Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statements for Forward-Looking Information

Unless otherwise indicated, references to "Johnson Controls," the "Company," "we," "our" and "us" in this Quarterly Report on Form 10-Q refer to Johnson Controls International plc and its consolidated subsidiaries.

The Company has made statements in this document that are forward-looking and therefore are subject to risks and uncertainties. All statements in this document other than statements of historical fact are, or could be, "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In this document, statements regarding the Company’s future financial position, sales, costs, earnings, cash flows, other measures of results of operations, synergies and integration opportunities, capital expenditures, debt levels and market outlook are forward-looking statements. Words such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "should," "forecast," "project" or "plan" and terms of similar meaning are also generally intended to identify forward-looking statements. However, the absence of these words does not mean that a statement is not forward-looking. The Company cautions that these statements are subject to numerous important risks, uncertainties, assumptions and other factors, some of which are beyond the Company’s control, that could cause the Company’s actual results to differ materially from those expressed or implied by such forward-looking statements, including, among others, risks related to: The Company’s ability to manage general economic, business and capital market conditions, including the impact of recessions and economic downturns; the ability to manage macroeconomic and geopolitical volatility, including global price inflation, shortages impacting the availability of raw materials and component products and the conflict between Russia and Ukraine; the ability to develop or acquire new products and technologies that achieve market acceptance and meet applicable quality and regulatory requirements; the ability to innovate and adapt to emerging technologies, ideas and trends in the marketplace; the strength of the U.S. or other economies; fluctuations in currency exchange rates; changes or uncertainty in laws, regulations, rates, policies or interpretations that impact the Company’s business operations or tax status; changes to laws or policies governing foreign trade, including economic sanctions, tariffs or trade restrictions; maintaining and improving the capacity, reliability and security of the Company’s enterprise information technology infrastructure; the ability to manage the lifecycle cybersecurity risk in the development, deployment and operation of the Company’s digital platforms and services; the outcome of litigation and governmental proceedings; the risk of infringement or expiration of intellectual property rights; the Company’s ability to manage the impacts of natural disasters, climate change, pandemics and outbreaks of contagious diseases and other adverse public health developments, such as the COVID-19 pandemic; the ability of the Company to drive organizational improvement; any delay or inability of the Company to realize the expected benefits and synergies of recent portfolio transactions; the ability to hire and retain senior management and other key personnel; the tax treatment of recent portfolio transactions; significant transaction costs and/or unknown liabilities associated with such transactions; labor shortages, work stoppages, union negotiations, labor disputes and other matters associated with the labor force; and the cancellation of or changes to commercial arrangements. A detailed discussion of risks related to Johnson Controls' business is included in the section entitled "Risk Factors" in Johnson Controls' Annual Report on Form 10-K for the year ended September 30, 2022 filed with the United States Securities and Exchange Commission ("SEC") on November 15, 2022, which is available at www.sec.gov and www.johnsoncontrols.com under the "Investors" tab. The forward-looking statements included in this document are made only as of the date of this document, unless otherwise specified, and, except as required by law, Johnson Controls assumes no obligation, and disclaims any obligation, to update such statements to reflect events or circumstances occurring after the date of this document.

Overview

Johnson Controls International plc, headquartered in Cork, Ireland, is a global leader in smart, healthy and sustainable buildings, serving a wide range of customers in more than 150 countries. The Company’s products, services, systems and solutions advance the safety, comfort and intelligence of spaces to serve people, places and the planet. The Company is committed to helping its customers win and creating greater value for all of its stakeholders through its strategic focus on buildings.

The Company is a global leader in engineering, manufacturing, commissioning and retrofitting building products and systems, including residential and commercial heating, ventilating, air-conditioning ("HVAC") equipment, industrial refrigeration systems, controls, security systems, fire-detection systems and fire-suppression solutions. The Company further serves customers by providing technical services, including maintenance, management, repair, retrofit and replacement of equipment (in the HVAC, industrial refrigeration, controls, security and fire-protection space), energy-management consulting and data-driven “smart building” services and solutions powered by its OpenBlue software platform and capabilities. The Company

partners with customers by leveraging its broad product portfolio and digital capabilities powered by OpenBlue, together with its direct channel service and solutions capabilities, to deliver outcome-based solutions across the lifecycle of a building that address customers’ needs to improve energy efficiency, enhance security, create healthy environments and reduce greenhouse gas emissions.

The following information should be read in conjunction with the September 30, 2022 consolidated financial statements and notes thereto, along with management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended September 30, 2022 filed with the SEC on November 15, 2022. References in the following discussion and analysis to "Three Months" (or similar language) refer to the three months ended June 30, 2023 compared to the three months ended June 30, 2022, while "Year-to-Date" refers to the nine months ended June 30, 2023 compared to the nine months ended June 30, 2022.

