OTIS - Earnings call transcript Q4 2020 | Otis Worldwide Corporation

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Operator

Good morning, and welcome to Otis Fourth 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 will now turn it over to Stacy Laszewski, Vice President of FP&A and Investor Relations.

Stacy Laszewski

Thank you, Justin and good morning everyone. quarter conference fourth Otis' to XXXX call. earnings Welcome

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

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

Judy Marks

Otis pandemic an a becoming We evolved. the and margins for product free grew support and a you, I'm a agile offerings, are, years Otis. challenging our good morning everyone. wavered safe and XX and our of XX,XXX benefits basis our of in prouder provide challenges staying independent $X.X we to our our and row, points results each who of we've Thank flow, and absolutes pleased and demonstrating Thank adjusted environment, solid unique to and expanded generated challenges equitable customers and demonstrate the I actions we communities remained this hope year. that XXXX in recognizing Stacy benefits UTC, XXXX keep a our Despite guide year rose strong the never essential And business did listening the throughout segment billion Otis our second while customers. toward more service is presented we of future. for the quarter joining independence. delivered everyone within the could of by and a to our our resiliency adjusted safe expanded our year We eight you and colleagues be us other well. to without services the commitment the margin not who to cash as earnings true behaviors following expansion the as to their in allowing of

the $XX At profit organic currency, full-year, outlook. X.X%. were XX our million prior expanded prior strong prior a of points, operating reflecting the sales our was adjusted service Adjusted $XX constant and improvement down or the Margin EPS outlook. For up million, XX.X% was $X.XX, year, segment year. up performance from from $X.XX, basis versus in the a the improvement $X.XX mid-point the throughout

a major new the Now We more segment, points, platform GenX of units and in XXth million delivered milestone, turning basis In X XX regions. surpassing grew anniversary our by hit share Page major all X. to growth proudly we our with GenX mark than [today]. equipment

to continue customers. We solutions introducing for innovate, new

grow pilot our than a business. XX% sales this launching our we'll we connected with later markets, platform Otis improve system, in For the coverage adjusted of major to business units low elevator shipping recurring generation to and our and units. high-single-digit EMEA, We portfolio, resulted forces’ IoT elevator. approximately This to One include our the expand in new and XXX,XXX of by than productivity to by and planned, approximately India to which with reach We to growth IoT a expansion environment. cost introduced maintenance growth accelerates more more with allowed new offering portfolio our IoT that efficiency basis the and other digitally-enabled Asia growing we progress China. year. began the to revenue on regions, in digitally example, We an all and market business ability XXX the enabled more GenXXX, more tools XXX our this solution advantages all continue including XXXX, added distributors address core in brings entry date, in implemented Prime, platform. back-end. we native enabled region this is find is us continue initiatives to customers us next new, along actions EMEA common units of the and To on in CRM we sales adding pleased China, in GenX enhanced This points on U.S., quarters formally agents And in and ways approximately of in level connectivity compact equipment made in industry-leading year. the added China, One. Otis XXX,XXX Pacific, to increasing we expansion the containment margin into deployment. dynamic This X% cost developing this a I'm our bringing year, as units earnings. mid-single-digits, for anticipate including Service our with transformational In model, shipping four

connected, globally, and units, plan up project XX% were some of delays we flat as XX% the portfolio face Otis. for in modernization accelerate sales value benefits to organic due productivity year, to the regions currently COVID-XX. to This roughly our Over approximately we creating medium-term, from connectivity customers

largely up approximately XX% modernization was sales orders double-digits, in Asia-Pacific However, demand with demand. particularly strong, driven by regulatory up and

offset outcomes. new cost from of commodities, XX% of to generated on material approximately productivity very focused Our basis our material. operational labor favorable headwinds approximately service and basis service and equipment XX% inflation and cost We're labor, initiatives our

our of equipment. to materials. volume The productivity We commitments XXXX, the scale, in customers. would savings, to some early the team, provided we cost raw out material actions supply spend, and taking and more we our X% products from offset potential to chain COVID any during even new and offset of made assurance taken of rationalizing impacts cost have goal initiatives by protection material deliver leveraging achieved our headwinds than that And helping on

Our sales extended expanding expenses adjusted while focus on the reduced versus coverage. our SG&A, where prior we year, $XX by to cost containment million

noted, basis schedule, shareholders tax increase channeled better debt generated year, strategy, structure density, our we the acquisitions outlook allocation on $X.X generation billion As $XXX XXX prior into exceeding in flow strong Day cash of year. million scale free year XXX% points basis adjusted We to reducing tax conversion significant our throughout progress cash million bolt-on in points and our rate original ahead made versus and to capital last our $XXX including expectations. to of the our Investor $XXX of and our the returned through dividends approximately million. repay with prior by three than We by the XXX quarters our

air air and that elevator less a expect sponsored on ride by adjusted a final We analysis quality led code of outdoor of and bring by have plans, and has to risk by short and to and amid over exchange Purdue design promising to news medium-term the Otis significant XXXX, approvals data airflow, tax than concluded professor the And vaccine expert elevators a indoor a dining. as and University of exposure to rate using that a study our elevator XX% range scientific required and comment by XX%. of level three-month distribution

