Welcome to Johnson Controls Third Quarter 2020 Earnings Call. Your lines have been placed on listen-only until the question-and-answer session. This conference is being recorded. If you have any objections, please disconnect at this time. I will turn over the call to Antonella Franzen, Vice President and Chief Investor Relations and Communications Officer.

Good morning. And thank you for joining our conference call to discuss Johnson Controls’ third quarter fiscal 2020 results. The press release and all related tables issued earlier this morning as well as the conference call slide presentation can be found on the Investor Relations portion of our website at johnsoncontrols.com.

Thanks, Antonella, and good morning, everyone. Thank you for joining us on today’s call. I hope you and your families are continuing to stay healthy and safe. Before we get into the detailed review of our third quarter results, I’d like to start by providing you with several highlights and key messages coming out of the quarter on slide 3. I am extremely pleased with how we executed in the quarter and have been encouraged by the monthly sequential improvement. Conditions are beginning to normalize. Our facilities are operating at near-normal levels and access to customer sites is improving more and more every day. And although global macro conditions remain challenging, and the political and social climate in many parts of the world remains extraordinarily dynamic, we are capitalizing on near-term opportunities to engage with our customers as they enhance the health and safety of their buildings and position ourselves long-term as a leader in intelligent building solutions.

Thanks, George, and good morning everyone. So, let’s take a look at the year-over-year EPS bridge on slide 10. As you can see, operations net of mitigating actions was a $0.16 headwind in Q3. And I would point out that although volumes were down significantly year-over-year, we did benefit from slightly favorable mix. Price/cost was again positive, and we achieved significant cost savings during the quarter. Ongoing synergies and productivity savings were an additional $0.04 tailwind, as planned. And non-controlling interest was a $0.03 tailwind, as a result of lower earnings at our Hitachi joint venture. Lower share count, given our significant share repurchase activity over the past 12 months, provided us $0.10. In total, the quarter benefited from approximately $300 million in mitigating cost actions in response to COVID-19. So, let’s take a look at the segment margin bridge on Slide 11. As I mentioned, we saw broad-based volume declines across all four business segments, as a result of COVID-19. However, our businesses did remain very disciplined on price in an increasingly competitive environment and that, accompanied with the benefit of a tailwind for most of our cost inputs, we were able to expand gross margins by 150 basis points year-over-year, and EBIT margins by 50 basis points. As a result, we held decrementals at 13% at the segment EBITDA level and 9% at the consolidated EBIT level. Relative to the framework we’ve provided you on our Q2 call for decrementals being in the low 20s net of mitigating actions and high teens including ongoing synergies and productivity at the EBIT level, I would just point out that volumes came in better than we expected. And as George mentioned, we accelerated our cost actions. So, let’s go to slide 12 and review our segment results in more detail. Total Q3 revenues declined 16% organically as our shorter cycle Global Products business declined 20%, while install and service declined 18% and 7%, respectively. The impacts of the pandemic were widespread, particularly at the beginning of the third quarter, with lockdowns in many parts of the world restricting our access to customer sites and disrupting our production capacity. Although field orders declined 16% in the quarter, we saw sequential improvement. Backlog of $9.1 billion increased 3% year-over-year and 1% on a sequential basis. Looking at the segments individually. North American revenues declined 13% with install down 16% and service down 7%. Applied HVAC declined high-single-digits and Fire & Security was down high-teens, while Performance Solutions grew mid-single-digits in the quarter. Segment margins in North America increased 200 basis points to 15.4%, given the acceleration of the cost mitigation actions that took place during the quarter. I would also point out that North American gross margins continue to improve year-over-year. Orders in North America declined 16% with similar percent declines in both HVAC and Fire & Security. In June, North American orders improved sequentially, trending down high-single-digits. North American backlog at the end of the quarter was $5.8 billion, up 2% year-over-year. Moving to EMEALA, revenues declined 15% with install down 24% and service down 6%. By end-market, applied HVAC declined at a mid-teens rate, while Fire & Security, which accounts for approximately 60% of segment revenues, decreased at a high-teens rate. Industrial refrigeration outperformed relative to the other end markets, declining only mid-single-digits in the quarter. I would note that by geography, we continue to see challenges across the regions. Europe declined high-teens, while the Middle East fell off double-digits and Latin America was down high-single-digits. Although EMEALA’s