Macroeconomic Trends

Much of the demand for the Company’s products and solutions is driven by construction, facility expansion, retrofit and maintenance projects within the commercial, institutional, industrial, data center, governmental and residential sectors. Construction projects are heavily dependent on general economic conditions, localized demand for real estate and the availability of credit, public funding or other financing sources. Positive or negative fluctuations in construction, industrial facility expansion, retrofit activity, maintenance projects and other capital investments in buildings within the sectors that the Company serves, as well as availability of credit, financing or funding for such projects, could have a corresponding impact on the Company’s financial condition, results of operations and cash flows.

As a result of the Company’s global presence, a significant portion of its revenues and expenses is denominated in currencies other than the U.S. dollar. The Company is therefore subject to non-U.S. currency risks and non-U.S. exchange exposure. While the Company employs financial instruments to hedge some of its transactional foreign exchange exposure, these activities do not insulate it completely from those exposures. In addition, the currency exposure from the translation of non-U.S. dollar functional currency subsidiaries are not able to be hedged. Exchange rates can be volatile and a substantial weakening or strengthening of foreign currencies against the U.S. dollar could increase or reduce the Company’s profit margin, respectively, and impact the comparability of results from period to period. During the three and nine months ended June 30, 2023, revenue and profits were adversely impacted due to the strengthening of the U.S. dollar against foreign currencies.

The Company continues to observe trends demonstrating increased interest and demand for its products and services that enable smart, safe, efficient and sustainable buildings. This demand is driven in part by government tax incentives, building performance standards and other regulations designed to limit emissions and combat climate change. In particular, legislative and regulatory initiatives such as the U.S. Climate Smart Buildings Initiative, U.S. Inflation Reduction Act and EU Energy Performance of Buildings Directive include provisions designed to fund and encourage investment in decarbonization and digital technologies for buildings. This demand is supplemented by an increase in commitments in both the public and private sectors to reduce emissions and/or achieve net zero emissions. The Company seeks to capitalize on these trends to drive growth by developing and delivering technologies and solutions to create smart, sustainable and healthy buildings. The Company is investing in new digital and product capabilities, including its OpenBlue platform, to enable it to deliver sustainable, high-efficiency products and tailored services to enable customers to achieve their sustainability goals. The Company is leveraging its install base, together with data-driven products and services, to offer outcome-based solutions to customers with a focus on generating accelerated growth in services and recurring revenue.

The Company has experienced, and could continue to experience, increased material cost inflation and component shortages, as well as disruptions and delays in its supply chain, as a result of global macroeconomic trends, including increased global demand, geopolitical and economic tensions, including the conflict between Russia and Ukraine, and labor shortages. Actions taken by the Company to mitigate supply chain disruptions and inflation, including expanding and redistributing its supplier network, supplier financing, price increases and productivity improvements, have generally been successful in offsetting some, but not all, of the impact of these trends. The collective impact of these trends has been favorable to revenue due to increased demand and price increases to offset inflation, while negatively impacting margins due to supply chain disruptions and cost pressures. However, the Company continues to observe improved margins as supply chain disruptions ease and higher priced backlog is converted to sales. Although the Company has experienced recent improvement in its supply chain, the Company could experience further disruptions, shortages and cost increases in the future, the effect of which will depend on the Company’s ability to successfully mitigate and offset the impact of these events.

During the second quarter of fiscal 2022, the Company suspended its operations in Russia in response to the conflict between Russia and Ukraine, with existing contractual obligations being fulfilled in a manner that fully complies with all sanctions and trade controls. The Company has subsequently reduced its business presence and operations in Russia. Although these actions have not had and are not expected to have a material impact on the Company’s operating results, the broader consequences of the ongoing conflict, including heightened supply chain disruption, inflation, economic instability and other factors have and could continue to adversely impact the Company’s results of operations.

The extent to which the Company’s results of operations and financial condition are impacted by these and other factors in the future will depend on developments that are highly uncertain and cannot be predicted. See the section entitled "Risk Factors" in Johnson Controls' Annual Report on Form 10-K for the year ended September 30, 2022 filed with the United States Securities and Exchange Commission ("SEC") on November 15, 2022.

Restructuring Activities

To better align its resources with its growth strategies and reduce the cost structure of its global operations, the Company commits to restructuring plans as necessary. In the third quarter of fiscal 2023, the Company began developing a restructuring plan with certain actions focused on continued scaling of selling, general and administrative expenses ("SG&A") to its planned growth. Early actions of this plan were committed to during the third quarter and charges, primarily related to workforce reductions, were recorded to restructuring and impairment costs in the consolidated statements of income, and additional restructuring charges are expected in subsequent quarters. Anticipated savings from the restructuring plan are not yet estimable, as the scope of the plan is expected to be finalized during the fourth quarter of fiscal 2023.