Turning and Slide to the with outlook. industry's X, starting

While industry's market dynamics the fluid, remain remain solid. fundamentals long-term

China. equipment growth industry's availability with are and new low-single-digit opportunities. COVID-XX of mid-single-digit signs our Asia, confident to sits] is low-single-digits on to in and At EMEA, growth the execute We segment in our were units is in maintenance grow is to the service growth expected is expected growth The XX% pace to Industry installed new the Asia, regions core ability return in present of Americas in The wider of built business roughly the of slight vaccines. X our of momentum the are based market strategy. will to million we the Otis, low-single-digits. is and grow global XXXX to globally industry-wide. in driven by encouraged our The EMEA recovery and equipment on we're we service Americas. feed base [portfolio model, about expected base year and mid-single-digit to expected and in by install recovery expecting future and Otis growth service per the in itself continue all grow long-term

Otis Looking our specifically outlook. at XXXX

and year, profit $X.XX, is the EPS we X.X% X%. up versus sales is prior be sales the $X.XX up midpoint. to million, with to range X% of $XXX expected to adjusted expected X.X% $XXX growth operating For at in year million X% expect of a XX% to organic $X.XX and Adjusted growth to to of

of of robust in be billion we cash $X.X net GAAP expect to income. conversion range free to XXX% $X.X with billion flow Lastly, a of approximately

share remain recovery million will along this capital start in foundation gives shareholders. disciplined our We in customers the built that confidence year is repayment repurchases to end working for in following expected strategy our that and well-positioned with independent markets $XXX The as and us of company, already deployment January. completed was we our debt an are our

our our outlook and to footprint, that, many capital confidence beyond. our we over turn more With me results strong XXXX this colleagues in leading leverage, deliver and it on operating Our management innovation to year sheet, and our program, through detail. walk our give industry successful can global balance our Rahul full years and outlook I'll

Rahul Ghai

$XX and $X.X service $XX segment. quarter X.X% six. the in impact new in by and X.X% of and decline unfavorable Thank to returned by strong offset currency you, mix, everyone. offset expected productivity new Starting equipment X% Judy the sales partially with driven were approximately profit equipment field operating constant the billion. were a to by inefficiencies business, on service million up was and volume and the in service equipment Net Slide lower the strong at and material new million up up in results higher was Organic business. as or recovery quarter, price partially sales good the morning growth up volume, fourth Adjusted

points or $X.XX rate. growth, adjusted on in driven lower $X.XX, focus Fourth by up of XX adjusted Our tax quarter. quarter operating expansion was execution and XX% a profit EPS $X.XX [grew] basis margin of the from

and business, environment. a results productivity, by growth driven of than Judy were in benefit mentioned earlier, from prior outlook service $X.XX ahead these equipment better slightly As pricing the better material new increased expected

Moving to X. Slide

New down region the equipment digits northeast of offset currency, than China, was weakness the compare double constant driven was by backlog order larger Awards, in and quarter precede basis was XX% the was down tough of a due in the margin order States. intake adjusted metropolitan decline and mix as China months X% orders backlog areas stable in couple the a that EMEA Americas, was points slightly Americas, North margin western and were in by versus typically America. Asia in constant a by and the the booked to in at and up overall strong United growth down by more with up X.X% the currency, in booking year. XX quarter, which Net at for prior Europe, in driven

China with by a At productivity decline field in mix, XX% agent $X investments channel, basis XX strong price New distributor sales were and up conversion. equipment and strong operating higher material X% in incremental develop margin million inefficiencies. by driven adjusted than was the organic expanded backlog X.X% in Americas offset more Asia. and about Service currency, volume and points segment up offset This growth and constant of respectively, discretionary unfavorable and segment profit as double to EMEA certain markets regulatory X. digit-growth was in up was orders down at partially maintenance under quarter mandated by projects increased maintenance units The X.X% intake fourth modernization order the number results were out. Asia, demand upgrades Americas sales currency modernization constant EMEA. and X%, repair the in driven organic with slightly, the contracts while up up and in X.X% on were pushed in as by offset lower and Slide Service were by partially contractual

