Dive Brief:

• Johnson Controls reported strong third-quarter results that met the high end of its guidance amid a resilient backlog and healthy order pipeline in its building solutions segments.
• The company saw a 10% jump in organic sales in its building solutions North America segment year over year, clocking $2.7 billion in revenue, driven by robust performances in its HVAC and controls segment, as well as fire and security.
• Johnson Controls has surpassed 16,000 connected chillers and is expanding its OpenBlue innovation centers to optimize security, customer assets and outcomes in buildings, CEO and chairman George Oliver said during the earnings call.

Dive Insight:

Orders in Johnson Controls’ building solutions business increased 8% organically amid strong demand, while its service and install businesses grew 12% and 10% respectively during the third fiscal quarter. 

The segment’s earnings before interest, taxes, depreciation and amortization jumped 48% year over year to $385 million, while its adjusted segment EBITDA rose 35%, with margins expanding 240 basis points. During the earnings call, CFO Olivier Leonetti highlighted the company’s efforts to execute a higher margin backlog and recognize savings from productivity initiatives. 

The company’s building solutions backlog grew 8% to a record $12 billion, with both service and install backlogs climbing 8% year over year. Installed order volume, however, rose a mere 6%, compared to a double-digit order growth range across North America in the previous year. 

The company attributed a 5% rise in orders in its North America building solutions segment to the strength of its HVAC and control platforms and robust demand from its office, data center, government, manufacturing and education sectors. Revenue from its HVAC division saw low double-digit growth, while fire and security experienced high single-digit growth. 

Johnson Controls has been looking to build its digital muscle. In July, the company bought integrated workplace management system provider FM:Systems. 

“Extreme temperatures are increasingly straining buildings, putting at risk the ability to deliver comfortable and healthy indoor environments. Our OpenBlue Digital Solutions help optimize indoor air quality, comfort and energy consumption while monitoring outdoor air conditions, ensuring our customers can meet their operating objectives, even in the most extreme conditions,” Oliver said during the call. He stated that Johnson Controls’ acquisition of FM:Systems would fortify OpenBlue’s capabilities and generate a huge volume of data, including space utilization, service and real estate portfolio management. 

Management also emphasized the company’s commitment to sustainability and emissions reduction. Its sustainability infrastructure business portfolio, which includes heat pumps, energy-efficient refrigerants and digital solutions, accounts for nearly 55% of revenue, the company said. Oliver pointed to a strong demand for its sustainability solutions with orders growing 20% in the third quarter. 

Back in June, Johnson Controls snapped up M&A Carnot, a natural refrigerant solutions provider whose equipment and controls use carbon dioxide, significantly reducing its global warming potential.