Net Sales

			Three Months Ended June 30,																		Nine Months Ended June 30,
(in millions)			2023						2022						Change						2023						2022						Change
Net sales			$	7,133					$	6,614					8		%				$	19,887					$	18,574					7		%

The increase in consolidated net sales for the three months ended June 30, 2023 was due to higher organic sales ($595 million) and the net impact of acquisitions and divestitures ($24 million), partially offset by the unfavorable impact of foreign currency translation ($100 million). Excluding the impact of foreign currency translation and business acquisitions and divestitures, consolidated net sales increased 9% as compared to the prior year, primarily attributable to increased pricing in response to inflation pressures and higher volumes. Refer to the "Segment Analysis" below within this Item 2 for a discussion of net sales by segment.

The increase in consolidated net sales for the nine months ended June 30, 2023 was due to higher organic sales ($1,854 million) and the net impact of acquisitions and divestitures ($57 million), partially offset by the unfavorable impact of foreign currency translation ($598 million). Excluding the impact of foreign currency translation and business acquisitions and divestitures, consolidated net sales increased 10% as compared to the prior year, attributable to increased pricing in response to inflation pressures and higher volumes. Refer to the "Segment Analysis" below within this Item 2 for a discussion of net sales by segment.

Cost of Sales / Gross Profit

			Three Months Ended June 30,																		Nine Months Ended June 30,
(in millions)			2023						2022						Change						2023						2022						Change
Cost of sales			$	4,702					$	4,414					7		%				$	13,124					$	12,526					5		%
Gross profit			2,431						2,200						11		%				6,763						6,048						12		%
% of sales			34.1		%				33.3		%										34.0		%				32.6		%

Cost of sales and gross profit increased for the three-month period ended June 30, 2023, and gross profit as a percentage of sales increased by 80 basis points. Gross profit increased due to sales growth and favorable price/cost, partially offset by

unfavorable foreign currency translation ($33 million). Gross profit as a percentage of sales increased primarily due to favorable price/cost. Refer to the "Segment Analysis" below within this Item 2 for a discussion of segment earnings before interest, taxes and amortization ("EBITA").

Cost of sales and gross profit increased for the nine-month period ended June 30, 2023, and gross profit as a percentage of sales increased by 140 basis points. Gross profit increased due to sales growth and favorable price/cost, partially offset by unfavorable foreign currency translation ($189 million). Gross profit as a percentage of sales increased primarily due to favorable price/cost. Refer to the "Segment Analysis" below within this Item 2 for a discussion of segment earnings before interest, taxes and amortization ("EBITA").

Selling, General and Administrative Expenses

			Three Months Ended June 30,																		Nine Months Ended June 30,
(in millions)			2023						2022						Change						2023						2022						Change
Selling, general and administrative expenses			$	1,555					$	1,589					-2		%				$	4,705					$	4,412					7		%
% of sales			21.8		%				24.0		%										23.7		%				23.8		%

SG&A for the three-month period ended June 30, 2023 decreased $34 million, and SG&A as a percentage of sales decreased by 220 basis points. The decrease in SG&A was primarily due to the favorable year-over-year impact of net mark-to-market adjustments and favorable foreign currency translation ($17 million), partially offset by certain investments to support growth and one-time transaction and separation costs. Refer to the "Segment Analysis" below within this Item 2 for a discussion of segment EBITA.

SG&A for the nine-month period ended June 30, 2023 increased $293 million, and SG&A as a percentage of sales decreased by 10 basis points. The increase in SG&A was primarily due to certain investments to support growth, one-time transaction and separation costs and a loss associated with a fire at a leased warehouse facility, partially offset by the favorable year-over-year impact of net mark-to-market adjustments and favorable foreign currency translation ($122 million). Refer to the "Segment Analysis" below within this Item 2 for a discussion of segment EBITA.

Restructuring and Impairment Costs

			Three Months Ended June 30,																		Nine Months Ended June 30,
(in millions)			2023						2022						Change						2023						2022						Change
Restructuring and impairment costs			$	81					$	121					-33		%				$	844					$	554					52		%

Restructuring and impairment costs for the three-month period ended June 30, 2023 included $67 million in severance charges and $14 million in other long-lived asset impairments and other restructuring costs.

Restructuring and impairment costs for the nine-month period ended June 30, 2023 included $498 million of impairment costs related to businesses classified or previously classified as held-for-sale, $184 million of goodwill impairment costs related to the Silent-Aire reporting unit, $114 million in severance charges and $48 million in other long-lived asset impairments and other restructuring costs.

Restructuring and impairment costs for the three-month period ended June 30, 2022 included $60 million of impairment costs related to businesses classified as held-for-sale, $52 million of severance charges, $7 million of other long-lived asset impairments and other restructuring costs and $2 million of impairment related to internal-use software projects that were no longer probable of being completed.

Restructuring and impairment costs for the nine-month period ended June 30, 2022 included $235 million of goodwill impairment costs related to the North America Retail reporting unit, $146 million of impairment costs related to businesses classified or previously classified as held-for-sale, $89 million of severance charges, $46 million of other long-lived asset

impairments and other restructuring costs, and $38 million of impairment related to internal-use software projects that were no longer probable of being completed.

