Johnson Controls International plc (JCI) Earnings Call Transcript & Summary

Welcome, and thank you for standing by. [Operator Instructions] I will now turn the call over to Mr. Steve Tusa with JPMorgan. You may begin.

Great. Thanks, operator, and welcome, everyone, to the final day here of our virtual conference. We're very pleased to have George, Brian as well as Antonella, and, I think, Ryan here from JCI. I'm going to leave it off to George to make some opening comments. As usual, please e-mail me any questions, and we'll hopefully have a good 40-minute chat here. George, to you.

Yes, terrific. Thanks, Steve, and we are happy that we're able to make things work out virtually here. What I thought, I would spend a couple minutes providing a few high-level comments before we get into questions, if that's okay, Steve?

Yes, absolutely. Fire away.

So let me start from a strategic standpoint. We are continuing to execute on the fundamentals and financial performance, and I feel very confident that over the long term, we are very well positioned as a strong leader in the industry. Additionally, we are, I would say, well positioned to the transition to digital over the next several years. As we've discussed, we made good progress integrating our digital technologies and building data capabilities which are fully aligned in supporting our customers' digital strategies focused on improving their customers' as well as their employee experiences while significantly contributing to achieving their sustainability goals. And as I'm sure the current environment and impact of COVID-19 is on the top of everyone's mind, why don't I just start with an update on that. From our perspective, it continues to remain a fluid situation. Certainly, we're focused on the safety of our employees, working with our customers and suppliers, which continues to be our priority. We have suspended all noncritical business and customer travel. And I'm chairing daily leadership meetings with our EHS, security, procurement, HR, communications, all of our operation folks across the globe. And I would tell you we have all hands on deck across the enterprise monitoring the situation and then making sure that we're taking immediate actions to mitigate any impact. We do have a significant footprint in China, not only serving the market but also related to our supply chain. 6% of our revenues are tied to the China market. And we also -- as you know, within our Hitachi JV, we have a significant presence in China with our Hisense JV. And also to note, in our Global Products business, about 1/3 of our products are either serving Asia or coming out of Asia. And when you look at what's happened here in China, we have calculated roughly about a 4 -- maybe 4- to 5-week shutdown here post the crisis there, and I'll talk a little bit now about how we're getting back online. As far as our facilities, now we're back online in China. We're currently running at -- it's roughly about 90% utilization. It's with the exception of one facility, which is in Wuhu, which is very close to the area where the virus started. And there, it's been really more challenging getting the people back to work. Although in my update a couple days back, we've made incredible progress here this week, and we're getting back to almost full operation. Just to give you a sense on our footprint, we have 14 sites in China. 11 of those sites are manufacturing facilities, and we do have 3 distribution centers. Now to give you a perspective of what our customers are doing in China. Right now, we estimate there's about 50% of our customers that are up and running. Their sites are open, we're serving them, and that continues to get better every day. As we look at the overall impact, what I would say is we have both a supply and demand issue in the quarter. When you look at the China supply base, we're now operating at about 80% capacity, and we do expect that to achieve a full run rate output by the end of March. I would tell you our sourcing team has been doing incredible work working with our Tier 1, Tier 2, Tier 3 suppliers and not only getting them up and running but also making sure, as we look at our global supply chain, leveraging alternative supply sources. And I would tell you the teams have made great progress. So all of that said, we've got the entire team focused on what we can control, which I would start by saying staying focused on delivering for our customers, maximizing our revenues while delivering on an accelerating synergies and productivity. And we are continuing to work a pipeline of additional actions to be able to work to mitigate any revenue shortfalls. And last, what I'd leave everyone with is we've got a very strong balance sheet, and we are staying very focused and disciplined on our capital deployment actions. So on that, I'll pass it over to Brian for some comments around how the COVID-19 is expected to impact our fiscal Q2 and where we think we currently stand for the year. Brian?

