OTIS - Earnings call transcript Q1 2020 | Otis Worldwide Corporation

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Operator

Good morning, and welcome to Otis' First Quarter 2020 Earnings Conference Call. This call is being carried live on the Internet and recorded for replay. Presentation materials are available for download from Otis website at www.otis.com.

I'll now turn the call over to Stacy Laszewski, Vice President of FP&A and Investor Relations.

Stacy Laszewski

Thank you, Angela, and good morning to everyone. Quarter Call. First Otis' to XXXX Earnings Welcome

On President Rahul and with me Ghai, Judy Marks, today are Officer. Chief Financial Vice and the President call Executive Chief Executive Officer; and

year. stand-alone operations, of period the except note, speak reconciliation from found Otis other A also company where though items. noted, refer and results a excluding Please were company the to made and in restructuring measures as the company adjusted otherwise these to current can will results The prior webcast. in will the significant continuing of where was adjustments be appendix

We S-X also including differ listeners the its details provide and filings, Form factors its risks to statements, presentation contains on remind Form are could to XX-Q, subject which results SEC important cause that actual uncertainties. on materially. registration Form Otis' that and and statements forward-looking XX

With that, to over I'd Judy. call like turn the to

Judith Marks

everyone. our well. listening good post-spin, everyone as We independent another earnings and that Stacy, call that glad important on We're is you, stakeholders us Otis' you could first company. for new in morning, era Thank this today hope an us join of safe milestone all across and

this service quarter Employee some health our first proud crisis Elevator the deemed core and our manufacturing paramount colleagues and global including prioritizing for health essential we value, and and and riding am utmost times. doing and values. these the of the service safety our Otis' to us. to proper discuss me work importantly, in critical residential of and our the home employees attention guidelines share world, are in more XX,XXX paying during repair safe working the maintenance our unprecedented a and we're I supporting buildings, maintenance Before our conditions countries safety, cities. workforce management let long-term is hospitals, was continue and customers the many public for first our insights who and and and an I from and providing our to most strategy and colleagues and outlook, infrastructure to around people, ensure operations. in our our our while this into portfolio, results business, hygienic through commitment PPE and to allowing field elevators And largest

we helped factories Today, Early COVID-XX world. us this decisions impacts, many in business in and and QX, our of China made ensure are navigate XX continuity, the critical throughout first principal countries open. to the all

supply while to and Our our excellent our demands. disruptions field done and chain globally locally team has in job factories minimizing sites an meeting customer

protect early we're decision full around the has air as capacity start demand soon supply Our confident businesses enabled world outbreak to to and parts us manufacture normal. to ship that Otis to the site as return resumes this ready job critical and at factories during are chain, to

we've limit During support time, advances where our to vendors providing extended supply this disruptions. necessary, to

new there and Asia job sites Japan, Kong, government-imposed due to hardest-hit At equipment China pace factories discuss pre-COVID new city limited to to access by new full China are is access varying and in including measures. Hong have while Let's we're our at shortages In equipment areas, certain region. capacity, has equipment where returned the are and several point, by job recovery labor Asia, substantial the China Pacific, Korea quarter. within the areas installing currently Southeast India seen is to levels. this sites in returning segment to and countries

job the and closely we continue are situation to site North closures new as and sites cities and areas in EMEA the experience installation of job certain that preventing monitoring reopen. America are equipment,

service. to Moving

and some repair critical are while maintenance shut on I most essential business areas, experiencing sales professionals provide Otis' XX% customers. allowing resilient, our Otis' up down. in maintenance to deemed repair was we made service are Maintenance of remains pressure mentioned and elevator buildings earlier, repair As in our where for maintenance services and XXXX, our business,

round-the-clock to professionals hospitals at support field the globe. service across continue Our

and to customers support need we America closures. EMEA, payment few hardest-hit seen have a with and the North concessions within terms In greater limited during verticals building delayed a

We to will relationships. strengthen continue customer long-term our

Modernization, Europe. from hold, on America the see discretionary other is expected impacts North as are XX% of our in and put to service business, especially COVID-XX projects

and code-driven some modernizations activity are other and However, Pacific driving in technologically required Asia regions.

we situation associated containment cost actions responded the address sales with and to Across business, evolving our declines.

are impact. containment travel China freeze, the and first team include discretionary Cost immediate underway a already minimize Our was global focused actions, other which actions quarter hiring in did on financial costs, team reduction and These salary furloughs in adjust locations. to our to actions, the necessary difficult evolving certain and and deferrals, situation. merit reducing continues address assess but pay and executive

the investors absolutes, also quality, face our has other, and elevator and we In workers world, maintenance, hospitals. live communities by Wuhan, crisis the us we commitment air purifiers This multiple across drive each and countries cab use to printing we ethics safety, technology manufacture in work. shown for teams providing our by beyond our customers, use to our that and frontline donated to In Otis our several to XD elevator hospitals. where passengers, shields our uninterrupted

local and employee ways. to in lastly, to colleagues communities And many to match pledged volunteer COVID-XX our contributions funds, in relief continue we

