01—Abstract
Summary
Summary of the 10-Q filed January 30, 2024. Cited figures are marked; the original filing is the authoritative source.
Johnson Controls International plc (JCI) reported its financial results for the fiscal second quarter ended December 31, 2023.
The company demonstrated a slight increase in net sales, reaching $6.1 billiona, up from $6.07 billion in the prior year's quarter. This growth was primarily driven by favorable foreign currency translation and acquisitions, though organic sales saw a slight decline due to lower volumes, partially offset by higher pricing. Profitability was impacted, with gross profit margin decreasing by 180 basis points to 32.7% primarily due to lower volumes and unfavorable manufacturing absorption, though improved pricing provided some offset.
The company continued to manage its operational efficiency, with Selling, General, and Administrative (SG&A) expenses decreasing by 4% year-over-year, both in absolute terms and as a percentage of sales. Restructuring and impairment costs significantly decreased compared to the prior year's quarter, which included substantial impairment charges related to businesses held for sale. Net income attributable to Johnson Controls saw a substantial increase, rising to $374 millionb ($0.55 per diluted share) from $118 million ($0.17 per diluted share) in the prior year, benefiting from lower restructuring costs and improved operational leverage.
02—Key points
Key Highlights
- Net sales increased slightly to $6.1 billion, driven by foreign currency and acquisitions, with organic sales declining 1% due to lower volumes offset by higher pricing.
- Gross profit margin decreased by 180 basis points to 32.7%, primarily due to lower volumes and unfavorable manufacturing absorption, despite favorable pricing.
- Selling, General, and Administrative (SG&A) expenses decreased by 4% year-over-year to $1.51 billion, improving as a percentage of sales.
- Restructuring and impairment costs significantly decreased to $39 million from $345 million in the prior year, which included significant impairment charges.
- Net income attributable to Johnson Controls surged to $374 million ($0.55 per diluted share) from $118 million ($0.17 per diluted share) in the prior year's quarter, largely due to reduced restructuring charges.
- The company reported $19.9 billion in remaining performance obligations, with approximately 64% expected to be recognized over the next two years.
- Cash used by operating activities was $(246) million, a slight improvement from $(296) million in the prior year, while cash provided by financing activities increased significantly to $1.23 billion due to higher short-term borrowings.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, Johnson Controls International plc kept $0.07.
- Revenue$5.21B100.0%
- Cost of revenue−$3.43B65.9%
- Gross profit$1.78B34.1%
- Operating costs−$1.44B27.6%
- Operating income$340.0M6.5%
- Interest, other & tax$34.0M0.7%
- Net income$374.0M7.2%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed January 30, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $5.21B$6.07B | −14.2% |
| Cost of Revenue | $3.43B$3.98B | −13.7% |
| Gross Profit | $1.78B$2.09B | −15.0% |
| SG&A Expenses | $1.33B$1.57B | −15.1% |
| Operating Income | $340.00M— | — |
| Net Income | $374.00M$118.00M | +216.9% |
| EPS (Basic) | $0.55$0.17 | +223.5% |
| EPS (Diluted) | $0.55$0.17 | +223.5% |
| Shares Outstanding (Basic) | 680.70M687.00M | −0.9% |
| Shares Outstanding (Diluted) | 682.40M690.30M | −1.1% |
05—Questions
Frequently Asked Questions
What was the key driver behind the significant increase in net income?
The substantial increase in net income attributable to Johnson Controls was primarily driven by a significant reduction in restructuring and impairment costs. In the prior year's comparable quarter, the company recorded $345 million in such costs, including substantial impairment charges. This quarter, these costs were reduced to $39 million, significantly boosting profitability.
How did the company's sales performance vary across its segments?
Sales growth was uneven across segments. Building Solutions North America and EMEA/LA saw increases of 5% and 6% respectively, driven by organic growth and favorable foreign currency. However, Building Solutions Asia Pacific experienced a significant decline of 22%, attributed to economic softening in China and unfavorable foreign currency. Global Products sales decreased by 1% due to lower volumes and unfavorable foreign currency, partially offset by acquisitions and higher pricing.
What is the outlook for the company's backlog and future revenue recognition?
Johnson Controls has a robust backlog of $13.7 billion, with remaining performance obligations totaling $19.9 billion. Of this, approximately 64% is expected to be recognized as revenue over the next two years. The company's large, multi-year contracts, particularly for building construction and services, contribute significantly to these remaining performance obligations, providing a solid revenue base for the foreseeable future.
What is the impact of the cybersecurity incident on the company's financials?
The cybersecurity incident that occurred in September 2023 resulted in approximately $27 million of impact on net income for the quarter, stemming from lost/deferred revenues and remediation expenses, net of insurance recoveries. The company anticipates further expenses in fiscal year 2024, primarily in the first half, though the overall impact for the full year is not expected to be material to net income or cash flows, net of insurance recoveries. Disruptions to billing systems also negatively impacted cash from operations in the quarter.
06—Continue