Okay. Thanks, George. So given the current fluid situation that George described, we are monitoring the virus' financial impacts with our teams on a daily basis across all of our businesses. And my comments today based upon Q2 and the full year are based upon what we know as of today, with March always a key month for us in the second quarter. But I would start by just saying that at this time, we do see an impact of the virus on our Q2 financial results, and let me try to frame that for you. So overall, we now expect a low single-digit organic revenue decline in the quarter. And as you recall, we expected organic revenue growth to be up low single digits. I would point out that some of that revenue shortfall relates to our 60%-owned Hitachi JV, which will result in a lower minority interest charge as well. As George mentioned, we've also taken immediate actions from a cost standpoint, deferring discretionary spend-type items and putting in place really all the actions around the flexible workforce that we've kind of worked on over the last couple years and put in place. And all of this will serve to mitigate a portion of the top line virus impact we're seeing in the quarter. So despite all of our actions, we do see EPS pressure in Q2. Now having said that, as we look at the full year, I would just point out a few things. First, we had a very strong Q1, which was better than our expectations. Secondly, we are accelerating our $2.2 billion share repurchase that we talked about completing throughout fiscal '20. And given current market conditions, we are going to accelerate that such that it's completed in Q3. So that should alleviate some of the impact that we're seeing in Q2 on a full year basis. Third, we do expect some of the volume impacts that we're seeing in Q2 to be temporary and could potentially be recovered by the end of the year. But we also recognize that some of this is demand related and B2C-type business where it could be lost in the fiscal year. And then lastly, as I mentioned, we're taking a lot of cost-mitigation actions. We are doing contingency planning workshops and so forth. And as things progress, if this virus continues to have negative implications in the global economy, we will take any structural cost changes that we need to. So I would just end by saying that when we look at the current impact of the spread of the virus and when it's going to allow us to get back to normal operations, that's going to really dictate things. But based upon the pluses and minuses that we have today, we continue to expect that net-net, our EPS for the year will be in the range of $2.50 to $2.60, which was our original guide. But I would point out that we need to monitor this situation closely, and as we get to the Q2 earnings call, we'll update things as needed.

So we'll turn it back to you, Steve, and we'll open it up for the fireside chat.

Great. Thanks, guys. Tremendous color there. We appreciate, at a challenging time, you guys putting some degree of brackets and framework around this thing. Maybe if you could just carve out or perhaps provide a bit more color around the drivers of that organic, maybe like what the revenue base is and what you're assuming from a revenue perspective, what you are kind of seeing -- where you are seeing the impact mostly.

Yes. So the impact is primarily in our Global Products business as well as our APAC business at this time. And I think there's some modest impact in EMEA/LA and North America, but the 2 primary areas of concern would be APAC and Global Products.

Recognize, Steve, that in our Global Products, we are more heavily weighted in APAC with our Hitachi JV, not only in the JV that we serve China but also more broadly in Asia. So that's -- we've seen a pretty significant impact there short term. But we've got the supply chain up and running, and as we now look at demand, it is beginning to come back. But that's something we're tracking closely.

So just kind of -- I guess for -- also for a bit of a framework for others, we're trying to kind of gather what everybody is seeing out there. I mean I think it looks like DuPont and Emerson yesterday talked about their -- just simply their China revenues being down in the range of 15% to 20%. It sounds like for you guys, you're looking at kind of this Asia bucket being down probably 15% to 20%. Is that kind of how we should think about it, maybe a little bit more than that?

Yes. I would say, when you aggregate it all, probably mid-teens based on the plus and minuses of where we are.

Right. And can you grow? Is North America growing in this kind of construct?

Yes. So we're -- as we had guided for North America, we're going to be low single digits in the quarter. The only -- we've been on track for the quarter, pretty much where we are through February. The more recent concern is where sites are being shut down as it relates to whether it be schools or hospitals or sites that we ultimately perform work or perform service. And so the -- right now, the -- obviously, the business has been good. I mean there is concern that because of the impact and how this is being addressed at our customer sites, there has been, short term, some impact there. But we are still beginning -- still executing as we had committed when we did the earnings call.