We're all we adaptations selection fans the long assist work elevators in who to and services while as and escalators. will return we and As reopens, with technology will interact continue locations, disinfectants smartphones cleaner to investing allow the for and a for innovate their of term. reopen for remote to environment and to lead elevators buildings with customers this world do We're elevator leveraging to providing closely floor in our working many people and requested industry.

to quarter X. first let our me on results turn Now Slide

the countries. more IT and almost off tax, moves executed in global our remiss an from the if start COVID-XX an including United thank release and elements re-signed various while exemplifying roots culture, Otis. from subsequent didn't contracts and facility were of to separated company our foot I'd this XX systems the for departments, processes created as independent spite seen relations historic successfully Over On We XXX quarter initial I the Otis' be nearly first a collaboration. than empowerment we and X, treasury China new replicated, XX several solid April in for Technologies, once you've and and innovation, to again yesterday, in us the and over. rising as right independent XXX undertaking, investor was our As earnings XXX Otis spread. of setting outbreak our team occasion on cut returning IT procurement

to of of have commercial of at billion had an billion $X.X we as liquidity, the terms approximately serves $X.X In time program. a backstop undrawn cash which paper separation our revolver, and

We first shareholders from in yesterday $X billion expectations. quarter, return our placed initial at through and interest the a of a per we of to QX favorable million debt balance reduction led dividends dividend the in expense During $X.XX $XXX rates. million over That to $XX announced to year. of plan share the

the continued saw operational results XXXX. during QX you that strong momentum

and where at COVID-XX and in Organic equipment declined with constant excluding EMEA. was top the excluding China, million, expansion XX%, flow points line new growth overall. outbreak. Americas of of segments by service mid-single-digit profit prepayments. increased increased China, tax was XXX margin expansion including currency, impacted New sales conversion growth margin significantly $XX operating impact with in Adjusted achieved in double-digit cash the slightly, Free growth orders we and basis X.X% both spin-related equipment the the

first I'm impact despite from the COVID-XX. strong pleased results with quarter the

we the in volume and are broader Adjusted outlook. immune QX currency, globe. not are at this operating organic spreads to to to economic at half from second the now be our actions we beginning is constant updating down X% delayed million pandemic I XXXX a described. cost high the profit across However, to containment end. in end decline impact declines, recovery early partially this recovery $XXX by $XX We reflecting previously the offset mind, at expect expected as X%, sales reflecting million With low

net from And $XXX reduction we free outlook strong $XXX XXX% adjusted be X to income. expectations XXX% and the in point income February. of net expect improvement cash our adjusted a expense conversion the remain lastly, of reflects interest to net rate expect between We range to million. and flow income million in tax This in

With to detail. in turn Rahul over it and results that, to more I'll outlook walk through our

Rahul Ghai

and at operating Operating or million improvement decline and in in Adjusted driven service growth the strong impact was net up service profit $XX costs. SG&A a part of constant growth million of more offset from by equipment at was the morning, impact good was and X.X%, vast with material from operational sales due lower Judy, transactional up results coming on service by Net volume, from sales approximately million reduced of half Starting organic you, constant with decline This X. currency estimated COVID-XX favorability. productivity, foreign COVID-XX. the Slide to Strong foreign X.X% and billion, and $X in exchange everyone. and of partially an than of $XX divestitures sales approximately by X% lower offset of currency. new higher the profit was $XX $XX organic volume Thank exchange XXXX. QX slightly down were than operating underabsorption less the by segment due and to X.X% million in profit that

was service segments. margin profit $X.XX more in headwind points improvement profit in Adjusted to operating SG&A both an by offset was $X.XX net higher as improved a R&D sales basis the flat percentage to Adjusted with quarter. expansion margin and from lower expense was year, operating $XX expanded versus down quarter in costs. from and compare XX.X%, cost about year-over-year unfavorable interest of as due equipment by tax and EPS adjusted interest noncontrolling new the prior million $X.XX the than and of XXX

X. to Moving Slide

Otis. constant and for orders overall excluding grew at equipment were New X.X% currency, flat China,

This in QX. mid-single excluding as and low and New XX% equipment Asia, in China the strong Middle in the a digits grew digits market in globally was double digits an delivered declined China. declined Europe and China growth down East; in estimated global market mid-single including teens was down the orders that order Americas; mid-teens

continued equipment the grow and XX was New basis share points in estimated an to up quarter.

projects were the received key several for While see and including to China. metro infrastructure orders, Nantong and in the overall progress we segment Chongqing the bookings in Asia, continued in down

one is infrastructure our key discussed of on grew segment a this As low Day, double target Investor in was bookings down and segments, high that our teens we digits.

