Johnson Controls at Oppenheimer Conference: Strategic Realignment Under New CEO

On Thursday, 08 May 2025, Johnson Controls (NYSE:JCI) presented at the Oppenheimer 20th Annual Industrial Growth Conference. The discussion, led by CFO Mark Van Diepenbeck, highlighted the company’s strategic realignment under new CEO Joaquin, focusing on operational efficiency and technological innovation. While the company faces macroeconomic challenges and tariffs, it remains optimistic about achieving its financial goals through disciplined capital management.

Key Takeaways

• New CEO Joaquin emphasizes customer-centric and lean approaches.
• Johnson Controls aims for long-term double-digit earnings growth.
• The OpenBlue technology platform offers significant market potential.
• Tariffs impact 2% of revenues, but strategic management aims to offset costs.
• Free cash flow conversion is targeted at 100%.

Financial Results

• Corporate costs are reduced to approximately $80 million, down from $130 million in the previous quarter.
• The company targets long-term double-digit earnings growth by leveraging existing cost structures.
• Service revenue remains strong, with a focus on recurring and contractual income.

Operational Updates

• CEO Joaquin visited eight countries and engaged with numerous customers and factory floors.
• The revised reporting structure aligns with industrial peers, focusing on regional segmentation.
• Strategic initiatives include reducing waste and simplifying the operating model.

Future Outlook

• The OpenBlue platform provides a single interface for asset management and monitoring KPIs like energy consumption.
• Adoption challenges exist due to structural inefficiencies in buildings and misaligned decision-makers.
• Penetration of OpenBlue in 10% of the installed base could result in a multibillion-dollar business.

Q&A Highlights

• Data centers show strong growth, while the industrial sector sees increased retrofit opportunities.
• Tariffs are expected to impact revenues but are being managed strategically.
• Free cash flow conversion is improved by strong upfront payments on large orders and better inventory management.

In conclusion, Johnson Controls is undergoing significant strategic changes under its new leadership, with a focus on efficiency and customer engagement. For a detailed understanding, readers are encouraged to refer to the full transcript.

Full transcript - Oppenheimer 20th Annual Industrial Growth Conference:

Noah Kaye, Managing Director, Oppenheimer: Well, good morning, everyone, and welcome back to day four of Oppenheimer’s twentieth Annual Industrial Growth Conference. I’m Noah Kaye, managing director in our research practice. We’re delighted to welcome the management team of Johnson Controls back to the conference. So we have CFO, Mark Van Diepenbeck, with us. Mark, thanks so much for making the time to be here.

Mark Van Diepenbeck, CFO, Johnson Controls: No. Thanks for having us, Noah.

Noah Kaye, Managing Director, Oppenheimer: And especially coming right after earnings. We appreciate the quick turnaround. Mark, obviously, leadership transition was a big focus of the discussion yesterday and earnings. Maybe from your perspective, walk us through the work you’ve done so far with Joaquin in his first two months in the CEO role. What are you looking forward to tackling kind of pursuant to lean initiatives and value creation opportunities?

Mark Van Diepenbeck, CFO, Johnson Controls: No. I mean, it’s only been seven weeks at the end of the day. But in his short seven weeks, he’s visited I think it’s eight countries, a hundred customer, walk 15 factory floors, visited all of our engineering center, hundreds of frontline technicians, hundreds of seller. I joined him on some of these, and I can tell you they are extremely immersive from Gamba works to to deep dive into commercial motion, deep discussion on our engineering advantages and gaps, all the way to factory floor, do doing lean exercise right there on the spot. So no stone unturned with with Jo Kim.

He he’s developing a deep understanding of our end markets and and what it takes to win and how can we accelerate growth and our profit margin. Being kind of unencumbered by our history, he can take a clean, fresh look and and and emotionally, I would say, develop a strategic plan. You you know that, but the the lean journey is not one that that takes a day. It’s it’s years, but it’s all about refocusing the entirety of the organization on on our customers and and doing critical value stream mapping across the board, and and that will take that will take some time. But, ultimately, what what I think you’ll see from us is two different opportunity.