Refer to Note 4, "Assets and Liabilities Held for Sale," Note 8, "Goodwill and Other Intangible Assets," and Note 17, "Restructuring and Related Costs," of the notes to the consolidated financial statements for further disclosure related to the Company's restructuring plans and impairment costs.

Net Financing Charges

			Three Months Ended June 30,																		Nine Months Ended June 30,
(in millions)			2023						2022						Change						2023						2022						Change
Net financing charges			$	80					$	49					63		%				$	218					$	153					42		%

Refer to Note 10, "Debt and Financing Arrangements," of the notes to the consolidated financial statements for further disclosure related to the Company's net financing charges.

Equity Income

			Three Months Ended June 30,																		Nine Months Ended June 30,
(in millions)			2023						2022						Change						2023						2022						Change
Equity income			$	78					$	63					24		%				$	190					$	175					9		%

The increase in equity income for the three and nine months ended June 30, 2023 was primarily due to higher income at certain partially-owned affiliates of the Johnson Controls - Hitachi joint venture. Refer to the "Segment Analysis" below within this Item 2 for a discussion of segment EBITA.

Income Tax (Benefit) Provision

			Three Months Ended June 30,																		Nine Months Ended June 30,
(in millions)			2023						2022						Change						2023						2022						Change
Income tax (benefit) provision			$	(329)					$	61					*						$	(266)					$	190					*
Effective tax rate			(41.5		%)				12.1		%										(22.4		%)				17.2		%

• Measure not meaningful

The decrease in the effective tax rate for the three and nine months ended June 30, 2023 was primarily due to reserve adjustments for uncertain tax positions resulting from tax audit developments and statute expirations, higher prior year tax impacts of impairment charges and the prior year establishment of a deferred tax liability on the outside basis difference of the Company's investment in certain subsidiaries as a result of the planned divestiture of its Global Retail business. Refer to Note 18, "Income Taxes," of the notes to the consolidated financial statements for further detail.

Income Attributable to Noncontrolling Interests

			Three Months Ended June 30,																		Nine Months Ended June 30,
(in millions)			2023						2022						Change						2023						2022						Change
Income attributable to noncontrolling interests			$	73					$	64					14		%				$	152					$	143					6		%

The increase in income attributable to noncontrolling interests for the three and nine months ended June 30, 2023 was primarily due to higher net income at certain partially-owned affiliates within the Global Products segment.

Net Income Attributable to Johnson Controls

			Three Months Ended June 30,																		Nine Months Ended June 30,
(in millions)			2023						2022						Change						2023						2022						Change
Net income attributable to Johnson Controls			$	1,049					$	379					*						$	1,300					$	771					69		%

• Measure not meaningful

The increase in net income attributable to Johnson Controls for the three months ended June 30, 2023 was primarily due to lower income tax provision and higher gross profit, both of which are discussed above. The increase in net income attributable to Johnson Controls for the nine months ended June 30, 2023 was primarily due to higher gross profit and lower income tax provision, partially offset by higher SG&A and restructuring and impairment costs, all of which are discussed above.

Diluted earnings per share attributable to Johnson Controls for the three months ended June 30, 2023 was $1.53 compared to $0.55 for the three months ended June 30, 2022. Diluted earnings per share attributable to Johnson Controls for the nine months ended June 30, 2023 was $1.89 compared to $1.10 for the nine months ended June 30, 2022.

Comprehensive Income Attributable to Johnson Controls

			Three Months Ended June 30,																		Nine Months Ended June 30,
(in millions)			2023						2022						Change						2023						2022						Change
Comprehensive income attributable to Johnson Controls			$	1,025					$	62					*						$	1,341					$	543					*

• Measure not meaningful

The increase in comprehensive income attributable to Johnson Controls for the three months ended June 30, 2023 was due to higher net income attributable to Johnson Controls ($670 million) and an increase in other comprehensive income attributable to Johnson Controls ($293 million) primarily resulting from currency translation adjustments.

The increase in comprehensive income attributable to Johnson Controls for the nine months ended June 30, 2023 was due to higher net income attributable to Johnson Controls ($529 million) and an increase in other comprehensive income attributable to Johnson Controls ($269 million) primarily resulting from currency translation adjustments.

Segment Analysis

Management evaluates the performance of its business units based primarily on segment EBITA, which represents income before income taxes and noncontrolling interests, excluding general corporate expenses, intangible asset amortization, net financing charges, restructuring and impairment costs, and net mark-to-market adjustments related to pension and postretirement plans and restricted asbestos investments.