on by second the This quarter. at profit COVID-XX by that over associated basis the absorption from encouraged goal cost lower the inefficiencies, expanded points growth large points profit with year. versus bad the benefit strategic about Cost in XX $XXX down million basis growing from on initiatives as per points, made resilient, from were impact contributor pleased flat SG&A better year and the slight was expansion, time, sales, repair Investor Adjusted with lower offsetting on pricing operating The profit were provided Despite notwithstanding productivity $X better more currency reflecting also favorable. year. sequentially periods our Operating of a a of with results X rate, full-year our at than the $X.XX in excluding improving repayment, as during XXXX. continued to constant X% decline, sales margin X% solid at lower outlook environment, yield results modestly We and to interest progress XXX up equipment and rate performance a operational October, organic is was the $XX compared down price adjusted Driven which margin. also caps tax down Slide was maintenance first by the we in XX the X.X% environment, Overall, by volume, our in adjusted the a year-over-year XXX currency. versus investments we savings $XXX projects in-line containment prior and $X.XX $XX concessions focus and the profit with prior adjusted sales, the EPS reducing adjusted Net also the $XX versus $X.XX, efforts XX.X%. full-year year. company. the EPS performance, we margin of close the million our successful was versus basis debt decline currency organic contribution year. at on of particularly operating not partially higher of X% XXXX, of strong and to unit was constant headwinds impact reflect despite in A are are or million, sales was margins with from third of grew on at the service and X.X%. public Day, costs, The new business. million strong field million productivity close constant down and adjusted growth by $XX profit hours operating the organic of service partially favorable to decline a was we and to the refinancing business prior being volume. operating and business less other profit debt down constant However, or only $X.XX progress February of pre-COVID provided resulted we with million R&D of detrimental same offset points currency under material prior outlook but expense XX.X% the the from in Full-year by contribution was performance pandemic At expense. making maintained achieve million than to basis a margin

in QX, on forward we business resiliency the the to in the we XX, given proxy starting all higher normalizing key across by a levels, year-over-year equipment and expect foundation do we pandemic, XXXX. us strong COVID-XX of with compares confidence XXXX million the adjusted $XXX with to built grow with of trends, X% to These quarter organic overall gives to encouraging in points $XXX job volume in access feel As metrics, maintenance sequential growth of excellence. building backlog, XX and look to resurgence XXXX, slowed Slide for operating confident combined the also due basis second showing of new repair is callbacks, margin of XXXX, XX our basis to million on sales profit our we turn Even focus continued improvement. though expansion. site to operational of points X% favorable Service by improvement rate

partially increase operating expected both This sales, in to segments. to midpoint. or expect range of from Adjusted $X.XX at in profit, in full-year to the operating profit in tax the $X.XX, reduction placed a impact debt XX.X%, a We be $X.XX million adjusted the a X% spin. at margins up cost increase is is XX-basis by offset and to driven improve and interest year-over-year of $XX rate EPS outlook, by strong point

interest, to expect related partially by income. range $X.X tax in and conversion incremental XXXX. reflects flow in billion of with the growth at offset cash GAAP strong We net outlook, non-recurring approximately free of XXX% billion, a This $X.X payments earnings

working in XXXX, the flat year-end capital to strong in we’re XXXX outlook. XX than performance at balances a working XXXX XX% of capital our of million our or mid-point reduction from holding Given close more

remain Our million $XXX at look of that conversion driven by XX. further of a the share the to $XXX XXXX, in have million business The capital between the deployment to X% payment in X% backlog be expect completed $XXX previously the repayment original is million the to up was organic schedule outlook repurchases expected Slide of at year track. with we on And market. plans up on X% new debt sales in January disclosed of in return ahead spin. a Taking and and growth equipment the accelerated XXXX projected

expect Asia We in of all difficult a growth as is from mid-single-digits the on higher single-digits, an up recovery requirements, with represents broad-based growth operating solid created other after in Slide regions low-to-mid up maintenance maintenance X% low-to-mid lines growing regions post sales with by Switching to EMEA sales to to convert X% the low-single-digits, to growth to maintaining and the returning all and regions from year-end demand a go base XXXX Overall, backlog. turnaround the returning and will and they we sales X% up of to momentum across be accelerate the tap with growth XX. by profit service market repair growth up effective strategy Modernization the Pacific expect business. In into three single-digits up growth to QX. should China. segment, repairs regulatory discretionary all stable sales that XXXX. driven in Asia to recovery and be X%, America with

$XXX in first challenges, to costs to as the productivity And from leverage for with Justin strong of at volumes, the material the pre-COVID to equipment the and recovery. million $XXX increases currency, please reflecting third to consecutive continue market million the to million million, step-up and in of open the and service of headwinds strong business investments questions. year with basics, I'll in operating returning outlook be constant and in offset execute from made to to the standalone line that, commodity benefit contribution the $XXX the levels, from expenses, pricing half and growth continued expect market, a new we represents We the maintenance profit we benefit the earnings incremental $XX up year. up This have in deal prices, request

Operator

Instructions] Sprague from comes Thank our Vertical question from And Research. first Jeff you. [Operator

now Your line is open.