EBITDA margins were down 300 basis points in the quarter, given the various country shutdowns and our relative cost structure across the region, gross margins are improving. As many parts of the region are now reopened, we expect improved margins in Q4, both on a year-over-year and sequential basis. Orders in EMEALA declined 20% in the quarter with service only down mid-single-digits. EMEALA ended with backlog of $1.7 billion, up 2% year-over-year. Moving to APAC, revenues were down 12% with install down 16% and service down 6%. China significantly improved from the mid-30s decline we saw in Q2 to down only 4% in Q3. Although activity in China continues to improve, we were negatively impacted by extended and renewed lockdowns in other parts of Asia. APAC orders declined 10% in Q3, but backlog remains up 4% year-over-year at $1.6 billion. So, moving to Global Products, which declined 20% in the quarter, just outperformed our original expectations. Our North America residential business declined only mid-single digits in Q3, driven primarily by favorable weather in June, strong dealer acquisition, and the sharp release of some pent-up demand. We also saw share gain in the quarter, primarily the result of our new 14 SEER split system and a competitor’s production issue. We’ve seen significant momentum into July, benefiting from unprecedented order growth in June and we expect a very strong Q4. In Asia Pacific, our residential business declined roughly 20%. However, we have seen signs of recovery in our largest markets, with Japan and Taiwan showing improvement in June. As you would expect, India was down significantly in Q3, due primarily to extended lockdowns related to the pandemic. Overall, we expect our APAC residential business to show strong performance in Q4. Although our North America light commercial business declined more than 20% in the quarter, we saw strong signs of recovery in June with orders up 30%. Daily order rates continue to track higher in July, and we see good traction with our new higher tonnage rooftop replacement units. This will contribute to a significant sequential improvement in Q4. Applied chiller revenues declined around 20%, despite strong chiller and air handling unit replacements in North America as APAC declined due to continued project delays and elevated channel inventories. Fire and security products were impacted by production challenges early in the quarter, which we highlighted for you in our Q2 call. Overall, we saw a significant improvement in our Global Products segment in the month of June, exiting the quarter at a high single-digit decline. So, let’s move to corporate expense on slide 13. Corporate expense was down significantly year-over-year to $48 million, reflecting cost mitigation actions, ongoing synergy and productivity savings, and our cost reductions related to the Power Solutions divestiture. We have not changed our guidance for fiscal ‘20, which implies Q4 corporate expense should be in the range of $50 million to $60 million. I would point out that certain benefits that we’re seeing in the second half of this year do relate to temporary cost reductions, which will put some pressure on corporate expense in fiscal ‘21. I think the way to think about it is directionally for next year, corporate expense will be in the range of $300 million to $330 million. Turning to our balance sheet on slide 14. As you can see, there are no significant changes versus what we discussed with you in early May. Our short-term debt increased as a result of the opportunistic financing arrangements we put in place in April. Overall, our net debt leverage remains at 1.8 times, well below our target range of 2 to 2.5. Given our strong balance sheet position and cash generation in Q3, as George mentioned, we did resume our share repurchases in Q4, which will approximate $750 million. We’ve also made excellent progress on our refinancing plan for our short-term maturities, which we expect to complete sometime in Q4. We’re very comfortable with our liquidity and balance sheet position and will continue to maintain flexibility as we move through the next couple of quarters. Turning to cash flow on slide 15. Another strong cash quarter with reported cash flow just over $700 million, driven primarily by solid working capital improvement, particularly receivable collections. Adjusted free cash flow was $800 million. Year-to-date adjusted free cash flow is $900 million, well above the prior year. And for the full year, we continue to expect our conversion to be in excess of 100%. Lastly, before I turn it over to George, we did have three significant special items which are listed on slide 16 that I’d like to comment on. As we highlighted for you last quarter, we did take a $186 million restructuring charge in connection with our COVID-19 cost mitigation actions. The majority of this cash outflow related to this restructuring will occur in Q4. In addition, we also took a $424 million non-cash impairment charge related to goodwill for our retail business, which was triggered by the current depressed environment for the retail industry. And finally, we had a non-cash mark-to-market adjustment of $132 million in the quarter, primarily related to our pension plans. So, overall, a really strong quarter in the current environment and we’re seeing continued momentum as we enter Q4. With that, George, I’ll turn it back over to you.