The first one is around defining our strategy and portfolio. Mhmm. And that strategy will will dictate where and how we play. It’s so early in the process to give you a clear insight of of where it is heading, but in general, it is. You can see certain business, not products line where it will be difficult for us to outpace the market either on growth or profit, and and we will likely take swiftly action on this.

But there are parts of the portfolio where we can see great opportunities either to run these parts of the portfolio better and and and create some very attractive cash flows within our our wallet and some places where we need to double down because we see great inorganic opportunities, and we see great organic opportunities to accelerate the growth of what’s in front of us. The second big benefit you’re gonna see is is around reducing waste and further simplifying our operating model. Right? The first change is really a first step towards improving margin and reducing our SG and A. And that constant customer and competitor focus as well, will ultimately allow us to accelerate our growth.

So so it will take time, but the opportunity is is is undeniable.

Noah Kaye, Managing Director, Oppenheimer: Yeah. You know, in relation to that, Mark, I mean, you you announced this revised reporting structure. It it brings the company in line with a number of industrial peers, you know, sort of a regional segment basis, and it really fits your regional go to market model. And and I have to if you allow me three three different questions embedded in this one. You know, I think we’d love to understand how that internally, translates.

The streamlined segmentation internally translates into cost out opportunities. So that’s the first question. The second is, you know, how do you think about that aligning with the efforts to become more customer centric? And the third, I think, sitting here as investors, you know, what are you hoping we understand about the change in reporting structure?

Mark Van Diepenbeck, CFO, Johnson Controls: Yeah. And I think all three are kind of all in the same but with different angle. I I mean, the the segmentation itself is not a major cost opportunity. It’s a first step. What’s important is what follows.

And you gotta understand where we came from. The separation we had between our global product segment and our three field regional based businesses, you literally had two operating models operating simultaneously within the within the company. And that created redundancy in processes, in infrastructure, in leadership, often having two teams doing the exact same thing but for different channels.

Noah Kaye, Managing Director, Oppenheimer: And

Mark Van Diepenbeck, CFO, Johnson Controls: so that harmonization will provide much, much clearer line of accountability and improve really the quality of our functional leadership and reducing the cost to deliver. And and we are gonna do that by really focusing on the customer, and that’s what those three segments are. Instead of focusing on the channel to market, we really focus at the market itself where the customer are. And that’s really the cornerstone of the change in that operating model. That historical structure with both team going to market kind of independently and trying trying to maximize their own ability to address that market with their limited view of the market is completely turned on itself.

We know of regional leaders that can maximize the opportunity in the market in order to win more customer and optimize channel management and meet the customer where where they want to be met. And what I mean by optimizing the the channel management, it’s really win more customer by meeting them through the channel that’s the most appropriate. You know, what we’ve learned from from from from our history is some customer and end market wants the OEM to be the partner. They want that life cycle. They want us to stand behind our product, and they they appreciate the engineering value that comes from our system.

There’s some parts of the market where life cycle isn’t a priority or the customer doesn’t have the right profile, and that is where we gotta deploy our channel partner. And now instead of having two team competing like that and potentially overlapping, you have separately teams that are looking at what’s best for JCI overall and then deploy the resources in a harmonious way in those markets. Now from an IR perspective, the the the very last part of that question, I I think there’s two or three solid outcome here. First, you know, we we we are more comparable, and that’s a benefit for you and and for all of our investors. That’s all that’s also a benefit for us.

I can now more easily hold my team accountable vis a vis some external benchmark and clearly say, you know, you we have outpaced these three g competitor, but not that last one for this particular region or that particular product line. And driving an entire organization, not only towards the customer, but towards the reality of we are competing day in and day out for the attention of those customer is gonna drive really critical, benefits. But ultimately and I mentioned that a little earlier, what investors are gonna see is a reduction in our in our cost to serve. And you you just see that already in the third quarter in our guidance. Our corporate costs, we’ve guided around $80,000,000.