most was booked expanded outside stability offset by pressure of pricing in the parts saw China and of with in Asia of basis America's XX booked margin world margin China. was also flat. the margin and slightly Booked EMEA expansion. points We in

in currency single-digit sales from Asia, including offset by China. EMEA constant and in at X% low Sales were the up was lower X%. Americas declines in was Organic a with in tough XXXX. down impact COVID-XX. a in X.X% intake East Europe in of EMEA Americas digits, of in with primarily declined growth this impact equipment China, Backlog X%, offset double-digit the than Middle quarter, market decline up the down compare new softness. were by in single results were Sales weak to Overall, due but of more reflecting in low order sales and QX

adjusted decline. our margin New of quarter are a long-term more Material that basis reflecting offset actions the X%, from impact of and exceeded productivity benefit of the operating prices expanded taking. the than was commodity in profit small volume material we the equipment lower XX points, benefit target strong productivity a

orders growth Modernization and high primarily by results quarter. on in high-teens X China a Asia, strong with of single-digit X.X% Service in Slide segment Americas. the Europe, grew first in offset decline remain outside the

portfolio Service basis profit and and operating maintenance sales currency margin in up maintenance with by sales partially mix up the as repair offset in Adjusted for XX all X%. $XX seventh points, quarter major expense strong costs. higher contribution price by labor SG&A modernization constant grew with favorability Our sales increased and grew productivity, growth and lower profit X.X%, X.X% straight and expanded regions. Organic by expanded X.X%. million at was

share driving equipment, the remains material on out pleased first service cost and we in contributions, close quarter, making SG&A agenda and progress are operational on the key we with gain track, on initiatives: new containing progress continuous our productivity As costs.

in on equipment economic activity activity spread down Slide and couple from China of a highlighted X, relatively is the slows second the start with both we as in the However, impact of globally of the business new the on after first year. quarter, the seeing of orders factory outside COVID-XX, in our months shipments April are strong which the

repair We modernization April and are also closure reduction sales business. seeing challenges a our impacting created the due service of buildings in in by to

business while year, the our in is had While adjust to China expectation the will recovering, clear as impact China we the activity at February not from earnings in cost slowdown. balance earnings growth to incremental revenue to look of taking we shortfall. need it immune and global the is the we offset to sales that be communicated actions that And

XX% expect start with decline equipment or end sales business. X% maintenance year to decline We service. organic reflects in The decline on overall or X% now continuation mid-single-digit expect stability trend the of new while second half, our the down new do into half reflects a in and to XXXX in levels. me the in We first low a recovery with Let XXXX of high contractual X% decline half a in to equipment X% sales continued Slide to second X. XX% to end a for low be a the

degrees range continue of back in occupancy out of modernization macroeconomic the year, projects repair push delay the discretionary overall sales the of environment varying half the and reflects depending and on the level However, to outlook and of service buildings.

Adjusted these that our midpoint, $XXX constant $XXX At outlook, implementation. profit would actual million varying the flat. $XXX announced at nearly Most million of At midpoint reflects actions of expected the alluded Judy at down this operating million between of relatively and million of and $XX million at containment to earlier. sales are to currency between and margins operating actions already stages be to expect cost $XX is currency. and we be

million in to and income rate by costs. million driven is noncontrolling $XXX the of tax be to net partially reduced expected offset by $XXX range profit, operating lower Adjusted interest

profit on continue flow strong as guidance XXX% and capital to projects income restructuring XXX% at reducing reduced over cash XX% We for remain the be expenditures. working reduction rate additional costs time. from Investor will approximately reduce tax our higher are net to partially and by XXXX Free in and of to rate XX% will Day between offset are

to organic our on Slide at and In a be site half job XX. digits expected look further in reflecting or sharp The end is the the of contemplates are XX%, segment, in with year. work X% to QX a Taking equipment new growth growth closures. we seeing the mid-single resuming assumptions back high decline Americas the decline QX down in

a single business parts - be digits EMEA South levels The XX%, sites Russia end in high In Middle with range to and South job high down in to significant EMEA, Middle the has the of Europe Europe there's QX delays Europe, in the continued access reflecting is to recovery the U.K., in the pre-COVID and limited and job sites and East. of reopening North expected new gradual East. equipment in

equipment China, South face Asia new in up In lockdown in Southeast held and India the QX. Asia, Japan measures. in continue And recovering and from activity But to business relatively in rest has Korea we government-imposed well. of is challenges

digits the of from and recovery of to impact India on Asia Southeast to depending and and Asia business extent mid- the Japanese the We of be economies in single high South pandemic. expect Korean new down the equipment the pace

we this to service the has segment, continue contractual maintenance In been and our be business anticipate stable. business to resilient,

