Johnson Controls International plc

please press star, fill it by one on your telephone keypad. I will now hand the call over to Jim Lucas, Vice President, Investor Relations, to begin. Jim, please go ahead.

Good morning, and thank you for joining our conference call to discuss Johnson Control's fiscal fourth quarter 2025 results. Joining me on the call today are Johnson Control's Chief Executive Officer, Joachim Weidemannis, and Mark Van Diepenbeck, 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 risks and uncertainties. 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 presentations. 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 Control's website. I will now turn the call over to Joachim.

Thanks, Jim, and good morning, everyone. Thank you for joining us on today's call. As we close out our 140th year as a company, I want to begin by recognizing the extraordinary efforts of our 90,000 colleagues around the world. Their dedication to our customers and their commitment to our mission have been the driving force behind our progress and the results. Since joining Johnson Controls, I made it a priority to spend time where value is created, in the field with customers and our teams, at our innovation centers, and on the factory floors around the world. It's important to be right alongside our team as they do the work to deliver for our customers. These experiences have given me a firsthand appreciation for the passion and expertise that define our culture. Our customers and my colleagues on the front lines give me valuable insights on how we work and where we can improve processes and uncover new opportunities together. Learning about our capabilities and seeing our teams drive our company forward by problem solving to better serve our customers has reinforced my belief in the strength of our foundation and the significant opportunities we're beginning to capture. Before I dive into the specifics, I want to summarize where we stand today and our path forward. First, We delivered strong results this quarter and for the full year, exceeding our free cash flow target and continuing to build a record backlog. Second, our proprietary business system is taking shape as our growth engine, combining 80-20 and lean principles with digital and AI approaches to create a more customer-centric and continuous improvement-oriented organization. Third, We are updating our long-term growth algorithm to reflect improved mid-single-digit top-line growth, enhanced operating leverage, double-digit adjusted EPS growth, and continuing to target 100% free cash flow conversion, demonstrating that the opportunity in front of us is clear, significant, and achievable. Turning to our results, fiscal 2025 was a year of strong execution and momentum. Sales grew 6%, segment margins expanded by 100 basis points, and adjusted EPS increased 17%. Notably, we offset the dilution from the residential and light commercial divestiture in one year, ahead of our original expectations. Free cash flow conversion reached 102%, reflecting our disciplined execution and financial strength. Orders grew 7% for the year, and our backlog expanded 13%. ending at a record $15 billion. This sustained demand highlights the value our customers place in our solutions and the strength of our portfolio. This quarter's performance reflects our discipline execution and operational focus. While our evolving business system is still in its early stages, we're already seeing encouraging signs of progress. Let's turn to slide six. Last quarter, we introduced our proprietary business system, a proven approach to building a stronger, more disciplined company. It is rooted in winning and retaining customers through differentiated products, services, and exceptional experiences. It's about enabling frontline colleagues, engaging all teams, and building a better Johnson Controls and being a magnet for talent. Our 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 and accelerate execution. And scale. leverage digital and AI approaches to amplify impact across the enterprise. And it's anchored in a global cross-functional language and methodology for how we communicate and collaborate to win. The approach is practical, identify barriers to growth and remove them quickly. We start narrow and go deep, get the root causes, pilot countermeasures, adjust and secure frontline buy-in before scaling broadly. While it's still early days and business systems take time to mature in large organizations, I'm energized by our progress. More than 700 colleagues are actively engaged across several priority areas and have conducted over 50 Kaizens to date, with many more to come. We have already trained 200 leaders worldwide through activation boot camps. Leadership plays a pivotal role in the progress of our business system and our opportunity to build an even stronger company that is more capable, more focused, and more disciplined, a company that executes with consistency, and delivers for customers where it matters most. To further strengthen our leadership capabilities and align talent with strategic priorities, we recently announced a new leader of our America segment, Todd Grabowski. He brings over 30 years of experience in the commercial part of our business and product management within our largest franchise, our global applied business. His industry knowledge and customer orientation will be instrumental as we accelerate growth and sharpen our customer focus in this important region. Earlier this week, we announced to our colleagues the hire of a global leader of manufacturing, a key role accountable for performance across our factory footprint, driving improvements in safety, quality delivery, and cost, SQDC, using our business system to build competitive advantage and winning performance for our customers, as well as drive overall productivity, creating more funding for reinvestments. As we continue to strengthen our talent development, it will enable us to accelerate our progress. Last quarter, we highlighted two areas with clear potential, sales capacity and productivity, and factory on-time delivery. Today, I want to show you how our proprietary business system is already delivering measurable progress. By working together across teams and leveraging 80-20 and lean tools, our conventional HVAC sellers in one of our local markets increase the time they're able to spend engaging with customers by over 60%. and our team manufacturing key chillers in North America improved on-time delivery to over 95%. These examples reflect our commitment to going narrow and deep, focusing on specific areas to uncover the true sources of waste and avoid surface-level fixes. This approach enables faster piloting, stronger frontline engagement, and eases broader deployment later across the organization. As is typical