And we're still looking at low single-digit North American growth.

Right, right. So when we think about this kind of revenue -- this type of revenue decline, it looks like it's somewhere in the range of maybe 3% to 5%-ish kind of swing. That's roughly $0.06 per share type of drop-through? Or is there something unique and unusual about the drop-through of this type of business that we should maybe lever it a little bit -- delever it a little bit less?

So I think the way to think about this is, because a lot of it relates to our Global Products business, there's probably a delever that's a bit higher on the products business. I think APAC is probably a more normalized delever. And so I think your estimate may be a bit on the light side relative to just the revenue impact, but the cost actions that we're taking to offset that as well as the minority interest impact that I mentioned will -- should cut that number about in half.

Should cut the number I said in half ultimately?

Yes.

I guess I'm just trying to kind of get at a range of kind of where we should settle out on EPS.

Yes. Yes, it should cut your number about in half.

Okay, okay. Great. I appreciate that. Can you just maybe give us a little bit of backdrop and detail around the revenue base there? And also, just how much of your kind of recurring -- is there a difference geographically with your recurring business? Kind of the truly recurring business, how much is in kind of affected -- the currently affected regions and how much is in North America and Europe? Maybe just a little more of a revenue breakdown on the China and Asia business and Hitachi JV impact there and then just your recurring business, how that kind of breaks down globally.

Yes. So let's start with -- when you look at our China -- our Field business, we're about 25%, 30% service. And so you can imagine with the -- pretty much the shutdown of our customers during the month of February, that was significantly impacted. As I said in my comments, about 50% of our customers are back up and operating. Some of the the sites where we're fulfilling projects are now back up and being worked, and so that's coming back. And we're tracking customer by customer what we're doing to make sure that we have the product to serve that market. Hitachi, when you look at the Hitachi revenues, in -- most of that is -- we got a high share position in Japan and Taiwan. There has been some -- as we stated during our earnings call, we're seeing some softness there, and we -- what we expected in the quarter, and that has been a little bit worse. Some of that is not only the demand but also the disruption of the supply chain, and we've been working that closely. When you look at the unconsolidated revenues, it is a large JV that we have with Hisense. And so as Brian said, the impact there is on the income that we get from that minority interest. And around the world, if you were to ask on the other regions, there's a higher service percentage elsewhere in Asia Pac. It's probably more like 40%, 45%. China is the -- from a service revenue standpoint, has a lower percentage, but we've been building that out over the last couple years. If you go to EMEA/LA, we're more -- it's more about 50-50, maybe 45-55 service, so higher service mix in EMEA/LA. And then in North America, we're about the same. So it's about 40-60 in North America. And so that's the breakdown. When you look at it globally, Steve, it's -- our service is roughly about 35%, 40%; 35%, I think, when you look at it -- when you aggregate all the regions.

And then how much is that kind of recurring piece now that it used to be the old kind of Tyco security or even kind of the mandated fire services stuff? How much of that is really kind of, on an annual basis, either just comes to you monthly or you have to -- this is kind of code mandated?

Yes. So when you look at our -- it's roughly about almost a $7 billion service business globally. When you look at that, it's -- where we have contracts either 1 year or beyond, where we have contracts in place, it's better than 50%. So the -- it's roughly around 55%, 60%.

Right, right. Makes a lot of sense. I appreciate the color. Sorry to get so far into the weeds on this stuff, but people are trying to kind of figure out the pie charts here and where there's exposure or where there is stability, which I think plays into where you are. And I guess looking at the potential for kind of a broader recessionary environment, you guys held up reasonably well in year 1 last cycle. '08, '09 is really what I'm talking about. What's kind of different or the same this time? And how does this feel to you having lived through a couple of these events and these types of recessions? Where is your mindset right now as a CEO? And also, how is the company better positioned to kind of withstand more of a kind of a mild recession type of scenario?