Jeff Sprague

Thank you. Good morning, everybody.

Judy Marks

Jeff. morning, Good

Jeff Sprague

morning. bit could little productivity interrelated, elaborate it's Good I'm on that? seeing with equipment dovetails price might question, multifaceted how the if and mix but you your you a wondering guess OE of just kind unfavorable topics the on, more I to is all of the this and some that a efforts side, of be pressure somewhat offset

Rahul Ghai

Sure. Good Jeff. morning

up So, the to momentum close momentum XXXX. into you earnings second know to XXXX, million seen we've XXXX. half earnings And we are into $XX with of going projecting this in continue

that strong with headwinds. we from that this actions the help you year the headwind to us growth with equipment commodity X.X% standalone and on year material short-term still cost were the So, earnings the we I the to strong are contributor after actions the And XXXX we X% slightly I absorbing earnings drop offset if able. along think cost pricing that backlog. of the know less with we'll get we from and couple impact challenging the pricing drivers that growth a at of is of the a restructuring mid-point, took through took; segment Along deliver productivity material was can returns in growth. segment, XXXX, we earnings down took protect productivity, you organic or materialize. actions driving biggest that look any some of that a sales last adverse more on XXXX side. mean, piece we the are mean, The the the incremental after will the from there in growth new at is the that last some that may to

our some we we are building guidance. that So, into or headwinds expect pricing, obviously but

grow know, the side that headwinds, call part understand programs despite on, arise. you the coming the that we and increase we talking in since first key This to these cost, been whether and last margins in has acceleration, excellence here back We've equipment about earnings facing, of costs backlog pressures. pricing is temporary anything of it been new we with working that are the the have our productivity the key to April strategy. we’re So, we standalone may able it's year commodity operational deal our or challenges material that back, are

we about [sit here So, now we good Jeff]. right feel where

Judy Marks

Yeah.

thing, Investor higher we'll at this target entered and and think equipment XXXX, XXXX Let one was it's new – through. then Day, at and I improved to a earnings backlog, call. every with you know, the me that than set and really a get both higher make reiterated XXXX backlog to with think just we we difference X% add fall when a in Rahul and heard up Jeff, in you I we've backlog that's end terms stood something go at into revenue, driving to the going of And conversion, we a

Jeff Sprague

margin one the coming of at order? related the just booked kind kind found margin maybe the realized the you How is have your of through year play actually in did consistently then time and that, you know, above follow-on, quarter? actual And of that

Rahul Ghai

delivered get track Every very month, our closely consistently every that important it's in and factory, we not equally what no, is Yeah, also based the, field. do you our country above booked our in operational we what is we in but reports excellence And the every the it's in margin. margin only thing from very, the know, coming do Jeff. around world, quarter, we

– pushing the know material to in along as we well. And know will that. be, continue productivity that with, know, will that push you you So, and and field you

margin So, the booked than a is delivered margin. the higher booked,

Jeff Sprague

it. Appreciate guys. lot, a Thanks Great.

Operator

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

open. now is line Your

Nigel Coe

Thanks. everyone. Good morning,

X% know, there’s about outlook X% backlog the up sales for think to, the down Just I orders, X%, you to X% wanted a a – there's I few equipment. versus questions mean,

high-end comp in just but got well? easy that helpful as maybe you Now, as forward from that through of expecting to look you any the the some or backlog] you clearly you know, be expect in the [burden orders of you are the achieve range to comment XXXX, would terms accelerate year shift, very would backlog

Judy Marks

Yeah.

morning, mean, some, Nigel, We Left in Judy. few good I a do there's to it's So, questions there. orders accelerate. expect

you think we've that, equipment I two-thirds shared on our that will of and across in is service. build in of XXXX book backlog. kind us rest the book and execute new board know, The is we type business for both

aren't different different we know, there's have best they regions. down, were in do determinant, we on fill up we do XXXX levels go keep this So, accelerate, so the in you have, that be you quarter momentum XXXX – will orders really we you know it expect strong going, do using X.X% to But and we we to basis at and any the and backlog know, go did constant. down

I X%. equipment out On would the were our almost point orders side, up new modernization

which is well. our modernization a So are we all discretion been Even the up. modernization, us in as happening that growing orders that's business, see with opportunity for

Rahul Ghai

quarter of to The the revenue. two, you that almost with X% backlog our higher X% guide up you at you equipment quarter. can other XXXX where to at look the about know on almost new floor], X% than substantially the of look demonstrated of we the the the Judy acceleration that because the beginning right the organic is of revenue fourth way, in driving just starting With our backlog to at then, that started can our that's that with. backlog, Nigel, backlog add [as of we was mentioned what And

happening, to that are And accelerate markets and Judy are So the that was we backlog steps know obviously, into XXXX. a that about. then continue you the what talking that conversion is shows And will back. is taking coming

shared mid-single-digits. data] expecting We expect, we world the up with across growth the that are Asia [Judy I mean

gets to helps start that as and recovery the the us range. growth on the backlog well. market add the on then X% But that to So add X%, conversion, with you X%

Nigel Coe

detail for [Thank Thanks again]. that. into you

Operator

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

is line Your now open.

