OTIS - Earnings call transcript Q3 2020 | Otis Worldwide Corporation

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Operator

Good morning, and welcome to Otis' Third Quarter 2020 Earnings Conference Call. Today's 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 will now turn it over to Stacy Laszewski, Vice President of FP&A and Investor Relations.

Stacy Laszewski

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

except On President current Rahul prior was and adjusted with to me results were Please Ghai, will made operations, the adjustments Judy significant A Marks, items. today company a company are these be note, Officer. Chief non-recurring Financial restructuring stand-alone Vice from and where the otherwise measures speak The the webcast. President noted, will appendix found company results call also period in Executive Chief of reconciliation where excluding Executive and in continuing the Officer; though year. of refer Otis and to can as and the the

statements, filings, risks uncertainties. could to Form factors to over which to With are We cause Judy. our listeners including XX-Q, the important that, results call I'd also quarterly remind subject Otis' provide and forward-looking that reports SEC that XX actual contains the and Form on on turn materially. details to differ like presentation

Judy Marks

our business Rahul I'm quarter. back towards and in additional Thank trending strong our raising for outlook as sequentially metrics. share everyone. continue want joining shareholders. equipment, results, pre-COVID thank is hope to of on and a all share pleased we to providing start, the around is to Thanks everyone down dedication well. to Overall, new our morning as you, listening and us that that our I safe commitments our with passengers, debt, gained each for their and Stacy unwavering details. see you'll world improving across colleagues we are good To and deliver we customers, We in paid very levels, had

Bay commissioned technologies in our on intelligent footprint smart a China provide such This legacy quality capabilities of advanced automation, our era. and organically our delighted real new quarter Otis. time M&A remain States. as and industry both new and despite robust and Otis we of edge innovative escalator continues continuing the new opened expect the to to to accretive serves focused on excellence digital upgrading new a modeling, to Innovation core to COVID rationalize of East continue and cutting completed Elevator, Bay to that of ability for X.X an our elevator portfolio, through a the State look and and forward University density to transmission in This Northeast in risk we this ability study how science service airflow and safety Are our safety months. is best elevators solutions, leader bolt the in for prevention spread we Furthering is the United source space, expanding We're accelerates colleagues Otis in indoor is the continue these strategy bring systems. this of the as infectious of mitigate expert accelerating sharing is coming led health and example in the examining to we need in through growth diseases based Purdue protocols. the to post products and incorporates scale strategy which while build quarter working unique manufacturing, engineering, X-D airborne of acquisition move the we inorganically. growth. is during to market State custom factory join products, our as execute, findings management. we're being an and those environment Our the an a on risks have manufacturing and team, to COVID. air by study We

the to to adding quarter, our and organization. productivity of this the adoption apps more iPhones deploy continues within field four suite to of driving during professionals, continue We our countries service expand

will region, heights approximately Otis's examples Tianjin’s XXXX during the to Otis the points the addition, China Despite our Project, that This total XXX continues key travel to for order the the And units. of basis passengers. of Défense an the Otis in bringing XXX to seamless plans first XX to deliver OptiSense These have support of the technologies, in new deploy to organization. several Metro IoT place solutions extends several outfit bring the we're faster, and rise also in nine selected with Compass equipment In building building will the of to a on in months story number U.S., Gen area Metro new add we XX first led passenger include a build of Expansion building. X. Tianjin a elevators over innovative In with us. key to nine in infrastructure safer and just CompassPlus, the Salesforce productivity was development Paris France. China deployment Europe, received for tallest to order The handful of Otis the to pandemic, months. allowing in elevators next more approximately new in new approximate elevators for involvement share have the This X, to X we the XX In business and ONE enhance momentum, received sky trip we capability of elevators. drive Link, escalators to France, dispatching Chicago award to creating pace we Line months and and to our seamless each the office during Tower a La eCall, highlighted challenges escalators helping several Slide introduced and the the across continue elevators throughout units next expect Each orders accelerate. and system these of by deployment are in strategy will project XX the gain and regions, over Otis Chicago the an our

facility a backstop paper ended we if $X.X commercial to a our with billion QX which of revolving continue as liquidity and issuances source and of terms liquidity of serves cash needed. for an additional In credit maintain

expert and to people Otis's ways smarter a the and practices programs. to STEM explore to you Made and quarter million of the XXXX, there and providing to need. launch identify we of just quarter, live are In recommendations work youth to freedom has to million three as and commitment future commitment for actions thrive results our a to shareholders, our program we inclusion on and to culture $XXX advancing help where to avenue young independently wavered. the communities providing not and quarter, We for our mobility Move example, and extends equity citizenship the shared repayment Communities, in we forward and to Otis if communities in in inclusive Last with to Later guide also diverse, months delivering the minds we our an outside get make dedicated change. ongoing equitable, and assess $XXX education going made enlisted launched look and This need focused the to CSR diversity customers world. commitment a during take to faster, prioritize solutions And in more progress remain corporate global for give connect quarter. we we I new our we on provide resources and decisions goal repaying inclusive debt to in taller,

to Slide X, XXXX Turning outlook. and results QX

from Otis slightly EMEA were recovery as currency low continued offset the low rapid orders and orders business its China at of On partially X%. approximately rolling constant equipment single-digit orders months, single-digits were up in total Asia single-digit up COVID-XX. New the the a down by with XX growth decline in Americas. were high impacts

