Johnson Controls Q1 2026 Johnson Controls International PLC Earnings Call | AllMind AI Earnings | AllMind AI
Q1 2026 Johnson Controls International PLC Earnings Call
The call today.
If you would like to ask a question at the end of the presentation, please press star followed by 1 on a telephone keypad.
I will now hand the call over to Mike Gates senior director of investor relations to begin Mike. Please go ahead.
Good morning and thank you for joining our conference call to discuss Johnson Controls fiscal. First quarter 2026 results. Joining me on the call today, are John's controls chief executive officer, yoken 1, and Mark McGee our Chief Financial Officer.
Before we begin, let me remind you that during our presentation today, we will make forward-looking statements that reflect our current views about our future performance and financial results. These statements are based on certain assumptions and expectations of future events that are subject to risk and uncertainty.
Please refer to our SEC filings for a list of these important risk factors that could cause actual results to differ from our predictions.
We will also reference certain non-gaap measures throughout today's presentation. Reconciliations of these non-gaap measures are contained in the schedules attached to our press release. And in the appendix, to this presentation, both of which can be found on the investor relations section of Johnson Controls website,
Oh my turn the call over to Yen.
Thanks Mike. Good morning everyone. Thank you for joining us on today's call.
I'd like to begin by recognizing our 90,000 colleagues around the world for their commitment, to our customers. And for the contributions they've made to strong start to the year.
Let's begin. Let's fight for
Johnson Controls enters 2026 with a solid foundation and more disciplined execution across the portfolio. Our first quarter performance, reflects the progress, we've been making with strong Revenue growth, meaningful, margin expansion and broad-based strength across the Enterprise.
We are still in the early stages of this work, but I'm encouraged by the progress we've seen today.
As we begin deploying our proprietary business system. More broadly leaders are displaying better kandare and assessments regarding where we have opportunity and how we address those opportunities through our businesses and approaches.
We're seeing this firsthand in gamma walks in our manufacturing plan and our field offices in operating rooms across the business and even in corporate
turning to the results.
The quarter delivered ahead of expectations. I'm proud to share that orders increased nearly 40% building in a very strong 16% last year. Compared
And adjusted EPS was up nearly 40% and exceeded our guidance.
our record backlog gives us strong visibility and reinforces the demand environment we're seeing
These results reflect the strength of our leading technology portfolio combined with more discipline execution across the company.
Given this strong start to the year. And in the meantime, we're seeing a business where raising our full year guidance, Mark will walk through the details in just a few minutes.
This quarter marked, an important step as we continue to provide much greater Clarity on our Direction and introduced our evolving, Enterprise strategy and priorities to leaders across the company.
We cascaded and aligned goals across the organization to a focused set of enterprise-wide metrics.
This gives every team, a clear line of sight of their priorities aligned with our definition of winning 1. That is rooted in winning, more customers and better enabling our colleagues.
Especially those on the front line.
This alignment is essential to how we operationalize, our strategy, where we focus, our commercial resources, where we direct our R&D investment and where we concentrate execution resources, to create the most impacts and win with customers.
We are building a faster growing more profitable and more disciplined company. That is easier to run.
We do that by focusing, our efforts to parts of the market where our strengths and technology and field presence in line with our passion to advance Human Society.
You can see that impact clearly in the places where our technology demonstrates its value today,
Energy, Efficiency and decarbonization.
Where factories, large, campuses and buildings are some of the largest consumers of energy and amongst the biggest contributors to Global emissions.
In an increasingly energy, constrained world where energy costs continues to rise. Our customers are under pressure to manage energy, more productively reduce the carbon footprint but also need strong operational returns
Data centers now, require increasingly energy, efficient and precise operating conditions.
Across Ai and high density compute environments. Architectures will continue to change but they all share the same fundamental requirements, significantly, greater thermal and energy management supported by more sophisticated controls.
Managing energy consumption while sustaining performance is essential, and that is exactly where our Technologies remain critical.
Against that backdrop our data center momentum. Reflects not only strong demand from existing customers, but also success in reaching new customers, as our differentiated Solutions gain traction.
We continue to work closely with Nvidia, applying our thermal management and controls expertise to support Next Generation, AI compute environments.
Johnson Controls recently released a new reference guide that Maps, the full thermal chain and outline, scalable high-performance cooling architectures for an emerging class of AI factories.
The guide outlines an integrated solution that leverages technology to accelerate data center deployment and increase their overall performance.
Going Beyond just supplying equipment. We are architecting, the thermal backbone for the next generation of AI computing.
It also reinforces the strength of renovation roadmap reflected in the products we introduced earlier this week.
We now 2, new Chiller platforms. That extend our leadership in high density data center Cooling.
The yam delivers up to 3 and a half megawatts of cooling in a compact footprint providing approximately 20% higher capacity, density than competing options and enabling warm water cooling for advanced gpus.
The ykt brings the industry's widest operating range and supports waterless heat reduction, which can eliminate up to 9 million gallons of cooling tower water, annually, and typical.
Joakim Weidemanis: Cooling in a compact footprint, providing approximately 20% higher capacity density than competing options, and enabling warm water cooling for advanced GPUs. The YKHT brings the industry's widest operating range and supports waterless heat reduction, which can eliminate up to 9 million gallons of cooling tower water annually in typical deployments. Complementing these data center platforms, we also expanded our digital service capabilities with the introduction of the Smart Ready Chiller, which provides 10 times the insights over a standard remote-connected chiller. This gives us and our customers deeper insights from day one, allowing us to shift more customers into proactive, recurring service relationships that improve reliability, reduce unplanned downtime, and lower lifecycle costs. Together, these launches build on an already strong and comprehensive portfolio, making it even more capable and more differentiated for our customers.
Joakim Weidemanis: Cooling in a compact footprint, providing approximately 20% higher capacity density than competing options, and enabling warm water cooling for advanced GPUs. The YKHT brings the industry's widest operating range and supports waterless heat reduction, which can eliminate up to 9 million gallons of cooling tower water annually in typical deployments. Complementing these data center platforms, we also expanded our digital service capabilities with the introduction of the Smart Ready Chiller, which provides 10 times the insights over a standard remote-connected chiller. This gives us and our customers deeper insights from day one, allowing us to shift more customers into proactive, recurring service relationships that improve reliability, reduce unplanned downtime, and lower lifecycle costs. Together, these launches build on an already strong and comprehensive portfolio, making it even more capable and more differentiated for our customers.
Percent higher capacity density than competing options and enabling warm water cooling for advanced Gpus.
Complementing, these data center platforms. We also expanded our digital service capabilities with the introduction of the smart ready, chiller?
The Y K H T brings the industry's widest operating range and supports waterless heat reduction, which can eliminate up to 9 million gallons of cooling tower water annually and typical deployments.
Which provides 10 times the insights over a standard remote connected Chiller? This gives us and our customers deeper insights from day 1. Allowing us to shift more customers into proactive, recurring service relationships than improve reliability reduce unplanned downtime and lower life cycle costs.
Complementing these data center platforms. We also expanded our digital service capabilities with the introduction of the smart ready chiller.
Together these launches build on an already strong and comprehensive portfolio, making an even more capable and more differentiated for our customers.
Which provides 10 times the insights over a standard remote connected chiller. This gives us and our customers deeper insights from day, one, allowing us to shift more customers into proactive recurring service relationships that improve reliability reduce unplanned downtime and lower life cycle costs.
In addition to the data center, we see similar demands for Energy, Efficiency precision and reliability across other Mission critical sectors.
Together these launches build on an already strong and comprehensive portfolio, making it even more capable and more differentiated for our customers.
Advanced manufacturing. Where, for example, Next Generation pharmaceutical manufacturing relies on precise environmental conditions meaning strict control of temperature, humidity pressurization and air purity.
And large complex, research campuses, and universities.
Joakim Weidemanis: In addition to the data centers, we see similar demands for energy efficiency, precision, and reliability across other mission-critical sectors. Advanced manufacturing, where, for example, next-generation pharmaceutical manufacturing relies on precise environmental conditions, meaning strict control of temperature, humidity, pressurization, and air purity, and large, complex research campuses and universities, where similar requirements exist as researchers discover new insights and translate science into real-world applications, and where students are learning, exploring, and preparing to make their own impact. Our customers have real unmet needs for technology innovation and service-based solutions that help them manage energy more efficiently and deliver outcomes in their mission-critical operating conditions. This is where our strengths set us apart and where we concentrate our investment and innovation. And this is exactly what gives me the confidence in the opportunity we have here at Johnson Controls and the ability to support our customers.
Joakim Weidemanis: In addition to the data centers, we see similar demands for energy efficiency, precision, and reliability across other mission-critical sectors. Advanced manufacturing, where, for example, next-generation pharmaceutical manufacturing relies on precise environmental conditions, meaning strict control of temperature, humidity, pressurization, and air purity, and large, complex research campuses and universities, where similar requirements exist as researchers discover new insights and translate science into real-world applications, and where students are learning, exploring, and preparing to make their own impact. Our customers have real unmet needs for technology innovation and service-based solutions that help them manage energy more efficiently and deliver outcomes in their mission-critical operating conditions. This is where our strengths set us apart and where we concentrate our investment and innovation. And this is exactly what gives me the confidence in the opportunity we have here at Johnson Controls and the ability to support our customers.
In addition to the Datacenters, we see similar demands for energy efficiency precision and reliability across other mission critical sectors.
Advanced manufacturing, where for example, next generation pharmaceutical manufacturing relies on precise environmental conditions, meaning strict control of temperature humidity pressurization and air purity.
Where similar requirements exist, as researchers, discovered new insights and translate science into real world applications and where students are learning exploring and preparing to make their own impacts?
Our customers have real unmet needs for Technology Innovation and service based Solutions.
And large complex research campuses and universities.
We're similar requirements exist as researchers discovered new insights and translate science into real world applications, and where students are learning exploring and preparing to make their own impact.
That help them, manage energy more efficiently and deliver outcomes in their mission critical. Operating conditions. This is where our strengths set us apart, and where we concentrate our investment and innovation.
And this is exactly what gives me the confidence in the opportunity. We have here at Johnson Controls and the ability to support our customers.
Our customers have real unmet needs for technology innovation and service based solutions that.
That help them manage energy more efficiently and deliver outcomes and their mission critical operating conditions. This is where our strength set us apart and where we concentrate our investment in innovation.
When I went to Gamba, I saw breakthrough Innovation happening at jadex, our Advanced development engineering center in Pennsylvania work. Built on New York's 150 year. Old Legacy of pushing the boundaries of HVAC and thermal technology for today's Data Center.
And this is exactly what gives me the confidence and the opportunity we have here at Johnson controls and the ability to support our customers.
And after also spending time with our field professionals, it became clear how much potential we can unlock by making their daily work easier and better leveraging their expertise and proximity to our customers.
Turning to slide 6.
Joakim Weidemanis: When I went to Gemba, I saw breakthrough innovation happening at JADEC, our advanced development engineering center in Pennsylvania, work built on YORK's 150-year-old legacy of pushing the boundaries of HVAC and thermal technology for today's data centers. After also spending time with our field professionals, it became clear how much potential we can unlock by making their daily work easier and better leveraging their expertise and proximity to our customers. Turning to Slide 6. This is where our proprietary business system will help us unlock that opportunity. As a reminder, our business system is built on three pillars: simplify, apply 80/20 principles to focus on what matters the most; accelerate, use lean methodologies to remove waste to speed up execution, improving productivity and reducing assets such as working capital tied up in the process; and amplify, leverage digital and AI approaches to amplify impact across the enterprise.
Joakim Weidemanis: When I went to Gemba, I saw breakthrough innovation happening at JADEC, our advanced development engineering center in Pennsylvania, work built on YORK's 150-year-old legacy of pushing the boundaries of HVAC and thermal technology for today's data centers. After also spending time with our field professionals, it became clear how much potential we can unlock by making their daily work easier and better leveraging their expertise and proximity to our customers. Turning to Slide 6. This is where our proprietary business system will help us unlock that opportunity. As a reminder, our business system is built on three pillars: simplify, apply 80/20 principles to focus on what matters the most; accelerate, use lean methodologies to remove waste to speed up execution, improving productivity and reducing assets such as working capital tied up in the process; and amplify, leverage digital and AI approaches to amplify impact across the enterprise.
When I went to gamba I saw breakthrough innovation happening at Jay deck, Our advanced development Engineering Center in Pennsylvania work built on New York's 150 year legacy of pushing the boundaries of HVAC and thermal technology for today's data centers.
This is where our proprietary business system will help us unlock that opportunity as a reminder. Our business system is built on 3 pillars
And after also spending time with our field professionals. It became clear how much potential we can unlock by making their daily work easier and better leveraging their expertise in proximity to our customers.
simplify apply 8020 principle to focus on what matters the most accelerate use lead methodology to remove waste to speed up execution, improving productivity, and reducing assets such as working, capital tied up in the process.
Turning to slide six.
This is where our proprietary business system will help us unlock that opportunity as a reminder, our business system is built on three pillars simplify apply 80 20 principles to focus on what matters. The most accelerate use lean methodologies to remove waste to speed up execution, improving productivity and reducing <unk>.
And amplifies leverage digital and AI approaches to amplify impacts across the Enterprise.
I think of it as accelerate or lean helps us accomplish work in days and hours versus weeks and days.
And amplify for digital and AI enables us to take that same work and accomplish the same in hours and minutes.
Assets, such as working capital tied up in the process.
And amplified leverage digital and AI approaches to amplify impacts across the enterprise.
Who.
Joakim Weidemanis: I think of it as accelerate or Lean, helps us accomplish work in days and hours versus weeks and days. And amplify, or digital and AI, enables us to take that same work and accomplish the same in hours and minutes. And it's anchored in a global cross-functional language and methodology for how we communicate, collaborate, and drive strong, continuous improvement momentum to win. We're already seeing evidence of the business system in the way teams operate, stronger alignment, clear ownership, and greater process and tool consistency. And our talent system also plays an incredibly powerful role in this. We've brought in select external talent with deep business system expertise, while also teaching and equipping our internal colleagues to lead in this new way of working and beginning to embed across our end-to-end talent processes.
Joakim Weidemanis: I think of it as accelerate or Lean, helps us accomplish work in days and hours versus weeks and days. And amplify, or digital and AI, enables us to take that same work and accomplish the same in hours and minutes. And it's anchored in a global cross-functional language and methodology for how we communicate, collaborate, and drive strong, continuous improvement momentum to win. We're already seeing evidence of the business system in the way teams operate, stronger alignment, clear ownership, and greater process and tool consistency. And our talent system also plays an incredibly powerful role in this. We've brought in select external talent with deep business system expertise, while also teaching and equipping our internal colleagues to lead in this new way of working and beginning to embed across our end-to-end talent processes.
I think of it is accelerate our lean helps us accomplish working days and hours versus weeks and days.
Win. We're already seeing evidence of the business system in the way teams, operate stronger alignment, clear ownership and greater process and Tool consistency.
And amplify our digital and AI enables us to take that same work and accomplish the same in hours and minutes.
And it's anchored in a global cross functional language and methodology for how we communicate collaborate and drive strong continuous improvement momentum to win.
And our talent system also plays an incredibly powerful role in this. We've brought in select external Talent with deep business system expertise while also teaching and equipping our internal colleagues who lead in this new way of working and beginning to embed across our end and talent processes.
We're already seeing evidence of the business system and the way teams operate stronger alignment clear ownership and greater process and tool consistency.
In our town system also plays an incredibly powerful role in this we brought in select external talent with deep business system expertise, while also teaching and equipping our internal colleagues to lead in this new way of working and beginning to embed across our end to end talent processes.
Today we have hosted gross Summits with hundreds of leaders diving deep into our Enterprise strategy and Hands-On teaching leaders teaching leaders our business system.
This includes the global Summit with our most senior leaders and we're now spending time in each region to ensure a full understanding clear, expectations, and accountability for this new way of working all focused on enabling our Frontline colleagues to deliver more for our customers.
Joakim Weidemanis: To date, we have hosted growth summits with hundreds of leaders, diving deep into our enterprise strategy and hands-on teaching, leaders teaching leaders, our business system. This includes a global summit with our most senior leaders, and we're now spending time in each region to ensure full understanding, clear expectations, and accountability for this new way of working, all focused on enabling our frontline colleagues to deliver more for our customers. As part of this, we started the new year in APAC with all the regional leaders. I spent significant time in that region in my professional life, and see great opportunity, particularly aligned with our strategy and where we have strengths. To further accelerate our progress and strengthen global execution, we recently appointed Susan Hughes as our APAC president.
Joakim Weidemanis: To date, we have hosted growth summits with hundreds of leaders, diving deep into our enterprise strategy and hands-on teaching, leaders teaching leaders, our business system. This includes a global summit with our most senior leaders, and we're now spending time in each region to ensure full understanding, clear expectations, and accountability for this new way of working, all focused on enabling our frontline colleagues to deliver more for our customers. As part of this, we started the new year in APAC with all the regional leaders. I spent significant time in that region in my professional life, and see great opportunity, particularly aligned with our strategy and where we have strengths. To further accelerate our progress and strengthen global execution, we recently appointed Susan Hughes as our APAC president.
To date, we have hosted growth summits with hundreds of leaders diving deep into our enterprise strategy and hands on teaching leaders teaching leaders our business system.
As part of this, we started the New Year in APAC, with all the regional leaders.
This includes the global summit with our most senior leaders and we're now spending time in each region to ensure a full understanding clear expectations and accountability for this new way of working all focused on enabling our frontline colleagues did a little bit more for our customers.
I spent significant time in that region in my professional life and see, great opportunities, particularly aligned with our strategy and where we have strength.
To further accelerate our progress and strengthen Global execution. We recently appointed Susan Hughes as our APAC president
As part of this we started the new year in APAC with all the regional leaders I spent significant time in that region in my professional life and see great opportunity, particularly aligned with our strategy and where we have strengths.
Susan brings more than 20 years of deep experience in the region and I'm excited for the impact. She'll have as we align our teams and sharpen our execution.
Let's not turn to slide 7 to show how our business system is taking hold and the progress. We're making across the company.
To further accelerate our progress and strengthen global execution, we recently appointed Susan choose as our APAC President.
By working together across teams and leveraging 80/20, and lean tools, we're seeing real measurable progress.
Joakim Weidemanis: Susan brings more than 20 years of deep experience in the region, and I'm excited for the impact she'll have as we align our teams and sharpen our execution. Let's now turn to slide 7 to show how our business system is taking hold and the progress we're making across the company. By working together across teams and leveraging 80/20 and lean tools, we're seeing real, measurable progress. Last quarter, I shared some examples, but I'm proud to illustrate continued improvement. Our conventional HVAC sellers in one of our local markets went from 60% improvements in time spent with customers to a 100% improvement. And as we bring AI into these workflows, we see the potential for another meaningful step change, one that simply wouldn't be achievable without AI.
Joakim Weidemanis: Susan brings more than 20 years of deep experience in the region, and I'm excited for the impact she'll have as we align our teams and sharpen our execution. Let's now turn to slide 7 to show how our business system is taking hold and the progress we're making across the company. By working together across teams and leveraging 80/20 and lean tools, we're seeing real, measurable progress. Last quarter, I shared some examples, but I'm proud to illustrate continued improvement. Our conventional HVAC sellers in one of our local markets went from 60% improvements in time spent with customers to a 100% improvement. And as we bring AI into these workflows, we see the potential for another meaningful step change, one that simply wouldn't be achievable without AI.
Last quarter, I shared some examples but I'm proud to illustrate continued Improvement.
Susan brings more than 20 years of deep experience in the region and I'm excited for the impact she will have as we align our teams and sharpen our execution.