If you look at the the the the the the prior quarter, the second quarter, that same number was about $50,000,000 higher. So so that’s the run rate benefit of simplifying and and transforming that that structure and getting ahead of that that that transformation if you’d like.

Noah Kaye, Managing Director, Oppenheimer: Well, and just to clarify, Mark, are you suggesting it’s a 50 like, $200,000,000 annualized run rate benefit from the transformation, or is this more like one time in the quarter? It it no. No.

Mark Van Diepenbeck, CFO, Johnson Controls: It’s not one time. But it’s it’s a combination of that’s why I said in and out of itself and resegmentation doesn’t drive that. Right? It’s the change in the operating model, getting ahead of the stranded cost we saw associated with the divestiture of the residential light commercial, and it’s the the value of our cost effort. But a big part of that of that lower corporate cost has to do with our cost to serve the operating model now that we have a unique one, created a a a allowed us to actually eliminate a lot of redundant team that we’re trying to support either way of the of the structure.

As you know, our our SG and A has been historically a little bit higher than best in class, and and that’s the first step to to get us towards that best in class SG and A.

Noah Kaye, Managing Director, Oppenheimer: Well, that makes perfect sense. Thanks, Mark. So then maybe we can talk through kind of the targets around long term double digit earnings growth. You you know, I think about the opportunity set to get there today. I mean, how much of the growth really requires kind of a a a top line growth and, you know, generating kind of kind of core good operating leverage versus some of these initiatives around, you know, cost out, OpEx optimization, post portfolio transformation, buybacks?

How do we think about disaggregating those levers?

Mark Van Diepenbeck, CFO, Johnson Controls: Yeah. So so let’s start with growth because it’s not purely like growth, but how do we leverage our existing cost, whether it’s our field infrastructure, whether it’s whether it’s our our sales team. And, I’ll take it really simply. If you look at the face of our financial, we probably have close to best in class gross margins, but our s g and a outpaced some of the other player. And if you look at the the couple of levers that explain why the s g and a has been a bit of a drag on the enterprise performance and our ability, therefore, to drive double g d the GDPs growth consistently and and perform well is that operating model and the best in class function from an operational performance that will reduce that cost to serve by simply supporting one simple, one single, I’m sorry, operating model.

That’s a two desperate one. The second one is, it also allows us to leverage our sales cost, our Salesforce much more productively. We we we can now address the end market much more efficiently. And so for a given dollar of investment on marketing, on selling, on infrastructure to actually serve those market, we can drive a whole lot more sales. And and and that will allow us to kind of create more leverage if you’d like in any additional point of growth we’ll see.

Now with the work Joaquin is leading on lean management, I I believe our gross margin entitlement is not yet where it’s at. It’s great, but it’s not where where where I think the entitlement is ultimately long term. As we implement lean, we create stand up work. We improve the capacity in our manufacturing. We accelerate our engineering cycle time.

You’ll see a productivity lift in gross margin. And and and between that and the s g and a, there’s hundreds of basis points to begin here. Now executing on all of that, we take the next couple of years and but it ultimately, it will drive net segment margin improvement. And and I think you combine that back to your second part of your question. You combine that effort on improving margin with a really disciplined capital allocation and aggressive share repurchase that will allow us to maintain that double digit EPS growth for the foreseeable future.

Noah Kaye, Managing Director, Oppenheimer: I think about the margin accretion from growing services, I mean, you’ve got already a high share of revenue relative to industry peers from services. By the is it fair to say that the service revenue is true recurring in MRO work rather than sort of new build services? You’re already nodding. So, yeah, that’s that’s a true services number. The margins are attractive.

Just give us a sense of how resilient, you know, the services business would be in the event, say, like, there’s an economic downturn.