in expanded and on XXX continued Free service continued with quarter, segment basis $XXX the containment sales X% the and by cost New points, equipment margin currency. and GAAP foreign new flow to down X.X% service down actions million, was transactional $XX X% expansion up favorable from Adjusted grow year cash versus robust constant exchange. productivity the operating equipment was backlog segment at contribution the In conversion the benefit were income. segment up at profit XXX% driven of and with third net X.X%. organic prior from strong the down million

these the confidence by revise and While experiencing, us to recovery are we're we there results giving remains the from outlook. trends uncertainty XXXX around encouraged the our pandemic, year-to-date strong global

improving is now are profit Adjusted now to range adjusted net operating $X.XX $XX share to prior interest sales expected million, organic outlook improvement the profit reflects our and We $X.XX, up prior to We rate, expected in range costs. operating tax to midpoint. improved outlook, versus X%. adjusted be now of be million a per the lower versus X% expect midpoint. adjusted million be approximately down to lower at This earnings the the $XX $XX up the

approximately it be With year to flow cash with more cash to net of XXX% free $X.XX income. results GAAP Rahul over conversion to free flow our at expect we detail. turn I'll billion, in Lastly, and through outlook at walk robust full approximately that,

Rahul Ghai

good Thank you, sales. Slide Judy were in third results quarter decline Net billion, down with a X.X% Starting with everyone. $X.X X. morning on sales organic and X.X%

transactional the quarter the or productivity, at inefficiencies more segments declined approximately temporary price equipment of strong offset was new and primarily both as favorable volume, was organically and of COVID-XX. by anticipated, As and up million in from containment, effects. concessions, service constant $XX profit $XX and X% up the million operating lower Adjusted cost impact the impact currency, field than

year-over-year. on of lower expense we the that focus Cost sales reducing to flat more efforts about pressure and helped material than SG&A maintenance a the sustained by per from was containment percentage hours of $XX launched cost invest a in Our in we At XXXX expense also results million yield downward R&D time, and to business down year. year-to-date the alleviate continues prior the and trajectory. was volume versus same as continued unit QX

adjusted focus execution the segment. continued improvement of with strong margin in basis points service Our expansion drove operational on margin XXX

drop the up quarter of progress $X.XX operating the of service or business, the tax outlook, growth we $X.XX results and costs. rate. These reducing from EPS and were XX% interest better maintenance the tax Third by than balance a adjusted rate was adjusted had stability a driven from productivity, savings and higher lower from adjusted previous in in the expected profit on

were versus and the Book of that year-to-date the XX-month pressure were currency China Pacific approximately was intake and Asia down constant and America partially up margin improvement in continues XX to low quarter in X, were North at and was X% a basis were slightly Slide quarter outperform the Moving new equipment the parts in orders third In up slightly market margins points approximately rolling market EMEA. in flat Order the year. book prior in single-digits. and to offset by on share of quarter, regained a basis. down

the Americas, versus improving in backlog overall year. equipment X% and QX growth backlog from constant at remaining with margin the currency stable New was up prior by driven slightly

the and strong and intake are basis up organic New volume over strong points offset down units business in than million equipment these by decline, impact XX currency offset mandated than X% mid-single-digit cost actions inefficiencies, profit Overall, from were productivity by and sales XX more service price of cost at resilient down At as by with million and of unfavorable year-to-date operating Modernization despite versus sales operating segments of quarter excluding orders growth profit pushed new levels. down results than more a the out. market concessions, parts price more remains an absorption, reflect were margin declines repair currency and improvement has were back XXXX China upgrades and regions major the currency, in $XX impact and strong a of levels certain margin prior expense. double-digit constant million service being in an $XX material $X expansion mix. pricing contribution returning and points under increased Service discretionary all largely X.X% debt in the basis Service EMEA. temporary currency Slide third organic and The constant were constant China increase from organic offset progress and on was margin as normal both volume At of X%. pre-COVID organic performance was XXX to demand markets in operating about than service at regulatory points of X% modernization to and contracts and was field and lower remained The as growth flat. particularly bad Americas. in in million, is trends in X.X% EMEA. results year. buildings Asia-Pacific. slight the constant, with Asia, concessions results India containment productivity adjusted equipment the profit in returned adjusted Americas in call sequential containment constant at $XX Asia, the Southeast was steady X.X% China the offset sales, environment, X impact outside currency while an in with and was extremely growth growth growth profit Also, Number more Europe the in adjusted direction down grew And as decline was driven heading down reflect adjusted under on basis and maintenance by solid profit and of to environment. Asia-Pacific in maintenance projects expanded and challenging Access sales order job strong sites to the of contracted towards in quarter. right by segment than more

our these improving during to are and encouraging reflect year strong XXXX progress trends. We the outlook

net the in approximately trends about be prior to up with operational the outlook. outlook, expected expected outlook X, to versus equipment to X% an X% at look X% sales quarter sales the to be We segments. recovery improvement addition Turning down equipment X% be the for expect million, favorable and in flat down year-to-date year is for is single-digits, one be both rate midpoint Northern points Taking is outlook, XX of segment, service the versus now year margin with versus performance, overall an to expected in the now growth a Adjusted in $X.XX exchange operating improved growth profit to to sales mid-single-digits we slightly. constant is million driven expectations actual expect in to $XX improvement the $XX reflecting EMEA with on This We midpoint tax reflecting million Slide to and service expansion. to be $XX up million organic Eastern million the to X% mid-single-digits, and year, prior new expect currency profit down and an to organic a a and new $X.XX Americas improvement. $X service up versus Adjusted higher down to At quarter. operating prior now is from to now EPS new lower the is productivity. be sequential now for year the XX.X% year-over-year down from adjusted of prior assumptions basis improvement prior mid now and expected fourth up operating reflecting strong interest to currency, tax of XX third down the improved further the cost, at point the benefit down to be rate. strong reduced expected to adjusted Slide be sales high to X, up and $XX at foreign be in to strong recovery reflecting equipment by the Europe. profit