Thanks, Brian. Let’s turn to slide 17 for a look at our guidance for the fourth quarter. Given the trends in Q3, we expect to see a nice sequential improvement in revenue, which is expected to result in a year-over-year organic revenue decline in the high single to low double-digit range, with sequential improvement expected across service, project installation, and products. Although some temporary actions, such as furloughs will come back in Q4, we will continue to benefit from significant mitigating actions, which will keep our net EBIT decrementals, including synergies and productivity in the low teens range. Overall, we expect our fourth quarter earnings per share before special items to be in the range of $0.68 to $0.72, another strong quarter, given the unprecedented environment. Versus our framework for a 15% to 20% organic revenue decline in the second half, we now expect the second half to only be down low teens. This, coupled with strong execution and additional cost savings, puts us in a very strong position to finish the year. We now expect our full year earnings per share to be in the range of $2.16 to $2.20, which represents an impressive year-over-year increase of 10% to 12%. As we continue to navigate through these unprecedented times, Johnson Controls is well-positioned, both financially and strategically. The launch of OpenBlue demonstrates our continued commitment to innovation, enhances our service capabilities and future-proofs our strategy. We are in a leadership position to capitalize on recovery and create long-term shareholder value. With that, operator, please open up the line for questions.

Thank you. We will now begin the question-and-answer session. Our first question comes from Jeff Sprague of Vertical Research.

George, could you give us a little more color on OpenBlue? It looks like there’s going to be a lot here for us to digest, not just today but going forward. But, just thinking about how you might be selling different with this, how the customer interaction might change and any kind of early color on adoption or feedback as you roll this out?

Yes. Let me provide some context. Since the merger we completed four years ago, we have focused on integrating our various capabilities across products and digital platforms into a cohesive architecture. The investments we’ve made during this time aim to consolidate the best elements and ultimately establish the platform. This involves merging products, new technological solutions, and services into a single digital architecture. Essentially, we are blending our operational technology with IT systems and a range of new cloud applications to create a dynamic digital platform. This enhancement positively impacts all of our business areas. In each sector, whether it's HVAC or Security & Fire, these digital capabilities are actively enhancing the services we offer to our customers. This also gives us an opportunity to create an ecosystem to be able to bring together other technology companies, and where we’re now deploying artificial intelligence and digital twins, to deliver unrealized and increased value to our customers. And so, I think, as we see it today, we are selling this as part of our core. And now, with the announcement today, it’s really now taken that to the next level, and we think now more than ever, it’s critical that building environments are safe and secure. So, it’s not only making sure that we have the highest level of indoor air quality, but it’s also combining what we do there with all of the other digital systems within the building to ultimately create the healthiest and safest environment for our customers. We are currently implementing this across several of our core businesses. I believe that this will allow us to tackle the larger issues we are addressing and enable us to better support our customers as they return to work.

Thanks. And then, just as an unrelated follow-up. Obviously, distinguished yourself very nicely here with this decremental margin improvement. It looks like you’re trying to make sure you're positioned to also kind of leverage the recovery. But, I think that’s a question on a lot of people’s minds, as things go the other way. How are you thinking about incremental margins now, when your revenues do kind of flip to positive potentially here in the next few quarters?

What I mentioned in my prepared remarks is that we have done an excellent job addressing costs, not just temporarily, but through significant restructuring that will position us well going forward into 2021. I am confident that the permanent measures we have implemented will effectively counterbalance or lessen the impact of the temporary measures related to the compensation benefits we received this year. When considering the incremental margins moving ahead, with all of the changes that have taken place, I believe we will be in a strong position after COVID. We also see ample opportunities and are committed to actively pursuing new prospects and focusing on revenue growth given the current environment. At the same time, we are being very disciplined with our costs, ensuring we implement the restructuring effectively and manage the temporary expenses addressed this year, so they don't return at a level that doesn't correspond to the volumes we expect to see as we progress into 2021. Therefore, I am confident that we can achieve incremental margins of 30% moving forward. With the efforts the team has made, I feel optimistic about our positioning for 2021.