Net Sales

			Three Months Ended June 30,																		Nine Months Ended June 30,
(in millions)			2023						2022						Change						2023						2022						Change
Building Solutions North America			$	2,665					$	2,426					10		%				$	7,552					$	6,805					11		%
Building Solutions EMEA/LA			1,045						952						10		%				3,051						2,869						6		%
Building Solutions Asia Pacific			736						665						11		%				2,049						1,963						4		%
Global Products			2,687						2,571						5		%				7,235						6,937						4		%
			$	7,133					$	6,614					8		%				$	19,887					$	18,574					7		%

Three Months:

• The increase in Building Solutions North America was due to higher prices and volumes ($246 million) and incremental sales related to business acquisitions ($5 million), partially offset by the unfavorable impact of foreign currency translation ($12 million). Excluding the impacts of business acquisitions and foreign currency translation, sales growth was led by low-teens growth in HVAC & Controls and high single-digit growth in Fire & Security.

• The increase in Building Solutions EMEA/LA was due to higher prices ($89 million) and the net impact of business acquisitions and divestitures ($6 million), partially offset by the unfavorable impact of foreign currency translation ($2 million). Excluding the impacts of foreign currency translation and business acquisitions and divestitures, sales growth was led by mid-teens growth in service and high single-digit growth in HVAC & Controls and Fire & Security. By region, there was strong organic growth in Europe and Latin America, with more modest growth in the Middle East.

• The increase in Building Solutions Asia Pacific was due to higher prices and volumes ($98 million) and incremental sales related to business acquisitions ($8 million), partially offset by the unfavorable impact of foreign currency translation ($35 million). Excluding the impacts of foreign currency translation and business acquisitions, sales growth was led by high-teen growth in service and continued momentum for HVAC & Controls. By region, sales in China grew over 25%, with strong double-digit growth in the service and install businesses as China rebounded from COVID-19 shutdowns in the prior year.

• The increase in Global Products was due to higher prices ($162 million) and incremental sales related to business acquisitions ($5 million), partially offset by the unfavorable impact of foreign currency translation ($51 million). Excluding the impacts of foreign currency translation and business acquisitions, sales growth was driven by growth in Applied, Fire Detection, Industrial Refrigeration and Commercial Ducted HVAC products.

Year-to-Date:

• The increase in Building Solutions North America was due to higher prices and volumes ($771 million) and incremental sales related to business acquisitions ($17 million), partially offset by the unfavorable impact of foreign currency translation ($41 million). Excluding the impacts of business acquisitions and foreign currency translation, sales growth was led by growth in HVAC & Controls and Fire & Security.

• The increase in Building Solutions EMEA/LA was due to higher prices ($296 million) and the net impact of business acquisitions and divestitures ($27 million), partially offset by the unfavorable impact of foreign currency translation ($141 million). Excluding the impacts of foreign currency translation and business acquisitions and divestitures, sales growth was led by growth in Fire & Security and HVAC & Controls. By region, there was strong organic growth in Europe and Latin America, with more modest growth in the Middle East.

• The increase in Building Solutions Asia Pacific was due to higher prices and volumes ($225 million) and incremental sales related to business acquisitions ($8 million), partially offset by the unfavorable impact of foreign currency translation ($147 million). Excluding the impacts of foreign currency translation and business acquisitions, sales growth was led by continued demand for HVAC & Controls. By region, sales in China grew, with strong growth in the service and install businesses.

• The increase in Global Products was due to the net impact of higher prices and lower volumes ($562 million) and incremental sales related to business acquisitions ($5 million), partially offset by the unfavorable impact of foreign currency translation ($269 million). Excluding the impacts of foreign currency translation and business acquisitions, sales growth was driven by strong price realization and growth in Applied, Fire Detection, Industrial Refrigeration and Commercial HVAC products.

Segment EBITA

			Three Months Ended June 30,																		Nine Months Ended June 30,
(in millions)			2023						2022						Change						2023						2022						Change
Building Solutions North America			$	385					$	260					48		%				$	967					$	745					30		%
Building Solutions EMEA/LA			90						83						8		%				234						266						-12		%
Building Solutions Asia Pacific			102						85						20		%				249						227						10		%
Global Products			593						570						4		%				1,463						1,283						14		%
			$	1,170					$	998					17		%				$	2,913					$	2,521					16		%

Three Months:

• The increase in Building Solutions North America was primarily due to favorable price/cost, ongoing productivity savings and growth in service.

• The increase in Building Solutions EMEA/LA was primarily due to favorable price/cost and productivity improvements.

• The increase in Building Solutions Asia Pacific was primarily due to service performance, favorable price/cost and productivity savings.

• The increase in Global Products was primarily due to favorable price/cost and productivity savings, partially offset by the unfavorable impact of continued weakness in the residential North America market and foreign currency translation ($11 million).

Year-to-Date:

• The increase in Building Solutions North America was primarily due to favorable price/cost, volume leverage and productivity savings, partially offset by unfavorable project mix.

• The decrease in Building Solutions EMEA/LA was primarily due to the unfavorable impact of foreign currency translation ($16 million) and unfavorable project mix, partially offset by favorable price/cost and productivity savings.