improving the expected by than third outlook performance are in Asia China. better We quarter driven

in challenges discretionary Asia and to with quarter However, we expect and sales fourth the service to to Asia. flat in recovery a expect repairs. India be we due in to maintenance maintenance slower In slightly resilient down down and the be the business remaining repair the Southeast segment, continuing

contribution demand Switching in year, effective offsetting price business. improvement more volume now under are and We driven Overall, modernization up of performance productivity containment than improvement $XX costs, pandemic, solid sales prior the and service and quarter regulatory the service the concessions the reduced versus the at to impact X% from materials levels represents COVID-XX Asia to a outlook million fourth equipment of prior X% the temporary be tap constant strategy absorption return versus This for to from about by fourth that at million profit quarter the by the million cost are channel XX, higher actions from sequentially market expected to and Pacific $XX improvements outlook in R&D in expectations to new in incremental visits, sequential in costs. flat in with requirements. operating created investments and maintenance be profit the includes raising expected Slide company public cost additional the service sales the both in to equipment reflecting and segments. to the decline outlook operating The new the to service expense, currency organic and midpoint. China, expected on go than is up of step complete benefit incremental pre-COVID the reflects to year, the better into of an $XX

now is million, Slide to An to billion capital headwind of deployment $XX euro approximately exchange the Foreign with an billion a in improvement performance. primarily working an XXXX, be of due against the strengthening on about July, from higher and income headwind $XX of capital the of generate We improvement midpoint an million we free of that in a flow had XX. to versus on dollar. cash million of expected the started cash million and expected to net $X.XX $XX U.S. now approximately improved from update expect $X.X XXXX $XXX prior

As quarter with of million planned $XXX million for in QX. we $XXX debt Judy of mentioned, another repayment the repaid

room denominated increase for expect the the complete our in debt share depending sheet evaluate on to XXXX. continued $XXX repayment. liquidity approximately through interest spent refinanced million towards that, We foreign M&A. cash actions to liquidity million and turn shareholders year, giving on of to transaction, overall Euro still between by $XXX also and maintain $XXX in to first These Judy to million return After U.S. Program, we $XXX it QX structure. and dividends to the QX of the we the debt previously us as our over optionality buyback Commercial disclosed non-controlling us conditions capital [ph] million remarks. of start stone Paper We through end currency I'll With the closing position us allow sufficient balance will to

Judy Marks

driving service This our XXXX, on XX focused navigating and generation, we of medium and continue In Thanks continued leading that, EPS robust and share position for like traction equipment continue of for an year growth outlook to sustainable in digital points our standalone basis the will line and cash committed we tools provide at performance portfolio, We year-to-date. to while Sonia year-to-date our XXXX remain where that all to investing I'd strategy Rahul. levels global drive pleased growth as our industry. margin first value IoT our to new update open shareholders, productivity, long-term customers, I'm feed approximately expansion. on early and with transformation driving term questions. value to this stay for COVID service while forefront are the company. deploying a remain challenges our seeing to sustainable With our and initiatives, at all with us continuing up expect to share for we'll drive growth

Operator

Thank you. [Operator Instructions].

Our first question comes Melius from Carter Copeland Research. of

Your line now open. is

Carter Copeland

everybody. Hey, good morning

Judy Marks

Good morning, Carter.

Carter Copeland

Just thoughts quick in any and Otis you've just would And add the those be what level -- high the units acquisition, just is Thanks. ONE then that on your for on that did pricing those expectation the pricing to appreciated? portfolio amount connected seen you differentials follow-up future, the or about a talked State on service as growth in Bay ones. One, meaningful Americas?

Judy Marks

You bet.

in America that contributed So enjoyed of portfolio family, have but material growth what not the Bay the again, specifically quarter. in the terms North State, the for in pleased to Americas, Otis to is

they or know in and we're value we've terms make to have productivity in on of get are productivity, up them China, giving it's already gains because North still in our We've subscriptions how In early terms in we've that. don't we're it's and quicker, in on America we they arrivals ramping where terms adding in and it deployment. arrival and Spain, show of and revenue, to up seen there It's it's have when on traction of to of able running our accelerating less that actually additional from Otis gain but terms seen seeing mechanics ONE, seen certainly the now call. to ability running service hearing they that

yet. that's the in we're added subscription really So it's but anything to line results, with pleased early terms top the not of revenue

Rahul Ghai

about of to suite Otis to System, just So of the Management XX% connected have and that Destination applications that like subscription the Carter, or Dispatch System, add to applications XX% those joins ONE revenue. we add a other combined

and capability as our We'll over customer, do we of both first provide on the visibility time. to remote in Otis that Judy adding lines. the and benefit productivity and focus that in other feel provide. we the we Asia So better we is terms do and of ONE And that revenue we Europe start see can uptime own incremental additional parts through service even where have said

able incremental get are price to We in those units.

it productivity time So on over first has we previously but as ONE focus Otis been stated. help will our

Carter Copeland

Great, thank else the let ask. color. you I'll somebody for

Operator

comes from J.P. our And you. question next Morgan. Steve Tusa Thank of

Your is now open. line

Steve Tusa

morning. Hey, guys. Good

Judy Marks

Hey, Steve.

