10-QPeriod: Q2 FY2022

Johnson Controls International plc Quarterly Report for Q2 Ended Mar 31, 2022

Filed May 4, 2022For Securities:JCI

Summary

Johnson Controls International plc (JCI) reported its financial results for the third quarter of fiscal year 2022, ending March 31, 2022. The company experienced a significant increase in net sales, driven by organic growth and acquisitions, though profit margins were compressed due to supply chain inefficiencies and cost pressures. Restructuring and impairment costs were notably higher compared to the prior year, largely impacting net income and comprehensive income attributable to Johnson Controls. The company also provided insights into ongoing macroeconomic challenges, including inflation and supply chain disruptions, which are expected to continue impacting results. While revenue showed a healthy increase, the substantial rise in restructuring and impairment costs, alongside increased selling, general, and administrative expenses, significantly reduced net income and diluted earnings per share compared to the prior year. The company continues to manage its capital structure, with a robust share repurchase program and dividend payments, while navigating a complex global economic environment characterized by persistent supply chain issues and inflationary pressures. Investors should monitor the company's ability to effectively manage these costs and supply chain challenges to improve profitability in future periods.

Financial Highlights

52 data points
Beta

Revenue

$6.10B

32.1% Gross Margin

Net Income

$11.00M

0.2% Net Margin

EPS (Diluted)

$0.02

Total Assets

$42.99B

Cash & Equivalents

$1.79B

Free Cash Flow

-$68.00M

Financial Statements
Beta
Revenue$6.10B
Cost of Revenue$4.14B
Gross Profit$1.96B
SG&A Expenses$1.45B
Operating Income$392.00M
Interest Expense$56.00M
Net Income$11.00M
EPS (Basic)$0.02
EPS (Diluted)$0.02
Shares Outstanding (Basic)699.10M
Shares Outstanding (Diluted)702.70M

Key Highlights

  • 1Net sales increased by 9% year-over-year for both the three and six months ended March 31, 2022, driven by organic sales growth and acquisitions.
  • 2Gross profit saw a modest increase of 1% for the quarter and 5% year-to-date, but gross profit margin declined due to supply chain inefficiencies and price/cost pressures.
  • 3Restructuring and impairment costs surged significantly, from $96 million in the prior year's quarter to $384 million in the current quarter, and from $96 million year-to-date to $433 million.
  • 4Net income attributable to Johnson Controls decreased substantially by 97% for the quarter and 51% year-to-date, largely due to increased restructuring and impairment costs and higher SG&A expenses.
  • 5Diluted earnings per share also saw a significant decline, to $0.02 for the quarter and $0.56 year-to-date, down from $0.48 and $1.10, respectively, in the prior year.
  • 6The company continues to repurchase shares, with approximately $4 billion remaining under its authorization, and declared a dividend of $0.35 per common share.
  • 7Persistent supply chain disruptions, inflation, and geopolitical factors (like the Russia-Ukraine conflict) are noted as ongoing challenges expected to impact results for the remainder of fiscal 2022.

Frequently Asked Questions

The primary driver for the significant decrease in net income attributable to Johnson Controls was the substantial increase in restructuring and impairment costs, which rose from $96 million in the prior year's comparable periods to $433 million year-to-date. Additionally, higher Selling, General, and Administrative (SG&A) expenses also contributed to the decline.

Johnson Controls reported a solid 9% increase in net sales for both the three and six months ended March 31, 2022. This growth was primarily driven by higher organic sales and contributions from acquisitions. However, the company also noted the unfavorable impact of foreign currency translation and lower sales due to business divestitures. Management attributed the sales increase to higher volumes and increased pricing in response to inflation pressures, though this was partially offset by supply chain inefficiencies and cost pressures that impacted gross margins.

The company is facing several macroeconomic challenges, including increased input material cost inflation, component shortages, and disruptions in its supply chain. These issues are exacerbated by global economic trends and the conflict in Ukraine. Management expects these trends to continue impacting the company's results for the remainder of fiscal 2022, potentially leading to further disruptions, shortages, and cost increases. These factors have negatively impacted profit margins and delayed the conversion of backlog into revenue.

Johnson Controls continues to actively engage in its share repurchase program, with approximately $4 billion remaining under its authorization as of March 31, 2022. The company also declared a dividend of $0.35 per common share for the quarter ended March 31, 2022, marking an increase for two consecutive quarters and a 30% rise since Q4 2021. They intend to continue paying dividends throughout fiscal 2022.