Let's now turn to slide seven to show how our business system is taking hold and the progress we're making across the company.
Our conventional HVAC Sellers and 1 of our local markets. Went from 60% improvements in time, spent with customers to 100% Improvement.
By working together across teams and leveraging 80, 20, and lean tools, we're seeing real measurable progress last quarter I shared some examples but I'm proud to illustrate continued improvement.
And as we bring AI into these workflows, we see the potential for another meaningful step change 1, that simply wouldn't be achievable without AI.
Our conventional HVAC sellers and one of our local markets went from 60% improvements in times that with customers to a 100% improvement.
In 1 of our key manufacturing facilities. For chillers, our Factory on time. Delivery went from 95% to now sustaining 95 to 100% for the past couple of months.
And as we bring AI entities workflows, we see the potential for another meaningful step change one that simply wouldn't be achievable without AI.
This level of performance combined with our now. Competitively advantaged lead time is driving higher wind rates with our customers especially in data centers as we can reliably commit to help them meet their rapidly growing needs.
Joakim Weidemanis: In one of our key manufacturing facilities for chillers, our factory on-time delivery went from 95% to now sustaining 95% to 100% for the past couple of months. This level of performance, combined with our now competitively advantaged lead times, is driving higher win rates with our customers, especially in data centers, as we can reliably commit to help them meet their rapidly growing needs. These are just two examples where we go narrow and deep on an area of opportunity. Our teams are going deep and addressing other areas of opportunity, from cutting service repair time to improving quality and addressing billing disputes. The benefit only continues as we scale these learnings more broadly in the organization over time. I'm inspired by the energy, the urgency, and the enthusiasm with which our leaders and teams are embracing this new way of working.
Joakim Weidemanis: In one of our key manufacturing facilities for chillers, our factory on-time delivery went from 95% to now sustaining 95% to 100% for the past couple of months. This level of performance, combined with our now competitively advantaged lead times, is driving higher win rates with our customers, especially in data centers, as we can reliably commit to help them meet their rapidly growing needs. These are just two examples where we go narrow and deep on an area of opportunity. Our teams are going deep and addressing other areas of opportunity, from cutting service repair time to improving quality and addressing billing disputes. The benefit only continues as we scale these learnings more broadly in the organization over time. I'm inspired by the energy, the urgency, and the enthusiasm with which our leaders and teams are embracing this new way of working.
And one of our key manufacturing facilities for Chillers are factory on time delivery went from 95% now sustaining 95% to 100%.
Past couple of months.
This level of performance combined with our now competitively advantage lead times is driving higher win rates with our customers, especially in data centers as we can reliably commit to help them meet their rapidly growing needs.
These are just 2 examples where we go narrow and deep on an area of opportunity. Our teams are going deep and addressing other areas of opportunity from cutting service repair, time to improving quality and addressing billing disputes.
The benefit only continues as we scale these learnings more broadly in the organization over time.
These are just two examples where we go narrow and deep on an area of opportunity. Our teams are going deep and addressing other areas of opportunity from cutting service repair time to improving quality and addressing billing disputes the.
I'm inspired by the energy, the urgency and the enthusiasm with which our leaders and teams are embracing this new way of working, more than a thousand calls have actively engaged the cross. Several priority areas.
Over 80 kaizens have been completed and 350, senior leaders have been trained in the new ways of working.
The benefit only continues as we scale these learnings more broadly in the organization over time.
I'm inspired by the energy the urgency and the enthusiasm with which our leaders and teams are embracing this new way of working more than a thousand colleagues have actively engaged across several priority areas.
And while many of our early Focus areas started in the us as we teach and equip, our leaders. We have now activated efforts in, both Amia, and Apex this way of working gives us confidence in our ability, to execute and deliver on our commitments.
Joakim Weidemanis: More than 1,000 colleagues have actively engaged across several priority areas. Over 80 Kaizens have been completed, and 350 senior leaders have been trained in the new ways of working. And while many of our early focus areas started in the US, as we teach and equip our leaders, we have now activated efforts in both EMEA and APAC. This way of working gives us confidence in our ability to execute and deliver on our commitments. With that, Marc will lead you through the details.
Joakim Weidemanis: More than 1,000 colleagues have actively engaged across several priority areas. Over 80 Kaizens have been completed, and 350 senior leaders have been trained in the new ways of working. And while many of our early focus areas started in the US, as we teach and equip our leaders, we have now activated efforts in both EMEA and APAC. This way of working gives us confidence in our ability to execute and deliver on our commitments. With that, Marc will lead you through the details.
With that Mark will lead you through the details.
Over 80, Kaizen have been completed and 350 senior leaders have been trained and the new ways of working.
Thank you, aim and good morning everyone. We deliver the strong start to the year, reflecting continual maintenance in the business.
And while many of our early focus area have started in the U S. As we teach and equip our leaders we have now activated efforts in both EMEA and APAC.
Our teams converted sustained, customer demand into record orders while delivering solid operating performance.
This way of working gives us confidence in our ability to execute and deliver on our commitments.
With that Mark will lead you through the details.
You're also seeing early benefits from the operating discipline. We've been embarrassing across the company which is helping us execute faster improve consistency and strengthen profitability.
Marc Vandiepenbeeck: Thanks, Joakim, and good morning, everyone. We delivered a strong start to the year, reflecting continued momentum in the business. Our teams converted sustained customer demand into record orders while delivering solid operating performance. We're also seeing early benefits from the operating discipline we've been embedding across the company, which is helping us execute faster, improve consistency, and strengthen profitability. With this foundation, we are well positioned to deliver on our priorities and achieve on our full year commitments. Let's turn to slide 8 to walk through the financial highlights for the quarter. Organic revenue grew 6%, with growth-based contribution across the portfolio, and we delivered solid margin expansion. Segment margins increased 70 basis points to 15.7%, and EBIT margin expanded 190 basis points to 12.4%, reflecting continued benefits from productivity, price realization, and improvement in our cost structure.
Marc Vandiepenbeeck: Thanks, Joakim, and good morning, everyone. We delivered a strong start to the year, reflecting continued momentum in the business. Our teams converted sustained customer demand into record orders while delivering solid operating performance. We're also seeing early benefits from the operating discipline we've been embedding across the company, which is helping us execute faster, improve consistency, and strengthen profitability. With this foundation, we are well positioned to deliver on our priorities and achieve on our full year commitments. Let's turn to slide 8 to walk through the financial highlights for the quarter. Organic revenue grew 6%, with growth-based contribution across the portfolio, and we delivered solid margin expansion. Segment margins increased 70 basis points to 15.7%, and EBIT margin expanded 190 basis points to 12.4%, reflecting continued benefits from productivity, price realization, and improvement in our cost structure.
Thanks for your acumen and good morning, everyone. We delivered a strong start to the year, reflecting continued momentum in the business of.
With this Foundation, we are well, positioned to deliver on our priorities and Achieve on our full year commitments.
Both teams converted sustained customer demand and to record orders, while delivering solid operating performance.
Let's turn to slide 8, to walk to the financial highlights for the quarter.
We're also seeing early benefits from the operating discipline, we've been embedding across the company, which is helping us execute plus to improve consistency and strength of profitability.
Organic Revenue grew 6% with growth based contribution across the portfolio and we deliver solid margin expansion.
With this foundation, we are well positioned to deliver on our priorities and achieve on a full year commitments.
Let's turn to slide eight to walk through the financial highlights for the quarter.
Segment, margins, increase, 70 basis points to 15.7% and ebit margin expanded. 190 basis points to 12.4% reflecting continued benefits from productivity price realization and improvement in our cost structure.
Organic revenue grew 6% these rules based contribution across the portfolio and we delivered solid margin expansion.
Adjusted EPS of 89 cents, increased nearly 40% year-over-year and exceeded our guide.
Segment margins increased 70 basis points to 15, 7% and EBIT margin expanded 190 basis points to 12, 4%.
Our ongoing work to simplify priority. Strengthen alignment and sharpen. Operational discipline is driving faster, decisions stronger, pricing and Tighter cost. Control supporting both growth and margins.
<unk> continued benefits from productivity price realization and improvements in our cost structure.
Marc Vandiepenbeeck: Adjusted EPS of $0.89 increased nearly 40% year-over-year and exceeded our guide. Our ongoing work to simplify priority, strengthen alignment, and sharpen operational discipline is driving faster decisions, stronger pricing, and tighter cost control, supporting both growth and margins. Let's now discuss our segment results in more detail on slide 9 and 10. Orders grew nearly 40% in the quarter, a strong performance on top of a tough 16% compare. Demand was led by data centers project, where customers are accelerating investment to support higher density workloads and AI-driven growth. Activity across our other key end markets remains stable, and customers continue to prioritize Johnson Controls' differentiated mission-critical solutions. By region, this demand strength translated into solid order across all three segments. The Americas delivered 56% growth, led by large-scale data center projects that continue to scale across the region.
Marc Vandiepenbeeck: Adjusted EPS of $0.89 increased nearly 40% year-over-year and exceeded our guide. Our ongoing work to simplify priority, strengthen alignment, and sharpen operational discipline is driving faster decisions, stronger pricing, and tighter cost control, supporting both growth and margins. Let's now discuss our segment results in more detail on slide 9 and 10. Orders grew nearly 40% in the quarter, a strong performance on top of a tough 16% compare. Demand was led by data centers project, where customers are accelerating investment to support higher density workloads and AI-driven growth. Activity across our other key end markets remains stable, and customers continue to prioritize Johnson Controls' differentiated mission-critical solutions. By region, this demand strength translated into solid order across all three segments. The Americas delivered 56% growth, led by large-scale data center projects that continue to scale across the region.
Adjusted EPS of <unk> 89 cents increased nearly 40% year over year and exceeded our guide.
All those through nearly 40% in the quarter, a strong performance on top of a tough 16% compared.
Our ongoing work to simplify priority strengthen alignment and sharpen operational discipline is driving faster decisions stronger pricing and tighter cost control supporting both growth and margins.
The man was led by data centers projects where customer are accelerating investment to support higher density, workloads and AI driven growth.
Let's now discuss our segment results in more detail on slides nine and 10.
Activity across all other key and Market remains stable and customers continue to prioritize Johnson Controls differentiate Mission critical Solutions.
All of those grew nearly 40% in the quarter with strong performance on top of a tough 16% compare.
By region is demands strength translated into solid order across all 3 segments.
Man was led by data centers project with customers accelerating investments to support high yield MCP workloads and AI driven growth.
The America delivered 566% growth, led by large scale data center projects that continue to scale across the region.
Activity across all those key end markets remain stable and customers continue to prioritize Johnson controls differentiated mission critical solutions.
Inia grew, 8% with balance high single-digit growth in both service and systems.
By region. These demand strength translated into solid although across all three segments.
In APAC, others increased, 10% driven by double digit growth in systems and high single digit growth in service.
The Americas delivered 56% growth led by large scale data center project that continued to scale across the region.
at the Enterprise level organic sales growth was led by continued strength in service which grew 9% year-over-year,
Marc Vandiepenbeeck: EMEA grew 8%, with balanced high single-digit growth in both service and system. In APAC, orders increased 10%, driven by double-digit growth in systems and high single-digit growth in service. At the enterprise level, organic sales growth was led by continued strength in service, which grew 9% year-over-year. In the Americas, sales were up 6% organically, with solid double-digit growth in service. EMEA grew 4%, led by high single-digit growth in service. APAC delivered 8% growth, led by strong system performance and steady demand in service. These results reflect strong execution across the portfolio, despite a challenging 10% year-over-year comparison. We delivered another quarter of steady margin expansion, reflecting disciplined execution across pricing, productivity, and project delivery. Our teams strengthened operating leverage in both service and systems through higher throughput, tighter cost control, and more consistent execution.
Marc Vandiepenbeeck: EMEA grew 8%, with balanced high single-digit growth in both service and system. In APAC, orders increased 10%, driven by double-digit growth in systems and high single-digit growth in service. At the enterprise level, organic sales growth was led by continued strength in service, which grew 9% year-over-year. In the Americas, sales were up 6% organically, with solid double-digit growth in service. EMEA grew 4%, led by high single-digit growth in service. APAC delivered 8% growth, led by strong system performance and steady demand in service. These results reflect strong execution across the portfolio, despite a challenging 10% year-over-year comparison. We delivered another quarter of steady margin expansion, reflecting disciplined execution across pricing, productivity, and project delivery. Our teams strengthened operating leverage in both service and systems through higher throughput, tighter cost control, and more consistent execution.
EMEA grew 8% with balanced high single digit growth in both service and system in.
In the Americas sales were up 6%, organically with solid double digit growth in service.
Maybe I grew 4% led by high single-digit goals in service.
In APAC, all those increased 10% driven by double digit growth in systems and high single digit growth in service.
APAC delivered 8% growth led by strong system performance, and steady demand in service.
At the enterprise level organic sales growth was led by continued strength in service, which grew 9% year over year.
These results reflect strong execution across the portfolio, despite a challenging 10% year-over-year comparison.
In the Americas sales were up 6% organically with solid double digit growth in service.
<unk> grew 4% led by high single digit goes in service.
We delivered another quarter of steady margin expansion, reflecting discipline execution across pricing productivity and project delivery.
Pac delivered 8% growth led by strong system performance and steady demand in service.
Of teams strengthen operating leverage in both service and systems through higher. Throughput titer cost control and more consistent execution.
These results reflect strong execution across the portfolio, despite the challenging 10% year over year comparison.
These actions reinforce The Continuous strengthening of our operating model and our ability to sustain meaningful margin progress.
We delivered another quarter of steady margin expansion, reflecting disciplined execution across pricing productivity and project delivery.
Both teams strengthen operating leveraging both service and systems through higher throughput tighter cost control and more consistent execution.
By region adjusted segment margins in the Americas. Improved 20 basis points to 16.4% supported by productivity gains and improved mix.
In AIA margins expanded. 120 basis points to 13% deflecting favorable, pricing and productivity gains
Marc Vandiepenbeeck: These actions reinforce the continued strengthening of our operating model and our ability to sustain meaningful margin progress. By region, adjusted segment EBITDA margins in the Americas improved 20 basis points to 16.4%, supported by productivity gains and improved mix. In EMEA, margins expanded 120 basis points to 13%, reflecting favorable pricing and productivity gains. In APAC, margins expanded 290 basis points to 16.9% as volumes increased and factory absorption improved. Our record backlog grew 20% to $18 billion, highlighting the continued strength of our pipeline as revenue conversion accelerated this quarter. Turning to our balance sheet and cash flow on slide 11. On the balance sheet, we ended the quarter with approximately $600 million in available cash. Total liquidity remains strong, supported by our available credit facilities and disciplined working capital management.
Marc Vandiepenbeeck: These actions reinforce the continued strengthening of our operating model and our ability to sustain meaningful margin progress. By region, adjusted segment EBITDA margins in the Americas improved 20 basis points to 16.4%, supported by productivity gains and improved mix. In EMEA, margins expanded 120 basis points to 13%, reflecting favorable pricing and productivity gains. In APAC, margins expanded 290 basis points to 16.9% as volumes increased and factory absorption improved. Our record backlog grew 20% to $18 billion, highlighting the continued strength of our pipeline as revenue conversion accelerated this quarter. Turning to our balance sheet and cash flow on slide 11. On the balance sheet, we ended the quarter with approximately $600 million in available cash. Total liquidity remains strong, supported by our available credit facilities and disciplined working capital management.
These actions reinforce the continued strengthening of our operating model and our ability to sustain meaningful margin progress.
By region adjusted segment EBITDA margins in the Americas improved 20 basis points to 16, 4% supported by productivity gains and improved mix.
In APAC margins expanded. 290 basis points to 16.9% as volumes increase and Factory absorption improved.
In EMEA margins expanded 120 basis points to 13%, reflecting favorable pricing and productivity gains.
All right, your backlog grew 20% to 18 billion dollars. Highlighting the continued strength of our pipeline as Revenue, conversion accelerated, this quarter
Turning to our balance sheet and cash flow on slide 11.
In APAC margins expanded 290 basis points to 16, 9% as volumes increase and factory absorption improved.
On the balance sheet, we ended the quarter with approximately million dollar in available cash.
Total liquidity remains strong supported by our available credit facilities and discipline working Capital Management.
Our record backlog grew 20% to 18 billion highly.
Highlighting the continued strength of our pipeline as revenue conversion accelerated this quarter.
Net debt remain within our long-term target range to 2.2 times.
Turning to our balance sheet and cash flow on slide 11.
Our Capital allocation priorities remain consistent investing in the business. Maintaining balance stream strength and returning Capital to shareholders.
On the balance sheet, we ended the quarter with approximately $600 million in available cash.
Let's now discuss our fiscal second, quarter and full year guide on slide 12.
Total liquidity remains strong supported by all available credit facilities and disciplined working capital management.
Marc Vandiepenbeeck: Net debt remained within our long-term target range, declining to 2.2 times. Our capital allocation priorities remain consistent, investing in the business, maintaining balance sheet strength, and returning capital to shareholders. Let's now discuss our fiscal Q2 and full year guide on slide 12. As we enter the Q2, operational momentum remains solid, supported by disciplined execution and continued strength in our backlog. We anticipate organic sales growth of approximately 5%, Operating Leverage of approximately 45%, and Adjusted EPS of approximately $1.11. For the full year, we are maintaining organic sales growth of mid-single digits, supported by solid execution and the visibility provided by our backlog.
Marc Vandiepenbeeck: Net debt remained within our long-term target range, declining to 2.2 times. Our capital allocation priorities remain consistent, investing in the business, maintaining balance sheet strength, and returning capital to shareholders. Let's now discuss our fiscal Q2 and full year guide on slide 12. As we enter the Q2, operational momentum remains solid, supported by disciplined execution and continued strength in our backlog. We anticipate organic sales growth of approximately 5%, Operating Leverage of approximately 45%, and Adjusted EPS of approximately $1.11. For the full year, we are maintaining organic sales growth of mid-single digits, supported by solid execution and the visibility provided by our backlog.
Net debt came in within our long term target range declining to two two times.
As we enter the second quarter, operational momentum remains solid supported by discipline execution and continued strength in our backlog.
Our capital allocation priorities remain consistent investing in the business maintaining balance sheet strength and returning capital to shareholders.
The anticipated organic sales growth of approximately 5% operating leverage of approximately, 45% and adjusted EPS of approximately $111.
It's not east coastal fiscal second quarter and full year guide on slide 12.
As we enter the second quarter operational momentum remains solid supported by disciplined execution and continued strength in our backlog.
For the full year, we are maintaining organic sales growth of mid single digits supported by solid execution and the visibility provided by our backlog.
We anticipate organic sales growth of approximately 5% operating leverage of approximately 45% and adjusted EPS of approximately one dollar and 11.
We continue to expect operating leverage of approximately 50%, which is above our long-term algorithm as last year's, trended car saving materializing. This year's performance
For the full year, we are maintaining organic sales growth of mid single digits supported by solid execution and the visibility provided by our backlog.
with the strong trial through the year. We are raising our adjusted EPS guidance to approximately 4.70 cents per share.
Which is roughly 25% growth.
Joakim Weidemanis: ... We continue to expect operating leverage of approximately 50%, which is above our long-term algorithm, as last year's trended cost savings materialize in this year's performance. With the strong start to the year, we are raising our adjusted EPS guidance to approximately $4.70 per share, which is roughly 25% growth. With the increase in our EPS guidance, we continue to expect approximately 100% free cash flow conversion for the year, underscoring the quality of our earnings and the discipline of our working capital processes. Our guidance reflect the progress we're making across our operating priorities and provide a solid foundation for delivering strong results throughout the remainder of the year. Operator, we are now ready for questions.