Steve Tusa

of first those the low is around up some moved just the regions, at a looks equipment maybe at least removing that high kind some only range, up really just kind you're seems the it And, like on have of error of for end kind should total more? move range you end or higher number of the the the of some took end. just new those it So that high the the for rounding of of year, of bit guide like just all

Rahul Ghai

high to Steve, did was noticed XX% it keep single-digits mind in did QX mid-single-digits the X% down you're looked we kind and -- mid end improved and -- down call. down to bottom range the we have from of mean, of we We the and right. regions to across from all I

the has high planned have Americas direction. in in movement and growth at regions. performance of Strong mid right China the and all kind across the the And for So end, and improved the outlook the QX. QX and we continued in especially

if we ranges, are high don’t rounding that be growth is so could take we there mid But Americas at and end overall do and good there expect we the So, because the way the moving you think specific questions. I about really EMEA offline in and of feel certain range. the the give can business some

-- about that's feel So we guidance. our good

Steve Tusa

other you Schindler And all round I Kone, guys like talking using Schindler and mean, these like I then you numbers. actually just its are quarter. about listening the or are price saying guys, okay to presentation Can your try pricing margin or a some and you're you pressure. uncertain. Yet timing intense is was that is that reconcile times And in mentioned is that XX and COVID, something guys on like in things all be going perspective, sneaking what business, something that where of from think financially of see that hey, your book are the it around flying is just a to up seeing orders in just, guys it's your price this matter you you pipeline in it's

it want just to numbers, -- like any around reconcile don't a but price kind price orders price, don't high-level help lot just it caution or see we really there's on So, that? seems you because the make of can in promises just I more

Judy Marks

Yes.

you held. the saw we pricing So, better productivity know quarter, strong and our remains Steve third volumes, our in

XX basis backlog. points way both you with basis we after the were coming margin other up we going our we up had orders Our points XX are especially that and said improvement, pleased in grew slightly the really second quarter and and it, where

up backlog. with X%, So X% in going we're where every

competitive in we're the seeing and high were in -- in are terms you the quarter, single-digit we we seeing the the -- America. low in low tell And and most we competitive, gains while was So EMEA market's single-digit pricing China, was was competitive single-digit place we in had it gains Asia, but of would third Americas. North down

And winning we so a dealing as that the going we backlog, and control and us then cost and good points far by share. put with grew position at our executing is productivity on about which growing there. we're this is control, really backlog growing what We as basis to XX much in can. driving the feed business, XXXX by can pretty So,

saw we on pleased in QX North all would getting is it would But -- were QX pricing. what and we So certainly more I sequential versus with improvements. we America tell the competitive you,

Rahul Ghai

add, our of sort to points of just a then year-to-date just to add what flat. said, booked -- to margins Steve And maybe couple Judy were

to that's a going -- good thing. So that's

down, First was third was up. up, quarter second quarter quarter was

year-to-date margin nine months our backlog margins is is So and up year. sequentially the year. the than the book flat for to the the and got last of point backlog better And flat QX other are

you right. So back goes to made comment that on the pipeline, that the

that great, driving fact XX we've but going been unwavering. we on hit kind that we We've it. focus productivity Obviously, backlog So I again, is for mean our months and nine story drive the not do -- X% been our margins, target a environment. next now the do the this is Investor to And hitting expected and macro conditions would Day have margins the saying that are we since which flat. pricing revenue that for year are of we've focus our and -- those is we that constantly are tough economic for months expect

maintenance continue we'll execution and we'll So installation, is productivity, to that. offset our find pricing improve if there pressure, a to our way

Steve Tusa

are looking analyze kind at market that's say and high how Schindler's One Kone verticals you attention different the a why you high to commercial, read fighting paying our verticals or talk very specific infrastructure, versus within And all competing, of because you differently. guys necessarily time. guys across share like not kind are and competitors obviously to you're how globally one it, numbers you those with a how companies guess These level gain of your really you level would all from share of one markets. not you're looking compare residential, different defined over of trying these Schindler explain I companies, the saying etcetera? world, kind When about you last or and the are for a and like to guys. learn kind of We're your about one quick for the like we directly it's things the guys that Kone’s

Rahul Ghai

Yeah, done versus about share talk so market. when Steve, we talk the how about we we have

think the our report from. how and exactly the share outgrown Kone the and we're we've that that's we market compare So again, and I know we don't orders, we know fact it. when that Schindler compare who don't, other But companies we gaining is, so

market So X% in for obviously the XX-month look on flat this XX-month down we and year-to-date. rolling down it's if a points more the you than we a X% on rolling quarter, environment, are basis basis. two down And know at, about is

a given that's environment. performance strong fairly the So

that so we of analysis and as us on points. XX And that to think based three our we we've her believe, about share do, by grow remarks, points said backlog basis prepared has that in about allowed we gained Judy the

Judy Marks

of in their And Steve our to share, one countries country we XXXX. share to that's and task every grow going continue beat through to

a it we finite look at So pretty at do level.