Steve Tusa

good morning. Hi,

Judy Marks

Steve. Hi,

Steve Tusa

was is too to – backlog actually clear, up by Just I little the organic be a influenced the the Forex think that? more organic than backlog right,

Rahul Ghai

Yes, about at the to, Steve be talking up from conversion backlog we X% currency backlog which – benefited absolutely. the actual at is X%, would reported but up effects that's constant we adding numbers.

Steve Tusa

right. numbers, reported Yeah,

must I that Okay, wrong. have that got missed and got it.

growth, you the on know services or you're there of is XXXX]? from, in doing the in for that's to up there specifically the know, growth through it, services anything early is Just that kind reading [for rate what show you technology around, too

Judy Marks

you that. see Otis we're the in about that look, field able for we're think, in that starting starting to productivity down, real and just our Otis to know pull that of North the callbacks. primarily them in in really Yeah, you new benefits, clearly but I demand know, I are and bring XXX,XXX America, think have, giving Otis One, to It's the that and EMEA, units professionals. remote, the professionals our China, things see benefits ability really benefits all being – seeing be our able investment. One, advanced deployed the We're there's We IoT One fix field of apps and to put to to and play from

Our retention leading In at our year retention going we up to rate, XX%, where we to that's year the earlier n the XX%. the think when were really this ended is which closer rate, is we and see from retention in you're rate. industry

getting Otis believe the there, reason U.S. That'll pre-positioning the we're EMEA, those but we're least really number places, to work shipping the in access we seeing China, We're our going it. deploying at customers It’s and are we're I that really now in buy through, the operational also on that from for year of or whether the way adding connected be gains, take started its they're thesis we knowledge, units to uptime? One, seeing is period, warranty the so Asia we're early some it, just a have we're to stickiness, site strategy. and believe and that to elevator or in am more So, able think on our that's that's and whole this returns, factory. in the same then our productivity working, time seeing already it year. Pacific. not, and And obviously, more going our we're we And my

Steve Tusa

just traded they And on kind pretty China, last can may they're know, read maybe tough types just more number, the it's, saying. visible make decent just know, from peers differences time, you you comments but all what have versus an what directly publicly to orders then sometimes within exposure one through you one, guys your know, of, You of you China? clarify

So, China? And than I'll what's be outlook different May you you And at maybe Thanks. leave know, guys? that. your it how on those

Judy Marks

Sure.

me kind of look XXXX. just, China at Let for back

through China, back year, look the in on commercial, as a and market slightly know, had that segment, base. Steve infrastructure us China, segment we large as started key seeing was as high-single-digit side, order thought kind as it And we we at the new and which in own in in is flat a we share the installed mid-single-digit at that up, markets really the becomes roll going January office, You growth. the to Day, of be Investor we half had Where portfolio really of our we're in to for for we gain was The held our equipment well. growth also really

China XXX back. for to to whole us in lot we strong agents China And have expect rate. us a this then came made build was results expansion, year great well. continues grows. expand this accounts, since a higher results that are helping year in And expansion conversion perform key market It's in a We strong and distributors that market the And high rise know, garner as market as the we you investments really, became get outgrow independent. had And investment of year foundation. we business Our the we last which XXXX. more significant to

Rahul Ghai

have where We've [series], we and done continued we've recover those distributors where publicly of the just there, that that's But gain this years X as traded really, I Tier markets, been Tier do year well. Steve, those you to in And Tier continue XXXX well to think some slow to stronger work markets over X series. the well we've we’ll previously And peers in to last the our agents know, was that, in in the XXXX or markets success do in to to slightly in need X to added next and a know, you in that was Tier But Tier do X with bread we're share and add slightly and better really discussed, Tier confident share. to the markets. year five, as our we we've six our has odd the X butter. X that those, that's

Operator

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

is line open. now Your

Cai von Rumohr

nice Yes. results. Thank you very much

of and China? So, your maintenance is, maybe trends Can units the comment were up in outside were how of third. organic fourth X% quarter. X% you recollection is acquisition in My that versus much the up they

Rahul Ghai

The X% full-year was number a Cai.

number. So, full-year a that's

and that's I don't was, think all know, think the saw we growth in quarter was any organic. we you year, about. the There worth acquisition know, there's the I that So, where speaking in ended you

So, it was all organic?

