross profit for the three months ended December 31, 2025 was primarily due to margin improvements as a result of disciplined execution across pricing, productivity, and project delivery.

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

Selling, General and Administrative Expenses ("SG&A")

Three Months Ended December 31,

(in millions) 2025 2024 Change

SG&A $ 1,221 $ 1,399 (13 %)

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

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.

% of sales 21.1 % 25.8 % (470) bp

The decrease in SG&A was primarily due to AFFF insurance recoveries related to the previously disclosed water systems settlement ($130 million) and the gain on the ADT Mexico business divestiture ($70 million).

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

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 June 30, Nine Months Ended June 30,

Three Months Ended December 31,

(in millions) 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 $ 37 $ 33

Other impairments 50 —

Restructuring and impairment costs $ 87 $ 33

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Net Financing Charges

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

(in millions) 2025 2024 2025 2024

Interest expense, net of capitalized interest costs $ 55 $ 84 $ 178 $ 266

Other financing charges 4 6 14 32

Interest income (3) (9) (8) (19)

Net foreign exchange results for financing activities 21 (11) 59 (33)

Net financing charges $ 77 $ 70 $ 243 $ 246

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.

Refer to Note 9, "Debt and Financing Arrangements," of the notes to the consolidated financial statements for further disclosure related to the Company's net financing charges and debt.

Income Tax Provision

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

Three Months Ended December 31,

(in millions) 2025 2024

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Segment Analysis

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 June 30, Nine Months Ended June 30,

(in millions) 2025 2024 Change 2025 2024 Change

The Chief Executive Officer, the Company’s chief operating decision maker ("CODM"), evaluates the performance of its segments and allocates resources based on two profitability measures, Segment EBITA and Segment EBIT:

• Segment earnings before interest, taxes, and amortization (“EBITA”) represents income from continuing operations, before income taxes and noncontrolling interests, excluding corporate expenses, restructuring and impairment costs, AFFF related settlement costs and insurance recoveries, gains or losses on divestitures, net mark-to-market gains and losses related to pension and postretirement plans and restricted asbestos investments, net finance charges, and amortization.

Segment EBITA is used as a tool to allow the CODM to evaluate the recurring profitability of the segments, including revenues and expenses that are within the operational control of the segments, and excluding the impact of certain non-cash and non-recurring items.

Segment EBITA also provides the CODM with performance comparability across periods and for more accurate benchmarking against peer companies that may not have similar historical acquisition activity, by holding constant the impact of significant acquisitions.

• Segment earnings before interest and taxes ("EBIT") represents Segment EBITA, adding back the impact of amortization of intangible assets.

Segment EBIT allows the CODM to review profitability, inclusive of the impact of significant acquisition activity, informing the CODM of how the business is integrating key strategic initiatives and generating synergies.

Both EBITA and EBIT are reviewed by the CODM and compared against the profit plan and forecast for the current and prior year.

Segment EBITA and Segment EBIT are not defined under GAAP and may not be comparable to similarly titled measures used by other companies.

Measures of total assets by reportable segment are not provided to the CODM.

Therefore, asset information by segment is not disclosed.

Three Months Ended December 31,

(in millions) 2025 2024 Change

Americas $ 3,843 $ 3,627 6 %

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$ 5,797 $ 5,426 7 %

Three Months:

• 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).

• The increase in Americas was primarily due to organic growth ($210 million).

Excluding the impact of divestitures and foreign currency translation, sales increased 6%, led by continued strength across Applied HVAC and Controls.

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• The increase in EMEA was primarily due to the favorable impact of foreign currency translation ($65 million) and organic growth ($51 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.

Year to Date:

• 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.

Excluding the impact of foreign currency translation, sales increased 4%, led by 8% growth in Services.

• The increase in APAC was primarily due to organic growth ($50 million).

Excluding the impact of foreign currency translation, sales increased 8%, led by 9% growth in Products and Systems.

Segment EBITA and Segment EBIT

Segment EBITA

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

Three Months Ended December 31, Segment EBIT

Three Months Ended December 31,

(in millions) 2025 2024 Change 2025 2024 Change

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APAC 117 90 30 % 113 85 33 %

Three Months:

• 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 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.

• The increase in Americas was primarily due to productivity improvements and improved mix.

• The increase in EMEA was primarily driven by favorable pricing and productivity improvements.

• The increase in APAC was primarily driven by increased volumes and 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 $16.2 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 by segment for the Systems and Services based businesses :

The following table summarizes backlog and orders by segment :

Backlog Orders

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

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

(in billions) December 31, 2025 Year-over-Year Change (1)

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

$ 13.3 22 % $ 5.0 56 %

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Total $ 18.2 20 % $ 7.0 39 %

(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.

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

• The increase in backlog and orders was primarily due to demand led by customers' accelerated investments in data center projects.

Remaining performance obligations were $24.5 billion at December 31, 2025.

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

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• Remaining performance obligations include the full remaining term of service contracts with substantial termination penalties versus backlog which includes only one year for all outstanding service contracts.

The Company reports backlog, which it believes is a useful measure of evaluating the Company's operational performance and relationship to total orders.

Liquidity and Capital Resources

Working Capital

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

(in millions) December 31, 2025 September 30, 2025 Change

Current assets $ 10,441 $ 10,162

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Accounts payable 3,614 3,614 — %

• 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.

The increase in working capital at December 31, 2025 as compared to September 30, 2025 was primarily due to increases in cash and inventories and decreases in short-term debt and accrued compensation, partially offset by the net impact of other current assets and liabilities.