Yes. So let's start with Global Products. And so Global Products, obviously, that's where we have a pretty significant amount of revenue that we transact through external channels as well as we support our internal channels with our project-based business. So our project-based business is pretty predictable because of the backlog that we have. But when you look at the external revenues, that's typically where you start to see some softness. We have been doing contingency planning there for the last 6 months, understanding what potential impacts could be. And we've been, let's say, adjusting that cost structure significantly, preparing for if there were to be an impact from a revenue standpoint. We've done a really nice job doing that, assuming that the revenues don't come in as we had originally expected. That's continuing. We're not only going after supply chain and consolidating our manufacturing footprint, but making the structural changes required that ultimately is really enabling us to be able to offset a significant amount of that pressure. That will continue, Steve. There's still -- with our synergies and productivity as well as additional cost actions, there's still more that can be done, and we'll continue that. When you look at our -- and that's typically where you -- from a flow-based business, you start to see the short-cycle impact. When you look at our field businesses, we are -- our backlog, as we said last quarter, we're up 6% year-on-year. Our average project converts in 9 to 12 months. And so although you get some short-term impact on short-term projects, we feel pretty good about the backlog and the probability of turning that backlog over the next year. And so that's the installed base. And then we built that structure with a flexible workforce. And so on the project-based business, we flex up, we flex down and ultimately try to manage the overall margins and structure given the volume. And then the other is what we just talked about on service, is that we've had a big focus on how do we continue to expand our services. Because from a customer standpoint, it is where there's a lot of value, both in -- not only in making sure that they're compliant with what we -- the systems that we support and maintain, but also -- it also helps them drive a lot of cost out and productivity themselves with us being able to perform a lot of work more efficiently than, ultimately, if they had their own resources doing the work. And so we believe that given the value proposition and the opportunity that we see that we're going to stay focused on executing on the growth there, which historically, in these types of downturns, does not turn down, like, as you said, significantly. So that's kind of where we are.

Yes. Steve, I would just add to that maybe from a balance sheet strength standpoint. If we look at where we are today and where we project to be by the end of this year, we're going to have $1 billion of remaining proceeds from the Power Solutions divestiture. That is kind of being held for optionality. And then we're going to have a strong second half of cash flow as well. So I think we're going to end this year with strength on our balance sheet, which I think also helps provide a little bit of flexibility as we move forward here given some of the uncertain economic times we're dealing with.

Right. And as far as -- yes, sorry, I just wanted to make sure that I understood the buyback comment from before. Are you -- you're basically doing the buyback as planned or you're accelerating some of that into like -- into the near term on the buyback front? I didn't quite catch. It didn't seem like there was a change, but is there a change in timing around that?

So the $2.2 billion is as planned. We're going to do the buyback in fiscal 2020 as we've talked about. We've just pulled a bit of that forward. We -- originally, it was going to be done throughout the fiscal year, and we've pulled a bit of that forward. It will probably be completed sometime in Q3.

Right. Okay. Got it. Where is -- when you think about the cost offsets that you're talking about, I mean, where is that coming from? Is that just stuff that you would have done in '21 and '22? Or is that extra kind of -- are those extra actions here that they hadn't been planned before? Where is that cost offset coming from? Or was there just conservatism in the guidance?

Yes. So I mean we're always -- Steve, this is constant. And as I said before, even though we're coming through the period of synergies and productivity, we have a robust pipeline to continue to simplify whether it be our manufacturing footprint, how we go to market, our structural cost layers and spans. There's a lot of different projects that we have underway. And so the answer to your question is it's all of the above. We're accelerating everything we can accelerate. We're continuing to execute on additional opportunities we've identified. It's really all of the above. And so we're going to just continue to execute, continue to seize the opportunities, accelerate what we can do today and then continue to see how the market performs and be positioned to adjust as needed.