Mark Van Diepenbeck, CFO, Johnson Controls: Yeah. And you’re right. We what we call service is is genuinely true service revenue. When we talk about service attachment rate, we we talk about real service. And and what I mean by that is real recurring contractual engagement, a lot of them being multiyear that are directly attached to a system of a product we sold.

Right? We exclude completely retrofits, refurbishments, or modernization upgrades, however you wanna call that. That is that is part of our system play Systems. Not at all part of of our service play. And so really using the traditional service definition means we have a lot of resiliency, and and we’ve tested over time how that how that how that business act or or behave through the economic cycle.

Now we’ve not had a a really big downturn in quite some time, but in the prior economic downturn, you can see, like, at the very beginning of the downturn, maybe a slight increase in cancellation of contracts at the very, very beginning. But very quickly, that’s come back through to a higher level of labor and material because, you see that that parts market, that service market kind of increasing simply because the deferral of critical maintenance, the deferral of replacement and modernization means the need for service. And that’s where the, kind of very enviable franchise we’ve created with our service technician across, across the world, across our our branches provide really a a different a differentiated value here. Now we still believe there is a big opportunity to continue to improve both the profitability of that business as well as its growth, again, through lean by, making our teams more productive and and relying less and less on increasing the number of the technicians to attain further accelerated growth and just making their life just more enjoyable and more productive through technological tools and and kind of bigger better standardization of of the work we do with them.

Noah Kaye, Managing Director, Oppenheimer: And and and better insights and intelligence. Right? And I think that really bridges to the OpenBlue technology platform. I mean, I I looked at that study with Forrester, you know, ROI of up to a 55% over three years. You know, it’s it’s a great payback period.

Yeah. I think, you know, with a value proposition that’s that’s that compelling, you know, what’s sort of the primary gating factor barrier to adoption? You know, if we think about OpenBlue as sort of low single digit percentage of your installed base today, and I think that’s correct. So Yeah. It is.

Okay. Yeah. What would a 10% penetration mean for kind of your overall revenue and EBITDA?

Mark Van Diepenbeck, CFO, Johnson Controls: It would mean a lot. Let let let’s first talk about what what OpenBlue really is. It’s like it’s a real differentiated offering. Right? We have a leadership position that was part of that Forrester Analytics.

We we we we analysis. We have capabilities that are completely unmatched. We can operate our own equipment through that system or competitors at WIM. And and we provide a single piece of glass for our customer to view all of their asset and see the operational health of those asset and take action on those, either through actually the software if we can change a set point or or improve the performance of an asset, or or we can do that by, you know, recommending a a service ticket and having, therefore, a technician on the back end coming in and making that that that that improvement. It it provides an ability for the subscriber of that of that software to have clear visibility on all critical KPI, like energy consumption, greenhouse gas emission, the load on different parts of the building and different part of the assets, but the list goes on.

Right? So we we we’ve seen an incredible growth in that business since its launch, but we continue to see kind of lower adoption than we had anticipated even though we have between that and our FM system well over a thousand customer that that we serve globally every day. There are a couple reason for that. Right? The the first one is we were way ahead of the market with our capabilities and product, and so kind of the market’s catching up, and that that’s that’s okay.

But the other part is there are some structural inefficiency that exist within the building that are not bubbling up quick enough to the actual decision maker within that building. What I mean by structural inefficiency is, like, the assets as we engineering and design, when we do the installation, when we design the system, as soon as it goes live or even sometimes through the installation process, which of more often than not, we are not doing ourselves, there’s already some deviation, if you like, from the ideal operating point or the the the the the operating point of that asset. And think about that operating point as, the the the forefront point of that of that asset, and it quickly falls off on on other side if you overrun or under utilize that asset. And when that system inside, we already see deviation, and then then the asset goes live, whether it’s our control system or HVAC system, whatever it might be. Right.