• The increase in Building Solutions Asia Pacific was primarily due to favorable price/cost and productivity savings, partially offset by the unfavorable impact of foreign currency translation ($21 million).

• The increase in Global Products was primarily due to favorable price/cost and productivity savings, partially offset by unfavorable mix, an uninsured loss associated with a fire at a leased warehouse facility and the unfavorable impact of foreign currency translation ($36 million).

Backlog

The Company’s backlog is applicable to its sales of systems and services. At June 30, 2023, the backlog was $13.3 billion, of which $12.0 billion was attributable to the building solutions (field) business. The backlog amount outstanding at any given time is not necessarily indicative of the amount of revenue to be earned in the upcoming fiscal year.

At June 30, 2023, remaining performance obligations were $19.2 billion, which is $5.9 billion higher than the Company's backlog of $13.3 billion. Differences between the Company’s remaining performance obligations and backlog are primarily due to:

• Remaining performance obligations include large, multi-purpose contracts to construct hospitals, schools and other governmental buildings, which are services to be performed over the building's lifetime with average initial contract terms of 25 to 35 years for the entire term of the contract versus backlog which includes only the lifecycle period of these contracts which approximates five years;

• Remaining performance obligations exclude certain customer contracts with a term of one year or less or contracts that are cancellable without substantial penalty versus backlog which includes short-term and cancellable contracts; and

• Remaining performance obligations include the full remaining term of service contracts with substantial termination penalties versus backlog which includes only one year for all outstanding service contracts.

The Company reports backlog as it believes it is a useful measure of evaluating the Company's operational performance and relationship to total orders.

Liquidity and Capital Resources

Working Capital

			June 30,						September 30,
(in millions)			2023						2022						Change
Current assets			$	12,006					$	11,685
Current liabilities			(11,128)						(11,239)
			878						446						97		%
Less: Cash and cash equivalents			(1,057)						(2,031)
Add: Short-term debt			186						669
Add: Current portion of long-term debt			1,081						865
Working capital (as defined)			$	1,088					$	(51)					*
Accounts receivable - net			$	6,540					$	5,727					14		%
Inventories			3,092						2,665						16		%
Accounts payable			4,296						4,368						(2		%)

• Measure not meaningful

• Working capital is a non-GAAP financial measure. The Company defines working capital as current assets less current liabilities, excluding cash, short-term debt, the current portion of long-term debt, and current assets and liabilities held for sale. Management believes that this measure of working capital, which excludes financing-related items and businesses to be divested, provides a more useful measurement of the Company’s operating performance.

• The increase in working capital at June 30, 2023 as compared to September 30, 2022, was primarily due to increases in accounts receivable due to increased sales and timing of collections and increases in inventory due to seasonality factors and softer demand in the residential end market.

• The Company’s days sales in accounts receivable at June 30, 2023 and September 30, 2022 were 58 days and 51 days, respectively. There have been no significant adverse changes in the level of overdue receivables or significant changes in revenue recognition methods.

• The Company’s inventory turns for the three months ended June 30, 2023 were lower than the comparable period ended September 30, 2022 primarily due to softer demand in the residential end market and certain other project delays.

• Days in accounts payable were 83 days at June 30, 2023 and 88 days at September 30, 2022.

Cash Flows From Continuing Operations

						Nine Months Ended June 30,
(in millions)						2023						2022
Cash provided by operating activities						$	831					$	811
Cash used by investing activities						(576)						(588)
Cash provided (used) by financing activities						(1,111)						29

• The increase in cash provided by operating activities reflects higher net income and lower cash payments for inventory, partially offset by the timing of accounts payable and accrued liabilities payments.

• The decrease in cash used by investing activities was primarily due to lower capital expenditures, partially offset by higher cash paid for acquisitions.

• The decrease in cash provided by financing activities was primarily due to lower net cash inflows from debt and borrowings, partially offset by lower cash outflows for stock repurchases.

Capitalization

			June 30,						September 30,
(in millions)			2023						2022						Change
Short-term debt			$	186					$	669
Current portion of long-term debt			1,081						865
Long-term debt			8,497						7,426
Total debt			9,764						8,960						9		%
Less: Cash and cash equivalents			1,057						2,031
Total net debt			8,707						6,929						26		%
Shareholders’ equity attributable to Johnson Controls ordinary shareholders			16,324						16,268						—		%
Total capitalization			$	25,031					$	23,197					8		%
Total net debt as a % of total capitalization			34.8		%				29.9		%

• Net debt and net debt as a percentage of total capitalization are non-GAAP financial measures. The Company believes the percentage of total net debt to total capitalization is useful to understanding the Company’s financial condition as it provides a view of the extent to which the Company relies on external debt financing for its funding and is a measure of risk to its shareholders.

• The Company's material cash requirements primarily consist of working capital requirements, repayments of long-term debt and related interest, operating leases, dividends, capital expenditures, potential acquisitions and share repurchases.