in continuous improvement, we see even more opportunities as we dig deeper. In the example of selling time with a customer, the team streamlined the sales process by eliminating non-value-added process steps and upgrading tools to accelerate the sales cycle. These improvements simplified workflows and led to more than a 60% increase in time spent engaging directly with customers. We're now applying AI to the overall sales process of estimation and selection. to codify, scale, and amplify several process steps that will yield even more time with customers on top of that. We've also been focused on improving the on-time delivery in one of our key chiller plants that serves the rapidly growing data center vertical. While we have a leading position in advanced thermal solutions for data centers, historically, our on-time delivery was inconsistent and our lead times were longer than what customers demand. Leveraging 80-20 and lean approaches, we have dramatically improved on-time delivery and are now over 95%. And lead times are on the way of being cut in half. I'm confident we can maintain this standard, which only strengthens our competitive advantage and our ability to win in this fast-growing vertical. This isn't about putting a playbook on a shelf. It's about fundamentally changing how we work. These improvements come from going narrow and deep, countermeasuring root causes, and engaging the teams impacted, ensuring sustainable change and easier scaling across the enterprise. Simplify, accelerate, scale. That's how we win together. As we move to slide seven, you'll see how our focus on technology innovation and sustainability is powering our future growth and reinforcing our leadership in mission-critical verticals. Johnson Controls continues to strengthen its leadership in advanced thermal management. With AI-driven demand for high density data centers, pushing cooling technology to new limits, we are well positioned across the thermal management for cooling chain, as well as with our integrated offering of digital monitoring and controls. During the quarter, we successfully launched our coolant distribution unit offering, a major milestone in our differentiated data cooling center strategy. CDUs are critical enablers of liquid cooling, which is rapidly becoming essential as AI chips are becoming more powerful and generating more heat. Traditional air-cooled systems are reaching physical limits, driving a transition toward liquid and hybrid cooling architectures that improve thermal management performance in addition to energy and water efficiency. combined with our award-winning YVAM magnetic bearing chillers, absorption chillers, and now our strategic investment in Excelsius, positions Johnson Controls to deliver a comprehensive and integrated portfolio that addresses the full thermal management spectrum from chip to ambient, covering the entire heat capture, removal, and regen journey. We are receiving strong early interest from hyperscale customers who are prioritizing energy efficiency and sustainability, core pillars of our innovation strategy. Our data center solutions are aligned with global trends in AI and increasing compute density, where thermal performance is now a strategic differentiator. With our cooling technologies reducing non-IT energy consumption by more than 50% in most North American hubs, we are delivering substantial energy savings. This reinforces our role as a strategic partner to the world's leading data center professionals at a time when the vertical is poised for significant growth over the next decade. In Europe, we recently made a major announcement that underscores our leadership in decarbonization. Johnson Controls will provide green heat to the city of Zurich through a landmark waste incineration project. While we've delivered similar solutions across the region, this deployment more than doubles the heat capacity of our previous largest project and ranks amongst the largest heat pump installations globally to utilize the zero GWP refrigerant ammonium. Our advanced heat pump technology will recover energy from flue gases and feed it into the district heating network, supplying heat to approximately 15,000 homes, about 15% of the city's total district heating demand. This project is another powerful example of how Johnson Controls is enabling critical industries, institutions, and now cities to transition to sustainable heating solutions while maintaining reliability and performance, and it highlights the tremendous opportunity to harness excess heat, reduce operating costs, and accelerate decarbonization. In 2024 alone, our heat pumps enabled customers to cut energy costs by 50% and emissions by 60%. The partnership we have with Zurich and other cities, as well as with hundreds of others, from global manufacturers and pharmaceuticals, chemicals, food and beverage, and more, solidifies our leadership position in the European energy and heat transition, where we can capture our share of these opportunities amid regulatory tailwinds and accelerating customer demand. These initiatives reinforce our leadership in thermal management, decarbonization, digital solutions, and mission-critical environments, supported by our commercially advantaged embedded service capabilities and relationships. The strength of our service model lies in the combination of customer intimacy, technical depth, and global reach. With direct service operations across the globe, Johnson Controls delivers consistent, high-quality support to customers over the lifecycle in mission-critical verticals such as data centers, advanced manufacturing, life science manufacturing, and large hospital and university research centers. Our ability to deliver consistent service across the global footprints of hyperscalers is a unique differentiator. As data centers multiply, our service model is helping maintain the pace, positioned to deliver reliability wherever our customers build. Our view is that customers will always demand high touch, high availability service, and that is an unparalleled differentiator for Johnson Controls. Now, as we look ahead, our guidance for fiscal 2026 builds directly on the momentum we've established this year. I already previewed our updated long-term growth algorithm, and Mark will discuss the details shortly. But I want to highlight how excited we are about the opportunity in front of us. In short, our strategy to leverage our strengths, particularly in HVAC controls and digital, to deliver differentiated value and long-term growth underpins our success. Our ability to meet global demand for mission-critical systems, whether in data centers or decarbonization projects, is backed by an exceptional service organization and positions us to capture significant opportunities ahead. With that, I will now turn it over to Mark.