And for three, sometimes six, sometimes twelve months, our service team doesn’t get engaged, and that asset continues to deviate from that that that four component. We have seen through OpenBlue, and that’s where a lot of that payback comes in, that between 3050% of efficiencies to begin by not waiting and bringing it back immediately to that ideal operating point. And that’s what OpenBlue does dynamically for our customer. It’s bringing it back to the original intended load, use, whatever it might be. Sometimes automatically through AI depending on how the customer decide, or sometime it literally shows the customer your asset, your chiller, your controls, your your engine is not working at the operating point, call a technician, and we can address that.

Now given that, would say, well, every building owner should be clamoring and asking for for that solution. And you mentioned that payback that that that that a lot of our customer has seen. But the decision maker in the boiler room, if you like, are not the same decision makers in the boardroom, and they don’t talk enough with each other. And and their agenda aren’t always aligned. So we are there to try and break that paradigm, but it needs to start at the top of the house where they need to realize that there’s huge inefficiency in their building assets, and there’s productivity to begin.

And as soon as that comes in, you will see a you will see a better alignment. What can you do ultimately, which is really the curve of your question, I think it’s it’s an incredible opportunity. It’s way less than 1% today if you if you would think it would be, like, 10% of our installed base, it it it would make this a multibillion dollar business for for the enterprise. We’re far from there because of what I’m talking about and the dynamic, and and that’s why the team is very focused on on transforming, kind of the market here and helping the market seeing those inefficiency quicker, rather than waiting the quarterly or annual maintenance of their equipment.

Noah Kaye, Managing Director, Oppenheimer: Yeah. You know, I was at Expo and looked at the enterprise manager’s AI integration. And as a layperson, seeing how, like, the generation of those recommendations and, you know, I can understand what that means. I’m not a technician. I know right away.

Okay. You know, this is seems something that would make sense. It’s actionable. That that could be a real bridge, right, between the boiler room or the boardroom.

Mark Van Diepenbeck, CFO, Johnson Controls: It is. It it it is the real bridge. Two things. I can tell you, I’ve I’ve met with customers, particularly in my prior role, and very often, the the pushback is they can’t believe it is that simple and transparent. Right?

It’s like you’re selling them the future, and they’re like, I can’t believe the future is already there. Very often in technology, the future is already there. It’s about acting on it and integrating it better, and we’re improving on that all the time. So that’s the first aspect. The second aspect is the the the costs that cost of operational efficiency sometimes shows up in their p and l, if you like, very quickly.

Right? Because your maintenance costs are going up and all of that. But sometimes it takes a couple of cycles, a couple of years, sometimes longer because you’ve shortened the life of an asset or your energy consumption that you’ve now gotten used, you don’t realize it should be 30% lower. And it’s not a priority because you think the size of the price is somewhere else. And so it’s that focus dynamically that we are working on and and and and and with the success we’ve had with, as I mentioned, the first few hundred customer, the thousand customer that I know on the platform, I I think that Flywheel will start to accelerate as those adoption and the critical value that comes from those adoption will start really driving kind of the market insight.

Noah Kaye, Managing Director, Oppenheimer: Yeah. We’re we’re looking forward to that. You know, I I wanna shift to demand more broadly. Just give us a sense of how the pipeline has developed. And I think particularly since some of the tariffs news really started coming out.

Have you seen any real changes, material changes in the pipeline or orders conversion as a result of tariffs?

Mark Van Diepenbeck, CFO, Johnson Controls: So probably just like you, we are watching all the key external indicators. Right? And you probably see the same conclusion we see. We can see there’s a point towards softness in the second half of the calendar year, would say not not not of our fiscal year, but but we we start seeing those indicator pointing to quite material softness in the back end of the year. And to be transparent with you, when we then go look to our own internal indicator, and those are measured by we have health indicator on our pipeline, pipeline grown, time to close an order, number of abandoned opportunities, all of those key leading indicator.