• As of June 30, 2023, approximately $3.0 billion remains available under the Company's share repurchase authorization, which does not have an expiration date and may be amended or terminated by the Board of Directors at any time without prior notice. The Company expects to repurchase outstanding shares from time to time depending on market conditions, alternate uses of capital, liquidity, and the economic environment.

• The Company declared a dividend of $0.37 per common share in the quarter ended June 30, 2023 and intends to continue paying dividends throughout fiscal 2023.

• The Company believes its capital resources and liquidity position, including cash and cash equivalents of $1.1 billion at June 30, 2023, are adequate to fund operations and meet its obligations for the foreseeable future. The Company expects

requirements for working capital, capital expenditures, dividends, minimum pension contributions, debt maturities and any potential acquisitions or stock repurchases in the remainder of fiscal 2023 will be funded from operations, supplemented by short- and long-term borrowings, if required.

**–**The Company manages its short-term debt position in the U.S. and euro commercial paper and bank loan markets. No commercial paper was outstanding as of June 30, 2023. Commercial paper outstanding totaled $172 million as of September 30, 2022.

–The Company maintains a shelf registration statement with the SEC under which it may issue additional debt securities, ordinary shares, preferred shares, depository shares, warrants purchase contracts and units that may be offered in one or more offerings on terms to be determined at the time of the offering. The Company anticipates that the proceeds of any offering would be used for general corporate purposes, including repayment of indebtedness, acquisitions, additions to working capital, repurchases of ordinary shares, dividends, capital expenditures and investments in the Company's subsidiaries.

–The Company also has the ability to draw on its $2.5 billion revolving credit facility which expires in December 2024 or its $0.5 billion 364-day revolving credit facility which expires in November 2023. There were no draws on the revolving credit facilities as of June 30, 2023 and September 30, 2022.

• The Company's ability to access the global capital markets and the related cost of financing is dependent upon, among other factors, the Company's credit ratings. As of June 30, 2023, the Company's credit ratings and outlook were as follows:

Rating Agency						Short-Term Rating						Long-Term Rating						Outlook
S&P						A-2						BBB+						Stable
Moody's						P-2						Baa2						Positive

The security ratings set forth above are issued by unaffiliated third party rating agencies and are not a recommendation to buy, sell or hold securities. The ratings may be subject to revision or withdrawal by the assigning rating organization at any time.

• Financial covenants in the Company's revolving credit facilities requires a minimum consolidated shareholders’ equity attributable to Johnson Controls of at least $3.5 billion at all times. The revolving credit facility also limits the amount of debt secured by liens that may be incurred to a maximum aggregated amount of 10% of consolidated shareholders’ equity attributable to Johnson Controls for liens and pledges. For purposes of calculating these covenants, consolidated shareholders’ equity attributable to Johnson Controls is calculated without giving effect to (i) the application of Accounting Standards Codification ("ASC") 715-60, "Defined Benefit Plans - Other Postretirement," or (ii) the cumulative foreign currency translation adjustment. As of June 30, 2023, the Company was in compliance with all covenants and other requirements set forth in its credit agreements and the indentures governing its notes, and expects to remain in compliance for the foreseeable future. None of the Company’s debt agreements limit access to stated borrowing levels or require accelerated repayment in the event of a decrease in the Company's credit rating.

• The key financial assumptions used in calculating the Company’s pension liability are determined annually, or whenever plan assets and liabilities are re-measured as required under accounting principles generally accepted in the U.S., including the expected rate of return on its plan assets. In fiscal 2023, the Company believes the long-term rate of return will approximate 8.25%, 3.70% and 6.65% for U.S. pension, non-U.S. pension and postretirement plans, respectively. During the first nine months of fiscal 2023, the Company made approximately $38 million in total pension and postretirement contributions. In total, the Company expects to contribute approximately $38 million in cash to its defined benefit pension plans and $3 million in cash to its postretirement plans in fiscal 2023.

• The Company earns a significant amount of its income outside of the parent company. Outside basis differences in these subsidiaries are deemed to be permanently reinvested except in limited circumstances. The Company currently does not intend nor foresee a need to repatriate undistributed earnings included in the outside basis differences other than in tax efficient manners. The Company's intent is to reduce basis differences only when it would be tax efficient. The Company expects existing U.S. cash and liquidity to continue to be sufficient to fund the Company’s U.S. operating activities and cash commitments for investing and financing activities for at least the next twelve months and thereafter for the foreseeable future. In the U.S., should the Company require more capital than is generated by its operations, the Company

could elect to raise capital in the U.S. through debt or equity issuances. The Company has borrowed funds in the U.S. and continues to have the ability to borrow funds in the U.S. at reasonable interest rates. In addition, the Company expects existing non-U.S. cash, cash equivalents, short-term investments and cash flows from operations to continue to be sufficient to fund the Company’s non-U.S. operating activities and cash commitments for investing activities, such as material capital expenditures, for at least the next twelve months and thereafter for the foreseeable future. Should the Company require more capital at its Luxembourg and Ireland holding and financing entities, other than amounts that can be provided in tax efficient methods, the Company could also elect to raise capital through debt or equity issuances. These alternatives could result in increased interest expense or other dilution of the Company’s earnings.