Steve Tusa

Great, thanks it. a lot. Appreciate

Rahul Ghai

Steve. Thanks,

Operator

you. with Thank And question Barclays. our Julian from next comes Mitchell

is now line open. Your

Julian Mitchell

maybe basis. looking Hey, that think a at environment, now comps question see start is at over about orders in a touch for next quarter the overall out equipment. in should a bit the that we foreseeable orders some third quarters, kind status They are do the the look help rolling to tougher, on but quarters? you level as Hi, around then think a gets trailing maybe XX of just get differences good you're sort regional of new quo few the you how couple there's months flattish China Americas us When this for morning. so understand first of down just globally, better, you the maybe

Rahul Ghai

Yeah.

orders up comment the to to what to are we we've we back year gives the it on what performance confidence. and the the new related hard And, strong in I want step call a this have -- us grow we to is we to gives said our fact year-to-date. to backlog wanted mean a position. backlog our step that further, XXXX confidence year. that for it's were that X% we obviously year-to-date go obviously of but pleased take to business hard with a being XXXX conversion And that headwinds Julian, we lot the had it's for that have equipment And end right, So the next volume want the comment, not accelerate us our last on and to priorities

new of So driving focus for our next equipment year. that's revenue kind

picture market, China. we In Judy seeing the comment think are mean, but, back pretty in the seeing a of terms -- bounce sharp I as well can I is fact is mixed. a we're

all are expanding And But what there's The little as the more driving focused Asia harder channel of to America Europe in want you as and point bit little is up based year-to-date. goes. then okay other partners a we're mixed to activity looks we China up And, and market bit softer proposal expect. is and that going bit where are more things our than more that to -- saying what data terms are we We've do in we'll seeing, little make in our is of the snap China. control. goes sales we sales Added is see can a XXX our back people a little kind other XXX in I bit double-digits. we've would people. well. year-to-date the on that a sales more but added is activity, proposal North adding And coverage, a projections of the been on

So increase hopefully that even a means down for come. allows market, and orders our us to our proposal well in that activity to

Judy Marks

sorry, Julian. I'm Steve, and Yeah

to in We've months one of changes? few the starting starts especially tried certainly in past America, to the with any into at cautious turned the we But the continuing We're have of add or a Europe. next non-res. weeks Asian rebound economies corner look still quarter see really and North just me or take COVID new is growth on we are in cases, segment. this expect Let the year seeing China item. China We're hard and accelerating

Julian Mitchell

my around Thank question you very profit much. outlook. And second and the then maybe cost

on costs standalone million year down prior come run is guidance the has guide, this XX, for unchanged. but Slide at standalone the about the versus XX rate costs looking So

those trying next a So of millionish costs that sort or into I year fourth to I it, close were mean think it? up also quarter costs am Did misreading some million into separation $XX step number XX P&L separation we next as year? we of in abate the then do was just see in the that those does I we get or in costs, to And QX. still that those understand, get in

Rahul Ghai

no. Yeah, All good questions Julian.

don't $XX right through that So, million SG&A, some QX on XXXX focused right. else lower for a and sign. see And framework We have said reduction fantastic. on be. the year-over-year a the want public you that And have since reducing We like is is our update you And didn't we driving company guys the of number for the been everything will sort yet. we and how number obviously context of -- XXXX providing to that versus coming on one cost. have good

is color but guidance not XXXX. about and of XXX, will So get again, more goal talk more we to to we the as our provide rest

on at are So, to XXX instead are discipline But the have the the we you XXX that good inside and for shows of this that. company. we being we more come able focus to year news that just

that's In terms year our think the number year. had of separation XXX we and number cost on between and said, to that's cost largely I XXX, next QX is this and stamp of [ph]

we will that. be think I to tracking

year-to-date is $XX the so numbers $XX around million. think million I that are million $XX and between

that cost. and the that QX end the far, be of rest separation between QX would So and

Julian Mitchell

Perfect. Thank you.

Rahul Ghai

Thank you, Julian.

Operator

Research. And Thank from Vertical question you. Jeff next Sprague comes of our

Your line open. is now

Jeffrey Sprague

can wondered below actually in of did, all coincidence maybe and to the is, pursuing seem but opportunities another focus but grow be are how you a screen of I they Obviously, orders radar lot the of And a in we does the the mean if quarter, there which just kind as we and you. can where probably but or selective all of it's competitor in maybe picks China profitable really earlier your you're a there's on see, interestingly just by couple I that Good Thank right, could that a what competing. did little threads, morning, not it addition bit everyone. matter in Kone Schindler, question. orders more up more the being inherently are noise That's you total quarter? purposely them. that global matched are much on basis kind as a more nearly that a first quarter, or in are but further your

Judy Marks

margin Yes, China us. are getting Jeff, so book or so we our price to orders the which important up return was new single-digit, quarter in equipment, really China high in China, for was up to in our

Our sales mid-single-digit. up were

We grew portfolio price service China. year-to-date also grew X% our on and got and in China our service in share

been pleased XXX where there spending and Two So we've One almost agents we that. the and a Tier strategic will have margin we're distributors China to got greater verticals provide return over we've investment. especially which of our different to well Rahul some in think and reach with greater year, intense been to lot and solid this focus and added -- has We to we infrastructure, of the again, time in on cities, in Tier and And to share did profit us booked capability an we've see positive opportunities. performance. a that, like

us in going investments to remarks, get growth in QX, factory, invest China and our with growth as in Rahul us continue to be sales we're his continue new to a is segment and significantly we China what the for to to think prepared make in mentioned channel XXXX. for in in We going