Cai von Rumohr

mean, were the the I units published quarter, I third you think that up correct? I X%. am

fourth So, full-year, what if the is X% quarter? was for the

Rahul Ghai

look where, is, year – way It QX it where of know, depends depends just versus last ended we on at XXXX. you QX on the it you should

That's like, know, balance think about right. know, to you a You this growth, number, it. you a a it's QX, year-over-year for it's a is but the, way know, sheet

at, So, we versus higher up at X% at it's XXXX. in we of units in know, ended ended where XXXX, the end QX XXXX, you in, of

Cai von Rumohr

memory; stainless then XX% raw on front, percent of What purchases? absolute the material quarter? basically, raw percent of close it a materials, raw And since middle is the number it refresh is steel? of like my topped the Terrific. to something material the stainless, Because what

Rahul Ghai

Yeah.

you about of X%, higher right you’re look is - bit our X% a about and we know, if the seeing kind of $XXX commodity now, And spend commodity to little out about is So, a steel. fall what lower. steel was XXXX, total is Cai are now, for maybe about spend at, right right, which is million, in you little XX% QX

X% X%. to out averages about to it So,

could for that today. local part steel for China. in happened the are that in simultaneously It's plus and and for dollar, next Europe where So, RMB is other Euro both both headwind the the a currency XXXX. tailwind million and $XX it suggest, be math year the a against XXXX. like hey, commodity But us. is would the issue that is have buy in And appreciated the sits about is, prices a the thinking we way spreadsheet was It headwind given

to of increase local So, commodity appreciation part we able of should by offset be currency. just the this

piece one it. that's of So

that commodity is piece hard really material the offset working really, to on productivity second The we’re headwinds.

cadence much, that's we is at what better we much than started And we a point did last and think XXXX earlier. said the higher position year. last XXXX in carryover benefit I the year, than that in from projects this XXXX mid-year a that gained in we’re where given were Julie starting we

you material headwinds we after think equipment X% So, margins, in question. which Jeff's grow we to I can a is, response said productivity and still commodity deliver know, absorbing earlier, what new the

piece, The dollar million earnings causing the that the seeing overall. the our, weakness know, other know, gain headwinds, you on FX $XX extent you is we’re also to on commodity

line is depreciation the different know, P&L, we it's So, a of the weakness of the some side. the of of dollar, but, overall earnings the because you on of that in but commodity gain appreciation

we know, productivity X%, an it bit it's of to is but guidance margins feel grow you in can overall, XXXX. But built little our equipment material we into trade-off. new get a and a So and our issue,

Cai von Rumohr

very Thank you much.

Operator

next from our from you. thank Barclays. Julian question And comes Mitchell And

now open. is line Your

Julian Mitchell

morning. Hi, good

Judy Marks

morning. Good

Julian Mitchell

outlook, lot morning. flow just isn't reasonable guide there around just dialed one a a really, split free of Good sort increase, of earnings Maybe despite cash adjusted couple into growth of was the a that any clarifications, wondered if And interest, very working year-on-year. change CapEx? working lower perhaps think capital I clarification, non-controlling seen fairly some around just in was of are there terms, your you've any a then quick capital squeezed? as versus customers And

So, just trying to understand that.

Rahul Ghai

Yeah.

with then [indiscernible] and So, cash let me payment. about talk we can the start

working the if better, really $XX prepared reduced So, And quarter in year look in just two than the you really I was net capital, you that deal we you said is, of a income for million better what strong year. was remarks, cash, as and timing next One improvement is came year. trying good. at know, a there the given Julian, we We which $XXX capital are performance working you we fantastic guided were to earnings, which driver last what in are our hear as but biggest you overall, the million, working payments. issues know, had with my XXXX, as referenced, capital and look is interest ended at

an So, XXXX, debt. way the in interest we in just landed, where given XXXX, when not the did extra timing we have the do which payment have we of payments raised interest

The is other inherited for we to need old do an make matter that tax that a issue we've from UTC. payment tax-related

but that So, is we've That into into our as well. matter built we’ve guidance. guidance that still ongoing, our built

But of into hard. As working, keep at prepared point. there guidance this plan improvement at our we’ll that. the because doesn't this working our our point we guidance, working we'll not have obviously keep contemplate in capital working my I keep We’ll remarks, said built any when at midpoint

of X.XX than we and, net where billion solid GAAP Investor for You a Day. XXXX be expected is know, to higher income, on XXX% number. It's XXXX substantially know, you

it for one various the it's a things. single NCI we was So, year. XXXX, On not any think a solid driver, combination of start to

here a You was a know, of as headwind and little were there them of FX bit and well. couple then

wouldn't where ended read on into XXXX. too NCI much for we I So,

Julian Mitchell

Great, you. thank

Operator

And Walsh thank you. John next Crédit from question comes Suisse. And our from

now is open. Your line

John Walsh

Hi, good morning.