To this date, we don’t see anything overly concerning. And so the conclusion here is that there might be a little bit of a disconnect between where some of the bigger project that maybe were helping some of those larger KPIs, whether it’s ABI or or the Dodge construction indices, versus what we see day in and day out in the key vertical we play. Now some of those key vertical are more impacted than others. Right? I’m not telling you every vertical is is is booming.

But the vast majority of the core vertical for JCI, their health is continuously improving, and and we don’t see any sign yet of a of a decline.

Noah Kaye, Managing Director, Oppenheimer: Can you double click on that a little bit by the verticals? I mean, know, applied, fire and security, you know, these are the major ones. Like

Mark Van Diepenbeck, CFO, Johnson Controls: Got it.

Noah Kaye, Managing Director, Oppenheimer: You know, give give us a sense of the trends.

Mark Van Diepenbeck, CFO, Johnson Controls: So if you think through vertical first and product second, data center, I I mean, it remains the strongest vertical globally, growing at very, very solid double digit with a pipeline that doesn’t seem to show any sign of slowing down or or or weakness. So so the next one from a vertical standpoint, the industrial the industrial vertical, particularly complex manufacturing, we still see a lot of increase in our pipeline, pipeline, especially around retrofit and improvement of the manufacturing footprint. And that’s not just in in The US, that’s across the globe. Right? Then you think about commercial real estate, that thing starts to break off a little bit.

And it’s a little bit of a tale of two cities, to be honest. The the higher end of that market, strong and getting stronger, and and we continue to see shows of signs of probably high single digit growth. So I’m not talking about data center kind of level, but still very healthy.

Noah Kaye, Managing Director, Oppenheimer: In class a. Yeah.

Mark Van Diepenbeck, CFO, Johnson Controls: In yeah. Think class a office, midsize, mixed use office, but in a higher end geographies or location. Yeah. Absolutely. And then you go to lower end on the office space, b or c, that that market is stable.

We you you see softness. And I always give the same example. You you you walk the street of New York City. You will see a class a building in a great location where every floor is occupied down to the brim. They’ve optimized the building, and you will see a completely empty class b office building right next door to it where half of the shutters are are closed, and it’s probably utilized less than 50%.

And that dynamic continues, particularly North America, but I think we see that outside. From a product standpoint, yeah, we see more demand on HVAC and controls because of our offerings and what we we do, more than we see that on fire and security. As fire security, by the way, is a little bit more exposed to those software end markets as well. So you explained one with the other. But Yeah.

HVAC between data center, the industrial momentum, the commercial heat pump in in Europe, overall demand for sustainable outcome. There’s a lot of tailwinds in in those two, those two product line, and so, we don’t see any softness in that demand right now. Fire and security in North America seeing a little bit more softness. It’s it’s not retracting, but it’s it’s it’s a very muted growth.

Noah Kaye, Managing Director, Oppenheimer: And and, Mark, you you know, you dimensioned helpfully the tariff impacts that you expect at sort of 2% of revenues, I should say, which you expect to offset dollar for dollar. And you also said that kind of the tariff impacts do limit some of the margin expansion opportunity in the back half. Maybe just help us understand that margin math a bit more. And maybe ex tariffs, could you remind us of what margin dynamics would have looked like otherwise for the back half?

Mark Van Diepenbeck, CFO, Johnson Controls: Yes. Starting with that last part. Outside of tariff, we would have anticipated much better margin improvement year on year and sequentially in the second half. But as you know, the tariff dynamics are extremely complicated to navigate, particularly with the fact that they are changing constantly. We we want to communicate fairly with our customer and give them a chance to understand where and why there is an impact.

And, you you know, we have a life cycle solution. That means a lot of our relationship, while they start with the system, they often end up with a multi decade relationship on service and and parts. And this customer will remember how we acted and manage the current environment. Sure. And what that what what that ultimately leads to is we have found a way to recover the vast majority of the impact of of of of tariff through targeted pricing and a better supply chain management.