Jeffrey Sprague

trying maybe then what the a new and commentary, indicator what to back could pretty the expect backlog bit good just the a more is whole little you're just color we and comment kind how the maybe if you should certainly more algorithm rate on an color backlog growth cycles of the growth, understand exit works, for you could? us about of just to equipment alluding Rahul, you little backlog, to conversion give relationship Right, made of a on and accelerate conversion

Rahul Ghai

pre-COVID revenue what we bit see we given given I a in from Yeah, see now is about year, a any our just equipment to typically coming typically thirds in backlog. so this back we of to am used see revenue, going two what little new is is year because

a little a has it given to that's it factories. had, the just and So the year than get only would both I typically in little seen. levels, back This higher the been lower what is, field our to said think previously, we XXXX is bit that goal bit drive we our goal disruptions have all And not in that. we've but

backlog. and talk more you XXXX. we thirds is we'll of so two as coming next typically And see more for revenue guidance color continue But from about what the year and provide

Jeffrey Sprague

you. Thank

Operator

Suisse. Thank you. Credit John And of question from our comes next Walsh

now is line Your open.

John Walsh

Hi, good morning.

Judy Marks

John. Hey,

John Walsh

Hey, at the equipment but debt keep and yet. and I pricing just up the XX of seen bringing first was questions one called new maybe pricing pricing, bad haven't bridge look then and sorry I couple your last go of just quarters, we guess on when on a to out, following Slide the through the that I each commentary

earlier So that's COVID to timing it's related going think issue? still question I again, a if once because curious to in hit we're I conservatism something's so was QX, an some just in that, actually or you just know,

Rahul Ghai

have on we material debt like bad bad have you environment little stock. It that environment, reserving appropriately in in year-over-year. being incremental enough bit an hasn't you the credit and debt out, the how We been a would I would had call but higher, would expect are for is to cautious, we say, this,

reserves if the direction, things So adequate we we that. are are in go seeing wrong providing for

through So refinance of bad debt kind up. adds And it's months. but it not cumulatively first the us enough each -- out has been been nine call with to material again, hasn't on

happen. out margins flat. said little Pricing as it of conservatism right, flat. for Backlog book okay. bit year-to-date things hasn't our they are are QX been, called just But kind margins is again, it we we a case expecting of are haven’t are we flat, you it are in So

on that common equipment right, a little does affect conservatism and of is on mode for pricing this you're a new So our QX bit part. for

John Walsh

help building utilization I understanding or where that's now next vacancy some there's there's given I we just that service be a are us understand impacted. would the maybe be but that are But only rolling kind helpful we portfolio waves might pressure rates, as when on clarification could and about better, a depending on concern Great, portion kind business might work that how you the it, way as parts even service of on see off the pricing then that some of think rates naturally like and any little think year think question on a can service. year that But takes on bit effect, repricing just I understand rolling of contract?

Judy Marks

many multi-year of are So our parts in contracts that annual are contracts in service and the others. world

all to early watching a different. shared building tend end staggered But match XX have well, and as the we open enter to do at cost and we next those or concessions service year those we in to find we are about we've So exposure, America as that also are Europe have a little the typically only. renew we'll long given important in been hospitality is We services under note, John, XX% our a little pretty go and that's year our escalators well. there indexed when the market North as lasted of are as we've it's lot in In and concessions limited a And terms days date retail have that price contracts us to industry be as times. where as came that to inflation. for deliver. the the date is And each in contracts country our And concessions to globally. we for our with those multi-year that they service of

maintain a our we've in margins been expansion. to that. service job able And been we've So margin that's doing and good why our

Every use, exactly But every not side residential does maintenance. open a any or as then but types a on are accordingly. for need cancellations watching. kind and up at services now job costs and all to significant the long then discuss minimal either receive, extreme and one is And -- cancel renewal, on equipment the come these building Right seen the unusual what they them we our service and equipment use customers side, the we side. we've the providing buildings as everybody's we new are have we even or of now of of with not adjust on As there new cancellations seen happening. out

has maintenance our are the as we've and the was has where resilient been modernization that choices. very very people making held had pricing repair And helpful. maintenance also up sales really, I discretionary any it's resilient. decline and in discretionary Our of hope

John Walsh

was that that helpful. Thank you. very Yeah, Appreciate color. all no,

Operator

our And you. Thank Nigel from next question Research. of Wolfe comes Coe

Your now open. line is

Nigel Coe

morning. good Hi,

Rahul Ghai

morning. Good

Nigel Coe

Yeah, hi.

the in a goes XXXX? I of I impinge any there's into activity might little you -- seeing that. Are on lot cooling as any of kind depth around mean, there on mean, churn any RP are some any government sector XXXX, we it So of a public down are and measures concerns started down that maybe China seeing bit, concerns

Judy Marks

growing we actually And a we that in this the next XXXX. in expected we segment proposals to in outcome actually very China. year. will the positive is China now in and cooling three we flat, year not segment be mainly started year believe even segment or private We're the again seen And seen effect measures I No, any the in would say. impact is segment, infrastructure years, not we've any for for looking in have been with almost developers, requests public. change we not which in But we the property have have volumes these on seen year -- this for as China grow now next the

Rahul Ghai

couple actually And you data of up if look on the that quick year-over-year. volume loan Nigel, mean, developers, the at I add real a for that's points estate domestic to just just

that up like XX%. developers up the is I prepared are estimates value X% X% and think to have it's the these land

to they So continue invest the in business.