Rahul Ghai

John. morning, Good

John Walsh

great of in-line? trying geographies. do sounds products these is, one the with of that guess understand, Because a questions some still like the talked had these investments this rolling of out hear of or be think leaping ahead it other lot excitement just them different kind lot already and So, you've I to it there's was around and I be if making new new leading of of roll across kind launches, in-line to market products? the U.S., you back products folks where some of to you're do that you EMEA, your these even these you the might believe new public you products competitive dynamics or I'm You across these ahead get competitors that where China, of other of is? about new a there to still kind are? kind with is these to new get APAC, there's if are with as are know, the

Judy Marks

since our up investments of R&D XXXX releases are we've and XXXX. our period, patents actually, a times increased since gone you we've really our made, XXX%. it's both. that John, Yeah, And, XX% we've well, have little product same done four since know, new up And

really the made DNA we've conscious engine in the a and effort this So, to reinvigorate innovation company.

little the down time. at going to them bring and that that and when an passengers you It's customers new, a really to an up, if, so safety authorities actual the handled to of to issue of elevator more others in any floor aren't, is approve. native, electronic industry length going the some entrapped, It's gracefully are digitally elevator, have there's So, an gracefully has to be of know actually know, landing how that going stop. but importantly, catch code our is bit like people to revolutionize incredibly GenXXX, first an in with you

So, you in Compass whole customers safety is, dispatch because the very products. we product know, always touch gives our product, product found us we've believe more really XXX our leading, free. we of interested capability. And that talked is destination are industry even destination the we've about released that it's And

of in it terms whether offerings Bluetooth to us and stable, tried, not features. other our then, you our complexity, talked COVID be entrant We've gesture, you the tried and workhorse just rapidly it with Prime affordable GenXXX, new to in Africa high-end allows a nice, Now, GenX about India, e-call phone. that'll and health Middle very a we've for East, know a find in And be in the also hit we the markets. emerging as be app our of era either during products, whether the team or we to other our also apps, about your moved our products, that to via use generate talk connectivity

we're span. trying that whole hit to So,

the a, productivity with you know, we One, keep going that. that we're we we did a a approach. that strategy There's the and sensors you to enabler to if based On productivity the One, Otis value, took And to and service we conscious rolled first. units not think going out The when decision globe. value, Otis just adding it or was out a to one-point did roll side, much across density we we as sprinkle made know, that, of IoT units do drive we're you reason as as

route-based And foundation value And grow So, in it'll to but be productivity, density-based retention customer and us. attempt will to actually provides services. to we did yield it in for and grow of also terms a production. that able for that very focus focused a us add

I argument a most based of we've some, little you both and But know, in accelerated passenger the mechanical, pre-XXXX. catch-up, the no importantly prior on bit think investments of really lack So, electronic, experience. digital, the the years

John Walsh

how in the in the through know think also portfolio was comment. any probably I growth, quarter orders just a but four kind that being over remind you out, be as awards know, looked looking know up, I follow Americas to what need Americas, talked your And the at, you orders best you maybe an I'm just figure now we've comment you. typically right to then data total And answer. can, is and that order period, lead, for and a to because I seen a you of us the ship negative you you if Thank Americas these can quarter through the trying stable. to roll model. elevators about Thank they at point, America's know, necessarily kind one and or isn't of know, didn't

Rahul Ghai

Yeah, John. no

elevators know, on the, I the North time is typical, ship you the said would before. XX America. order the That's So, in about we say months what to

couple North proceed they and which America's by know, typically So that's in if on at uncertain, remarks, Asia, are, seen about I her orders the we mid-single-digit of mean, mentioned, the right? months, The where know, prepared a John, markets That of think comment. stable look good] quarter. Judy good I the growth we we've in a are. America there. as overall, were you was in you [feel comment But seen growth we've awards, kind of kind

look good you the low-single-digit. the and feel market Americas at last If down challenging, about year. remains mid-teens was we EMEA,

than better strongly market. momentum you in did the turned first index we at look December, And months. obviously, the positive time just if for the several So, Dodge that in

for since four recovery inquiries you architectural initial So now at months XX. the that's that's been have sign COVID, but positive the look an index, if of But still under straight. billings

part So, giving, kind range of at mixed the signals. outlook. And we you of that are America's the that know, growth guidance range if you look is of driven by

that. a our of But you China, points in you you know, contributor in know, we've So think, know, taken product of, you know, Nigel introductions. sales terms earlier, that X XX overall, steps kind we we I you to coverage, discussed the that's overall with good points, new improving again, all know, feel about

X% Our year. last proposals up were

into good that. building built So keep that guidance. the on America's that on building that's momentum we but another market what can our enjoyed, the keep that, that uncertain, is have, share can we obviously, But is and we've gain this we sign we

John Walsh

Great, thank you.

Operator

our comes Research. from question And you. from thank Melius Copeland And next Carter

now is line Your open.