Thank you for that. I appreciate it.

Thank you. Our next question comes from Joe Ritchie of Goldman Sachs. Your line is open.

Thank you. Good morning, everyone.

Good morning.

So, maybe just starting off, like, on the service versus install. I think, as expected, service did a little bit better than install this quarter. I’m just curious, as you kind of progress throughout the quarters, how did onsite access work? Were you able to get into a lot more access into facilities? I think, when we talked intra-quarter, you’d mentioned that you had about 20% of your business that you had access to, but want to see how that trended as the quarter progressed?

What we experienced during this time was truly unprecedented due to the shutdowns that took place. Throughout most of the quarter, all of our field businesses faced significant restrictions in accessing customer sites, which limited our ability to carry out our usual service and installation work. This situation was quite unusual compared to typical downturns. Despite this, I believe we performed well, experiencing a 9% decline globally, which aligned with the most significant lockdowns we encountered. Regarding our service days, it's important to note that about two-thirds of our service revenue is recurring, with approximately 40% of that generated remotely, meaning that over 40% of our work does not require customer access and is done at mutually agreed times. And that typically inspires where you actually have to go on site and give codes on on-prem inspections where they’re performed. That’s a big chunk of our services, roughly a little over $1 billion in PSAs in Fire that are excluded from that 40%. We do see that getting better, Joe, as we move forward. We’ve seen significant improvement in June and again now in July with our overall service activity. It helps that we can do it remotely, and I think we’ve done that extremely well given the restrictions we’ve had. However, now that things are opening up, we’re starting to see that demand come back nicely.

That's great to hear, George. Congratulations on OpenBlue. I have one follow-up question about free cash flow. It's clear that this quarter's performance is very strong and better than last year, which is impressive given the unprecedented decline we've experienced this quarter. Brian, could you provide more details on what contributed to the free cash flow this quarter and how you envision it moving forward? I know it's a bit early for 2021, but how are you all thinking about it for the future?

Yes. And I think when you look at Q3, very strong quarter, I do think there was probably some timing between Q3 and Q4 which is why we didn’t change our guidance here to greater than 100% for the full year. But, when I look forward, I still believe 100% free cash flow is our near-term target. And I have all positive signs that we’re going to be able to deliver that. I think some of the activities that our cash management office that we put in place two years ago, they have done a fantastic job of really getting policies and procedures and protocols in place on a global basis now. And I think we’re starting to see the benefits of that in the routine processes that we’ve got around cash collection, cash forecasting. So, when we look at the second half, I think you ought to think of it in terms of second half getting us to that greater than 100% free cash. There might have been a little pull forward here in Q3.

Our next question comes from Nigel Coe of Wolfe Research.

So, first of all, I appreciate the guidance. Most companies are still shying away from formal guidance. So, I appreciate that. My first question is really, can we just run through in a bit more sort of detail, the difference between the commercial HVAC performance in Global Products versus what we saw in the geographic segments? I think, it’s probably due to destocking from channels. I know you typically go through independent channels in Global Products. But, can you maybe just talk about whether there are any geographic things to think about that, or is it just primarily destocking?

When we examine the commercial sector for applied products, we experienced a decline of approximately 9% in revenue. This decline was attributed mainly to a slightly higher decrease in installations and a 6% drop in service. In terms of orders for commercial applied products, there was an 11% decrease. The decline was somewhat less steep in Asia, which began to recover faster than North America, while the EMEALA region saw a decline in the high teens. I think that addresses your question regarding the applied sector. In the commercial unitary segment, HVAC experienced a decline of around 25%. However, we've made progress in gaining market share during the quarter, and in June, we observed an increase in orders, which gives us confidence about this market moving forward. This pertains to the commercial side. By the way, I didn't quite catch your question, Nigel; did you ask about residential HVAC?