X% half year. year. continue reflects to QX be the However, and an for delays X% end modernization first repair down to modernization conditions globally, discretionary projects organic and and be the these digits projects there maintenance expect Overall, into been digits high on single to assumes and the half end have mid- of push recovery we of early as single down now and decline into sales the the high low second repair to the XXXX. sales low to

by we be will taken to the take the especially partially operating constant to in balance due outlook expected credit between adjusted will the down currency, higher profit costs; impact is profit million pricing, to and of to XX. At underabsorption million year. decline. $XX have offset be pandemic; the the impact an on the expense bad actions incremental COVID-XX reflecting and of the $XXX deteriorating year-over-year, debt This and sales of end reduced cost from Switching of Slide outlook; at higher volume

exchange versus we expected Foreign million of a February is due $XX U.S. were the to year for that dollar. to the headwind in the strength of be million $XX expecting the now

on XXXX At debt-to-EBITDA with cash. billion XX. $X.X in to deployment our was capital Moving net X.Xx Slide spin, about

during we capital the to these cash generation and year our allow million between dividends are XXXX, shareholders During expect they about the the QX and be generate of the deployment consistent at Approximately by are $XXX to cash to million of believe increase million plan in prudent and of We spent QX in between down the return on $XXX $X.XXX to uncertain to cash reflecting net between balance confidence pay February, billion flow end as and we noncontrolling income. this million $XXX plans interest sheet with announced XX% will debt these us of adjusted and through M&A. what times of capacity business. $XXX

over it to turn I'll that, some remarks. Judy for With closing

Judith Marks

endure great Thanks, that results pace known strategy. of Rahul. yet, we illustrate that the and recovery confident while current today's We're And long-term not to investment to our thesis is succeed support will start challenges. the and are despite Otis QX on A year. track

an have been fundamentals reminding And iconic in of by strong large the to brand This fantastic want you where business. behind the industry, close is this I this leader. truly we

going still technology, innovations, million to level forefront expect expenditures more where normal to ensure heart and expansion at to are service of we'll of productivity. model, professionals the share to in times, expand growth recurring all X new And to we're to and through we tools unit driving digital lives, difficult our the when term, business to providing and gain continue that global continue continue margin to customers our medium and we our on a return capital the Over invest portfolio, these them on solutions sustainable leading sustainable our effective. for focus equipment for new R&D our we with empowering make field growth, maintaining of

that our we'll our in value, to have of You XXX% with shareholder our excess you announcement generation yesterday. dividend that and commitment net cash robust saw income of use create

open I'd like for line Angela to that, questions. With the up

Operator

[Operator Instructions].

with question first line Jeff from Research. the Our Sprague of is Vertical

Jeffrey Sprague

Congrats out please. A the of could, if from start gate. on me, a great couple I

little debt? bit you issue? comment potential seeing also? on Judy new that are a pricing and is the And First, the or bad essentially you're what a business could Rahul, more service on on pressure the seeing comment you Or pricing equipment across

Rahul Ghai

right, All Jeff.

So the pricing, was remarks, - I we it actually outside it good had expanded. booked the in across year. globe a Asia. to pretty that, as new I the with small in fairly pressure slight mentioned saw actually, good. start the that, - equipment strong prepared and my mean, was of margin We But

the to pricing - start markets margins China, good thing the saw year. really - were actually even went our In where good bit. year. booked saw down, where And was were stable in America, pricing. some same the really, So pricing the we year, this last a we little we Europe, up

to good the side. So equipment start new the on year

with Having the our And and on mean, bit the pricing we regularly situation in our And a little we about XX% do the I hardest-hit make expect - any installed service service price impact are had long-term but up temporary scheduled mentioned working QX, retail, up comments. her well and QX customers time, our in in QX. said pricing service in These not we sectors from in held therefore, And bit we of hospitality, a is specific in we're thing same and different, et really Judy very And in these. of prepared and cetera, that little planned. that, increases a than base. price of implemented well. gained these as less concessions sectors period that

the and our customers do address need do service call have when partially and to we fixed of only buildings maintain costs most occupied. our we - center, Also, understand that Otis issues even are and like

each addressed have limited, is very and of the we've why that them So one concession individually. requests been

in which time. addressed we these. on a impact in gave - orders. that a we concession some range. assumed at not of bit our is as these But at have and guidance, - we've one There Again, the there increase. same I few a We've of at as on factored we've requests But little them end a might equipment. especially assumed pressure we guidance, new of obviously pricing in of the that have especially said, new lot the seen higher and year, And back thing end the been the

this concessions the not of But our year. will results the through we're most impact will service that year. on this Now talking that about pricing, come

not lot we've what to. of bad thing in the not some at kind a a results that's the We did P&L incremental of Same on we expense take factored There incremental of were year. in So The expense. guided lot have of outlook back QX, okay debt. QX. P&L but the end was our in