And then you guys had mentioned, obviously, that you're kind of reaffirming the year given the buyback and the cost. What ultimately -- obviously, with the negative performance in the second quarter here, there's -- probably third quarter on a run rate basis is going to be pretty challenging year-over-year as well even if you kind of improve sequentially throughout. You have an extra month of pressure there perhaps and a seasonally more important month for you guys. What is the -- what's the kind of latest view on revenue or organic revenue for the year? Because I'm sure it's going to be kind of tough to hit that target given the hole we've gotten blown here in the -- unexpectedly in the second quarter.

Yes. I mean it's pretty fluid, Steve. I mean there's no doubt about it. I mean sitting here today, we can see some pressure that's kind of flowing to Q3. But the comments that we're making today are reflective of things getting back to normal in some reasonable time period. If that doesn't happen, then, obviously, there's a challenge for us in the $2.50 to $2.60. But we're going to work this day to day and do what we can to drive the back half of the year.

Okay. Got it. From an orders perspective, really, it's probably a stupid question. I would assume orders -- the guidance that you guys have kind of provided, that's off the table and orders are probably going to be worse than sales here on a year-over-year in 2Q.

Yes. So let me give you a perspective on that. So putting APAC aside, orders in North America and EMEA/LA were pretty much on track through February. And so we were tracking to what we had said during the earnings call that we would be kind of more towards mid-single digits. And so that's in North America and EMEA/LA. Obviously, in Asia Pac, given the situation in China being shut down for better than a month, that has had a big impact. Now when you look at March, March typically is the biggest month of the quarter. And you see a lot of the large projects that ultimately close by quarter end. And so the only thing we've seen here recently is it's more customer delays in North America and EMEA/LA, and it's mainly around project approval. So it isn't that the project is not going to get booked. It's more because that the customer's disrupted. For instance, in municipalities or -- and the like, now they are focused on other priorities given the safety of the situation and what they're doing to address their issues. So with some of that, we see some potential push to the right with some of the order activity, but these are projects -- when you look at our base of business and how we take on these projects, there's no risk that these projects aren't going to be done. It's more just how they're going to be booked. And so we're watching that closely. We've got people assigned to every one of them and how we're trying to close them, but some of that could be pushed to the right. And then with that said, we do have a strong pipeline, and that pipeline is still strong. I mean we track it weekly. It's still up high single digits. And so I think, at this stage, we're going to continue to see how things progress as we go through the course of the year.

Got it. Great color. One last question on kind of the year and the guide before we dive into the businesses. Any free cash dynamics that we have to take into account when thinking about -- obviously, you have the JV. Sometimes that's not the most cash-rich earnings stream. Maybe that's actually a positive from a conversion perspective. Anything else we have to consider when it comes to -- if we take our earnings down a certain amount, is cash -- could cash maybe be a little bit better than that? Or does cash just kind of move in the direction of whatever we do with our earnings in this scenario?

I think you should view 95% as being a pretty good number for us, Steve. I mean through February, things are continuing as planned. And so we're focused on the 95% for the year.

Okay. That's good. When it comes to commercial HVAC you just kind of touched a bit on what could happen if things tighten up here a little bit with municipalities. I guess what are you seeing in the other verticals? Any near-term concerns around the more commercial verticals on nonresi? And can you guys continue to outperform on that front?

Yes. I mean what I'd say today, and we review this on a weekly basis, when you look at our pipeline, whether it be institutional end markets, commercial end markets, certainly, the pipeline is still strong. And HVAC is a big part of that. And so where we are today, I don't think -- like Brian said in his comments, I don't think it's a matter of the projects getting done. It's more of the timing given some of the disruption. So we still feel very good about the end market, certainly taking into account what the short-term disruption has meant and what that might mean going forward. But we're keeping a pulse on the pipeline and making sure that we're being -- we're accurately assessing projects that are going to either be stopped or delayed and making sure we have an accurate view of what's in the near future, and we still feel pretty good, Steve.

What are -- where are you guys on your -- every year, we go to the AHR Expo, and you guys have done a really visible job of putting out new products, and there's been this kind of steady flow of portfolio refresh. What inning are we in on that? I know it's a continuous journey, if you want to give the CEO answer, the continuous journey answer. But it seems to me that this is a little bit unique where you guys have definitely put more money to work to develop these new products and refresh the portfolio. Where are we in the -- in that process?