Marc Vandiepenbeeck: ... We continue to expect operating leverage of approximately 50%, which is above our long-term algorithm, as last year's trended cost savings materialize in this year's performance. With the strong start to the year, we are raising our adjusted EPS guidance to approximately $4.70 per share, which is roughly 25% growth. With the increase in our EPS guidance, we continue to expect approximately 100% free cash flow conversion for the year, underscoring the quality of our earnings and the discipline of our working capital processes. Our guidance reflect the progress we're making across our operating priorities and provide a solid foundation for delivering strong results throughout the remainder of the year. Operator, we are now ready for questions.
We continue to expect operating leverage of approximately 50%, which is above our long term algorithm as last year's trended cost saving materializing This year's performance.
With the increase. In our EPS guidance, we continue to expect approximately 100% free cash flow conversion for the year underscoring. The quality of our earnings and the discipline of our working capital processes.
With the strong trough through the year, we are raising our adjusted EPS guidance to approximately <unk> 70 per share.
Or guidance reflect the progress, we're making across our operating priorities and provide a solid foundation for delivering strong results throughout the remainder of the year.
Which is roughly 25% growth.
Operator. We are now ready for questions.
With the increasing our EPS guidance, we continue to expect approximately 100% free cash flow conversion for the year underscoring the quality of earnings and the discipline of our working capital processes.
Thank you. We will now begin at the question and answer session. If you would like to ask a question, please press star. Followed by 1 on your telephone keypad, if you would like to remove your question, please press star followed by 2.
Our guidance reflect the progress week, making a crossover operating priorities and provide a solid foundation for delivering strong results throughout the remainder of the year.
When the parent asks for a question, please and your phone is unique to locally.
This out to 1 question and 1 follow-up.
Operator, we're now ready for questions.
The first question goes to Nigel Co of wolf research Nigel, please, go ahead.
Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to remove your question, please press star followed by two. When preparing to ask your question, please ensure your phone is unmuted locally. We ask you please limit yourselves to one question and one follow-up. The first question goes to Nigel Coe of Wolfe Research. Nigel, please go ahead.
Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to remove your question, please press star followed by two. When preparing to ask your question, please ensure your phone is unmuted locally. We ask you please limit yourselves to one question and one follow-up. The first question goes to Nigel Coe of Wolfe Research. Nigel, please go ahead.
Thank you we will now begin the question and answer session. If you would like to ask a question. Please press star followed by one on telephony.
Pat if you would like to remove your question. Please press star followed by Chase.
On the Pan to ask your question picking sure Nishu lately.
Please limit yourself to one question I wanted to follow up.
This last question go to Nigel Coe of Wolfe Research.
Michael Please go ahead.
Nigel Coe: Thanks. Good morning, everyone. Thanks for the question. So I think that a good place to start would be on the orders. I don't know if this is a record order quarter, but I'm sure it's pretty damn close. Anything that you'd call out, because we've seen extraordinary strength in other places in data center, and but this is like another level higher. So just curious, are we seeing more kind of longer duration orders, multi-year orders? Anything you'd call out, you know, driving the strength in orders?
Nigel Coe: Thanks. Good morning, everyone. Thanks for the question. So I think that a good place to start would be on the orders. I don't know if this is a record order quarter, but I'm sure it's pretty damn close. Anything that you'd call out, because we've seen extraordinary strength in other places in data center, and but this is like another level higher. So just curious, are we seeing more kind of longer duration orders, multi-year orders? Anything you'd call out, you know, driving the strength in orders?
Thanks, Good morning, everyone and thanks for the question.
Oh, thanks. Good morning, everyone. Thanks for the question. Um, yeah, so I think the a good place to start would be on the orders. Um, I I don't know. I don't know if this is a record order, but, uh, quarter. But I'm, I'm, I'm sure it's pretty darn close, um, anything that you'd call out, uh, because we've seen extraordinary strength in other places in data center, um, and but, but this is like another level higher. So just just curious, uh, are we seeing more kind of longer duration orders, multi-year, orders, um, anything to call out, um, you know, driving the strength in in orders?
Yes, So I think the group is now it would be on the orders.
I don't know if this is a record order, but quarter, but I'm sure it's pretty darn close.
Anything you'd call out because.
Because we've seen extraordinary strength in other phases and data center.
And but this is.
Another level highest so just curious.
Are we seeing more kind of longer duration orders multi year orders.
Hey Nigel. Uh, we are seeing, uh, record orders. As you saw, we have a record backlog, and we'll try and keep it like that going forward too. By the way, um, I'm super, uh, happy that it's not only data centers, that's driving the strength of our order entry. Um, we had a very healthy life science,
Anything you'd call out.
Driving this strength in orders.
Uh, order entry during, uh, the quarter. And that's not the first quarter that we see that strength,
Joakim Weidemanis: Hey, Nigel. We are seeing record orders, as you saw. We have a record backlog, and we'll try and keep it like that going forward, too, by the way. I'm super happy that it's not only data centers that's driving the strength of our order entry. We had a very healthy life science order entry during the quarter, and that's not the first quarter that we see that strength. And that's really a result of, you know, all the effort being put into the innovation pipeline over the years, as well as the field coverage for what we call our mission-critical verticals, you know, where thermal management and the indoor operating conditions really matter for our customers.
Joakim Weidemanis: Hey, Nigel. We are seeing record orders, as you saw. We have a record backlog, and we'll try and keep it like that going forward, too, by the way. I'm super happy that it's not only data centers that's driving the strength of our order entry. We had a very healthy life science order entry during the quarter, and that's not the first quarter that we see that strength. And that's really a result of, you know, all the effort being put into the innovation pipeline over the years, as well as the field coverage for what we call our mission-critical verticals, you know, where thermal management and the indoor operating conditions really matter for our customers.
Hey, Nigel.
We are seeing a record orders as you saw we have a record backlog and we'll try and keep it like that going forward too by the way.
I'm Super happy that it's not only data centers, that's driving the strength.
Of our order entry.
We had a very healthy life science.
Order entry during the quarter and that's not the first quarter that we see that.
Thanks.
And and Thats really a result of all the effort being put into the innovation pipeline over the years as well as the field coverage for what we call our mission critical verticals, where thermal management in the indoor operating conditions really matter for.
For our customers.
Joakim Weidemanis: Now, data centers was very strong and, so I'm very proud of the team, what they accomplished during the quarter. Pipelines remain healthy, and as a reminder, you know, we really play in three categories broadly in data centers. Not just on the chiller side, but across the air handling units through our Silent-Aire franchise, which is the leading franchise in air handling. And as you know, a couple of quarters ago, we announced that we entered the CDU space, where we're making some good progress. So, very pleased overall with the order entry, but data centers is definitely not the only vertical that's showing really, really good strength there.
Joakim Weidemanis: Now, data centers was very strong and, so I'm very proud of the team, what they accomplished during the quarter. Pipelines remain healthy, and as a reminder, you know, we really play in three categories broadly in data centers. Not just on the chiller side, but across the air handling units through our Silent-Aire franchise, which is the leading franchise in air handling. And as you know, a couple of quarters ago, we announced that we entered the CDU space, where we're making some good progress. So, very pleased overall with the order entry, but data centers is definitely not the only vertical that's showing really, really good strength there.
Now data centers was very strong and some very proud of the team what they accomplished during the quarter pipelines remain healthy and as a reminder, we really play in three categories broadly and data centers.
And uh, and that's really a result of, you know, all the effort being put into the Innovation pipeline over the years as well as the field coverage for what we call our mission critical verticals, you know, we're a thermal management and the indoor operating conditions really matter, uh, for our customers then now, data centers was very strong and, um, some very, uh, proud of of the team what they accomplished during the quarter pipelines remain healthy and and as a reminder, you know, we really play in and, uh, 3 categories, broadly in data centers, um, not just on the chiller side, but on the cross, the air handling units through our silent air franchise which is the leading franchise and are handling. And as you know, a couple of quarters ago, we announced that we answered the CDU space where we're making some good progress. So um very pleased overall with the with the order entry. But data centers is definitely not the only vertical. That's showing really really good strength here.
Not just on the chiller side, but on the cross air handling units through our silent Air franchise, which is the leading franchise in air handling and as you know a couple of quarters ago, We announced that we entered the <unk> space, where we're making some good progress. So I'm very pleased overall with the order entry, but data centers is definitely not the only vertical.
Sean really really good strength there.
Great. Thanks okay. Um, and then my follow on is I I believe the backlog reflects orders that are shipped as well as the next 12 months. So the obviously the the backlog, uh, increase. I think 20% was the number if I'm not mistaken, um, versus young change, mystical digits for this year. So just wondering how to think about that uh inflection and backlog versus non-inflation in organic growth. I'm just wondering if we're still going to see a lot of sites, you know, High single digits to organic growth.
Nigel Coe: Great. Thanks, Joakim. And then my follow-on is, I believe the backlog reflects orders that are shippable for the next 12 months. So obviously, the backlog increase, I think 20% was the number, if I'm not mistaken, versus the unchanged mid-single digits for this year. So just wondering how to think about that inflection in backlog versus non-inflection in organic growth. I'm just wondering if we're starting to see a line of sight towards, you know, high single digits organic growth.
Nigel Coe: Great. Thanks, Joakim. And then my follow-on is, I believe the backlog reflects orders that are shippable for the next 12 months. So obviously, the backlog increase, I think 20% was the number, if I'm not mistaken, versus the unchanged mid-single digits for this year. So just wondering how to think about that inflection in backlog versus non-inflection in organic growth. I'm just wondering if we're starting to see a line of sight towards, you know, high single digits organic growth.
Great. Thanks, Okay.
And then my final one is I believe the backlog reflects orders that will ship over the next 12 months.
So the obviously the backlog increase I think 20% was the number if I'm not mistaken.
This is unchanged mid single digits for this year. So just wondering how to think about that inflection in backlog versus non inflection in organic growth I'm. Just wondering if we're starting to see a line of sight towards high single digit organic growth.
You know, are I think the organic growth will continue to strengthen over time? Um, you know, our guide, uh, currently reflects, you know what we see for for this year. Um, many of those larger orders that we're taking, um, also in in the life science field but in in data centers, uh our uh not necessarily shippable you know, within the next 9 months or so. Um but we'll keep you updated on on the guide here as we see opportunities to to do better here potentially
Joakim Weidemanis: You know, I think the organic growth will continue to strengthen over time. You know, our guide currently reflects, you know, what we see for this year. Many of those larger orders that we're taking, also in the life science field, but in data centers, are not necessarily shippable, you know, within the next nine months or so. But we'll keep you updated on the guide here as we see opportunities to do better here, potentially.
Joakim Weidemanis: You know, I think the organic growth will continue to strengthen over time. You know, our guide currently reflects, you know, what we see for this year. Many of those larger orders that we're taking, also in the life science field, but in data centers, are not necessarily shippable, you know, within the next nine months or so. But we'll keep you updated on the guide here as we see opportunities to do better here, potentially.
I think the organic growth will continue to strengthen over time.
Thank you. The next question, goes to
Ultra or be.
It, please go ahead.
Guide currently reflects what we see for this year.
Many of those larger orders that we're taking.
Also in the life science field, but in data centers.
They are not necessarily shippable within the next nine months herself.
But we'll keep you updated on the guide here as we see opportunities to get better here potentially.
Operator: Thank you. The next question goes to Amit Mehrotra of UBS. Amit, please go ahead.
Operator: Thank you. The next question goes to Amit Mehrotra of UBS. Amit, please go ahead.
Thank you. The next question goes to Amit Mehrotra of UBS. Please go ahead.
[Analyst]: Thanks. Morning, everybody. I just wanted to follow up on the orders question, if I could. And just understand, you know, how much of this order strength is, you know, the market coming to you as opposed to maybe how you're evolving, how you go to market? And I know, you know, last time we chatted, there was maybe some initiatives underway to kind of go after what you guys call the belly of the market. Is that indicative of the orders? And then just related to that, Joakim, any numbers you can provide around the non-data center growth, just so we can understand a little bit how broad-based this is.
Amit Mehrotra: Thanks. Morning, everybody. I just wanted to follow up on the orders question, if I could. And just understand, you know, how much of this order strength is, you know, the market coming to you as opposed to maybe how you're evolving, how you go to market? And I know, you know, last time we chatted, there was maybe some initiatives underway to kind of go after what you guys call the belly of the market. Is that indicative of the orders? And then just related to that, Joakim, any numbers you can provide around the non-data center growth, just so we can understand a little bit how broad-based this is.
Thanks, Good morning, everybody.
Wanted to follow up on the orders question if I could.
Thanks morning. I have everybody. Um, I just wanted to follow up on the orders question. If I could. Um, and and just understand, you know, how much of this order strength is, you know, the market coming to you as opposed to maybe how you're evolving, how you go to market. And I know, you know, last time we chatted, there was maybe some initiatives underway to kind of go after, um, what you guys called the belly of the market? Um, is, there is, is, is that indicative of, of the orders. And then, and then just related to that Yoakam. Any, any numbers, you can provide around the non-data center growth, it's just so we can understand a little bit. How broad basis is
And just understand how much of this order strength as the market coming to you as opposed to maybe how you're evolving how you go to market and I know last time, we chatted. It was maybe some initiatives underway to kind of go after.
What you guys called the belly of the market.
Is there is that indicative of the orders and then and then just related to that yocum any any numbers you can provide around the non data center growth. Just so we can understand a little bit how broad basis.
Joakim Weidemanis: Yeah. So I think the data center market is growing in many different parts of the world and in different applications as well. So our growth is pretty broad-based. So like I said, you know, we play in three different application categories: the chillers, the CRACs, the air handling units, and now starting to grow nicely here on the CDU side as well. So historically, we had a good position with our hyperscalers, as well as many of the large colos, in particular in the United States. But, you know, over the last couple of quarters, we're very happy to see the growth in Europe and Asia also start to become very meaningful for us.
Joakim Weidemanis: Yeah. So I think the data center market is growing in many different parts of the world and in different applications as well. So our growth is pretty broad-based. So like I said, you know, we play in three different application categories: the chillers, the CRACs, the air handling units, and now starting to grow nicely here on the CDU side as well. So historically, we had a good position with our hyperscalers, as well as many of the large colos, in particular in the United States. But, you know, over the last couple of quarters, we're very happy to see the growth in Europe and Asia also start to become very meaningful for us.
Yeah. So I think the data center market is growing in many different parts of the world in different applications as well. So our growth is pretty broad based but like I said you know we plan three different application categories. The chillers, the Crosby air handling units and and now.
Yeah, so I think the data center Market is um, growing in many different parts of the world and and in different applications as well. So our growth is is pretty broad-based. So like I said, you know, we play in 3, different application categories, the chillers, the cross, the air handling units and and now starting to, uh, grow nicely here on on the CDU side as well. So historically, we had a, a good position with with our hyperscalers, as well as many of the large colos and particular in the United States. But, you know, over the last couple of quarters, we're very happy to see the growth and in Europe and and Asia also start to become um very meaningful for us.
Starting to grow.
Grow nicely here on the CPU side as well so historically, we had a good position with our with our hyperscale or <unk> as well as many of the large co Los and particular in the United States, but you know over the last couple of quarters, we're very happy to see the growth in Europe and Asia also start to become very meaningful.
Oriented growth that that we're seeing uh, and just to put a little bit more color on that.
All for us.
Joakim Weidemanis: And like I said in my previous comment, you know, our orders strength in the quarter here is, of course, helped by data centers, but we're also very happy about, in particular, the life science-oriented growth that we're seeing. And just to put a little bit more color on that, you know, what's happening in the pharmaceutical industry is that, with the rise of biologics-based therapies, you know, the manufacturing environments are materially different than the historical manufacturing environments. And that's why, you know, large pharmaceutical manufacturers are building new plants in many parts of the world.
And like I said in my previous comments, our order strength in the quarter here is of course helped by data centers, but we're also very.
Joakim Weidemanis: And like I said in my previous comment, you know, our orders strength in the quarter here is, of course, helped by data centers, but we're also very happy about, in particular, the life science-oriented growth that we're seeing. And just to put a little bit more color on that, you know, what's happening in the pharmaceutical industry is that, with the rise of biologics-based therapies, you know, the manufacturing environments are materially different than the historical manufacturing environments. And that's why, you know, large pharmaceutical manufacturers are building new plants in many parts of the world.
You know what's happening in the pharmaceutical industry is that with the rise of biologics based therapies, you know the manufacturing environments uh are materially different than the historical manufacturing environments. And that's why, you know, large pharmaceutical. Uh uh manufacturers are building new plants in many parts of the world and the indoor operating conditions.
Very happy about in particular, the life science.
Oriented growth that we're seeing.
And just to put a little bit more color on that.
You know what's happening in the pharmaceutical industry is that with the rise of biologic based therapies.
Uh, that they require to be able to effectively uh you know, manufacture these biologic space drugs, you know, really require very strong thermal management.
Manufacturing environments are materially different than the historical manufacturing environments from that's fine large pharmaceutical.
Manufacturers are building new plants in many parts of the world in the indoor operating conditions.
Joakim Weidemanis: The indoor operating conditions that they require to be able to effectively, you know, manufacture these biologics-based drugs, you know, really require very strong thermal management, which is not just the HVAC, but also controls. Because these are large campuses with thousands and thousands of employees moving in and out every day, and the value of what they manufacture is very high, it also requires other solutions in our portfolio. Very encouraged-
Joakim Weidemanis: The indoor operating conditions that they require to be able to effectively, you know, manufacture these biologics-based drugs, you know, really require very strong thermal management, which is not just the HVAC, but also controls. Because these are large campuses with thousands and thousands of employees moving in and out every day, and the value of what they manufacture is very high, it also requires other solutions in our portfolio. Very encouraged-
That they require to be able to effectively.
Uh uh which is not just HVAC but also controls and because these are large campuses with thousands and thousands of employees moving in and out every day and the value of what they manufacture is very high. It also requires uh other Solutions in in our portfolio. So um very very uh encouraged by our continued progress and life sciences.
The manufacturer of these biologics based drugs in it really require very strong thermal management.
Which is not just a HVAC, but also controls and because these are large campuses with.
Thousands and thousands of employees moving in and out every day and the value of what they manufacturer is very high. It also requires other solutions in our portfolio. So I'm very encouraged by our continued progress in life Sciences.
That that makes sense. Thank you. And then just 1 my follow-up, Mark. Um, I wanted to ask about second half versus first half incremental margins. Um, you know, obviously you have a full year of 50% plus, um, you will achieve or have achieved in the first quarter second quarter, maybe about 40 45%, it does imply. Kind of this nice step up in the second half above 50. Can you just talk about that? And maybe what are the drivers of that step up on the second half?
[Analyst]: Right.
Amit Mehrotra: Right.
Joakim Weidemanis: -by our continued progress in life sciences.
Joakim Weidemanis: -by our continued progress in life sciences.
[Analyst]: That, that makes sense. Thank you. And then just one - my follow-up, Marc. I wanted to ask about second half versus first half incremental margins. You know, obviously, you have a full year of 50%+, you'll achieve or have achieved in Q1, Q2, maybe about 40-45%. It does imply kind of this nice step up in the second half above 50%. Can you just talk about that? And maybe what are the drivers of that step up are in the second half?
Amit Mehrotra: That, that makes sense. Thank you. And then just one - my follow-up, Marc. I wanted to ask about second half versus first half incremental margins. You know, obviously, you have a full year of 50%+, you'll achieve or have achieved in Q1, Q2, maybe about 40-45%. It does imply kind of this nice step up in the second half above 50%. Can you just talk about that? And maybe what are the drivers of that step up are in the second half?
That makes sense. Thank you and then just my follow up Mark.