Judith Marks

them Judy. that as is the said, with we price/mix there this And we're straight challenging just times seventh when XX% for customers pleased, was long-term Jeff, these under China segment hospitality the retail I for up Rahul for well. Yes. really is The us. as quarter. relationships have are are

China, a was service although as COVID - quarter. revenue pricing, up again, And equipment, it in quarter. booked per again, everywhere. up margin was unit especially for our new on well delivering, our up So another was then

again, QX, going QX So in price in X. to we're watch those performance and through indications, strong to continue

Jeffrey Sprague

an X - have tax. just time what the just belt, be? question maybe of a bit maybe unrelated second might the And your kind the little or idea year a under better Great. With tax trajectory you rate X of on more do of

Rahul Ghai

we right? Investor on feel to rate Day. guided last We Jeff, year progress. XX%. that tax days, I we're our was early making Again, mean it's Overall, XX%

on the repatriation And the Investor that cash. from and in reduction between improvement to pay you're is now XX%. coming at are of Day seeing we taxes have that Now we

points to that, we that to we the U.S. X at of when we cash to because If Day, headwind we've pay Investor And our been needed we you early had tax into actions about repatriate able on in we had take debt. tax of X mentioned recall XXXX debt into that incremental projects maybe and taking are euro-denominated that, certain to work dollar-denominated some reduce and convert to

incremental to tax business more, we come better are So down And stages. that the jurisdictions. and we as pay initiatives we're updating actions. I'm reduce taking we we on working our are confident on But that, rate early going to but is that beyond structure several We'll keep you learn to in high-tax over time.

Operator

And with your line Julian next question the is from of Mitchell Barclays.

Julian Mitchell

And that perhaps a actually, is the directionally. sub-XX%, end one is KONE be you thing market first congrats about of if from tricky quarter the provide a might some on not, of Maybe more at out a the split, out bit to Understood differ way. when getting other to of color you'd split willing slope retail be least helpful thinking your and on that. hospitality is Or just flesh might the Judy, how if that the one as splits. just but ago we're provided us could couple if some that maybe give weeks context recovery

Judith Marks

Julian. Sure,

on which commercial in you coming the that That's homes, So overall. imagine, really really the utilized, in Other in customers been market repair has the out buildings come segment. or segments, as we and are not both especially malls residential and tracks as been But north the more market, talking lot of as and that residential that's office from reopen want don't of our of to office the and to pause than obviously we've us buildings. to been whether can is they XX% is below from residential be single-family well they these coming usage that. as for has the is the off how break strength demand the and their that, do seeing rebound where importantly, a importantly, more space, industry we

it is touch-free got of products. elevators. lots help of think additional improved But our does product, limited gotten requests we've with I with it as We've to reinforces does well requests what product, allow our helps utilization destination spacing. help - as dispatch So to which utilization Compass

the world in to but So segments all customers where reopens, on see and dialogue the - it's lots of with early that. how across when days we're our recovery happens significant

Julian Mitchell

was quickly just on maybe how us a flow Rahul pressure the the free I help in first cash Maybe cash for quarter then I free recovers. that understand question also, the And just And look a at follow-up guess, cash free at the the $XXX flow flow. and free I the think adjusted I have if guide excluding because I bit million midpoint. net cash flow material, about million of you confused, guess at income about $XXX of NCI, midpoint.

So it's XXX% versus maybe is a GAAP the present adjusted about conversion you on I conversion net. think income. But net

big income And wanted adjusted to that net QX? mean So that delta with just GAAP are for net does that check that. and in income broadly similar the even year

Rahul Ghai

Yes.

QX Let's with cash, start Julian.

a COVID-XX good the the year situation. start had feel we despite we to So

we tax $XX in spin. about cash, QX that was So through payments primarily forward of our QX to due from and the million QX, pulled

remarks. from results. see to So that extend And had Again, it about payables in Judy down prepared our China. vendors, you were QX December million $XXX to our support Also, that's in we the did especially our March. in

million decline to support we China, $XX should mitigated QX then in So was impact QX. we separation and came supply ready about in But actually this saw capital in get of that about working had and costs. part and getting million - China, $XX our down quarter, impact chain despite the between the this cash of by up and and flow our

we then had to the our saw extend we China given feel we very impact a we So costs. strong overall, separation to in given that the operationally the the that performance tax support payments, had pull of forward vendors that and

down. coming capital working So

feel performed So overall environment. how on given good we really our cash overall, the about business

how will kind on - Now rest of back this of you going the the see question your year. second translates into what and to

And cash environment. pressure given expect little will Now skewed to our bit recover, see would Europe QX and is, the than feel QX be is and QX it flow will QX and going but in China a some Europe going Europe U.S. about we to bit be overall so U.S. and in macroeconomic but the is challenging - the we in typically you China guidance. a then our that more good little towards But -