No. It’s really more about just explaining the difference between the performance we saw in Global Products where I think we saw much heavier declines in both, unitary and applied commercial versus what we saw in the geo segments. So, I’m just trying to understand that dynamic. That was just my question.

Okay. Regarding the products, the pure products were down roughly 20% overall when looking at the different businesses. We saw a strong recovery in the residential sector in North America, which Brian mentioned, with orders in June up nearly 200%. On the other hand, the North America commercial sector is also recovering. In the APAC residential market, we experienced a 20% decline in Hitachi, primarily due to challenges from market shutdowns. However, we are seeing Japan and Taiwan beginning to recover nicely. Earlier in the quarter, we experienced destocking and some challenges. However, during the quarter, we observed a strong recovery in orders within our Global Products business, which is expected to continue into the fourth quarter.

And my follow-on is really about this return to work, getting customers prepared for that. And obviously, everyone’s getting very excited about air quality, indoor air quality. And it seems that the breadth of your portfolio is pretty uniquely well-positioned to help customers solve these problems, be it tracing employees or access, continue access and even the changed filters and that kind of stuff. Are customers looking for complete solutions here? I mean, are you seeing that and therefore, the breadth of your portfolio helping or is it still very much bucket by bucket? Any color that would be helpful.

Now, let me start, Nigel, by saying, the changes that are coming to buildings and infrastructure post this pandemic absolutely do play to our strengths. Our entire strategy revolves around capitalizing on the evolution to these smarter, safer spaces. And why we have a unique competitive position? We do look at this holistically. When you examine our service technicians, we have the largest team of service technicians and sales forces worldwide, along with one of the biggest installation bases and an unparalleled range of products. If we focus on the HVAC and indoor air quality sector, we are actively addressing this issue by recommending a shift from MERV 6 to 8 to MERV 13 and 14 for active filtration. We are capable of making this transition, but it often necessitates upgrading the fan motor to achieve the necessary airflow for the area being conditioned. We are actively working on ensuring that you receive the appropriate flow of outdoor air to maximize air purification through outdoor air exchange. This is a crucial part of our solution. In our air handlers and rooftop units, we utilize UV lighting technologies and bipolar ionization to purify the air based on the specific space being served. Additionally, we offer portable units and integrate our filtration systems with ducted systems to enhance air quality. We have established ourselves as a leader in providing capacity for hospitals with the temporary spaces we are constructing worldwide. And then, with that, every one of these situations requires engineering. And so, how you go into a particular customer and whether it be filtration or air purification technologies, and/or how you change the makeup air or outdoor airflow, and then ultimately, how you upgrade the overall system to be able to achieve the highest level of air purification? That’s one aspect, but what I see the opportunity to be is how does that combine with the other building systems that we ultimately deploy, which is Fire & Security. You might have seen where we launched our new camera, thermal imaging camera last week, which is approved by the FDA and it’s got the tightest variation on being able to check temperatures, not only at entries, but then being able to be deployed more broadly across indoor spaces. And so, that can be attached to the systems that we deploy. Frictionless, as far as how we upgrade all of these devices within a facility and become frictionless. And then, the last is what’s been most exciting for us is taking what we do today with those systems and being able to track and trace, so we can ultimately identify individuals where they’ve been within a facility, who they’ve been with, and potentially if they were to be infected, who would need to be quarantined. And so, I believe this digital control does create a competitive advantage. It offers a unique, enhanced user experience with these types of capabilities beyond just any one of the domains, Nigel.

Thank you. Our next question comes from Scott Davis of Melius Research. Your line is open.

The OpenBlue seems pretty interesting. Logistically, who installs the product? You have your field technicians, your 16,000 employees. Does it require some specialization to install the product and customize it for the customer? Do you handle that, or does someone else?

So, one of our advantages, Scott, is that we do that. I mean, we have technicians in the field. And as we’ve been deploying these capabilities, we’ve been obviously enhancing the skill sets of the technicians required to ultimately deploy these types of solutions. And so, that has been ongoing as we’ve been enhancing these capabilities. And so, I think when you look at our footprint, and not only having our core technologies that we deploy, but now being able to put all of those together into a simple architecture, and be able to then now create outcomes that our customers are looking for to solve some of these new challenges, this is going to give us some incredible advantage.