I wanted to ask about second half versus first half incremental margin.
You have a full year of 50% plus.
Youll achieve or have achieved in the first quarter second quarter, maybe about 40% to 45%. It does imply kind of this nice step up in the second half above 50 can you just talk about that and maybe what are the drivers of that step up on the second half.
Marc Vandiepenbeeck: For sure. We can maintain the full year roughly 50% operating leverage or close, because the structural driver of our leverage builds materially around the year. And as reported, of course, the backlog and the backlog margin, the visibility we have, and the margin expansion that comes, but also the work associated with the trend in cost, and it's all inflecting in the second half of the year, and that leverage continues to improve. You know, that 50% is based on our mid-single-digit perspective on top line growth. If we can accelerate that top line growth, not all of that incremental growth will come at the operating leverage in the 50s.
Marc Vandiepenbeeck: For sure. We can maintain the full year roughly 50% operating leverage or close, because the structural driver of our leverage builds materially around the year. And as reported, of course, the backlog and the backlog margin, the visibility we have, and the margin expansion that comes, but also the work associated with the trend in cost, and it's all inflecting in the second half of the year, and that leverage continues to improve. You know, that 50% is based on our mid-single-digit perspective on top line growth. If we can accelerate that top line growth, not all of that incremental growth will come at the operating leverage in the 50s.
For sure we can maintain the full year.
Roughly 50% operating leverage a clue because the the structural driver of all of our leverage AR build materially around the U.
And as reported by of course, the backlog and the backlog margin. The visibility we have that in the margin expansion that come but also the work associated with trended costs.
And it's all inflicting in the second half of the year end and our leverage continues to improve.
For sure. We, we can maintain the full year. Um, roughly 50% operating leverage or look because the the structural driver of our of our leverage, uh, build materially, uh, around the year, um, and are supported by, of course, the backlog. And the backlog margin the visibility we have that and the margin expansion that come, but also the work associated with, with the trended cast. And, and, and it's all inflecting, uh, in the second half of the year. And, and, and that leverage continues to improve, um, you know, that that 50% in based on, on our mid single digits, um, uh perspective on Topline growth. Um, if we can accelerate that Topline growth, not all of that, incremental growth will come um, at the operating leverage in the 50s. Uh, it will probably come closer to our long-term algorithm well above 30%, but maybe not at the at the 50%.
Range.
It's 50 people sending based on mid single digits.
Thank you. The next question goes to Steve qusar of JP Morgan. Steve. Please go ahead.
Our perspective on topline growth.
Uh, hi. Good morning.
If we can accelerate that top line growth not all of that incremental growth will come.
Can you hear me, okay?
Yes. Yes, we can. Hello, can you hear me? Okay.
The no operating leverage in the fifties.
Marc Vandiepenbeeck: It will probably come closer to our long-term algorithm, well above 30%, but maybe not at the 50% range.
Marc Vandiepenbeeck: It will probably come closer to our long-term algorithm, well above 30%, but maybe not at the 50% range.
It will probably come closer to our long term algorithm, well above 30%, but maybe not that the other 50% range.
Operator: Thank you. The next question goes to Steve Tusa of J.P. Morgan. Steve, please go ahead.
Operator: Thank you. The next question goes to Steve Tusa of J.P. Morgan. Steve, please go ahead.
Thank you. The next question go to Steve Tusa of Jpmorgan, Steve. Please go ahead.
Great. Um, thanks, sorry. Um, just on the North America uh, margin with just a little bit lighter. I hate to nitpick because they were really good results on especially on orders. Uh, the, the North America margin was a little bit lighter. There was a 15 million dollar headwind from other. Maybe that was something we were missing from the comp from last year or something like that. Um, maybe just, uh, touch on how you see North America margin trending, um, in the next couple quarters and anything there in the quarter.
Steve Tusa: Hi, good morning.
Hi, good morning.
Stephen Tusa: Hi, good morning.
Operator: Thanks, Steve. Please proceed with your question.
Operator: Thanks, Steve. Please proceed with your question.
Thanks, Steve. Please proceed with your question.
Steve Tusa: Hello? Can you hear me okay?
Stephen Tusa: Hello? Can you hear me okay?
Hello can you hear me okay.
Joakim Weidemanis: Yes. Yes, we can hear you, Steve.
Joakim Weidemanis: Yes. Yes, we can hear you, Steve.
Yes, yes, we can hear you say Hello can you me okay.
Steve Tusa: Hello, can you hear me okay? Great. Thanks. Sorry. Just on the North America margin, it was just a little bit lighter. I hate to nitpick because they were really good results on, especially on orders. The North America margin was a little bit lighter. There was a $15 million headwind from other. Maybe that was something we were missing from the comp from last year, or something like that. Maybe just touch on how you see North America margin trending in the next couple quarters. And anything there from the quarter.
Stephen Tusa: Hello, can you hear me okay? Great. Thanks. Sorry. Just on the North America margin, it was just a little bit lighter. I hate to nitpick because they were really good results on, especially on orders. The North America margin was a little bit lighter. There was a $15 million headwind from other. Maybe that was something we were missing from the comp from last year, or something like that. Maybe just touch on how you see North America margin trending in the next couple quarters. And anything there from the quarter.
Great. Thanks, sorry.
Just on the North America margin with just a little bit later I hate to nitpick, because they were really good results on especially on orders.
The North America margin was a little bit lighter there was a $15 million headwind from other maybe that was something we were missing from the comp from last year something like that maybe just a.
Touch on how you see North America margin trending.
A couple of quarters.
The thing there from the quarter.
Marc Vandiepenbeeck: So, if you look at the growth in North America, right? Very strong system growth, strong service growth as well. That mix, you know, normally would be lifted by much better growth in the service, thanks to the rates. And we saw some benefit associated to productivity. Overall, the opportunity in North America is accelerating our service growth and the margin rate that comes with that. You know, there was a few smaller headwind in the quarter in North America, about $15 million we tag as other. That more has to do with some periodic small adjustments we do on product liability. Those are just reserve we adjust over time, not something material, not something recurring.
Marc Vandiepenbeeck: So, if you look at the growth in North America, right? Very strong system growth, strong service growth as well. That mix, you know, normally would be lifted by much better growth in the service, thanks to the rates. And we saw some benefit associated to productivity. Overall, the opportunity in North America is accelerating our service growth and the margin rate that comes with that. You know, there was a few smaller headwind in the quarter in North America, about $15 million we tag as other. That more has to do with some periodic small adjustments we do on product liability. Those are just reserve we adjust over time, not something material, not something recurring.
If you look at the growth in North America right.
Very strong our system growth, a strong service growth as well that mix.
Normally would be lifted by by much much better growth in the in the service thanks to the rates.
So, so if you look at, at, at the growth in, in North America, right? Uh, um, very strong, uh, uh, uh, uh, uh, system growth, uh, strong service growth as well, that that, that makes, you know, normally would be lifted by by much much, much better growth in in, in the service. Thanks to the rates, um, and, and we saw some benefit Associated to productivity or overall the opportunity, North America is accelerating or, or service growth and, and the margin rate that comes with that, um, you know, that there was a, a few smaller, uh, headwind in the quarter in North America about 15 million dollar with tagged as as other um, that that more us to do. With some periodic small adjustments we do on on product liability, those are just reserved, we had just over time, not something material, not something recurring, um we think North America make margin potential continues to be to be strong and and and will probably come a slightly better than what you saw in the court.
In in the second half.
And we saw some benefit associated to productivity overall, the opportunity Milsom AK is accelerating <unk> growth and the margin rates that comes with that.
You know that there was a few smaller headwind in the quarter in North America of about 15 million Bella Vita goes as others.
Therefore wants to do would be some failure the small adjustments we do on product liability those out just reserve we had just over time not something material enough something recurring.
Great, thanks. Um, just the uh, the data center lead times where, where are you now? And then, uh, Mark can you just give us a little bit of color on what BMS did in the quarter? We're trying to tease out kind of the like, for like applied orders growth. Uh, you know, the BMS kind of orders would I would think be lower than what applied was, maybe not but maybe those 2, uh, those 2 follow-ups and uh, thanks again.
Marc Vandiepenbeeck: We think North America margin potential continues to be strong, and will probably come slightly better than what you saw in the quarter in the second half.
Marc Vandiepenbeeck: We think North America margin potential continues to be strong, and will probably come slightly better than what you saw in the quarter in the second half.
We think also make a margin potential continues to be to be strong and we will probably come a slightly better than what you saw in the quality in the second half.
Steve Tusa: Great, thanks. And then just one on data center. Where do your lead times stand today?
Stephen Tusa: Great, thanks. And then just one on data center. Where do your lead times stand today?
Great. Thanks, and then just one on data center.
Your what are your lead times.
being predictable within the lead times that the customers are asking for
Operator: The next question goes to Scott Davis of Melius Research. Scott, please go ahead.
Operator: The next question goes to Scott Davis of Melius Research. Scott, please go ahead.
Hey, guys, Hey, Scott Davis of Melius Research. Please go ahead.
Joakim Weidemanis: Scott, I,
Scott Hey, guys.
Joakim Weidemanis: Scott, I,
um we uh continue to sustain. You know, I talked in previous calls about uh how we cut you know, lead times in half.
[Analyst]: Hey, guys,
Stephen Tusa: Hey, guys,
Steve go ahead.
Joakim Weidemanis: Yeah.
Joakim Weidemanis: Yeah.
[Analyst]: Is Steve still on there?
Scott Davis: Is Steve still on there?
Yeah.
Joakim Weidemanis: Yeah, we are. Operator, can we please ask you to take command here? Steve was asking his follow-up question, so let's allow Steve to do that, and then, Scott, we'll go to you right after.
Joakim Weidemanis: Yeah, we are. Operator, can we please ask you to take command here? Steve was asking his follow-up question, so let's allow Steve to do that, and then, Scott, we'll go to you right after.
Yes, we are operator can we please ask you to take come on here Steve.
Steve was asking has a follow up question. So let's allow Steve to do that and then Scott will go to you right. After.
Yeah.
[Analyst]: No worries, guys.
Scott Davis: No worries, guys.
Nowhere are these guys.
For, uh, 1 of our product lines and in a factory and uh, that work is now being cascaded out to the other product lines in that factory and and other factories. And we did, uh, hire a new VP of of operations, uh, couple couple months ago.
Joakim Weidemanis: Thank you. Operator, can you please step in? Okay, Scott, if we have you on the line, please go, please go ahead. I will act as the interim operator.
Joakim Weidemanis: Thank you. Operator, can you please step in? Okay, Scott, if we have you on the line, please go, please go ahead. I will act as the interim operator.
Thank you.
Operator can you please stefan.
Yeah.
Okay. Scott if we have you on the line. Please. Please go ahead I will act as the interim operator.
[Analyst]: I could call Steve and ask him what his question is, but...
I could call Stephen asking one question is but.
Scott Davis: I could call Steve and ask him what his question is, but...
[laughter] go ahead Scott.
Joakim Weidemanis: Go ahead, Scott.
Joakim Weidemanis: Go ahead, Scott.
[Analyst]: No, sorry about that. But look, yeah, I'm kind of curious, the entrance into CDUs, is the goal here to kind of bundle this into a total solution that, you know, I would imagine it's still a separate purchase order right now, and perhaps even a separate process altogether. But what-
Scott Davis: No, sorry about that. But look, yeah, I'm kind of curious, the entrance into CDUs, is the goal here to kind of bundle this into a total solution that, you know, I would imagine it's still a separate purchase order right now, and perhaps even a separate process altogether. But what-
No sorry about that.
And uh, you know, he and his team are now, uh ramping, you know, very, very nicely. And uh, I'm I'm actually and we were reviewing it just the other day. I'm, I'm really excited about what I'm seeing from our operations teams. Uh, not just in terms of short-term results, but the aspirations and where we think we can get to, you know, not next year. But but this year and, uh, so, you know, more to come on that. And I think in a, in a little bit of a, you know, an environment like we have
Im kind of curious the entrance into <unk>.
The goal here to kind of bundle this into a total solution.
I would imagine it's still a separate purchase order right now and perhaps even a separate process altogether, but what what are you kind of see that market going for you guys.
In the data center market right now, the ability to be able to deliver not just predictably. But uh, fast is part of, you know, 1, 1 of many things that contributes to our competitive Advantage. So
Joakim Weidemanis: Yeah.
Joakim Weidemanis: Yeah.
[Analyst]: Where do you kind of see that market going for you guys?
Scott Davis: Where do you kind of see that market going for you guys?
Joakim Weidemanis: Today, it's a mix, Scott. So there are certainly a lot of business that transacts, you know, CDUs only. But we do see plenty of opportunity for combined offers. And obviously, we have a number of very important key accounts. And so, you know, we work on more than one application together with them. You know, over time, as the thermal architecture for data centers evolve, as is normal, I think in a complicated system like that, you might see some slight changes in the overall architecture. And so the roles that certain devices play today might evolve a little bit over time.
Joakim Weidemanis: Today, it's a mix, Scott. So there are certainly a lot of business that transacts, you know, CDUs only. But we do see plenty of opportunity for combined offers. And obviously, we have a number of very important key accounts. And so, you know, we work on more than one application together with them. You know, over time, as the thermal architecture for data centers evolve, as is normal, I think in a complicated system like that, you might see some slight changes in the overall architecture. And so the roles that certain devices play today might evolve a little bit over time.
Today, it's a mix Scott. So there are certainly a lot of business that transact C to use only.
But we do see plenty of opportunity for us.
Combined offer so obviously we have a.
A number of very important key accounts and so we work on them.
More than one application together with them.
Overtime.
As the thermo architecture for data centers of all.
As is normal I think in a complicated.
System like that you might see some slight.
Um, and then BMS. Yeah. BMS. Go ahead. So, so, the BMS grows in the quarter was a, a, a, a, would characterize very solid, uh, in the high single digit rate. We, we, we feel very strong about the backlog of that business because it's it's continued to improve the, the pipeline of opportunity is also accelerating align a little bit with the strategy. We, we laid out at the beginning of the opening comments around our mission critical and how is strong BMS controls offering for those particular. Uh, specific vertical is really resonating well with the customer and we think we can continue to improve that business nicely over the over the next few quarters.
Slight changes in the overall architecture.
The next question. Goes to Scott Davis of melia's research, Scott, please go ahead.
So the roles that certain devices play today Mike.
Evolve a little bit over time, and I think that's of course, why we chose to add <unk> to our portfolio to be able to lead in that and be able to be a player that helps our data center customers with the most optimal and highest performing parallel architecture not just for today.
Joakim Weidemanis: And I think that's of course why we chose to add CDUs to our portfolio, to be able to lead in that, and be able to be a player that helps our data center customers with the most optimal and highest performing thermal architecture, not just for today, but in the future as well.
Joakim Weidemanis: And I think that's of course why we chose to add CDUs to our portfolio, to be able to lead in that, and be able to be a player that helps our data center customers with the most optimal and highest performing thermal architecture, not just for today, but in the future as well.
yeah, I'm kind of curious that the entrance into CDU is is the is the goal here to kind of bundle this into a total solution that, you know, it, I would imagine, it's still a separate purchase order right now and perhaps even a separate
Process all together. But what what do you kind of see that market going for you guys?
But in the future as well.
Scott Davis: Okay, fair enough. And then, look, you mentioned that you were just in Asia Pacific. Not sure if it's a big, broad region, so I'm not exactly sure where you were, but perhaps since you were there recently, you could just tell us what you're seeing on the ground. 'Cause clearly-
Scott Davis: Okay, fair enough. And then, look, you mentioned that you were just in Asia Pacific. Not sure if it's a big, broad region, so I'm not exactly sure where you were, but perhaps since you were there recently, you could just tell us what you're seeing on the ground. 'Cause clearly-
Okay Fair enough and then Jim you mentioned that you were just in Asia Pac.
Uh, today it's a mix, uh, start. So there there are, there are certainly a lot of business that transacts, you know, CD use, uh, only, um, but we do see, uh, plenty of opportunity for
A broad regions, so not exactly sure where you're worried but perhaps since you are there recently could you just tell us what youre seeing on the ground as well.
Joakim Weidemanis: Yeah
Joakim Weidemanis: Yeah
Scott Davis: ... we're seeing a broad set of different results.
Scott Davis: ... we're seeing a broad set of different results.
Um, combined offers. And obviously we have uh, a number of very important key accounts. And so, you know, we work on
A broad set of different results you guys were a little better than most people this quarter right Yep.
Joakim Weidemanis: Yeah.
Joakim Weidemanis: Yeah.
Scott Davis: You guys are a little better than most people this quarter.
Scott Davis: You guys are a little better than most people this quarter.
Joakim Weidemanis: Right. Yep, yeah. So I was, I'm not gonna say I was all over the region, but I was in all, all the-
Joakim Weidemanis: Right. Yep, yeah. So I was, I'm not gonna say I was all over the region, but I was in all, all the-
Yes, sorry, I was I'm not going to say I was all over the region, but I was in all the British major markets a number of countries. So so in our case, we are seeing continued stabilization in China.
more than 1 application together with them, you know, over time um as the thermal architecture for data centers evolve
Scott Davis: Region
Scott Davis: Region
Joakim Weidemanis: ... major markets, a number of countries, so. So in our case, we are seeing continued stabilization in China, and part of our business, and part of that, of course, is that we have worked hard on shifting a little bit on what the mix of which verticals we focus on in China. And so I think we're in a better place now. Our commercial teams are more aligned with where there is still growth and, you know, our service business there. We have continued to invest in, and so we see that as a continued good opportunity. So we see stabilization in China, but unlikely that China is going to return to the kind of growth rates we saw in past years.
Joakim Weidemanis: ... major markets, a number of countries, so. So in our case, we are seeing continued stabilization in China, and part of our business, and part of that, of course, is that we have worked hard on shifting a little bit on what the mix of which verticals we focus on in China. And so I think we're in a better place now. Our commercial teams are more aligned with where there is still growth and, you know, our service business there. We have continued to invest in, and so we see that as a continued good opportunity. So we see stabilization in China, but unlikely that China is going to return to the kind of growth rates we saw in past years.
uh, as is normal, I think in in a complicated, um, system like that, you, you might see some, um, slight changes in the overall architecture and
And a part in our business and part of that of course is that we have worked hard on shifting a little bit.
What the mix of which verticals we focus on in China.
And so I think we're in a better place now our commercial teams are more aligned with where there is still growth and that our service business there.
We have continued to invest in and so we see that as a continued good opportunity. So we see stabilization in China, but.
So the roles that certain uh devices play today might uh, evolved a little bit over time and and I think that's of course why we chose to uh add CD use to our portfolio to be able to lead in that and be able to be a player that helps our data center customers with the the most optimal and highest performing uh thermal architecture. Not just for today but in the future as well.
Unlikely that China is going to return to that kind of growth rates, we saw in <unk>.
Joakim Weidemanis: But what's exciting is that, of course, it's no secret that there are some other major economies in the region that have continued to strengthen overall. And so I think we have, you know, a really strong, good team on the ground in a number of countries in Southeast Asia as well as India. And some of these countries, of course, they're all looking at data centers. And there are several emerging players in these markets. But in terms of, for example, you know, investments in healthcare, hospitals, and pharmaceutical manufacturing, that's also a growth driver for us in a number of those countries there. So I'm super excited about our prospects here in Asia.
Joakim Weidemanis: But what's exciting is that, of course, it's no secret that there are some other major economies in the region that have continued to strengthen overall. And so I think we have, you know, a really strong, good team on the ground in a number of countries in Southeast Asia as well as India. And some of these countries, of course, they're all looking at data centers. And there are several emerging players in these markets. But in terms of, for example, you know, investments in healthcare, hospitals, and pharmaceutical manufacturing, that's also a growth driver for us in a number of those countries there. So I'm super excited about our prospects here in Asia.