Nigel Coe

I to is the nature on of what go the up pay not sort next year? repair discretionary into some working in don't create to pent hear. there's demand are some or then great from here of as four. differed, this significant a we we And that's there, mentioned, you That's -- is this cracks being weakness the it know they're facade talking and moving caps of Does six down about

Judy Marks

demand side. pent is it this on create believe delay repair and the up do a will We demand

what that's repair going so side, will of challenging the modernization come It's modernization But back, the quarter it to determine discretionary. occur. to believe is On the happen. since we we much will believe

Some some the are facility of of it buildings the some usage holding on repairs. managers need access just buildings, discretionary more those we it to of those and need

it a go to our of back it expect we expect little see bounce and back. as we we We into QX in more XXXX, think and we'll bounce

Nigel Coe

quick lot one then And balance of Rahul, obviously the Judy. for cash sheets. a Thanks, in a

do normal into that environment, forward? needs going get we you once know, maintain sort whatever more Otis of much cash to means, how think You a

Rahul Ghai

is that's few I a -- offshore. we our of something to great question, it's to we cash mean, the that Yeah, need exactly need belt lot and out. under again figure a Nigel, quarters a

say it that that not harder figure right little to X.X billion. out not So is. number one. exactly to it's But say safe a makes I that bit to easy mean, it's what that's

in you which I when couldn't borrow environment like think go we you an because have March more cash April, in what than if we CP need, this, is or to market. back appropriate

beyond feel our XXXX. in be feel that's months. So, be uncertain, share you But from next back that to we into XXXX want is to cash things don't little a at get and six shareholders, three going to need X.X down a and to be what to least think position is And our for as that, we do promises we we prepared to when I the because buyback settle accelerate bit. should life

is -- really we events. objective. some again there stated barring that is So really, And unforeseen get we'll a think that

What number billion is. we more it. is, it's the think I quarters what right X.X keep exactly now we'll to So it's that few number exactly lower But and watching a than that. need know

Nigel Coe

very Great. much. Thank you

Operator

Thank you. comes Morningstar. And question our Denise next Molina of from

now Your open. line is

Denise Molina

of for level Morningstar. a Are then you to connected top hundred of to across revenue contract? you've got these to because adopted to budget Hi, wider expected for of a that's those points normally everyone contracts a kind of be just that margin back on customer you if And carry Denise Molina the if basis what to of for to yearly the kind you're wondering think expecting base contracts, that to couple are the widely get certain XX% another adding high of segment, have XX% a budgets on their is sort for from think that on would left am or high do these I service to Thanks population your building? go services revenue to from they're services. the comment of you just in be going trying XX% a for question. thanks. tier XX% about made of maybe you

Rahul Ghai

Yeah XX% Denise, XX% so more my comment on kind of the to fact. was around

connected we solutions, Otis to ONE. So in have several addition

of little dispatch. bit destination a management So a we We provide system. the have

We connected. involves are that that have eView -- systems

you together, is the that. XX% revenue that of XX% when that cost all not So that add get that there can incremental lot off a unit. support we to on put to about And

to margins as expect -- would higher you in So as can close you rate be get. close perfection to to almost addition to retention

rates high. very very, So the are retention

response Otis not in comments those cumulative. expect Yes, XX% Carter’s to So you ae to is XX% there question incremental do benefits. that? are from we lots And incremental ONE, of again It's now do. revenue

day, unit So a as it's incremental get the portfolio ONE. Otis responded is uptime from not the down. we breaks end going technician how customer visibility gets the dispatch complete the on the as performing at earlier, can revenue to higher of because double do because we expect soon Judy But, as to

So the down customer know we so dispatch we unit calls we before us, is technician. know the can

higher. So the uptimes are

But will our time revenue been has expect get we So this. over focus. we from do not that primary

the we this, these at outweighs we benefits think investing productivity our installing the units are are We because own cost cost.

So we expect but our primary over has time, focus been that do revenue.

Judy Marks

and beats our industry across the rates on elevators Denise, retention And conversion globe. our retention rates leading connected rates our

hundred portfolio we units do service normal in our have ability the we retention retain globally. those to points So our at several connected rate with basis actually above what

It time. us they want So on service that's additional another time, customer be ability added that more the gives and us. over upgrades especially over benefit to with for when years

Denise Molina

difficult from Kone don't the think the is I we're a to just much respond follow-up what had your think one difference players. do you because those trying on that kind of uptimes. were that and get going OEM up lot do elevators ISPs figure of as to think sounds connected against those Schindler be [indiscernible] the say Do are information right, kind out number But going I or that you ask you differentiated it's they have feeding we've the and it many like that algorithms, services amongst up good still? and you you the are on the to if same heard services another not think maybe that's as feeding would that, against elevators ones of Can

Judy Marks

do a data make than difference trucks terms that comes XX% especially of back. and able that value of up ISPs. above and the who to and we units intend, the having our what with and and Rahul are to said as get to controlled to over believe going decisions, data a is analytics, that's we're roll have incredible The and differentiation do going able globally the And half That's out to to to there get and lake, and transparent the we after as get X data our in field our make now service It’s possible being scale are the time. of portfolio service of being drive as predictive with clarity quick maintenance, to we right grow market units to -- portfolio the our million from share going get professionals to of more leading that's by already. -- share. that's ISPs Otis where service share