We've midpoint to mitigate There down I we about steps of payments lower offset kind the CARES impact $XXX all on taken yet at net reduced some the through income is that to of try previous are at our the mean we've and at midpoint. from this that to coming think million. from probably guide-to-guide guide. try we look $XXX to cost. And drop net - of But interest that our the through done our the we've income, if in you I as we've guide drive some AFX, million manage, that and put mitigated coming some in cash the Capex. that Act. tax of through good

- So about good recovery flow. feel it's our in back-end we cash

the right, separation provided Now our some PSA to It will But income you'll is on costs, includes question, outflow guide reported on you're that the the of about have Julian. the the cash we that UTC. basis. make - to that conversion XXX% to on net payments

in. that factored we So

actually gone the well. as some the that taken And - restructuring of up restructuring has year-over-year we've

of the some reflects on that that. impact So

the number adjusting noncash And we've calculation. expenses that million. had So we have, onetimers. $XXX from the that million $XXX excluded asset write-off the QX, onetime the of we any Like excluded will some in for between is to we've

So for purely income that will on adjusting the charges we have. it is noncash any net GAAP

adjusted That's at million the income, to the So XXX% And as range, which that's $XXX to, $XXX we'll the net speak at midpoint. guide. that's million.

Operator

the with from is Steve line question Tusa next JPMorgan. your And of

Steve Tusa

part clarify, is kind that million? of separation part payment to $XXX you're $XX the the - Just of and that tax of including in million the that is

Rahul Ghai

of part spin not - spin. separation, of it Steve. forward pulled is of It because It's into the of QX - No. got sort consequences related

Let me way. put it that

year. no So QX on the to spin. some working that's reality the forward full complicated. to due things. what got But - we're It It's into impact pulled is

So that's it.

Steve Tusa

Right.

on your going GAAP you're rate your is with point kind make rate. to cash this So consistent I of the like moves guess, absent expect you what tax strategically year would going is tax any forward of the

Rahul Ghai

it cash For have full taxes. no year, Right. to will impact our

right. that's So

Steve Tusa

Right. Right.

point? a So next it be year tailwind your is won't

Rahul Ghai

won't next It tailwind be No. a year.

Steve Tusa

it. Got

When you to I Is bounced there back could other. talked sense. new other? it just, of so kind and mean that think That of about heavier Maybe or the and the services to be one makes between a one out out. dynamics, about equipment. talked dynamic. some or would forth a like, should about you customers helping you more of seems services there's of That more How pricing the a if weighting weighting like flesh Okay. you breakout? kind we

Judith Marks

Yes.

So in Steve, industry made, the hospitality services mainly in X so those we've of mainly are in understand. terms concessions the you just the U.S.,

book But $XX.X and And margin, And these up work over EMEA substantively it than team more was then very in fairly rapidly. XX as we ensuing billion partner side, long-term on it are China a obviously, partnerships, booked service the equipment look able at mainly this new But supplier. up and really our responsive was booked fairly Our the new equipment was obviously, we're significantly, up. the through it months. backlog to China. and being was margin margin drives significantly the

anywhere in get So China in on it into can the us time orders, be margin any next tailwind else we a sales. up nice it's for as year's rolling we the or look world, that booked

Steve Tusa

And quarter. second question the it. on Okay. last then just one Got

back year, If pretty you last punchy margins. number look for equipment new to

of You had pretty flowing that through. significant, China think, I tailwind. kind was Maybe mix

could the if tough. Maybe year-over-year in - quarter, what's us of kind an perspective, that things second much coming in the Are sequential of EPS some down everybody be - looks for XX% could here bounce we give calibrate So half. bounce kind on as from of second acknowledging the color back kind of XQ comp just to we as kind of around to there you kind will XQ? or to XX% sequentially

Rahul Ghai

Yes.

mean comment was out you're seen to and you saw for toughest specific without tough - data in April, doubt. we that month May, of we've up. I things the to happened what's But our want April obviously, there. us, probably put a some don't we open recovery begin as is quarter, on you some really that in QX Steve, numbers, And and but see So to a right. be going

- going But be be service expect on we a to on modernization then in decline to impacted and repair. side is going in - on side year-over-year, for less the and substantially sharp the more the do QX. So revenue and it's service organic and fairly so then equipment equipment is new mainly to new the going be

what So expecting. that are we is

kind year. good to had equipment in of we of back the kind and see in that, you're year. offset - starting modeling. of recovery new QX maybe in should the some then we a the to So side start right on happen half terms of the of Obviously,

Judith Marks

So Steve, let me...