But we’ve not embarked on trying to get margin rates entitlement on top of those surcharges. By the way, this has been extremely well received by our customers, and it’s also easier for your Salesforce to explain that. So we have great engagement there, but we think it’s part of the reason some of those demand signal I was talk talking about earlier are still very strong. Now the dynamic of our margin rate in the back half is, yeah, q three, when we provided guidance for q three and and for full year, obviously, we give by default, some visibility into q four as well. So you can see the second half, it’s still strong margin because we have very strong margin in in the second half last year.

But year on year, it’s flat to slightly up, and and we were originally anticipating to be a little bit better. Now you you’re gonna see segment margin under our new reporting segmentation. Americas will have higher segment margin rate than the rest of the enterprise like EMEALA EMEA. I’m sorry. I even have to rewire my brain in APAC.

Yeah. But but the year on year improvement, you’ll see from a margin rate standpoint, we really come from a from EMEA, APAC having some pressure, and Americas staying about where it is to slightly up. Yeah.

Noah Kaye, Managing Director, Oppenheimer: Great. Great. Mark, I want to end with a couple of questions around free cash flow conversion and capital structure. I give you credit. I mean, the revised guide, 100% free cash flow conversion.

What drove that increase in the guide? And were there any sort of non repeating benefits to be aware of that would challenge your ability to replicate that in ’26 and beyond?

Mark Van Diepenbeck, CFO, Johnson Controls: Not something particular I would point to, but what I can tell you is as soon as I took the role, we’ve embarked on a on a quality of earning improvement journey. We discontinued our factoring programs. We improved our supply chain. We deployed best in class procurement and receivable management. That really allows us last year to have still 95% free cash flow conversion, which we were happy with, and this year getting even higher at 100% and then next year probably somewhere in between.

But we still see some strong opportunities in inventory management where the lean management approach that we talked about earlier will drive material improvement. It will take some time. But for this year, there’s a couple of dynamic that at the beginning of the year, we weren’t sure they would drive as much as as they have. We’ve been able to command very strong upfront payments on our large order, and we continue to do so. As all the momentum continues to be strong, so does that cash flow improvement.

And then the structural headwinds we’ve talked about historically, they’re not going away. Right? But but because of the fundamentals of our work and kept improving so well, I think we’ve seen we’ve seen that %, back in, and I think the opportunity in 20 singles beyond with the inventory management is we have more tailwind that can help us support, I would say, a a mean to high nineties cash flow conversion over over time.

Noah Kaye, Managing Director, Oppenheimer: I think the related question here is just around capital intensity, revised structure, new leadership. Will there be any shift or opportunities for decreasing capital intensity in the business if you just think about CapEx, for example?

Mark Van Diepenbeck, CFO, Johnson Controls: Yeah. I well, it’s very early for me to comment exactly on where we’re gonna go. But what I can tell you already from the the early stage conversation Joaquin brought to the table is that lean approach means you do more with the infrastructure you already have. And our ability to build more capacity within the existing footprint of the either manufacturing or or or incredible 40,000 field based labor, we can drive a whole lot more out of that existing capacity, reducing our need to constantly reinvest. Now having now better visibility on higher growth and more attractive part of the market, we can also deploy capital in parts of the market that accelerate growth faster.

And that doesn’t just mean capital capital as in CapEx. It also means, like, the way we spend our r and d, the way we deploy some of our s g and a, and get faster and quicker leverage on all of that.

Noah Kaye, Managing Director, Oppenheimer: Very good. Mark, I I think we’re gonna have to leave it there, but really wanna appreciate thank you for, you know, sharing your thoughts and and insights with us. You know, this is a very exciting chapter for the company, you know, between sort of the organizational leadership changes, building off of a very, you know, proud and long foundation. We’re looking forward to seeing you, you know, continue to be successful on the journey. I’ll say thank you, and have a great day with the conference, everyone.

Mark Van Diepenbeck, CFO, Johnson Controls: You can. Cheers.

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