Well, I'll give you the simple version here. So when you look at some of the key platforms, what I would tell you is, starting in residential, UPG or Hitachi, we've done a nice job advancing our product, having leadership product and -- whether it be in the North America market or the global markets as it relates to our Hitachi JV. So we feel good about the product mix there. We're always working on how do we fill out the line card to make sure as we're serving the different growth markets that we've got the right line card, and that will continue. When you look at the other unitary products, and we talk about rooftops, Steve, and I think you saw some of the new products at AHR this year, we've had some tremendous new product launches here over the last 12 months with 3 new rooftop units. We have been investing significantly over the last few years in getting these products to market. And what I would tell you, with those new products, they've got industry-leading efficiency and performance. They are way ahead of the 2023 standards. And then that, combined with the new residential products we've launched, all of our products now are positioned to be able to achieve or outperform those regulatory changes. When you move to -- then, if you go to chillers, that's obviously a strong position for us globally within the applied space. We've had strong reinvestment there. We continue to make sure that with our product offerings, we're bringing the most efficient -- most energy-efficient product to market, and that has gone well with the YZ. And we continue to take our other lineup of products there, continuing to advance there, so we feel good about that. And then I -- if I go to the Building Management platforms, and -- the foundation of those platforms are controls, building controls. You had brought up before some of the key platforms. Verasys is gaining a lot of traction with our customers, particularly in our national accounts business. And this is where we very successfully took -- embedded our smart equipment controls on every rooftop and really pushed intelligence to the edge. They're connected, real time being able to monitor that equipment. It offers customers configurable control system, which ultimately scales over time to their requirements. And it's really been a very high value proposition with a modular product for our smaller and midsized customers. And then the last I'd note is in Metasys, which is, when you look at all of our digital platforms coming together with Metasys, it's really around the value proposition. And with the most recent launch, we've received incredible feedback from the market with our user interfaces being viewed as the best in the market. And I think when we think of that platform, the opportunity not only on-prem but through the cloud and then the data that can be collected not only from our systems but also other systems within the building really is the foundation of the value proposition that we can bring to our customers. So those are the key reinvestments. I think at the rate that we're reinvesting at, we believe that we'll continue to sustain that as a percent of revenue, but certainly across our platforms positions us extremely well.

And I guess Trane talks about what percentage of their portfolio they've refreshed over the last 8, 9 years or whatever it is. Carrier put out some numbers. It's kind of -- it's not really a vitality index, but it's just talking about what percentage had been refreshed over the course of time. Is there any kind of high-level number you can provide on the product side that you would have -- you're obviously tracking this, maybe just to kind of put a finer exclamation point on all those things that we've seen at the show in the last several years.

Yes. So there's really not one number, Steve, but I would tell you that in HVAC, when you -- if you -- your refresh is really driven by platforms. And so when you look at our platforms in HVAC, it's a high percentage now of our revenue streams that now are built off the platforms that we've brought to market over the last 2 or 3 years. In BMS, it's more -- it is a higher vitality purely because of the functionality, the features. And so it's less platform-based, but that is where you're getting high vitality based on software launches and the integration and the ability to be able to add features and user interface and the like. So I'd say, overall, it's a high percentage. It really does get down to the details of is it a new platform. And HVAC platforms are typically refreshed every -- when you say platform, every decade or so. And then on the BMS, it's continuous because of the software element and the capabilities that, that provides.

How would you expect the building control side of the portfolio to hold up? It's a little bit of a tough space to model. It doesn't seem to grow that dramatically when things are going well. Is it a business that can be a bit more stable here? Is there -- was it viewed as more of kind of a bit of a service versus a more cyclical equipment type of business? It's always hard for us to kind of analyze that across the board because it's not that visible at the major players. How do you view the kind of cyclicality of that business?