Last years, but what's exciting is that of course.
No secret that there are some other major economies in the region that.
Have continued to strengthen overall.
And and so we.
Okay, fair enough. And then to keep you mentioned that you were just in uh Asia Pac, not sure if that's a big broad region, so not exactly sure where you were. But perhaps since you were there recently, you could just tell us what you're seeing on the ground because clearly we're seeing a broad set of different results, you guys are a little better than than most people this quarter.
I think we have a really strong good team on the ground in a number of countries in southeast Asia as well as India.
And in some of these countries.
Of course, they are all looking at.
Data centers.
And there are several emerging players in these markets, but in terms of for example investments in health care hospitals and.
Right. Yep, uh yeah. So I was uh I'm not going to say I was all over the region but I was in all all the major markets and a number of of countries. So so in our case, uh, we are seeing continued stabilization in China.
Pharmaceutical manufacturing that's also a growth driver for us and a number of those countries. There so I'm.
And uh part in our business and part of that, of course is that we have worked hard on shifting a little bit uh on what the mix of which verticals, we focus on in China.
Very excited about our prospects here.
And in Asia, So stabilization in China, and then growth opportunities in major economies elsewhere.
Joakim Weidemanis: So stabilization in China, and then growth opportunities in major economies elsewhere.
Joakim Weidemanis: So stabilization in China, and then growth opportunities in major economies elsewhere.
Okay.
Scott Davis: Okay, helpful. Best of luck, the rest of you guys. Thank you.
Scott Davis: Okay, helpful. Best of luck, the rest of you guys. Thank you.
Okay helpful. Best of luck the rest of your guys. Thank you. Thank you.
And so I think we're in a, a better place. Now our commercial teams are more aligned with where there is still growth and uh, you know, our service business there. Um we have continued to invest in and so we see that as a continued good opportunity. So we see stabilization in China, but
Joakim Weidemanis: Yeah. Thank you.
Joakim Weidemanis: Yeah. Thank you.
Operator: Thank you. Moving back to Steve Tusa of J.P. Morgan. Steve, please go ahead.
Operator: Thank you. Moving back to Steve Tusa of J.P. Morgan. Steve, please go ahead.
Thank you moving back to Steve Tusa of Jpmorgan, Steve. Please go ahead.
Okay.
Steve Tusa: Yeah, thanks. That was... That's a quality move. Thank you for letting me back in. Appreciate that. Just the data center lead times, where are you now? And then, Marc, if you just give us a little bit of color on what BMS did in the quarter. We're trying to tease out kind of the like for like, Applied orders growth. You know, the BMS kind of orders would, I would think, be lower than what Applied was. Maybe not, but maybe those two follow-ups, and thanks again for letting me back in.
Stephen Tusa: Yeah, thanks. That was... That's a quality move. Thank you for letting me back in. Appreciate that. Just the data center lead times, where are you now? And then, Marc, if you just give us a little bit of color on what BMS did in the quarter. We're trying to tease out kind of the like for like, Applied orders growth. You know, the BMS kind of orders would, I would think, be lower than what Applied was. Maybe not, but maybe those two follow-ups, and thanks again for letting me back in.
Yeah, Thanks that was a.
Quality move thank you for letting me back in I appreciate that.
Just the datacenter lead times, where where are you now and then Mark if you could give us a little bit of color on what BMS did in the quarter were trying to tease out kind of a like for like applied orders growth.
And so we I think we have, you know, a really strong good team on the ground and and uh a number of countries in Southeast Asia as well as India.
The BNS kind of orders would I would think would be lower than what applied was maybe not but maybe those two those two follow ups.
Again for Monday backend.
Joakim Weidemanis: Yeah, sure. Lead times, you know, I gave the example in the prepared remarks here. So we're making good, good progress on the on-time delivery, and that's on-time delivery as requested by customers, right? So by definition, that is then being predictable within the lead times that the customers are asking for. We continue to sustain, and I talked in previous calls about how we've cut, you know, lead times in half for one of our product lines in a factory. And that work is now being cascaded out to the other product lines in that factory and other factories. And we did hire a new VP of operations a couple of months ago. And you know, he and his team are now ramping, you know, very, very nicely.
Joakim Weidemanis: Yeah, sure. Lead times, you know, I gave the example in the prepared remarks here. So we're making good, good progress on the on-time delivery, and that's on-time delivery as requested by customers, right? So by definition, that is then being predictable within the lead times that the customers are asking for. We continue to sustain, and I talked in previous calls about how we've cut, you know, lead times in half for one of our product lines in a factory. And that work is now being cascaded out to the other product lines in that factory and other factories. And we did hire a new VP of operations a couple of months ago. And you know, he and his team are now ramping, you know, very, very nicely.
Sure lead times, you know I I.
I gave the example in the prepared remarks here. So we're making good good progress on the on time delivery and on time delivery as requested by customers right. So by definition that has been.
And, uh, and and some of these countries, uh, of course, they're all looking at, uh, data centers. Um, and and there are several emerging players in, in these markets, but in terms of, uh, for example, you know, Investments and and Healthcare hospitals and and uh, pharmaceutical manufacturing, that's also a, a growth driver for us and a number of those countries there. So I'm, um,
Being predictable within the lead times that the customers are asking for.
Super excited about our, our prospects here, um, in in Asia, so stabilization in China and then growth opportunities and major economies elsewhere.
Helpful. That's a lot the rest of your guys. Thank you.
We continue to sustain and I talked in previous calls about how.
Yeah, thank you.
How we cut lead times in half.
Thank you. The next question. Go see Jeffrey or vertical research. Jeff. Please. Go ahead.
For our one of our product lines in a factory and that work is now being cascaded out to the other product lines in that factory and in other factories than we did.
Hey, thank you. Good morning everyone. Um, hey, I want to come back to the new products Yoakam. Um,
Hire a new VP of operations a couple.
Couple of couple of months ago.
And he and his team are now ramping very very nicely.
Joakim Weidemanis: And, I'm actually-- And we were reviewing it just the other day. I'm really excited about what I'm seeing from our operations teams, not just in terms of short-term results, but the aspirations and where we think we can get to, you know, not next year, but this year. And, so you know, more to come on that. And I think in a little bit of a, you know, an environment like we have in the data center market right now, the ability to be able to deliver, not just predictably, but fast, is part of, you know, one of many things that contributes to our competitive advantage, so.
Joakim Weidemanis: And, I'm actually-- And we were reviewing it just the other day. I'm really excited about what I'm seeing from our operations teams, not just in terms of short-term results, but the aspirations and where we think we can get to, you know, not next year, but this year. And, so you know, more to come on that. And I think in a little bit of a, you know, an environment like we have in the data center market right now, the ability to be able to deliver, not just predictably, but fast, is part of, you know, one of many things that contributes to our competitive advantage, so.
And.
I'm actually in we were reviewing it just the other day and I'm really excited about what I'm seeing from our operations teams.
You know, it's just kind of an interesting house sensitive. This Market is, right? You might argue your stock has been has been weak here today, because nvidia's scared people about warm water cooling, you know? And here you are with, you know, an offering, right? So, um, you know, clearly you're in the loop on product development, you mentioned reference designs, maybe just for the benefit of all of us, just um, you know, a little bit more detail on, you know.
Not just in terms of short term results, but the aspirations and where we think we can get to.
No not next year, but this year.
And so more to come on that and I think in a little bit of a you know an environment like we have.
Where you sit and sort of the technology path, the forward planning understanding what's coming down the pike and, um, you know how you're, you know, we're not surprised by this. But in fact, we're prepared,
And datacenter market right now the ability to be able to deliver it not predictably, but.
Fast is part of one of many things that contributes to our competitive advantage. So.
Marc Vandiepenbeeck: And then BMS, yeah.
Marc Vandiepenbeeck: And then BMS, yeah.
<unk> go ahead, so so the BMS gross in the quarter was.
Joakim Weidemanis: BMS, go ahead, Marc.
Joakim Weidemanis: BMS, go ahead, Marc.
Marc Vandiepenbeeck: So the BMS growth in the quarter was, I would characterize very solid, in the high single digit rate. We feel very strong about the backlog of that business because it's continued to improve. The pipeline of opportunity is also accelerating. Aligned a little bit with the strategy we laid out at the beginning of the opening comments around our mission critical, and how a strong BMS controls offering for those particular, specific vertical is really resonating well with the customer, and we think we can continue to improve that business nicely over the next few quarters.
Marc Vandiepenbeeck: So the BMS growth in the quarter was, I would characterize very solid, in the high single digit rate. We feel very strong about the backlog of that business because it's continued to improve. The pipeline of opportunity is also accelerating. Aligned a little bit with the strategy we laid out at the beginning of the opening comments around our mission critical, and how a strong BMS controls offering for those particular, specific vertical is really resonating well with the customer, and we think we can continue to improve that business nicely over the next few quarters.
I would characterize very solid in the high.
Single digit rate.
We feel very strong about the backlog of that business because it's continued to improve the pipeline of opportunity is also accelerating allowing a little bit with the strategic we laid out at the beginning of the opening comments Serrano mission critical and Holly strong BMS controls offering.
yeah, uh, so I can't good morning job. I won't comment on specific product launches in the future, um, but the reference design that, uh, and there are 2 documents that we guide that we issued to the market and these reference designs for, for those of you who don't know, they're really, uh, for the benefit of data center, uh, designers and and operators as they're working on uh, designing the next generation of data centers, um, and uh, that that kind of work, you know, we did a lot of work with Nvidia and and so some of the guys that we published here is in collaboration with Nvidia
So those particular specific.
Specific royalty Kelly is really resonating well with the customer and we think we can continue to improve that business nicely over the over the next few quarters.
Operator: Thank you. The next question goes to Jeff Sprague of Vertical Research. Jeff, please go ahead.
Operator: Thank you. The next question goes to Jeff Sprague of Vertical Research. Jeff, please go ahead.
Thank you. The next question does he Jeff Sprague of back to research Jeff. Please go ahead.
Yeah.
Jeff Sprague: Hey, thank you. Good morning, everyone. Hey, I want to come back to the new products, Joakim. You know, it's just kind of interesting how sensitive this market is, right? You might argue your stock has been, has been weak year-to-date, 'cause NVIDIA scared people about warm water cooling, you know, and here you are with, you know, an offering, right? So, you know, clearly, you're in the loop on product development. You mentioned reference designs. Maybe just for the benefit of all of us, just, you know, a little bit more detail on, you know, where you sit in sort of the technology path, the forward planning, understanding what's coming down the pike, and, you know, how you're... You know, we're not surprised by this, but in fact, we're prepared.
Jeff Sprague: Hey, thank you. Good morning, everyone. Hey, I want to come back to the new products, Joakim. You know, it's just kind of interesting how sensitive this market is, right? You might argue your stock has been, has been weak year-to-date, 'cause NVIDIA scared people about warm water cooling, you know, and here you are with, you know, an offering, right? So, you know, clearly, you're in the loop on product development. You mentioned reference designs. Maybe just for the benefit of all of us, just, you know, a little bit more detail on, you know, where you sit in sort of the technology path, the forward planning, understanding what's coming down the pike, and, you know, how you're... You know, we're not surprised by this, but in fact, we're prepared.
Hey, Thank you good morning, everyone.
Hey, I want to come back to the new products Yocum.
So just kind of interesting how sensitive this market is right you might argue your stock has been it's been weak year to date, because Nvidia has scared people about warm water cooling in.
Of course, Beyond those documents that we publish, um, an element of how we work in this industry. Is we um, essentially every other week have, um, large engineering teams from our largest customers colos, and hackers scalars, who sit with us in our Innovation Center, in Jada and Pennsylvania to to collaborate on, you know, what the next generation of designers should be based on the learnings, uh, so far. And that helps, uh, feed our Innovation Pipeline. And, uh, it's it's really an excellent way where we can combine our our deep technological know-how and and
And here you are with an offering right. So.
Clearly you are in the loop on product development, you mentioned reference designs, maybe just for the benefit of all of Us just.
Thermal management represented by, you know, our very talented people in that Innovation Center with the people who are actually using the products from our customers and then apply the technologies that we have and, and more and more competitive Solutions. And um,
A little bit more detail on.
Where you sit and sort of the technology path forward planning understanding what's coming down the pike.
So you saw a couple of launches here uh earlier this week at at the big uh Big Show that's uh ongoing as we speak here.
How you are.
We're not surprised by this but in fact, we're prepared.
Joakim Weidemanis: Yeah. Hey, good morning, Jeff. I won't comment on specific product launches in the future. But the reference design that, and there are two documents, guides that we issued to the market, and these reference designs, for those of you who don't know, they're really for the benefit of data center designers and operators as they're working on designing the next generation of data centers. And that kind of work, you know, we did a lot of work with NVIDIA, and so some of the guides that we published here is in collaboration with NVIDIA.
Joakim Weidemanis: Yeah. Hey, good morning, Jeff. I won't comment on specific product launches in the future. But the reference design that, and there are two documents, guides that we issued to the market, and these reference designs, for those of you who don't know, they're really for the benefit of data center designers and operators as they're working on designing the next generation of data centers. And that kind of work, you know, we did a lot of work with NVIDIA, and so some of the guides that we published here is in collaboration with NVIDIA.
So I can't.
Yeah.
Wont comment on specific product launches in the future, but the reference design that.
And, uh, and we have a significant roadmap behind that. And as you remember, we play in 3 categories, in, in data centers, when it comes to Thermal management chillers air handling units, uh, mainly through our silent air franchise, but beyond that, as well. And then we answered CD use. And then, of course, we're in the controls, uh, uh, system, uh, as well.
Two documents that we guide that we issued to the market and these reference designs for those of you don't know they're really for.
And uh, so there's a lot more to to come Jeff and we'll, we'll keep you posted as we launch these new products.
For the benefit of datacenter designers and operators.
As they are working on designing the next generation of data centers.
And that that kind of working on when we did a lot of work with Nvidia and answer some of the guys that with public terrorism collaborations with Nvidia.
Joakim Weidemanis: Of course, beyond those documents that we publish, an element of how we work in this industry is we essentially, every other week, have large engineering teams from our largest customers, colos and hyperscalers, who sit with us in our innovation center in JADEC in Pennsylvania, to collaborate on, you know, what the next generation of designs should be based on the learnings so far. And that helps feed our innovation pipeline, and it's really an excellent way where we can combine our deep technological know-how and thermal management, represented by, you know, our very talented people in that innovation center, with the people who are actually using the products from our customers, and then apply the technologies that we have in more and more competitive solutions.
Joakim Weidemanis: Of course, beyond those documents that we publish, an element of how we work in this industry is we essentially, every other week, have large engineering teams from our largest customers, colos and hyperscalers, who sit with us in our innovation center in JADEC in Pennsylvania, to collaborate on, you know, what the next generation of designs should be based on the learnings so far. And that helps feed our innovation pipeline, and it's really an excellent way where we can combine our deep technological know-how and thermal management, represented by, you know, our very talented people in that innovation center, with the people who are actually using the products from our customers, and then apply the technologies that we have in more and more competitive solutions.
Of course beyond those documents that we publish and.
And the element of how we work in this industry as we are.
Great appreciate that. And then maybe just a, a, a different, uh, thread here just on the, uh, kind of the portfolio overview Yoakam, um, that I would assume that's still ongoing, but it also looks like the retail business did not close yet. I thought that was sort of pending and close to being done. Maybe the stuff that you've already publicly identified to go where we in those processes and any other update would be appreciated.
Essentially every other week have.
Large engineering teams from our largest customers Colo and hyperscale or who sit with us and our innovation center and Jada can Pennsylvania to collaborate on what the next generation of designs should be based on the learnings so far and that helps.
Yeah, so we can we continue? I think I've commented on that in the past but we have undertaken a
Our innovation pipeline.
And if it's really an excellent way, where we can combine our deep technological know how and thermal management represented by an R.
Our very talented people in that innovation center, where the people are actually using the products from our customers and then apply the technologies that we have in and more and more competitive solutions.
Solutions and.
Joakim Weidemanis: So you saw a couple of launches here earlier this week at the big show that's ongoing as we speak here. We have a significant roadmap behind that. As you remember, we play in three categories in data centers when it comes to thermal management: chillers, air handling units mainly through our Silent-Aire franchise, but beyond that as well, and then we entered CDUs, and then, of course, we're in the controls system as well. So there's a lot more to come, Jeff, and we'll keep you posted as we launch these new products.
Joakim Weidemanis: So you saw a couple of launches here earlier this week at the big show that's ongoing as we speak here. We have a significant roadmap behind that. As you remember, we play in three categories in data centers when it comes to thermal management: chillers, air handling units mainly through our Silent-Aire franchise, but beyond that as well, and then we entered CDUs, and then, of course, we're in the controls system as well. So there's a lot more to come, Jeff, and we'll keep you posted as we launch these new products.
So you saw a couple of launches here earlier this week at the Big Big show, that's ongoing as we speak here.
And and we have a significant roadmap behind that and as you remember we play in three categories and data centers when it comes to thermal management Chillers air handling units.
The work on both improving execution and on, um, the portfolio move that we flagged in the past and we'll keep you posted as we make progress on that. And and I'm not going to comment on, on particular ongoing transaction. We have not announced anything particular on retail. We're very happy that we, we close the disposition of 1 of our, uh, residential, uh, monitoring security system as we continue to, um, walk away. If you'd like from that particular sub segments of the market.
Mainly through our silent air franchise, but beyond that as well and then we entered Cdos and then of course, we're in the controls.
The next question, goes to Chris Schneider of Morgan Stanley. Chris, please go ahead.
System as well.
And so theres a lot more to come Jeff and we'll keep you posted as we launch these new products.
Jeff Sprague: Great. Appreciate that. And then maybe just a different thread here. Just on the kind of the portfolio review, Joakim, that I would assume that's still ongoing, but it also looks like the retail business did not close yet. I thought that was sort of pending and close to being done. Maybe the stuff that you've already publicly identified to go, where are we in those processes? And any other update would be appreciated.
Jeff Sprague: Great. Appreciate that. And then maybe just a different thread here. Just on the kind of the portfolio review, Joakim, that I would assume that's still ongoing, but it also looks like the retail business did not close yet. I thought that was sort of pending and close to being done. Maybe the stuff that you've already publicly identified to go, where are we in those processes? And any other update would be appreciated.
Great appreciate that and then maybe just a different threat here just on the kind of the portfolio review yocum.
I would assume that's still ongoing but it also looks like the retail business did not closed yet I thought that was sort of pending and close to being done maybe the stuff that you've already publicly identified to go where are we in those processes and any other update would be appreciated.
Thank you. Um, I wanted to talk about the longer term margin opportunity for the company. Um, you know, I think when we look at the model, you know, we can see the sgna as a percentage of sales is quite High compared to the competitors. So I think it's, you know, understandable the opportunity there, but can you talk about the opportunity on gross margin? Um, just because the company is already running above the industry. It seems like on the gross margin line. Um, so can you just kind of talk about entitlement? There what is the opportunity to kind of grow that into the coming years? Thank you.
Joakim Weidemanis: Yeah. So we continue. I think I've commented on that in the past, but we have undertaken a thorough strategic review of our entire portfolio. You know, we've worked with the board and calibrated and aligned on what we think is appropriate and to do, and that includes both how we can execute better, as well as potential alternative futures. And we've commented on a little bit, you know, how big a part of the portfolio that might entail. And you know, the main driver here is to create shareholder value. And so we continue to work on both improving execution and on the portfolio moves that we've flagged in the past. And we'll keep you posted as we make progress on that.