Steve Tusa

Yes.

flat? So margins quarter-to-quarter? those equipment down be new you hold Or will can

Rahul Ghai

the margins quarter-to-quarter. they how little not it guidance, job to yes, we're we going give activity, seeing. depends If could we're and specific bit quickly but to We're little hesitating, the And recovery able a all to open equipment begin depends the work resume out bit on coming be sites - - it we're a of is better. be could June. give Steve, in the what we New it reason gate on are if down and could up all is to get

very we're kind just the of clear is where point. this that's it outlook is So near-term at because not hesitating

where that's ourselves of we're So bit. kind little hedging a

Judith Marks

sites look in the job regions. now a But like almost a Italy, when daily Steve, XX% Spain, in opening job it open. how pace was you really country And on basis monitoring are they're are almost carefully. almost lockdown watching And which open. - very a XX% are at Yes. - - open sites the that the job company In sites we we're at

of really other we're XQ. and new element monitor piece. installation so main watch the manufacturing equipment, new seeing which part for speed the is that And of and It's - the is construction than of that to calibrate and obviously, construction the trying the we're recovery

Operator

Research. question And Carter from of with line your is Melius Copeland the next

Carter Copeland

world welcome results. of independent your a and conference It's to set first great call. And the

Judith Marks

Carter. Thanks,

Carter Copeland

we ones. much be bit one is Rahul, how then more anything I for and couple Just you furloughs wondered future. that things run on might of color temporary, Judy. if the further look of like the cost-out versus One, quick that into as a rate And little could actions give us a

competitive about us wondering of impact thoughts more I you given your the side landscape bring this some the ISPs. it just scale versus to service might I that can whole change terms bring on and much mean of that. bear on Just benefits you performance reliability. wondered and thing just in on I the the give if service may would assume

Rahul Ghai

Yes.

at you combination of of cost expect, actions. mentioned, that as structural Judy obviously, the merit midpoint that the we're a actions $XXX for, also planned including I million So of would It's that which of lot short-term deferral. actions we a of a both. have takeout it's mean combination taking, it's furlough,

it's the two and you to we million. our of numbers, year. upped spent million million $XX if that combination $XX $XX to So a about We million to last see restructuring $XX

So it's incrementally higher.

We very are cost at at at pulling our is hard that structural looking duplication of happening, work very, looking a where out. way,

do. you actions, of lot us restructuring would So hard we a as expect taking are

help help a through a lot in going benefit that's impact lot probably see that may XXXX more short-term of that XXXX. in come piece the XXXX, cost XXXX in are In from you than us actions a be So the takeout. limited of a they of is have more actions taking. us the But to these and will we

actions depends XXXX, we structural will get how that out would onetime to all taking. will goal very whether impact carefully, And on us watch - to our this of cost and that the we're depends and merit on back. includes translates mitigate comes executive into we And do. That the enough pay includes how things headwind we're that that furloughs going ensure take the it to it any thing deferrals. revenue reductions, be that expect from these So to you

Judith Marks

And second UTC to impact point, back you'll looked to XX XX let XX on ROS Otis then, part you not there. financial that crisis the for those We've nearest and local had percentage question, And basis our your transpired than global of modeled a as just points, we point competitors. what service. me covered percentage recall address Carter, of understand back higher

in XXXX with not of COVID-XX skilled element an that seeing now is see global on the financial coming this no but repairs. global and other differences impact, field building biggest which did We the on And discretionary precipitous we're construction financial now our in professionals, during are not right especially technicians are access for the side did having we the repairs, back which the key there's crisis. the two The closures, crisis. have oversupply right just

have our professionals, extremely and we hard XX,XXX labor - business, - of this strength our and all sure worked we So field unions, make have to a are is councils, with servicing maintain our service we retained service with our company drive workforce field to have to our that working workers' engaged they're because XX,XXX that, globally. the of

of We have have. some the won't as ISPs well, which the liquidity

grow in transparent to provide ISPs the sustained Otis sales who able our technological investment the so back, customers both able our that see better information a left are forces have years. while be as over for well campaign predictive recapture to of And So and and productive started a our have changing. way us offering to then home be to We've ONE we from our in continue our working for more mainly dynamic our may to we a get IoT as service have portfolio to way and customers. we'll some

once service service we So the delay discretionary think demand really through I of the issue. having this It's they're a actually once see we see delays. through potential I coming And get accelerate. those, we don't out a to issue. get

Operator

with Cowen. the Cai Rumohr from And of von your next is line question

Cai von Rumohr

Terrific.

seeing base, So the split XX%? and How of specifically between infrastructure, resi any you office? is What's weakness there, the you other it commercial your are mentioned retail And hospitals XX% hospitality. office? and commercial