Yes. It seems interesting. But, when you think about your main competitors, George, I mean Honeywell has a pretty solid product, Schneider has a solid product, plenty of others. But, do you guys feel like you’ve had a chance to see what everybody else has and come up with something that is better or is it just better because you’ve got the installed base, you know the customer, you know the needs more, you’ve got a broader set of product in the building, et cetera? I mean, just try to get a sense of where you think it stacks up versus perhaps the competitors?

Yes. I believe that is absolutely a step forward because it’s taken all of the operational technology that we have embedded within our products in edge devices. It’s ultimately then integrating that with IT systems, allowing us with that platform to create cloud applications. And so, it’s built off of our core product technologies. And now with the integration of the software into one architecture, it allows us to be able to create a very dynamic digital platform that we can now create significant outcomes. It takes what I said earlier, very inflexible assets. It makes it very dynamic with the data that we can extract and then ultimately create new services for the customers.

Our next question comes from Steve Tusa of JP Morgan.

The order pipeline seems to show that across the industry, particularly in residential and somewhat in commercial, there are notable order declines, although the backlog remains steady. This suggests a potential buildup of demand. You mentioned that there haven't been many cancellations; rather, orders have simply been delayed. What does the overall pipeline look like compared to last year? I assume it's not increasing, so does it indicate the same number of opportunities being postponed? Could you elaborate on this dynamic in the commercial sector as we look to assess how orders will translate into revenue over the next few quarters?

Yes. Let me give you some color there. I think throughout Q3, and of course, we’re engaging with customers on a real-time basis, understanding what their demands are and what else we need to do to support some of the new challenges. So, we have a lot of good insight into what is happening. We did see, like I said, the field order pipeline being pushed a bit to the right. We haven’t seen significant cancellations of existing orders. We have seen some of what was in the pipeline get removed from the pipeline now, given the economic conditions. But even with all of that, our pipeline was up 3% on a year-on-year basis. So, we did see steep declines in April and May, we did see material improvement in June. I believe this indicates that our pipeline is starting to convert. We faced challenges in April and May with our Global Products, and while we monitored the book and bill metrics, we experienced a recovery in June that has continued into July, with strong order flow during this period. Therefore, we expect orders to improve sequentially in Q4, driven by the pipeline I mentioned. Additionally, we are actively engaging with customers to help address COVID-19 challenges, and based on our real-time observations, things are continuing to get better.

I would just add in there, and just to remind folks that our orders for Global Products are not in our overall order number. And you mentioned earlier, like commercial and residential and a lot of activity that folks are seeing. And just to be clear, we saw a very similar trend and had really good order growth in both, the commercial side and the residential side in our Global Products business, particularly in the month of June, and as Brian mentioned, unprecedented order growth in the month of June in residential.

Right. And that’s that backlog of one that you showed in the slides there?

Yes.

Got it. And just one last question. Is there a way to quantify the benefits of the mix when installation decreases significantly compared to services?

Well, see, let me take that one. So, overall mix, there’s a lot of different dynamics to think about, when you think about our business, because service and install is one component of mix. But then, remember, within each field business and even within Global Products, each domain has mixed up as well. So, overall for the quarter, when you look at all the businesses and various mix across the board, I would say mix overall was about a 20 basis-point benefit.

Our next question comes from Deane Dray of RBC Capital Markets.

Could we go back to the indoor air quality topic? And George, what percent of your installed base you think have done their initial assessment of their HVAC systems, as well as their security systems? Because you do the initial assessment first and then you can assess what is needed in terms of upgrades on filtration and air handling and so forth? So, that’s the first part. And then, can you provide us a framework for what you think that potential revenue ramp will look like, again, for all the COVID upgrades?