• The Company may from time to time purchase its outstanding debt through open market purchases, privately negotiated transactions or otherwise. Purchases or retirement of debt, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

• Refer to Note 10, "Debt and Financing Arrangements," of the notes to the consolidated financial statements for additional information on debt activity and items impacting capitalization.

Co-Issued Securities: Summarized Financial Information

The following information is provided in compliance with Rule 13-01 of Regulation S-X under the Securities Exchange Act of 1934 with respect to the following unsecured, unsubordinated senior notes (collectively, ("the Notes) which were issued by Johnson Controls International plc ("Parent Company") and Tyco Fire & Security Finance S.C.A. (“TFSCA”):

• €500 million aggregate principal amount of 0.375% Senior Notes due 2027

• €600 million aggregate principal amount of 3.000% Senior Notes due 2028

• $625 million aggregate principal amount of 1.750% Senior Notes due 2030

• $500 million aggregate principal amount of 2.000% Sustainability-Linked Senior Notes due 2031

• $400 million aggregate principal amount of 4.900% Senior Notes due 2032

• €500 million aggregate principal amount of 1.000% Senior Notes due 2032

• €800 million aggregate principal amount of 4.25% Senior Notes due 2035

TFSCA is a corporate partnership limited by shares (société en commandite par actions) incorporated and organized under the laws of the Grand Duchy of Luxembourg (“Luxembourg”) and is a wholly-owned consolidated subsidiary of the Company that is 99.924% owned directly by the Parent Company and 0.076% owned by TFSCA’s sole general partner and manager, Tyco Fire & Security S.à r.l., which is itself wholly-owned by the Company. The Parent Company is incorporated and organized under the laws of Ireland. TFSCA is incorporated and organized under the laws of Luxembourg. The bankruptcy, insolvency, administrative, debtor relief and other laws of Luxembourg or Ireland, as applicable, may be materially different from, or in conflict with, those of the United States, including in the areas of rights of creditors, priority of governmental and other creditors, ability to obtain post-petition interest and duration of the proceeding. The application of these laws, or any conflict among them, could adversely affect noteholders’ ability to enforce their rights under the Notes in those jurisdictions or limit any amounts that they may receive.

The tables below set forth summarized financial information of the Parent Company and TFSCA (collectively, the “Obligor Group”) on a combined basis after intercompany transactions have been eliminated, including adjustments to remove the receivable and payable balances, investment in, and equity in earnings from, those subsidiaries of the Parent Company other than TFSCA (collectively, the "Non-Obligor Subsidiaries").

The following table presents summarized income statement information (in millions):

						Nine Months Ended June 30, 2023						Year Ended September 30, 2022
Net sales						$	—					$	—
Gross profit						—						—
Net loss						(390)						(268)
Income attributable to noncontrolling interests						—						—
Net loss attributable to the entity						(390)						(268)

Excluded from the table above are intercompany transactions between the Obligor Group and Non-Obligor Subsidiaries as follows (in millions):

						Nine Months Ended June 30, 2023						Year Ended September 30, 2022
Net sales						$	—					$	—
Gross profit						—						—
Net income (loss)						(81)						92
Income attributable to noncontrolling interests						—						—
Net income (loss) attributable to the entity						(81)						92

The following table presents summarized balance sheet information as of June 30, 2023 and September 30, 2022 (in millions):

						June 30, 2023						September 30, 2022
Current assets						$	207					$	1,231
Noncurrent assets						243						243
Current liabilities						2,314						5,463
Noncurrent liabilities						8,232						7,176
Noncontrolling interests						—						—

Excluded from the table above are intercompany balances between the Obligor Group and Non-Obligor Subsidiaries as follows (in millions):

						June 30, 2023						September 30, 2022
Current assets						$	1,812					$	455
Noncurrent assets						1,951						2,952
Current liabilities						6,921						2,538
Noncurrent liabilities						6,346						6,228
Noncontrolling interests						—						—

The same accounting policies as described in Note 1, "Summary of Significant Accounting Policies," of the Company's Annual Report on 10-K for the year ended September 30, 2022 are used by the Parent Company and each of its subsidiaries in connection with the summarized financial information presented above.

New Accounting Standards

Refer to Note 2, "New Accounting Standards," of the notes to the consolidated financial statements.

Critical Accounting Estimates

The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). This requires management to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates. The Company’s critical accounting estimates requiring significant judgement that could materially impact the Company's results of operations, financial position and cash flows are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2022. Since the date of the Company’s most recent Annual Report, there have been no material changes in the Company’s critical accounting estimates or assumptions.