Joakim Weidemanis: Yeah. So we continue. I think I've commented on that in the past, but we have undertaken a thorough strategic review of our entire portfolio. You know, we've worked with the board and calibrated and aligned on what we think is appropriate and to do, and that includes both how we can execute better, as well as potential alternative futures. And we've commented on a little bit, you know, how big a part of the portfolio that might entail. And you know, the main driver here is to create shareholder value. And so we continue to work on both improving execution and on the portfolio moves that we've flagged in the past. And we'll keep you posted as we make progress on that.
So we can we continue I think I've commented on that in the past that we have undertaken a.
A thorough strategic review of our entire portfolio, we've worked with our board and calibrate them aligned on what we think is appropriate and do and that includes both how we can execute better as well as potential alternative futures.
Hey, how are you? Yeah, that's a topic we've discussed uh, in the past and yes, our gross margins are running a little higher than some of our direct tears. I see opportunities there.
um, I think we've discussed that with at least, with some of you and and some of your events, the opportunity, for example, in footprint consolidation in our manufacturing, um, setup
And and we've commented on a little bit you know, how big part of the portfolio that that might and hail and the main driver here is to create shareholder value and so we continue to to.
Work on both improving execution and on.
The portfolio moves that we flagged in the past and we'll keep you posted as we make progress on that and I'm not going to comment on particular ongoing transaction, we have not announced anything particular on the retail we are very happy that we closed the disposition of wonderful residential monitor leading security system.
Marc Vandiepenbeeck: And I'm not gonna comment on particular ongoing transaction. We have not announced anything particular on retail. We are very happy that we closed the disposition of one of our residential monitoring security system as we continue to walk away, if you'd like, from that particular subsegment of the market.
Marc Vandiepenbeeck: And I'm not gonna comment on particular ongoing transaction. We have not announced anything particular on retail. We are very happy that we closed the disposition of one of our residential monitoring security system as we continue to walk away, if you'd like, from that particular subsegment of the market.
And there's also an opportunity to continue to drive better productivity in our field. On the server side of things. Um, you you know, you should think of the example that we've talked about, um, in our the work we've done with the business system with our HVAC sellers, where we've been able to more than double the amount of time they spend with customers and selling. You know, we have that kind of opportunity that we're already working on, uh, in a, in a couple of our markets with our service team. So I still see.
We continue to work with each you'd like on that particular sub segment of the market.
Yes.
Yeah.
Okay.
Uh healthy, uh, Runway to improve our gross margins and then on sgna. Um, maybe, you know, on the a side of that I mean we are working away at at just simply reducing, um, our costs. You know we are a smaller company than we were when we owned retail and there are there continued to be cost reduction opportunities on on the administrative cost of of the sgna on the S side and the uh, R&D spend
Operator: The next question-
Operator: The next question-
And now operator, Chris Snyder of Morgan Stanley Chris. Please go ahead.
Jeff Sprague: Operator?
Joakim Weidemanis: Operator?
Operator: Go to Chris Snyder of Morgan Stanley. Chris, please go ahead.
Operator: Go to Chris Snyder of Morgan Stanley. Chris, please go ahead.
Within fdna, you know, on the outside, I'll refer to the example with the HVAC sellers. Um, we think we can decouple the future growth.
Chris Snyder: Thank you. I wanted to talk about the longer-term margin opportunity for the company. You know, I think when we look at the model, you know, we can see the SG&A as a percentage of sales is quite high compared to the competitors, so I think it's, you know, understandable, the opportunity there. But can you talk about the opportunity on gross margin? Just because the company is already running above the industry, it seems like, on the gross margin line. So can you just kind of talk about entitlement there? What is the opportunity to kind of grow that into the coming years? Thank you.
Chris Snyder: Thank you. I wanted to talk about the longer-term margin opportunity for the company. You know, I think when we look at the model, you know, we can see the SG&A as a percentage of sales is quite high compared to the competitors, so I think it's, you know, understandable, the opportunity there. But can you talk about the opportunity on gross margin? Just because the company is already running above the industry, it seems like, on the gross margin line. So can you just kind of talk about entitlement there? What is the opportunity to kind of grow that into the coming years? Thank you.
Thank you I wanted to talk about the longer term margin opportunity for the company.
I think when we look at the model, we can see the SG&A as a percentage of sales is quite high compared to the competitors. So I think it's understandable the opportunity there, but can you talk about the opportunity on gross margin just because the company is already running above the industry. It seems like on the gross margin line. So can you just kind of.
Talk about entitlement there what is the opportunity to kind of grow that into the coming years. Thank you.
Joakim Weidemanis: Hey, how are you? Yeah, that's a topic we've discussed in the past. And yes, our gross margins are running a little higher than some of our direct peers. I see opportunities there. I think we've discussed with at least some of you and some of your events the opportunity, for example, in footprint consolidation in our manufacturing setup. There's also an opportunity to continue to drive better productivity in our field on the service side of things. You know, you should think of the example that we've talked about in the work we've done with the business system, with our HVAC sellers, where we've been able to more than double the amount of time they spend with customers and selling.
Joakim Weidemanis: Hey, how are you? Yeah, that's a topic we've discussed in the past. And yes, our gross margins are running a little higher than some of our direct peers. I see opportunities there. I think we've discussed with at least some of you and some of your events the opportunity, for example, in footprint consolidation in our manufacturing setup. There's also an opportunity to continue to drive better productivity in our field on the service side of things. You know, you should think of the example that we've talked about in the work we've done with the business system, with our HVAC sellers, where we've been able to more than double the amount of time they spend with customers and selling.
Hey, how are you up yet.
Topic, we have discussed in the past and yes, our gross margins are running a little higher than some of our direct peers I see opportunities there.
I think we've discussed at least with some of you in some of your events the opportunity for example, and footprint consolidation and our manufacturing setup.
From, uh, Topline growth from the growth of the FC costs by applying to business system. And exactly the way we outlined at, uh, in the example that we gave, you know, it's basically help our sellers, uh, help them do their job, double the amount of time they can spend with with, with customers. And meanwhile, though, on on the R&D costs, uh, you know, our ambition is to significantly. And we have already this year in our plan and it's embedded in the guides um started to to ramp up our spend and R&D and that's going to continue to increase uh, at a very healthy rate uh, here going forward and um but we'll still be able to drive margin expansion because of uh the types of things that we're working on that I gave you examples over here. So Still Still Still unchanged, a view versus what we've talked about in the past.
Setup.
And there's also an opportunity to continue to drive better productivity in our field on the service side of things.
I see no reason for us uh and not being able to achieve the um, secondly bit margins. That's uh uh our our best performing peers have. And uh, and I think over time we should be able to even go beyond that and obviously they are not
Yes.
You should think of the example that we've talked about.
And are the work we've done with the business system with our HVAC sellers, where we've been able to more than double the amount of time, they spend with customers and selling and we have that kind of opportunity that we're already working on.
Uh, sitting still. We we recognize that and there are extremely capable, so we know that's a moving Target, but our opportunities are are plenty here.
Joakim Weidemanis: We have that kind of opportunity that we're already working on in a couple of our markets with our service teams. So I still see healthy runway to improve our gross margins. And then on SG&A, maybe, you know, on the A side of that, I mean, we are working away at just simply reducing our costs. You know, we are a smaller company than we were when we owned retail, and there continue to be cost reduction opportunities on the administrative costs of the SG&A. On the S side and the R&D spend within SG&A, you know, on the S side, I'll refer to the example with the HVAC sellers.
Joakim Weidemanis: We have that kind of opportunity that we're already working on in a couple of our markets with our service teams. So I still see healthy runway to improve our gross margins. And then on SG&A, maybe, you know, on the A side of that, I mean, we are working away at just simply reducing our costs. You know, we are a smaller company than we were when we owned retail, and there continue to be cost reduction opportunities on the administrative costs of the SG&A. On the S side and the R&D spend within SG&A, you know, on the S side, I'll refer to the example with the HVAC sellers.
And a couple of our markets with our service teams, so I still see.
Healthy runway to improve our gross margins and then on SG&A.
Maybe on the a side of that I mean, we are working away at it just simply reducing.
Our costs, we are a smaller company than we were when we owned retail and there are there continue to be cost reduction opportunities on the administrative cost.
Of the SG&A on the S side.
And the R&D spend.
Thank you, I really appreciate that. And then if I could maybe follow up on labor, availability in the market and particularly how it impacts the service business. Um, you know, we're, we're obviously labor seems like it's still tight out there when we see these orders and growth numbers, it feels like it will continue to get tight. Um you know, have you has there been any change from your perspective in the ability to kind of either recruit or retain service professionals and is this becoming a growing competitive Advantage for a company like jci who already has, you know, such a big, um, you know, technician base compared to some other smaller competitors, or upstarts in the market. Thank you.
Within SG&A on the S side I'll refer to the example, with the HVAC salaries.
Joakim Weidemanis: We think we can decouple the future growth from top-line growth from the growth of the SG&A cost by applying the business system and exactly the way we outlined it in the example that we gave. You know, basically help our sellers help them do their job, double the amount of time they can spend with customers. And meanwhile, though, on the R&D cost, you know, our ambition is to significantly, and we have already this year in our plan, and it's embedded in the guide, started to ramp up our spend in R&D, and that's going to continue to increase at a very healthy rate here going forward.
Joakim Weidemanis: We think we can decouple the future growth from top-line growth from the growth of the SG&A cost by applying the business system and exactly the way we outlined it in the example that we gave. You know, basically help our sellers help them do their job, double the amount of time they can spend with customers. And meanwhile, though, on the R&D cost, you know, our ambition is to significantly, and we have already this year in our plan, and it's embedded in the guide, started to ramp up our spend in R&D, and that's going to continue to increase at a very healthy rate here going forward.
We think we can decouple has a future growth.
Sure. I think the availability of service labor has, uh, been a topic for the last 15 years.
From a top line growth from the growth of the <unk> costs by acquiring the business system and exactly the way we outlined in the example that we gave you know basically help our sellers.
um and that's why, you know, so many companies including ours, um, you know, have been working on for several years, but now we've accelerated
Help them do their job double that by the time they comes bandwidth Wednesday with customers and Meanwhile, though on the R&D cost.
On uh looking at how we can make our our teams that we already have in the field, much more productive.
Our ambition is to significantly and we have already this year and our plan and it's embedded in the guide.
And, uh, again, you know, think the example of how we can double the amount of time, the sales people spend with customers, we can do the same thing and we're working on a similar thing with with our service team.
Started to ramp up our spend in R&D and that's going to continue to increase at a very healthy rate here going forward and but we'll still be able to drive margin expansion because of.
And uh, in that process work. But it's also uh in a much better way leveraging. You know, the connected installed base that we have
Joakim Weidemanis: But we'll still be able to drive margin expansion because of the types of things that we're working on that I gave you examples of here. So still, still unchanged view versus what we've talked about in the past. I see no reason for us not being able to achieve the segment EBIT margins that our our best-performing peers have. And and I think over time, we should be able to even go beyond that. And obviously, they are not sitting still. We we recognize that, and they are extremely capable, so we know that's a moving target, but our opportunities are are plenty here.
Joakim Weidemanis: But we'll still be able to drive margin expansion because of the types of things that we're working on that I gave you examples of here. So still, still unchanged view versus what we've talked about in the past. I see no reason for us not being able to achieve the segment EBIT margins that our our best-performing peers have. And and I think over time, we should be able to even go beyond that. And obviously, they are not sitting still. We we recognize that, and they are extremely capable, so we know that's a moving target, but our opportunities are are plenty here.
The types of things that we're working on that I'll give you examples of yourself still still unchanged view versus what we've talked about in the past.
And you reconfigure a little bit, um, how work is done field versus the office and so there's plenty of opportunity, lots to go out there.
I see no reason for us.
Not being able to achieve.
Now we do have uh like you pointed out a significantly larger Field Force than many of uh our our peers.
Segment EBIT margins that.
Our best performing peers have and and I think over time, we should be able to even go beyond that and obviously they are nuts.
Sitting still we recognize that and they are extremely capable. So we know that's another target, but our opportunities are are plenty here.
Chris Snyder: Thank you. I really appreciate that. Then, if I could maybe follow up on labor availability in the market, and particularly how it impacts the service business. I mean, we're obviously labor seems like it's still tight out there. When we see these orders and growth numbers, it feels like it will continue to get tight. You know, has there been any change from your perspective in the ability to kind of either recruit or retain service professionals? And is this becoming a growing competitive advantage for a company like JCI, who already has, you know, such a big technician base compared to some other smaller competitors or upstarts in the market? Thank you.
Chris Snyder: Thank you. I really appreciate that. Then, if I could maybe follow up on labor availability in the market, and particularly how it impacts the service business. I mean, we're obviously labor seems like it's still tight out there. When we see these orders and growth numbers, it feels like it will continue to get tight. You know, has there been any change from your perspective in the ability to kind of either recruit or retain service professionals? And is this becoming a growing competitive advantage for a company like JCI, who already has, you know, such a big technician base compared to some other smaller competitors or upstarts in the market? Thank you.
Thank you I really appreciate that and then if I could maybe follow up on labor availability in the market and particularly how it impacts the service business.
We're obviously labor seems like it's still tight out there when we see these orders and growth numbers. It feels like it will continue to get tight.
And uh, that is, uh, uh, an advantage. Um, so we want to make sure that we make them more capable, more productive, um, but we're also uh wanting them to provide even more value to our customers. So over the next couple of quarters you know, we're working on a number of service products offerings um, that we don't have today that will be be launching to the market and you'll hear more about that uh in in the future. So um um we're we're happy to have that advantage to to be able to leverage, but what we have to leverage it in a much, better way you do in the kinds of things that I would
Talking about here.
Thank you. The next question, goes to Julian Mitchell of Barkley's, Julian. Please go ahead.
Have you has there been any change from your perspective in the ability to kind of either recruit or retained service professionals.
And is this becoming a growing competitive advantage for a company like <unk>, who already has such a big.
Technician base compared to some other smaller competitors are up starts in the market. Thank you.
Joakim Weidemanis: Sure. I think the availability of service labor has been a topic for the last 15 years, so that's, it's hardly a new phenomenon. And that's why, you know, so many companies, including ours, you know, have been working on for several years. But now we've accelerated on looking at how we can make our teams that we already have in the field much more productive. And, again, you know, think the example of how we can double the amount of time the salespeople spend with customers. We can do the same thing, and we're working on a similar thing with our service team. And that's process work, but it's also, in a much better way, leveraging, you know, the connected installed base that we have.
Joakim Weidemanis: Sure. I think the availability of service labor has been a topic for the last 15 years, so that's, it's hardly a new phenomenon. And that's why, you know, so many companies, including ours, you know, have been working on for several years. But now we've accelerated on looking at how we can make our teams that we already have in the field much more productive. And, again, you know, think the example of how we can double the amount of time the salespeople spend with customers. We can do the same thing, and we're working on a similar thing with our service team. And that's process work, but it's also, in a much better way, leveraging, you know, the connected installed base that we have.
Sure I think the availability of service labor has.
Hi, good morning. Um, I just wanted to start off with slide 9 and 10, um, just to try and understand, I guess the, uh, tie in of the systems, uh, orders to the, um, systems Revenue. Because again, with that very high order growth, and, and your lead times of you've made good progress bringing those down.
And a topic for the last 15 years.
So that's it's hardly a new phenomenon.
Would have thought you'd get some translation of that into Revenue, this fiscal year. So, is it the case that the customers are
And that's why so many companies including ours.
You know I have been working on for several years, but now we've accelerated.
On looking at how we can make our teams that we already have in the field much more productive.
Specifically, placing orders that are very long dated, um, and also wanted to understand what you use to call products. Um, is that still not in the order numbers on slide, 9, and, and anything to call out with what's happening with products.
And again I think the example of how we can double the amount of time and the salespeople spend with customers. We can do the same thing and we're working on a similar thing with our service team.
And in that process work, but it's also in a much better way leveraging.
Yeah, thanks Julian. So yeah the the backlog strain is is very encouraging. Um but the mix of that backlog and the timing of of of of the Border portfolio dynamic.
The connected install base that we have.
Joakim Weidemanis: And you reconfigure a little bit how work is done in the field versus the office. So there's plenty of opportunities, lots to go out there. Now, we do have, like you pointed out, a significantly larger field force than many of our peers, and that is an advantage. So we want to make sure that we make them more capable, more productive, but we're also wanting them to provide even more value to our customers. So over the next couple of quarters, you know, we're working on a number of service product offerings that we don't have today, that we'll be launching to the market, and you'll hear more about that in the future.
Joakim Weidemanis: And you reconfigure a little bit how work is done in the field versus the office. So there's plenty of opportunities, lots to go out there. Now, we do have, like you pointed out, a significantly larger field force than many of our peers, and that is an advantage. So we want to make sure that we make them more capable, more productive, but we're also wanting them to provide even more value to our customers. So over the next couple of quarters, you know, we're working on a number of service product offerings that we don't have today, that we'll be launching to the market, and you'll hear more about that in the future.
And you reconfigure a little bit.
And how work is done in field versus the office and so there's plenty of opportunity loss to go out there.
Uh today only supports the, the mids single digit guide, we're providing. Um I would say we started the year on the lower range of that mid single digit range.
Now we do have head like you pointed out a significantly larger field force than many of our peers.
And that is.
An advantage.
So we want to make sure that we make them more capable and more productive.
Um and I think we are going to print the the second half on on on on the the the higher uh half of that range, the better half of that range. Um and if you look at the the content of that backlog um
But we're also wanting them to provide even more value to our customers. So over the next couple of quarters. You know, we're working on a number of service products offerings.
We don't have today that we'll be launching to the market and you'll hear more about that.
In the future so.
Joakim Weidemanis: So, we're happy to have that advantage to be able to leverage, but we have to leverage it in a much better way, doing the kinds of things that I was talking about here.
Joakim Weidemanis: So, we're happy to have that advantage to be able to leverage, but we have to leverage it in a much better way, doing the kinds of things that I was talking about here.
We're happy to have that advantage to be able to leverage but we have to leverage it in a much better way of doing the kinds of things that I was talking about here.
Operator: Thank you. The next question goes to Julian Mitchell of Barclays. Julian, please go ahead.
Operator: Thank you. The next question goes to Julian Mitchell of Barclays. Julian, please go ahead.
Thank you. The next question go to Julian Mitchell of Barclays. Julian. Please go ahead.
Julian Mitchell: Hi, good morning. I just wanted to start off with slide 9 and 10. Just to try and understand, I guess, the tie-in of the systems orders to the systems revenue. Because again, with that very high order growth and your lead times of you've made good progress bringing those down, would have thought you'd get some translation of that into revenue this fiscal year. So is it the case that the customers are specifically placing orders that are very long dated? And I also wanted to understand what you used to call products. Is that still not in the order numbers on slide 9, and anything to call out with what's happening with products?
Julian Mitchell: Hi, good morning. I just wanted to start off with slide 9 and 10. Just to try and understand, I guess, the tie-in of the systems orders to the systems revenue. Because again, with that very high order growth and your lead times of you've made good progress bringing those down, would have thought you'd get some translation of that into revenue this fiscal year. So is it the case that the customers are specifically placing orders that are very long dated? And I also wanted to understand what you used to call products. Is that still not in the order numbers on slide 9, and anything to call out with what's happening with products?
Hi, good morning.
I just wanted to start off with slide nine and 10, just to try and understand I guess the.
Tie in of the systems orders to the system's revenue because again with that very high order growth and Youll lead times of you've made good progress, bringing those down I would've thought.