Well, what I've seen here since the merger is that it is an incredible value proposition for our customers. And so with that being said, not only with the installed base -- obviously, creating new installed base in a much more integrated fashion but even with the current installed base, it becomes the platform to be able to create a lot more value within that because it's not only taking what you do today but adding additional upgrades and sensoring and use of data that ultimately is getting at much higher value propositions for our customers. And so as you think of the customer trends now within buildings, they're really driving what does it do to help them improve their customer experience and then -- and reduce their cost in doing that and then, at the same time, how do they enable that by their employee experience in how they utilize the facility and then all of that -- so not only being able to create new outcomes that enhance their business but also enhance their environment for their employees. But then the savings that you get from an operation standpoint as well as when you think about sustainability, there's a huge value proposition there. And so our focus is through this -- whatever the cycle may be is how do we continue to make sure we've got access to the customer with that value proposition that leverages all of our digital capabilities, which controls is the foundation of.

Right, right, right. But I guess that business separate down into -- what percentage of that would you consider to be kind of aftermarket and services?

Oh, there's -- we have the core business -- we've been growing the core business nicely in our BMS, in our Global Products business. And then in our field-type businesses, this is one of the significant opportunities that we see from a service standpoint to continue to build upon on a go-forward basis. So I don't know exactly the way that, that breaks out or -- because a lot of our service agreements are -- it's a combination of what we do, maintaining equipment as well as providing the service with our digital controls, but it is an important piece of that, Steve.

Got it. One last question for you. I know that you guys have talked about this buyback. There's plenty of assets out there that are a lot cheaper than they were a couple years ago. The S&P is, I think, down now year-over-year, so it's not that cheap. It was just probably pretty expensive a couple months ago. Does -- are you still 100% committed to these buybacks? Or with all this cash, do you kind of take a look and start poking around and revisiting some of the perhaps acquisition plans that you may or may not have had a couple years ago or a year ago?

I think as it relates to the $2.2 billion, Steve, we're committed to a buyback here in fiscal '20. As it relates to the other $1 billion, I would say there's some optionality around that. But George, maybe...

Yes, I would say, Steve, as we've always said, I think given where we are and the progress we're making, we're remaining focused on execution, delivering on commitments and, ultimately, driving results. I think it's been clear that we've been very consistent with what we've said, returning a significant amount of capital to our shareholders at attractive ROIs. We've done everything we committed at the same time while we're driving and improving the fundamentals of the business. We believe we've got a lot of momentum on the fundamentals, the way that we're launching new products. We've been continuing to strengthen our leadership and now, on a go-forward basis, really lead in the digital space. I think we feel very good about our positions, whether it be HVAC, Fire & Security, Building Management. As you noted earlier, we've had a heavy reinvestment pretty much across each one of these platforms, and we're beginning to see the results. So I think at this stage, we're going to continue to execute. We're going to execute on the buybacks that Brian talked about and then, ultimately, on a go-forward basis, certainly making sure that we look at how we do bolt-ons or other activities that ultimately could enhance what we're doing operationally.

Is residential HVAC a high priority for you guys to kind of build out the scale there? Or is that more of a continued evolutionary kind of organic exercise?

Yes. Residential, as we've said, has been an important element of our line card. We've got the product now positioned pretty well. It's critical to be able to maintain strong distribution. So we feel good about the work we've done, and we're going to continue to execute.

Got it. Guys, I really appreciate the color. Sorry to kind of hamper this call with so much near-term discussion on the numbers, but I appreciate your responses. And as much detail as you've given is probably more than anybody's given. So we really do appreciate that and the transparency, and I think that will pay you back in spades when some of the other guys come out and have to surprise the market. So we -- kudos to you, and we appreciate that. And thanks for being flexible and spending the time and I hope you guys stay healthy and safe. And we'll talk on the first quarter earnings if we still have a stock market and a business here to come to.

Thanks for your time today, Steve.

Thanks, Steve.

Absolutely, guys. Stay safe. Bye-bye.

That concludes today's conference. Thank you for participating. You may disconnect at this time.