It’s difficult to make predictions. However, I would say that all of our customers are involved in evaluating their spaces. This engagement reaches up to the CEO level, as they look into ensuring safe working conditions for their employees. There is a significant focus on understanding what needs to be done and identifying potential solutions. We are currently in the early stages of this process with strong engagement, presenting what we can offer, and addressing challenges. This includes enhancing indoor air quality, integrating temperature checks, and connecting these with their building systems for effective tracking and tracing. I believe we are in the early stages of actively engaging with our customers. At this point, it's difficult to predict the final outcome. However, I can tell you that there is considerable activity across all our customers. For example, with this thermal imaging camera, you can integrate it with an existing system and deploy it not just at the entrance but also in common areas within the facilities. This allows for accurate temperature detection of the occupants. And then, you’d be able to then quickly assess, if there was an elevated temperature, to be able to then isolate that individual. And then, if there were any other people with our track and trace around that individual, then you’d be able to address and isolate the problem. And so, these are being deployed incrementally, as far as parts of solutions. And then, obviously working with customers and looking at more comprehensive solutions that ultimately address the new workplace.

Can you elaborate on the significance of remote monitoring? You are already positioning Fire & Security for monitoring, but now commercial buildings are increasingly concerned about their indoor air quality on an ongoing basis, not just during upgrades. This may involve CO2 monitoring. From a technology perspective, how ready are you to integrate HVAC monitoring in the future?

Well, it starts with everything being connected. And so, we’re making sure that all products that we deploy are connected, and then, with that connection, being able to provide services that ultimately address whether it be energy efficiency, whether it be monitoring the equipment operation and maintaining the service of that. So, connectivity is the start of it; and then, the ability to collect data, not only on an individual piece of equipment, but how does that correlate to other systems within the building that enable us with now OpenBlue that we can provide the most enhanced solution or the most value for our customers and how we either drive sustainability, efficiency, health or safety. And that’s the unique advantage that we have now with this connectivity and with this architecture within this platform.

That’s really helpful. Thank you.

Thank you. Our last question comes from Markus Mittermaier of UBS. Your line is open.

Yes. Hi. Good morning, everyone. Maybe I can start with OpenBlue as well, the slide that you have on page five, here on the ecosystem map. If you consider sort of the profit pools behind this map, where do you see your current strength in the portfolio and gaps, and how does that then relate to the M&A priorities? I mean, do you think more sort of vertical atrocity, various thick layers or still sort of horizontal along the edge and device layer? Maybe let’s start there.

Yes. So, the idea of OpenBlue is we bring our domain and core capabilities to the platform and then it’s open, so that we can integrate other systems within the building where we don’t have that domain, and then bring that together into one platform that allows us to then be able to utilize the data and apply AI analytics to create the outcomes that we’re committed to achieve. And so, it doesn’t mean that you have to have every one of these domains. Although what I would say, it does build off of our strength of being a leader in building controls, and then having the multiple digital systems that we have today within Security & Fire that come together into the platform and gives us incredible opportunity to now be able to bring these types of solutions to the market with this connectivity.

Great, thanks. And then, maybe second one on client security. Can you just peel the onion a little bit? You mentioned the production issues that you have flagged and sort of like extended and renewed lockdowns in Asia. If you look at the supplemental data that you published, which is quite helpful, ex-retail looks like EMEALA was down low-teens, North America mid-teens. How much of that is sort of like really pushed out, rather than kind of disappeared? You mentioned $1 billion roughly, of your top line that you have access. So, how should you think about Q4 in light of all these access issues that you have? Thank you.

Yes. When we examine each region, it's clear that the shutdowns had a significant impact in Q3, which is quite different from typical downturns. We're now observing a resurgence in demand as facilities reopen, particularly in June and even more so in July. We expect to see continuous improvement in each area moving forward. However, we do have concerns in certain regions experiencing a second wave of shutdowns, specifically in some parts of Asia and possibly Latin America. Nonetheless, where openings are occurring, demand for our services is returning in a similar manner.

I would just like to turn the call over to George for some closing comments.

Yes. Again, thanks again for joining our call this morning. I want to thank our employees for their extraordinary efforts during this unprecedented time. I am extremely pleased with our continued strong performance. And again, I hope that you and your families remain safe. And I look forward to speaking with many of you soon. So, operator, that concludes our call.

Ladies and gentlemen, this concludes today’s conference. Thank you for your participation. You may disconnect at this time.