All of it could be shippable right in the uh, in the next 12 months. Um, but a lot of it, uh, depends on customer availability, and customer ability to accept that orders. And the way, uh, the dynamic works with some of our larger relationship is, uh, it's an ongoing conversation with those with those customers. Um, the quicker, they can take it. The quicker, we can turn Revenue. Uh, there's obviously at a certain level of growth, the capacity constraint, but we don't believe we've reached that capacity constraint. Just yet, there's opportunity to to improve there. But overall, we think that, uh, that, uh, that backlog continues to support a, a, a, a solid mid, single digit, probably guide. Um, what what I would say is, is if you continue to, um, unfold that backlog beyond the next 12 months, I think will be very comfortable to start uh, talking about a a a slightly better growth than than what we've seen Maybe
In in in in the quiet quarter.
You'd get some translation of that into revenue. This fiscal year. So is it the case that the customers are.
The next question, goes to Andrew Oban of Bank of America Andrew. Please go ahead.
Hey, yes. Good morning. Can you hear me?
Specifically, placing orders set are very long dated.
And also wanted to understand what you used to call products.
Hi, Andrew. Yes, we can. Thank you for asking. Yeah, good morning.
Is that still not in the order numbers on slide nine and anything to call out with what's happening with products.
Marc Vandiepenbeeck: Yeah. Thanks, Julian. So, yeah, the backlog strain is very encouraging. But the mix of that backlog and the timing of the broader portfolio dynamic today only supports the mid-single-digit guide we're providing. I would say we started the year on the lower range of that mid-single-digit range. And I think we are gonna print the second half on the higher half of that range, the better half of that range. And if you look at the content of that backlog, all of it could be shippable, right? In the next 12 months. But a lot of it depends on customer availability and customer ability to accept that orders.
Marc Vandiepenbeeck: Yeah. Thanks, Julian. So, yeah, the backlog strain is very encouraging. But the mix of that backlog and the timing of the broader portfolio dynamic today only supports the mid-single-digit guide we're providing. I would say we started the year on the lower range of that mid-single-digit range. And I think we are gonna print the second half on the higher half of that range, the better half of that range. And if you look at the content of that backlog, all of it could be shippable, right? In the next 12 months. But a lot of it depends on customer availability and customer ability to accept that orders.
Yes. Thanks, you Dan So yes, the backlog strain is very encouraging, but the mix of that backlog and the timing of.
Yeah, of course. Uh, just a question. I'm in clearly improving throughput. Uh, has been a key kpi for you. And, you know, I think I'm trying to figure out this order thing as well. Uh, should we think that there is a relationship, uh, with freeing up more capacity and your ability to take more orders in the near term?
The boarder portfolio dynamic.
To be only supports the mid single digit guide we were providing.
I would see we started the year on the lower range of that mid single digit range.
Investments, and it is in physical plants and Machinery, uh, before I joined the company,
And I think we are going to print the second hull form on the the higher half of that range or better half of that range.
And uh so we more than tripled our capat physical capacity.
And if you look at the content of that backlog.
All of it could be shippable right in the in the next 12 months.
And then With The Lean work, the business system work, you know, there there's an opportunity to keep expanding that capacity materially very materially without having to spend the same amount of capital you know. We may need a little bit of capital here and there but nowhere close to what we spent uh, in the past.
But a lot of it depends on customer availability and customer ability to accept that orders in the way the dynamic works with some of our larger relationship is.
um, when um, larger customers uh, are negotiating or looking at
Marc Vandiepenbeeck: The way the dynamic works with some of our larger relationships is, it's an ongoing conversation with those with those customers. The quicker they can take it, the quicker we can turn revenue. There's obviously at a certain level of growth, a capacity constraint, but we don't believe we've reached that capacity constraint just yet. There's opportunity to improve there. But overall, we think that that backlog continues to support a solid mid-single-digit revenue guide. What I would say is if you continue to unfold that backlog beyond the next 12 months, I think we'll be very comfortable to start talking about a slightly better growth than what we've seen maybe in the prior quarter.
Marc Vandiepenbeeck: The way the dynamic works with some of our larger relationships is, it's an ongoing conversation with those with those customers. The quicker they can take it, the quicker we can turn revenue. There's obviously at a certain level of growth, a capacity constraint, but we don't believe we've reached that capacity constraint just yet. There's opportunity to improve there. But overall, we think that that backlog continues to support a solid mid-single-digit revenue guide. What I would say is if you continue to unfold that backlog beyond the next 12 months, I think we'll be very comfortable to start talking about a slightly better growth than what we've seen maybe in the prior quarter.
It's an ongoing conversation we have stores, we used those customer.
placing, um, uh, larger orders for, you know, the number data centers that they're planning over the next couple of years, 1 of the factors. They do look at and vendors as their ability to deliver.
The quicker they can take a day quicker weekend to a revenue.
There's obviously a certain level of growth so capacity constrained, which we don't believe we have reached our capacity Gulfstream just yet there's opportunity to improve there, but overall, we think that the that that backlog continues to support a solid mid single digit probably guide.
What I would say is is if you continue to.
Unfold that backlog beyond the next 12 months I think we'll be very comfortable to stopped talking about a slightly better growth than what we've seen maybe in.
And uh, it's the reliability proof points and the ability to turn things around quickly. That doesn't mean that they need things. You know, in 6 weeks from now, uh, they're, they're simply very super realistic about their own ability to plan ahead and manage all the construction work and so on. So, they know that their plans may change as the project progresses. And then they need a partner who can react quickly and be flexible on, on the factory side. So that's kind of where both the capacity the lead times and the reliability of the on-time delivery come in. So, yeah, it's definitely part of a competitive advantage in, in this, um, in this game that we're playing.
In the prior quarter.
Okay.
Operator: The next question goes to Andrew Obin of Bank of America. Andrew, please go ahead.
Operator: The next question goes to Andrew Obin of Bank of America. Andrew, please go ahead.
The next question goes to you Andrew <unk> of Bank of America, Andrew. Please go ahead.
Andrew Obin: Yes, good morning. Can you hear me?
Andrew Obin: Yes, good morning. Can you hear me?
Hey, guys. Good morning can you hear me.
Joakim Weidemanis: Hi, Andrew. Yes, we can. Thank you for asking.
Joakim Weidemanis: Hi, Andrew. Yes, we can. Thank you for asking.
Hi, Andrew Yes, we can thank you for asking.
Andrew Obin: Yeah, good morning. Yeah, of course. Just a question. I mean, clearly, improving throughput has been a key KPI for you, and, you know, I think I'm trying to figure out this order thing as well. Should we think that there is a relationship with freeing up more capacity and your ability to take more orders in the near term?
Andrew Obin: Yeah, good morning. Yeah, of course. Just a question. I mean, clearly, improving throughput has been a key KPI for you, and, you know, I think I'm trying to figure out this order thing as well. Should we think that there is a relationship with freeing up more capacity and your ability to take more orders in the near term?
Yes, good morning.
Of course.
Just a question I am clearly improving throughput has been a key kpis for you and I'm trying to figure out this order thing as well.
And just a follow-up question on slide 6. I mean, clearly you're highlighting this product introduction. I think a lot of us were in Vegas, uh and so are specifically white HD product which I think is very important for you and Lee ping, the competition. Uh, I use starting uh, to are we seeing the impact of this product introductions uh, on your orders? This quarter is this still in the come?
Should we think that there is a relationship was freeing up more capacity and your ability to take more orders in the near term.
Joakim Weidemanis: Yeah, absolutely. So, and on the capacity, you know, we made significant investments in phys- in physical plant and machinery, before I joined the company. And, so we more than, tripled our capa- physical capacity. And then with the lean work, the business system work, you know, there, there's an opportunity to keep expanding that capacity materially, very materially, without having to spend the same amount of capital. You know, we may need a little bit of capital here and there, but nowhere close to what we've spent, in the past.
Joakim Weidemanis: Yeah, absolutely. So, and on the capacity, you know, we made significant investments in phys- in physical plant and machinery, before I joined the company. And, so we more than, tripled our capa- physical capacity. And then with the lean work, the business system work, you know, there, there's an opportunity to keep expanding that capacity materially, very materially, without having to spend the same amount of capital. You know, we may need a little bit of capital here and there, but nowhere close to what we've spent, in the past.
Yeah.
Absolutely.
So.
And on the capacity, we made significant investments in <unk>.
And physical plant and machinery before I joined the company.
And so we more than tripled.
Tripled our capacity our capacity.
And then with the lean work the business system work.
There is an opportunity to keep expanding that capacity materially vary materially without having to spend the same amount of capital we may need a little bit of capital here and there, but nowhere close to what we spent.
In the past.
Joakim Weidemanis: When larger customers are negotiating or looking at placing larger orders for, you know, number of data centers that they're planning over the next couple of years, one of the factors they do look at in vendors is their ability to deliver, and it's the reliability, proof points, and the ability to turn things around quickly. That doesn't mean that they need things, you know, in six weeks from now. They're simply very super realistic about their own ability to plan ahead and manage all the construction work and so on. So they know that their plans may change as the project progresses, and then they need a partner who can react quickly and be flexible on the factory side. So that's kind of where both the capacity, the lead times, and the reliability of the on-time delivery come in.
When our larger customers.
Joakim Weidemanis: When larger customers are negotiating or looking at placing larger orders for, you know, number of data centers that they're planning over the next couple of years, one of the factors they do look at in vendors is their ability to deliver, and it's the reliability, proof points, and the ability to turn things around quickly. That doesn't mean that they need things, you know, in six weeks from now. They're simply very super realistic about their own ability to plan ahead and manage all the construction work and so on. So they know that their plans may change as the project progresses, and then they need a partner who can react quickly and be flexible on the factory side. So that's kind of where both the capacity, the lead times, and the reliability of the on-time delivery come in.
Our negotiating are looking at.
Lacing.
Uh, I think there's uh, it's very minor in the orders that we've taken so far, um, so it's more about what's to come. And by the way, those launches I did get a note from the team. So thanks for, uh, thanks for stopping by and spending time with our team there. Um, all all those new products, I mean, they are a result of the work that we, we do together with our customers. You know. I alluded to it earlier this morning, you know, we have large engineering teams coming in from from our customers and that sit with us for a week 10 days. And uh so we're we're creating the new uh, road map product roadmaps. You know, basically off of what they have learned by applying ours and and other people's products. And uh so that's why we're so excited about the launches that we have because we know that the, the, these precise needs are there and uh, we will be able to see that in our order entry. I expect, you know, already here, ramping in in the quarter, we're in already.
Orders for number of data centers that they're planning over the next couple of years one of the factors they do look at and vendors as their ability to deliver.
The next question because you Joe odia of Wells Fargo, Joe, please go ahead.
And if the reliability proof points and the ability to turn things around quickly that doesn't mean that they need things in six weeks from now.
There are simply very super realistic about their own ability to plan ahead and manage all the construction work and so on so they know that their plans may change as the project progresses, and then they need a partner who can react quickly and be flexible.
On the factory side, so that's kind of where both the capacity.
Hi, good morning. Um, just on on the capacity expansion and the tripling of physical capacity and is that, um, specific to chillers or includes Air, Handlers just any specificity around it and and kind of global versus Americas. And then um, you know, really just in terms of the, the fixed cost impact that that has today, any quantification of of a burden today and and sort of how you see that improving, you know, over the next 12 months or so.
Lead times and the reliability of the on time delivery covenants. So yeah, it's definitely part of our competitive advantage in this in this game that we're playing.
Joakim Weidemanis: So yeah, it's definitely part of a competitive advantage in this game that we're playing.
Joakim Weidemanis: So yeah, it's definitely part of a competitive advantage in this game that we're playing.
Andrew Obin: Just a follow-up question on slide six. I mean, clearly you're highlighting this product introduction. I think a lot of us were in Vegas, and saw specifically YK-HD product, which I think is very important for you and lead product in the competition. Are we seeing the impact of these product introductions on your orders this quarter, or is this still on the come?
Andrew Obin: Just a follow-up question on slide six. I mean, clearly you're highlighting this product introduction. I think a lot of us were in Vegas, and saw specifically YK-HD product, which I think is very important for you and lead product in the competition. Are we seeing the impact of these product introductions on your orders this quarter, or is this still on the come?
And just a follow up question on slide six I mean, clearly youre highlighting this product introduction I think a lot of us were in Vegas.
More specific or Waikiki product, which I think is very important for you and leapfrog the competition.
Are you starting to.
We're seeing the impact of these product introductions on your orders this quarter or is that still to come.
Um, the uh, the good question, the, the answer is that, you know, we have had invested in capacity across the board and meaning chillers air handling units. And, um, because of the investments in the air handling unit capacity. Um, we also made room for the CDU business that we, uh, uh, launched into here a couple couple of quarters ago, the sixth cost aspects of those Investments have already been in our run rate for more than a year
Joakim Weidemanis: I think there's, it's very minor in the orders that we've taken so far. So it's more about what's to come. And by the way, those launches, I did get a note from the team, so thanks for stopping by and spending time with our team there. All those new products, I mean, they are a result of the work that we do together with our customers. You know, I alluded to it earlier this morning. You know, we have large engineering teams coming in from our customers, and that sit with us for a week, 10 days, and so we're creating the new roadmap, product roadmaps, you know, basically off of what they have learned by applying ours and other people's products.
I think there is.
Joakim Weidemanis: I think there's, it's very minor in the orders that we've taken so far. So it's more about what's to come. And by the way, those launches, I did get a note from the team, so thanks for stopping by and spending time with our team there. All those new products, I mean, they are a result of the work that we do together with our customers. You know, I alluded to it earlier this morning. You know, we have large engineering teams coming in from our customers, and that sit with us for a week, 10 days, and so we're creating the new roadmap, product roadmaps, you know, basically off of what they have learned by applying ours and other people's products.
It's very minor in the orders that we've taken so far.
And presumably, that's a Tailwind. Kind of each quarter in terms of utilization.
So it's more about what's to come and by the way those launches I did get a note from the team. So thanks for thanks for stopping by and spending time with our team there.
All of those new products I mean, they are a result of the work that we do together with our customers and I alluded to it.
It creates leverage opportunity of the volume comes in. Absolutely yeah. Yeah. And as we continue to, um, work on, on the lean work to EK out more capacity without adding fixed costs. Yeah.
Earlier. This morning, we have a large engineering teams coming in from our customers and that sit with us for a week 10 days and so.
Thank you. The next question, gives you adequate Wits of City Group. Andy, please go ahead.
Hey, good morning, everyone.
I think.
So where we're creating the new roadmap product roadmaps.
Basically off of what they have learned by applying ours and other people's products and.
Joakim Weidemanis: So that's why we're so excited about the launches that we have, because we know that these precise needs are there, and we will be able to see that in our order entry. I expect, you know, already here ramping in the quarter we're in already.
Joakim Weidemanis: So that's why we're so excited about the launches that we have, because we know that these precise needs are there, and we will be able to see that in our order entry. I expect, you know, already here ramping in the quarter we're in already.
So that's why we're so excited about the launches that we have because we know that the these precise needs are there and we will be able to see that in our order entry I expect you know already here ramping in the quarter we're in already.
Economy looking a little better.
I'd say there's there's no material change in in the markets. Uh, I think the change, you know that we we are working on operationally.
Operator: The next question goes to Joe O'Dea of Wells Fargo. Joe, please go ahead.
Operator: The next question goes to Joe O'Dea of Wells Fargo. Joe, please go ahead.
The next question to C. J the idea of Wild Sockeye Jae. Please go ahead.
Marc Vandiepenbeeck: Hi, good morning. Just on the capacity expansion and the tripling of physical capacity, and is that specific to chillers or includes air handlers? Just any specificity around it and kind of global versus Americas. And then, you know, really just in terms of the fixed cost impact that has today, any quantification of a burden today and sort of how you see that improving, you know, over the next 12 months or so?
Joseph O'Dea: Hi, good morning. Just on the capacity expansion and the tripling of physical capacity, and is that specific to chillers or includes air handlers? Just any specificity around it and kind of global versus Americas. And then, you know, really just in terms of the fixed cost impact that has today, any quantification of a burden today and sort of how you see that improving, you know, over the next 12 months or so?
Hi, good morning.
Just on the capacity expansion and the tripling of physical capacity and is that specific.
Um, is that what you heard me talk about? Uh I talked about the HVAC seller capacity time with customers and so on that kind of work, you know, we've embarked on in the other.
Specific to Chillers or includes air handlers, just any specificity around it and kind of global versus Americas and then.
Really just in terms of the the fixed cost impact that that has today any quantification of a burden today and sort of how you see that improving over the next 12 months or so.
Joakim Weidemanis: The good question. The answer is that, you know, we have had invested in capacity across the board, meaning chillers, air handling units, and, because of the investments in the air handling units capacity, we also made room for the CDU business that we launched into here a couple of quarters ago. The fixed cost aspects of those investments have already been in our run rate for more than a year. And presumably, that's a tailwind kind of each quarter in terms of utilization.
Joakim Weidemanis: The good question. The answer is that, you know, we have had invested in capacity across the board, meaning chillers, air handling units, and, because of the investments in the air handling units capacity, we also made room for the CDU business that we launched into here a couple of quarters ago. The fixed cost aspects of those investments have already been in our run rate for more than a year. And presumably, that's a tailwind kind of each quarter in terms of utilization.
Good question the answer is that we have.
Uh, parts of the company as well. And uh, and then um, for those the Fire and Security businesses, we're also looking over. Um, how are we? Where are we specifically pointing the effort at what parts of the market and uh, trying to help that team? You know, just be more clear about, you know, our priorities and and, uh, making sure that, um, we're behaving, uh, and, uh, in the way and pointing the effort at the most attractive parts of the market,
Invested in capacity across the board, meaning Chillers air handling units and because of the investments in the air handling units capacity.
We also made room for the CDU business that we.
Um so um like I like I mentioned before when I got the portfolio question, where regardless of what the outcome is on the portfolio? We're making sure that um, you know, we improve the uh execution, the operational performance of all parts, of Johnson Control,
Launched answer here, a couple of quarters ago, the fixed cost aspects of those investments have already been in our run rate for more than a year.
And presumably that's a tailwind kind of each quarter in terms of utilization it creates leverage opportunity of the volume absolutely yes.
Joe Ritchie: It creates leverage opportunity as the volume comes in. Absolutely.
Joseph O'Dea: It creates leverage opportunity as the volume comes in. Absolutely.
I think that's helpful and then maybe I just want to ask the sort of uh capacity question in a different way. Like obviously you're getting larger orders now and to become a bigger part of the portfolio. I assume they're competitive on pricing but what's your ability to scale these projects themselves? I mean, you know maybe you have 50 Killers or 100 killers in each of these orders. Can you get better margin on these individual projects moving forward?
Joakim Weidemanis: Yeah. Yeah, yeah. And as we continue to-
Joakim Weidemanis: Yeah. Yeah, yeah. And as we continue to-
And as we continue to.
Joe Ritchie: Yep
Joseph O'Dea: Yep
Joakim Weidemanis: work on the lean work to eke out more capacity without adding fixed costs, yeah.
Joakim Weidemanis: work on the lean work to eke out more capacity without adding fixed costs, yeah.
Work on the lean work to Eke out more capacity without adding fixed costs yet.
Operator: Thank you. The next question goes to Andy Kaplowitz of Citigroup. Andy, please go ahead.
Operator: Thank you. The next question goes to Andy Kaplowitz of Citigroup. Andy, please go ahead.
Thank you. The next question gives you Andy Kaplowitz of Citigroup. Please go ahead.
Uh, in terms of our ability to scale, their there are no. Um we have no major bottlenecks at at this point in time at least um and um
Andy Kaplowitz: Hey, good morning, everyone.
Andrew Kaplowitz: Hey, good morning, everyone. Andy.
Hey, good morning, everyone.