Denise Molina

you. thank helpful, Very

Operator

Thank of Cowen. you. von Rumohr And next Cai question our comes from

open. now is line Your

Cai von Rumohr

much. Yes. Thanks so

in you margin, fourth flat. be are in call hold of for the margin What can that backlog fourth worse Schindler pricing their talked in backlog quarter that and quarter? for, margin looking third the down So indicated quarter. it's getting you looking backlog to therefore on you the

Rahul Ghai

of Cai, comment is, it look that's hard backlog the at future The margin you books margin. news is good listen, to on up.

out. is that's in be largely to There pressures up, the You generally a backlog couple year this stable. a Asia-Pacific, were yes. margin little up, previously, new the China But equipment Southeast environment But the markets would was markets that especially it's new what margins in EMEA I Asia flat as of look of as pressure in equipment behaving are we've and think, you and America booking India service bit will both and pricing is last from at takeaway discussed my in as in and expect, well. North like

good we being margin going put the that see in that, the to all and So up booking margin all and stable. it's backlog

you are well. think these because I made on they and the of Judy these temporary concessions a bit these pricing temporary outside was up, -- Europe and comment America of as for up expect limited of okay time, well a service would mean, I was okay as was North in price outside the temporary concessions this market -- but so pricing little holding. is service overall looks that's as are period Asia well. Europe pressure price

it, we're pressure? kind the right. are feel there is. we manifested pressure ready we ready be are. If Absolutely. good okay for may yet. where but the feel we not we mean, environment And has is, I about So for there it where Would come that of

Judy Marks

portfolio, have resilient And And actions other are is and the that in high on our our discretionary single-digit side and despite medium has our said XX% we productivity, remained and facing. to that multiple service margins been equipment and the And we new service credit in driving productivity Yeah, based service of is business, shared service, plus yielding future but shown on our EPS. term both our we which challenges for both do for outlook continuing basically to that's growing now driving we've margins. the service that quarters straight equipment on material side productivity the yield. I

for term medium track, on our and we're that's strategy is are our outlook, executing. We on what track

Cai von Rumohr

Terrific had. wins and very for a orders then compare? bolstered Are tougher you large were you that are your by in at third wins quarter large looking the fourth orders we quarter or three looking

Rahul Ghai

last [indiscernible] probably as will well quarter Cai. They

in we've so year-over-year difference. Listen, necessarily mean, know had we Cai think been our these QX sizable things talking a driving sure large sales that wins a about think of don't made year rest few China, it's I I in I the I wins the last are in the of I between Europe, at whether if markets certain to whether markets, it's have that you coverage anywhere we our look coverage our are up markets mean XX the Asia-Pacific, whether it's sales targeted in X performance. points.

and both in added people. than So doing mean, right. more we than are and partners we've added channel XXX I doing just said the We've added I -- sales We've Judy really XXX China. well basics more

in So we Southeast we now. are more market, the new We on a we're have entry product we segments, expanding putting Asia. in didn't it ground, feet to we do are India, the tier backing launched

are business didn't in volume attacking the play. we certain that We markets

the gain a it's to making and it's technology And testament front the that. we that to all continue out share. large these are on So the sure than a broader But, wins pretty customer relationships.

Cai von Rumohr

XX bps you losing where percentage listening been Southern Can that think be and Asia, outside share last the China you do. you substantially three than Americas, markets gaining gains and share to are about on you're of of your on you Terrific, the Europe, where competitors, they then share? may all are revenues and complaining maybe they've markets of where so comment share just do you gains, greater your part mentioned, and have all is one,

Judy Marks

to yeah, with we our equipment especially pleased Japan service, And of of world Korea our China, both So, out major in in Japan. a results are take where and in Asia new -- outside service share have player. you and we happened that are very has if we in

those And equipment regulations put Southeast of Asia gain place sales have side. on world, we share more the our like So although really to there also with rest the we're by in pleased of both some our the in to get investments India impacted Asia, the and share there. with but deal new new Pacific, just Korea,

year. remains providing and teams Brazil America what especially that. and cost with the competitive with ABI Europe performance in up the maintenance in America. America. watch we're just very to gained in that have have our with to was work the then productivity and pivot to of we've America aligning minimal that our And the and share the having we quicker, continuing information but We I In well conversion South with concessions. And looked and we align backlog North cost Dodge our great to Latin pleased to continue done As that we to our really and the in of same improvement has Americas, control, portfolio we heart grew we closely. Latin the job and service are is deal for drive North perform marginal -- our access we're a really can next Dodge watch pace throughout, and going

So we're South Europe, including in side, on across it the new equipment in the new starts board. seeing we think and we're really Europe, seeing

retreat the by to site India, still of in XX% is really a the starting EMEA, little terms Asia. starts than haven't job Southeast from high East, New of which EMEA. in less but parts China in to been and turn. rebound the to rest far. slower the second either is led are Asian we Middle any access COVID or else are the have place that economies turning due constraints we've XX% But North seen Asian corner, of the has restored in only by the of America economies The Everywhere in and

Cai von Rumohr

Terrific. Thank you much. very

Operator

gentlemen, you. any turn to this conclude And I remarks. closing call session. does back ladies now to Thank over Judy and our question-and-answer Marks would for like the

Judy Marks

well. as you as me so and Well, fighting for COVID-XX. stay thank let colleagues dedication, and much all to our those Thank all for I you. safe on front the well line Please of again morning. want joining the need their call this thank

Operator

gentlemen, this for Ladies call. you and concludes today's Thank conference participating.

disconnect. You may now

Otis Worldwide (OTIS) 26 Oct 202020 Q3 Earnings call transcript