Carter Copeland

Hey, good morning thanks and everybody.

Judy Marks

Hey, Carter.

Rahul Ghai

Good morning, Carter.

Carter Copeland

if data, just year, in one regional you and I of speak you number, to time, know, the color wondered you talked you think rates? give some that exact finished – just of – how conversion? any trends, of on a can't conversion the point the on year about could terms in specifically sort at once I us you those, given even

Judy Marks

you start, I'll add. and let give some more then flavor Rahul of regional and can me Yeah,

saw know, base our that's most portfolio. uptick encouraging You us. is of portfolio, service largest, and our the conversion growth for to strong opportunity That's over Because the you know, obviously the at China, we and in which segment. XX% grow the largest service

we single high in mentioned, I as digit know, growth You there. had

units nice we our saw as get went on as conversion, we up our wanted did to rate well, in rate back. retention China, recapture and So,

you accounts, the China know, have IoT playing XX% also positive. conversion all rates. for stickiness, enhanced that's more about, Everything the more infrastructure, drive range, were you metrics So, higher told closer in recovery helped strategy us, net that think which has key which out. customer we've conversion three to And rates we higher

you macro So, comment that's in Rahul, we're seeing in that to the at do our on want with that China, where level? pivot accelerate. strategy

Rahul Ghai

of Yeah. The kind in [XX%-ish] overall at there about conversion hung Carter.

overall change half. So, not a a lot point about to of We China up a and said conversions. the was

in thing very, the good very XX% for And other only XXXX, the was was which critical versus retention momentum. that So, in at is XX% us, know, is XXXX. rate you

up picked well. as So that

So, that's good.

in well. good that you through service So Obviously, come the as the saw momentum business. results

Judy Marks

and we service know, Yeah, on, XXXX. comment early finished our thing, hold happen we off, what if I'll you just pricing, you exist, and other saw, Carter, still to the know, a just, concessions they still you the from believe hospitality, parts service XXXX, XXXX, pricing held going the or in in business well the we retail, in in of they're the as

know, the not if keeping getting you conversions retention, only, and not – just getting slightly we up. So, were were price were we we the holding

Carter Copeland

and presumably XXXX those based to on So XXXX, assume? versus portfolio expect I would accelerate trends, growth you your service

Judy Marks

Yes.

Carter Copeland

Okay. Thank very you much. All right.

Rahul Ghai

Carter. Thanks

Operator

we from have question Coe Instructions] Nigel [Operator a Wolfe you. Thank Research. from And follow-up

Your line is open. now

Nigel Coe

forecast? wondering into just Is And FX just pure clarify for budget. increase kind I Thanks $XX the [stock that that like or the you your [just was material, productivity it. prices]? size] in maybe you Is raw if movement? growth of then impact just of that, is know, you've that net into sort appreciate the delved of of number Rahul, or that million your follow-up, text dialed the maybe could got

Rahul Ghai

piece. with absorbing XX offset that Nigel will $XX that net we We X% after is think No. productivity will material we and million just the productivity X% commodity headwind. deliver million a

that's just So commodity a piece.

Nigel, On kind a number. know, not of so it's tens the of number. in It's it's you a big savings, small tax millions,

it's You know, a tax matter.

So, you P&L with outflow impact. P&L know, all basically we cash accrued. will a is it. is continue Again, XXXX. The will, in no dealing we for It us

Nigel Coe

a So, Does separation that more the like less or matters [indiscernible] at this it’s type point? number. separation

Rahul Ghai

toll tax change, UTC from remember and if time had that Nigel, cash tax years. and – continue. a for know, to will you will few, that's few following that a of outflow you guys continue year-over-year million that's old in the We a for a have year. every be long guys you million But $XX will this $XX not been matters There

but number, big a biggest have from one remaining not we this that's So the of issues that is separation.

Nigel Coe

Okay. much. Thanks very

Operator

And Judy And I over like thank Marks closing turn the to call for remarks. now you. to back would

Judy Marks

strategy. We first growth the model, Nearly all a held drive our of toward commitment of deliver our To an delivered a Thank summarize, long-term track profitability, business a solid value. independent laid strength company. Stock shared you, set the of Justin. a strong pleased as capital York foundation to with disciplined portfolio, strength a and our we ago, We long-term year New you performance Day strategy Exchange. the close our the year out and to Investor execution, we delivered our with at XXXX against economic our and targets challenging I'm strong allocation, and record the we the of to resiliency our shareholder reflect for backdrop.

Our our safe us. our to for for thank fundamentals shareholders. well-positioned and you strong. We're stay driving our all colleagues, value and well and joining remain you continue I hope for customers,

Operator

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

may You disconnect. now

Otis Worldwide (OTIS) 1 Feb 212020 Q4 Earnings call transcript