Joe Ritchie: Andy.
and to some extent, you know, larger orders have always been part of. If we talk about data centers,
Andy.
Andy Kaplowitz: Good morning. I think fire and security markets, I think you said were up, like, low single digits in the quarter. But as you know, a lot of that business is a short cycle. So are you seeing an improvement in sort of more of your short cycle markets these days, you know, given where the global economy is and specifically the US economy looking a little better?
Andrew Kaplowitz: Good morning. I think fire and security markets, I think you said were up, like, low single digits in the quarter. But as you know, a lot of that business is a short cycle. So are you seeing an improvement in sort of more of your short cycle markets these days, you know, given where the global economy is and specifically the US economy looking a little better?
Good morning.
I think fair and security markets. I think you said were up like low single digits in the quarter, but as you know a lot of those businesses are a short cycle. So are you seeing an improvement in sort of more of your short cycle markets. These days.
Given where the global economy is was specifically the U S economy looking a little better.
Joakim Weidemanis: I'd say there's no material change in the markets. I think the change, you know, that we are working on operationally, is what you heard me talk about. I talked about the HVAC seller capacity time with customers and so on. That kind of work, you know, we've embarked on in the other parts of the company as well.
Joakim Weidemanis: I'd say there's no material change in the markets. I think the change, you know, that we are working on operationally, is what you heard me talk about. I talked about the HVAC seller capacity time with customers and so on. That kind of work, you know, we've embarked on in the other parts of the company as well.
I'd say, there's there's no material change in the markets.
I think the change that we are working on operationally.
Is that what you heard me talk about Ah I talked about the HVAC seller capacity time with customers. This on that kind of work we've embarked on.
Um but by the way, on, on the Pharma side that I uh commented on on some of the prepared remarks here too. Some of those Factory buildups um are um also significant, you know projects. So um that's not a new phenomena and and the capacity bill that I talked about. It isn't just the physical facilities. It's also you know, the resources around that project engineering teams project management teams and and uh, you know, capabilities like that. So so we we have made those Investments as well. And our, our um, working on improving, uh, our ability to get more out of those teams.
The other.
Parts of the company as well and and then for those the fire and security businesses. We're also looking over.
Joakim Weidemanis: Then, for those, the fire and security businesses, we're also looking over where we are specifically pointing the effort, at what parts of the market, and trying to help that team, you know, just be more clear about, you know, our priorities and making sure that we're behaving in the way and pointing the effort at the most attractive parts of the market. So, like I mentioned before, when I got the portfolio question, we're, regardless of what the outcome is on the portfolio, making sure that, you know, we improve the execution, the operational performance of all parts of Johnson Controls.
And it's the same lean principles. We're applying in those teams as we're applying and, and, uh, in the factories.
Joakim Weidemanis: Then, for those, the fire and security businesses, we're also looking over where we are specifically pointing the effort, at what parts of the market, and trying to help that team, you know, just be more clear about, you know, our priorities and making sure that we're behaving in the way and pointing the effort at the most attractive parts of the market. So, like I mentioned before, when I got the portfolio question, we're, regardless of what the outcome is on the portfolio, making sure that, you know, we improve the execution, the operational performance of all parts of Johnson Controls.
How are we where are we specifically pointing the effort at what parts of the market and.
Uh, on on the margins. I mean, these are um, of course, uh discussions where obviously the the customers ask for.
To help that team just.
Be more clear about our priorities and making sure that.
We're behaving.
And the way endpoints and the effort at the most attractive parts of the market.
Multiple bids uh, uh but then also, you know, there's an ongoing discussion as you heard of, they send their engineering teams, they sit with our engineering teams. And and uh, we try and come up with
So I guess like I mentioned before when I got the portfolio question of where regardless of what the outcome is on the portfolio, we're making sure that.
We improve the execution on the operational performance of all parts of Johnson controls.
Andy Kaplowitz: I think that's helpful. And then maybe I just want to ask the sort of, capacity question a different way. Like, obviously, you're getting larger orders now and to become a bigger part of the portfolio. I assume they're competitive on pricing, but what's your ability to scale these projects themselves? I mean, you know, maybe you have 50 chillers or 100 chillers in each of these orders. Can you get better margin on these individual projects moving forward?
Andrew Kaplowitz: I think that's helpful. And then maybe I just want to ask the sort of, capacity question a different way. Like, obviously, you're getting larger orders now and to become a bigger part of the portfolio. I assume they're competitive on pricing, but what's your ability to scale these projects themselves? I mean, you know, maybe you have 50 chillers or 100 chillers in each of these orders. Can you get better margin on these individual projects moving forward?
I think thats helpful. And then maybe I just wanted to ask sort of capacity question a different way like obviously, you're getting larger orders now and to become a bigger part of the portfolio I assume theyre competitive on pricing, but what's your ability to scale. These projects themselves I mean, maybe you have.
A solution that uh, really offer real tangible value, and it costs, less energy consumption, more cost savings, and things like that. And as we do that work, we of course, look at opportunities for us to also, uh, be very, very cost competitive. So I there's no particular, uh, margin headwind coming out of this. Uh, if if that's the question, we, we don't see that at this point in time.
Thank you. The next question. Goes to Joe Richie or Goldman Sachs, Joe. Please go ahead.
Uh, thank you. Good morning and, uh, thanks for putting me in
The Chillers are hundred Chillers in each of these orders can you get better margin on these individual projects moving forward.
Yeah.
Joakim Weidemanis: In terms of our ability to scale, we have no major bottlenecks at this point in time, at least. To some extent, you know, larger orders have always been part of it if we talk about data centers. But by the way, on the pharma side that I commented on in some of the prepared remarks here, too, some of those factory buildouts are also significant, you know, projects. So, that's not a new phenomenon. The capacity build that I talked about, it isn't just the physical facilities, it's also, you know, the resources around that, project engineering teams, project management teams, and, you know, capabilities like that.
Yes.
Joakim Weidemanis: In terms of our ability to scale, we have no major bottlenecks at this point in time, at least. To some extent, you know, larger orders have always been part of it if we talk about data centers. But by the way, on the pharma side that I commented on in some of the prepared remarks here, too, some of those factory buildouts are also significant, you know, projects. So, that's not a new phenomenon. The capacity build that I talked about, it isn't just the physical facilities, it's also, you know, the resources around that, project engineering teams, project management teams, and, you know, capabilities like that.
In terms of our ability to scale with their there are no and no.
We have no major bottlenecks at this point in time at least.
So, um, look Yoko, you sounded, uh, you know, obviously uh very happy about the record order quarter. Sounds like you're pretty sanguine on the pipeline as well. If if you could maybe just characterize, what the pipeline of orders looks like today versus maybe 3 to 6 months ago, and then and then also um as you kind of think about your
Uh huh.
And to some extent larger orders have always been part of if we talk about data centers.
But by the way on the pharma side.
Data center customers, has there been any real discernible shift, uh, in like colos versus hyperscalers and where you're seeing demand growth today?
Comments around some of the prepared remarks here to some of those factory build outs.
Also significant project so.
Uh, pipeline continues to remain very healthy and healthier.
Um, it we are also doing um,
That's not a new phenomenon and the capacity build that I talked about it it isn't just the physical facilities.
It's also.
Resources around that project engineering teams project management teams.
And capabilities like that so so we have made those investments as well and are working.
Joakim Weidemanis: So we have made those investments as well and are working on improving our ability to get more out of those teams. And it's the same Lean principles we're applying in those teams as we're applying in the factories. On the margins, I mean, these are, of course, discussions where obviously the customers ask for multiple bids. But then also, you know, there's an ongoing discussion, as you heard, of they send their engineering teams, they sit with our engineering teams, and we try and come up with solutions that really offer real tangible value, cost, less energy consumption, more cost savings, and things like that.
Joakim Weidemanis: So we have made those investments as well and are working on improving our ability to get more out of those teams. And it's the same Lean principles we're applying in those teams as we're applying in the factories. On the margins, I mean, these are, of course, discussions where obviously the customers ask for multiple bids. But then also, you know, there's an ongoing discussion, as you heard, of they send their engineering teams, they sit with our engineering teams, and we try and come up with solutions that really offer real tangible value, cost, less energy consumption, more cost savings, and things like that.
I should, um, and it's not that things are just falling in our laps, you know, we we're working with our sales teams around the world. So, in addition to the example, I gave you about the, uh, double the the amount of time that our HVAC sellers in 1 region are spending with customers.
Working on improving our <unk>.
ICal pragmatic.
Our ability to get more out of those teams and it's the same lean principles, we are applying and those things that we're playing in.
Um, pipeline management approach, uh, which basically aims to, um,
In the factories.
On the margins I mean, these are and of course.
help and teach our sales leaders and our sales individual sales contributors
Discussions, where obviously they cut their customers ask for.
Multiple bids are.
But then also you know there is an ongoing discussion as you heard of <unk>.
Send their engineering teams I sit with our engineering teams and we'll try and come up with.
Solutions that are.
Really offer real tangible value cost less energy consumption more cost savings and things like that and as we do that work. We of course looked at opportunities for us to also be very very cost competitive so.
Joakim Weidemanis: And as we do that work, we of course look at opportunities for us to also be very, very cost competitive. So I- there's no particular margin headwind coming at us, if that's the question, we don't see that at this point in time.
Joakim Weidemanis: And as we do that work, we of course look at opportunities for us to also be very, very cost competitive. So I- there's no particular margin headwind coming at us, if that's the question, we don't see that at this point in time.
On how to more uh, effectively plan and spend their their time and uh, in my experience, having done that. A number of times. What, what tends to happen is that, um, you know, you you just get better pipeline growth and over time, um, you you are positioning yourself for for even better order growth. So, so that's on the pipeline. Um, so, uh, and, and of course, the result of, uh, as I alluded to, in my prepared comments here, being much, much more, deliberate with our teams about which parts of the market. We want to go after
There's no particular.
The margin headwind coming at us.
If that's the question we don't see that at this point in time.
um versus maybe not as important that has that has an impact as well as as you shift your effort more to the parts of the market that have healthier growth rate, growth rates your your mix of your pipeline and order entry, of course, changes as as well
Operator: Thank you. The next question goes to Joe Ritchie of Goldman Sachs. Joe, please go ahead.
Operator: Thank you. The next question goes to Joe Ritchie of Goldman Sachs. Joe, please go ahead.
Thank you. The next question guys, Hey, Joe Ritchie of Goldman Sachs. Please go ahead.
Joe Ritchie: Thank you. Good morning, and thanks for fitting me in. So, look, Joakim, you sounded, you know, obviously, very happy about the record order quarter. Sounds like you're pretty sanguine on the pipeline as well. If, if you could maybe just characterize what the pipeline of orders looks like today versus maybe three to six months ago. And then, and then also, as you kind of think about your data center customers, has there been any real discernible shift, in, like, colos versus hyperscalers and where you're seeing demand growth today?
Joe Ritchie: Thank you. Good morning, and thanks for fitting me in. So, look, Joakim, you sounded, you know, obviously, very happy about the record order quarter. Sounds like you're pretty sanguine on the pipeline as well. If, if you could maybe just characterize what the pipeline of orders looks like today versus maybe three to six months ago. And then, and then also, as you kind of think about your data center customers, has there been any real discernible shift, in, like, colos versus hyperscalers and where you're seeing demand growth today?
Thank you good morning, and thanks for fitting me in.
So I'm.
Look yocum you sounded.
Obviously very happy about the record order quarter sounds like Youre pretty sanguine on the pipeline as well.
Um, and then qless versus Hyper. Yeah, yeah. I, I mean, there are uh, incremental changes and how certain hyperscalers, or colos of approach, uh, how they do business and
If you could maybe just characterize what the pipeline of orders looks like today versus maybe three to six months ago, and then and then also.
You kind of think about your data center customers has there been any real discernible shift.
In light colors versus hyper scaler, and where youre seeing demand growth today.
Joakim Weidemanis: Pipeline continues to remain very healthy and healthier. We are also doing... And it's not that things are just falling in our laps. You know, we're working with our sales teams around the world. So in addition to the example I gave you about the doubling the amount of time that our HVAC sellers in one region are spending with customers, you know, we are also in the process of rolling out a very practical, pragmatic pipeline management approach, which basically aims to help and teach our sales leaders and our individual sales contributors on how to more effectively plan and spend their time.
But the pipeline continues to remain very healthy.
Joakim Weidemanis: Pipeline continues to remain very healthy and healthier. We are also doing... And it's not that things are just falling in our laps. You know, we're working with our sales teams around the world. So in addition to the example I gave you about the doubling the amount of time that our HVAC sellers in one region are spending with customers, you know, we are also in the process of rolling out a very practical, pragmatic pipeline management approach, which basically aims to help and teach our sales leaders and our individual sales contributors on how to more effectively plan and spend their time.
And healthier.
We are also doing.
Should.
And uh how how they buy and who they partner with and so on. Um, but they're look, they're no real material changes and how the big players are are behaving. Um, I think as a result of our growth uh uh in the future, it started to. But more in the future we'll uh, come from also from Asia Pac and and Europe. And uh, the mix there of hyperscalers versus, let's call them Lo local players local colos is uh, a little different than in the United States, but materially different. Um, so I think if anything, you know, our our um, Data Center business is going to broaden, uh, and I think that's a good thing.
And it's not that things are just falling in our labs, where we're working with our sales teams around the world. So in addition to the example, I gave you about the doubling the amount of time that our HVAC sellers in one region or spending with customers.
Thank you, this concludes our Q&A session. I will hand the call back over to Yo. Kim. Water. Manis for any closing comments.
We are also in the process of rolling out a very practical pragmatic.
Pipeline management approach, which basically ends too.
Health and teach our sales leaders and our sales individual sales <unk>.
Thank you, and thank you for all your questions today. And thank you for those of you who visit our booth at ahr, um, we certainly have kept our team on their toes there. So if a great great to have you and host you there, hey, this quarter's results. Reflect the momentum that's building across Johnson Controls
On how to more effectively plan of spend their time and in my experience, having done that a number of times with what tends to happen is that you.
Joakim Weidemanis: In my experience, having done that a number of times, what tends to happen is that, you know, you just get better pipeline growth, and over time, you are positioning yourself for even better order growth. So that's on the pipeline. Of course, the results, as I alluded to in my prepared comments here, being much more deliberate with our teams about which parts of the market we wanna go after, versus maybe not as important, that has an impact, as well. So as you shift your effort more to parts of the market that have healthier growth rate, growth rates, your mix of your pipeline and order entry, of course, changes as well.
Joakim Weidemanis: In my experience, having done that a number of times, what tends to happen is that, you know, you just get better pipeline growth, and over time, you are positioning yourself for even better order growth. So that's on the pipeline. Of course, the results, as I alluded to in my prepared comments here, being much more deliberate with our teams about which parts of the market we wanna go after, versus maybe not as important, that has an impact, as well. So as you shift your effort more to parts of the market that have healthier growth rate, growth rates, your mix of your pipeline and order entry, of course, changes as well.
As our teams operate with greater Clarity discipline and consistency. And we're seeing those improvements show up and how we serve customers and, and in the strength of our results, as you can see,
You just get better pipeline growth and overtime.
You are positioning yourself for for even better order growth. So so that's on the pipeline.
I want to thank our 90,000 colleagues for their commitment and energy, your focus and ownership are what? Give me such confidence in our opportunities to have
I look forward to continuing my conversations with all of our stakeholders. Thank you for joining us today.
So and of course the.
The result of as I alluded to in my prepared comments here being much much more deliberate with our teams about which parts of the market we want to go after.
This now concludes today's call, thank you for joining and you may now disconnect your lines.
Versus maybe not as important that has that has an impact as well as you shift your effort more to parts of the markets that have out their growth rate growth rates. Your mix of your pipeline and order entry of course changes as well.
Marc Vandiepenbeeck: And then Colos versus hypers, yeah.
Marc Vandiepenbeeck: And then Colos versus hypers, yeah.
And then kudos versus hybrid.
Joakim Weidemanis: Yeah, I mean, there are incremental changes in how certain hyperscalers or colos approach how they do business and how they buy and who they partner with, and so on. But there, look, there are no real material changes in how the big players are behaving. I think as a result of our growth, in the future, it started to, but more in the future, will come from also from Asia Pac and Europe. And the mix there of hyperscalers versus, let's call them local players, local colos, is a little different than in the United States, but materially different. So I think if anything, you know, our data center business is gonna broaden, and I think that's a good thing.
Joakim Weidemanis: Yeah, I mean, there are incremental changes in how certain hyperscalers or colos approach how they do business and how they buy and who they partner with, and so on. But there, look, there are no real material changes in how the big players are behaving. I think as a result of our growth, in the future, it started to, but more in the future, will come from also from Asia Pac and Europe. And the mix there of hyperscalers versus, let's call them local players, local colos, is a little different than in the United States, but materially different. So I think if anything, you know, our data center business is gonna broaden, and I think that's a good thing.
Yeah, I mean, there are.
Incremental changes and how certain hyper scaler or Colo so approach.
How they do business in.
And how they buy and who they partner with and so on.
But there look there no real material changes in how the big players are behaving.
I think as a result of our growth.
And the future is started to but more in the future well.
Come from also from Asia Pac and in Europe.
And the mix there of hyperscale or us versus let's call them low local players.
Carlos is a little different than in the United States that materially different.
So I think if anything you know R. R.
Datacenter business is going to broaden our and I think that's a good thing.
Operator: Thank you. This concludes our Q&A session. I will hand the call back over to you, Joakim Weidemanis, for any closing comments.
Operator: Thank you. This concludes our Q&A session. I will hand the call back over to you, Joakim Weidemanis, for any closing comments.
Thank you. This concludes our Q&A session I will hand, the call back over to it yes, the Kim <unk> for any closing comments.
Joakim Weidemanis: Thank you, and thank you for all your questions today. Thank you for those of you who visited our booth at AHR. You certainly kept our team on their toes there, so, but great, great to have you and host you there. This quarter's results reflect the momentum that's building across Johnson Controls as our teams operate with greater clarity, discipline, and consistency. We're seeing those improvements show up in how we serve customers and in the strength of our results, as you can see. I wanna thank our 90,000 colleagues for their commitment and energy. Your focus and ownership are what give me such confidence in our opportunities ahead. But I look forward to continuing my conversations with all of our stakeholders. Thank you for joining us today.
Joakim Weidemanis: Thank you, and thank you for all your questions today. Thank you for those of you who visited our booth at AHR. You certainly kept our team on their toes there, so, but great, great to have you and host you there. This quarter's results reflect the momentum that's building across Johnson Controls as our teams operate with greater clarity, discipline, and consistency. We're seeing those improvements show up in how we serve customers and in the strength of our results, as you can see. I wanna thank our 90,000 colleagues for their commitment and energy. Your focus and ownership are what give me such confidence in our opportunities ahead. But I look forward to continuing my conversations with all of our stakeholders. Thank you for joining us today.
Thank you and thank you for all your questions today and thank you for those of you who visited our booth that HR.
Certainly.
Our team on their toes there so a great great to have you in house you. There at this quarter's results reflect the momentum that's building across Johnson controls.
As our teams operate with greater clarity discipline and consistency and we're seeing those improvements show up in how we serve customers in this and in the strength of our results as you can see.
I want to thank our 90000 colleagues for their commitment and energy. Your focus on ownership are what gives me such confidence in our opportunities ahead I look forward to continuing my conversations with all of our stakeholders. Thank you for joining us today.
Okay.
Operator: This now concludes today's call. Thank you all for joining, and you may now disconnect your lines.
Operator: This now concludes today's call. Thank you all for joining, and you may now disconnect your lines.
This now concludes today's call. Thank you all for joining and you may now disconnect your lines.
