Why did JCI's operating expenses plummet in Q3 2024?

The operating expenses of Johnson Controls International PLC (JCI) in Q3 2024 did not experience a decrease; in fact, there was a slight increase. The company's financial performance in Q3 2024 was characterized by robust growth in key metrics despite challenges in the Asia-Pacific region. Here are the details: 1. **Strategic Divestitures**: Johnson Controls International PLC (JCI) recently announced the divestiture of its Residential and Light Commercial HVAC business and Air Distribution Technologies business, which represented approximately 20% of current sales. The transaction value for these businesses was $8.1 billion. These divestitures could have been a significant part of the operational changes that might have affected the operating expenses. 2. **Financial Performance**: JCI reported robust growth in key metrics for the quarter. Organic sales grew by 3%, and segment margin expanded by 150 basis points to 17.9%. The company's free cash flow generation was more than $500 million higher than the comparable period one year ago. The increase in revenue and segment margin could indicate a more efficient use of resources, which might have led to a perception of a decrease in operating expenses relative to revenue. 3. **Cost Management**: Johnson Controls' cost of sales increased by approximately 1% year-over-year to $4.7 billion. Gross profit increased by 2% year-over-year to $2.5 billion, and the margin increased by 30 basis points to 34.4%. Selling, general, and administrative expenses were $1.5 billion, down 2% year-over-year. The company's focus on cost management, especially in selling and administrative expenses, might have contributed to the overall operating expenses not increasing in tandem with revenue growth. In conclusion, Johnson Controls' operating expenses did not plummet in Q3 2024, but the company's strategic divestitures, financial performance, and cost management efforts might have led to a perception of a decrease in operating expenses relative to revenue.