Cash Flows From Continuing Operations

Nine Months Ended June 30,

Three Months Ended December 31,

(in millions) 2025 2024

Cash provided by operating activities $ 611 $ 249

Cash used by investing activities (302) (286)

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.

Cash provided (used) by investing activities 90 (105)

Cash provided (used) by financing activities (464) 201

The increase in cash provided by operating activities primarily reflects higher net income and favorable changes in accounts payable and accrued liabilities.

The change in investing activities was due to proceeds from the ADT Mexico divestiture.

The change in financing activities was primarily due to changes in net debt activity, partially offset by lower stock repurchases.

Capitalization

(in millions) June 30, 2025

September 30, 2024

(in millions) December 31, 2025 September 30, 2025

Short-term debt $ 436 $ 723

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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.

• 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.

• As of December 31, 2025, approximately $4.8 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 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 declared a dividend of $0.40 per common share in the quarter ended December 31, 2025 and intends to continue paying dividends throughout fiscal 2026.

• The Company believes its capital resources and liquidity position, including cash and cash equivalents of $552 million at December 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 $650 million as of June 30, 2025 and $350 million as of September 30, 2024.

Commercial paper outstanding totaled $200 million as of December 31, 2025 and $400 million as of September 30, 2025.

– 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 is scheduled to expire in December 2025.

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

– The Company also has the ability to draw on its $2.5 billion revolving credit facility which is scheduled to expire in December 2028.

There were no draws on the revolving credit facility as of December 31, 2025 and September 30, 2025.

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

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

Rating Agency Short-Term Rating Long-Term Rating Outlook

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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 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.

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, 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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Outside basis differences in these subsidiaries are deemed to be permanently reinvested except in limited circumstances.

However, in the first quarter of fiscal 2024, the Company recorded income tax expense related to a change in the Company's assertion over the outside basis differences of the Company’s investment in certain consolidated subsidiaries as a result of the planned divestiture of its R&LC HVAC business.

The Company currently does not intend nor foresee a need to repatriate undistributed earnings included in the outside basis differences other than in tax efficient manners.

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The amounts involved may be material.

• Refer to Note 8, "Debt and Financing Arrangements," of the notes to the consolidated financial statements for additional information on debt balances and items impacting capitalization.

Co-Issued Securities:

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The following information is provided in compliance with Rule 13-01 of Regulation S-X under the Securities Exchange Act of 1934 with respect to the following unsecured, unsubordinated senior notes (collectively, ("the Notes) which were issued by Johnson Controls International plc ("Parent Company") and Tyco Fire & Security Finance S.C.A.

• €500 million aggregate principal amount of 0.375% Senior Notes due 2027

• €600 million aggregate principal amount of 3.000% Senior Notes due 2028

• $700 million aggregate principal amount of 5.500% Senior Notes due 2029

• $625 million aggregate principal amount of 1.750% Senior Notes due 2030

• $500 million aggregate principal amount of 2.000% Sustainability-Linked Senior Notes due 2031

• €500 million aggregate principal amount of 1.000% Senior Notes due 2032

• $650 million aggregate principal amount of 4.900% Senior Notes due 2032

• €500 million aggregate principal amount of 3.125% Senior Notes due 2033

• €800 million aggregate principal amount of 4.250% Senior Notes due 2035

• €500 million aggregate principal amount of 0.375% Senior Notes due September 2027

• €600 million aggregate principal amount of 3.000% Senior Notes due September 2028

• $700 million aggregate principal amount of 5.500% Senior Notes due April 2029

• $625 million aggregate principal amount of 1.750% Senior Notes due September 2030

• $500 million aggregate principal amount of 2.000% Sustainability-Linked Senior Notes due September 2031

• €500 million aggregate principal amount of 1.000% Senior Notes due September 2032

• $650 million aggregate principal amount of 4.900% Senior Notes due December 2032

• €500 million aggregate principal amount of 3.125% Senior Notes due December 2033

• €800 million aggregate principal amount of 4.250% Senior Notes due May 2035

TFSCA is a corporate partnership limited by shares ( société en commandite par actions ) incorporated and organized under the laws of the Grand Duchy of Luxembourg (“Luxembourg”) and is a wholly-owned consolidated subsidiary of the Company that is 99.924% owned directly by the Parent Company and 0.076% owned by TFSCA’s sole general partner and manager, Tyco Fire & Security S.à r.l., which is itself wholly-owned by the Company.

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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):

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

Three Months Ended December 31, 2025 Year Ended September 30, 2025

Net loss attributable to the Obligor Group $ 69 $ 844

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Obligor Group Intercompany Balances

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

December 31, 2025 September 30, 2025 December 31, 2025 September 30, 2025

Current assets $ 1,513 $ 2,748 $ 6,350 $ 6,161

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Noncurrent liabilities 8,576 8,473 5,058 22,450 *

* Includes $17 billion of intercompany loans that were canceled as the result of a distribution by a non-obligor subsidiary in October 2025.

The same accounting policies as described in Note 1, "Summary of Significant Accounting Policies," of the Company's Annual Report on 10-K for the year ended September 30, 2025 are used by the Parent Company and each of its subsidiaries in connection with the summarized financial information presented above.

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Actual results could differ from those estimates.

The Company’s critical accounting estimates requiring significant judgement that could materially impact the Company's results of operations, financial position and cash flows are described in 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.

Company’s Annual Report on Form 10-K for the year ended September 30, 2025.

Since the date of the Company’s most recent Annual Report, there have been no material changes in the Company’s critical accounting estimates or assumptions.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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.

As of December 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, 2025.

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