Judith Marks

China the underway the - don't way happening airports. support We markets continuing infrastructure again, also our tell delay disclose we but we I rail to metros success All maintenance well continuing. service obviously out bids obviously, airport the broad-based our is for are break business, Yes. and the world. stadiums, rest the as Obviously, that business, Cai, don't well. not because is think linkage you, demand of market that can are work great end support segments we But that that several we in But as those large this aviation way. in is a it's modernization business Judy. in do what's to and is as be still only there specifically. that going

Cai von Rumohr

section for the And in hospitality trend population the to in there been does the requests the margins getting I first? the mean then second second relative quarter worse? what for retail, the concessions. on concessions service imply And Americas, a given that service in you're seeing and Great. you strongest where that one that are have

Rahul Ghai

getting with expect, long-standing Cai. customers where not that did, trends we are We do believe industries hurting. customers. applicable, The the as would our are in you we've where worse, been Judy relationships make they're to working with concessions said

we some share to have that are react suffering. So of and the pain they

- price are where tied out, and So came made period. to certain we limited that time was concessions a we that and certain certain

we where that's So worked.

worse. getting not it's Now

very, started. time, some it's concessions of be QX. to and may limited on spread You from period and it's when QX will spill for and that see very impact of QX in going QX, those a between depending But that into over some

Operator

question And from your Nigel with Wolfe Coe of line Research. final the is

Nigel Coe

a Last I question one. so better good make this

volumes, raw for service, do you the that X debts new think COVID-XX margins that how out that think and bridge, $XXX So about look, I - and for price, when buckets, I mean, $XXX the turning we volumes. break absorption decremental that? includes bucket, of expect course, But we between how segments? to the should to equipment million about does and mean the obviously, million the profit bad

Rahul Ghai

this, the and right? first So it's is - good, whether one. - matter the question one or So it question Nigel think way your last I doesn't the always the about would

margin our depending on that's in obviously contribution disclosures side, overall equipment. look averages service XX%, it's we terms if at new the quarter, to about So equipment So And between, - have our new on the so right? our on you that contribution higher. made, XX%

is because underabsorption use revenue as if is - fact XX% business, then the there modernize that is we what decline we about the as But And on to we're our entire service averages you own the those out elevators elevators. sharp service, primarily and overall, year, contribution this the in of technicians the XX%, across service side some seeing especially so margin. look when cost

where we So see pressure some that's because of cost. incremental of underabsorption

underabsorption what in that we've incremental that impact modeled from contribution cost. that's kind So margin, an of bucket. of It's there's plus

working are - bucket. the you that we to of in the green offset and Now see some that on

we could to about, furlough. spoke through or we reduce As actions - actions have we through it's underabsorption wherever taken the whether through restructuring

the are actions we taking underabsorption. reduce to So

the So one other of of one middle the in we is page. kind on - is the left, the

So that's is. what that

So of impact from overall, contribution additional our underabsorption. you should about plus think XX% margin an

Nigel Coe

Great. That's then good information. here. ones And couple just a of quick

But all you've assuming that, could declines great we it, to most if not some be the outlook, well? some expect you Or XQ? there. in for regional the the that of in as service that mid-single-digit declines, low of there are XQ So flavor outlook given lands should

Judith Marks

Yes.

whether I it to low on we're the end high see Nigel, end. think depends, the going or

out rolling how majority on whole think whole are. then end, the obviously, we more high challenged the we repairs on will of half to - it do the the second depending the far our access for QX, it continue So - And on see, in the year. end, the that again, and being but is of low buildings year throughout

Nigel Coe

And - than of China on in performance bit China Great. light what's XQ. quick the in expected, just stronger then certainly in NCI. A a one

just higher. that So wondering drove what

Rahul Ghai

QX, Is question? the Nigel? In that

Nigel Coe

yes. QX, In

Rahul Ghai

yes. QX,

of and some And that we and JVs Spain was of did to our drove JV - partners. China some in had year-over-year the payment businesses, JV those that Our higher better. profit in better we with a

Nigel Coe

JV higher China year-over-year? So was income actually

Rahul Ghai

in our Again, about overall challenges NCI specifically. business up incremental But makes China Spain, China But very, QX. expense the and our we did on very don't between volume. what's driving China about despite well that's of our talk that XX% and income, on

Nigel Coe

it. Got

on congratulations the And launched. Okay. ship getting

Operator

I turn showing no this for at Marks am to back questions Judy Thank further the now you. call I will time. closing remarks.

Judith Marks

again morning. for this call Well, the joining thanks

and shareholders. Please those thank hear risks to remain I want soon. During Otis on you. you front-line from safe on our well, times, managing to stay hope colleagues driving their we as well these as fighting uncertain our for Thank for focused we strategy, the executing COVID-XX. value all and dedication and

Operator

you and concludes have Ladies today's your day. wonderful participation, this a conference and call. gentlemen, Thank for

You may all disconnect.

Otis Worldwide (OTIS) 7 May 202020 Q1 Earnings call transcript