OTIS - Earnings call transcript Q2 2022 | Otis Worldwide Corporation

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Operator

Good day, and thank you for standing by. Welcome to the Otis Second Quarter 2022 Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Michael Rednor, Senior Vice Senior Director of Investor Relations. ahead. go Please

Michael Rednor

Welcome Call. Michelle. Second XXXX Quarter Thank to Conference Earnings you, Otis'

On Judy of of noted, today and me nonrecurring the continuing the with call appendix and restructuring are can speak results Please significant be except operations, in excluding will A Anurag note, Marks; measures where the company otherwise reconciliation webcast. the items. to from these Maheshwari. Ghai; Rahul found

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

Judith Marks

you, is joining everyone Asia for that leading Mike, experienced Thank More operational the Investor independent future my to him our want then. and Anurag us. well. like Otis Relations long-term thank strategy. of forward since recently, Anurag in look Rahul his driving wish value you, thank team at take is Harris. many transitioning listening you his for in this with We also and his worked been well to and in morning. an as in an customers, leadership to endeavors. leading hope all Maheshwari and to championing I this in I'd Anurag growth, colleagues his our region CFO with role and I contributions welcome execution for and partnership company shareholders. our he's opportunity to in safe have prior executive finance Pacific of in us We joining everyone,

concluded on into Russian compares. our and customers, results in noted for solution Russia. we time, that Before that return and our an the expected stability mounting our to this colleagues contribute call, was of about in Otis' concerns a At Ukraine. will XXXX operations divest we to shareholders Amidst our ongoing I prior we get of we operations do and year imminently. the and to efforts the to long-term hopeful is relief the from agreement sustainability we region, entered and best outlook into We for continue QX the remain peace and to so. recently regulations, the growing in Closing business, removed our outlook, humanitarian and transaction

charges year our quarter results, This going operations are forward, adjusted and and and nonrecurring from compares Otis' prior our Russia related excluded outlook.

portfolio especially maintenance quarter, We our had and Otis margins out continue nearly X.X% the was record adjusted Moving to a closing Slide organic grew second strong new build quarter. growth. EPS and that XX% achieved solid delivered faced. first macro on QX in to headwinds expanded X. a sales, bookings up highlights we half, considering We equipment We the that

another the $XXX Service and Our in continuing grew million to margins generated shareholders, top we share return QX. million flow where business while pricing We due completed $XXX free quarter cash completing productivity. in favorable to sales expanded $XXX continued business in of all to million this on and to cash deliver of repurchases in lines

market was growth second for approximately new globally. mid-single orders In in digits equipment X that in point gained early share down new equipment We teens as in Zardoya delisted expected, was high the addition, driven May. Otis of Otis by a quarter,

further include of the difficult a LAX. XXX-meter latest XX strong, office, in prior Hensel particularly of the equipment Americas we're the Gen hospitality Otis the with selected was Tour in Terminal In project retail to that the to In Phelps marking Los X and supporting construction a relationship despite contractor modernization Angeles, LAX. long-term support were will the up was at selected extending at and Triangle, Paris, X our the general high New facing provide spaces. Otis tower orders year. XX%, compare elevators,

more XX construction real the Gen Otis include Royal Shenzhen, Fair China's Times digital project meet phase elevators to Otis to performance technologies, several selected new In The self-climbing the Insurance Korea, move shopping several This speed escalators equipped In supporting elevator Otis with XXX building's tenants complex, and smart Guangzhou's and the building will Business CompassXXX to serving for ascend destination and we elevators construction was lastly, Ping digitally development. hotels. in and Square. is the And in Otis in project standards Canton providing will providing seamlessly escalators SkyBuild the will designed Greater include is GenXXX latest SkyRise XX like provide our dispatching. SkyRise simplified in will During that XX teams. Otis' elevators. floors In Gen Fair the provide Pension in will destination tower, systems IoT well our Zhuhai, as will of Central Tower dispatching X Teachers' support and offices, X will China environmental floors. be And between This including platform, financial city that Phase by and to passengers and for elevators monitor logistics ambience and District will time. escalators landmark Ngong as Life of headed the elevators features Compass SkyRise more served space-saving nearly Otis centers the elevators are soul. a native nearly built, Otis solutions to system district than XX fuel double-deck provide South Canton Area, than projects XXX Complex, by the to help as Bay X

Slide XXXX X, QX and results Moving outlook. to

business. and Organic XXX% at X.X% service the income. currency, driven up cash up GAAP performance million margin currency Free in the profit $XX a conversion XX-month equipment X.X% up quarter was of operating net basis XX.X% flow second New constant at and adjusted were and strong expanded was were orders points at basis. XX on rolling up by in sales constant robust

to impacts net year. million, exchange. $XXX range to in $X.XX, the full range our operating the headwinds $X revising $X.XX to million. to $X.X $XXX up expected we're our of growth to to profit million is to now from After is $XX at is range $XX.X and in of EPS XXXX to currency down approximately translation, million excluding expected operating expect a in Adjusted to the Adjusted prior X% ahead sales foreign exchange million adjusted $XXX million foreign versus outlook, be X% organic up in up of actual to sales billion profit year outlook $XX.X X.X%, be $X.X expected billion. of X.X% billion, Looking a with from

cash approximately expect robust Lastly, XXX% free be of income. $X.X we GAAP about still to at flow billion conversion or net

bolt-on now advancing position $XXX allocation, increase and We QX disciplined and will to detail. in I'll which the returning to makes announced our to it through to through shareholders repurchases, that, sense Rahul balanced M&A it to on turn million where walk a target strategy share remain we're dividends more cash million With $XXX capital results our over versus and previously. in

Rahul Ghai

on Organic growth, increases translational everyone. at X%. the broad X. points, Thank price sales basis Starting profit up by you, Judy, excluding strengthening profit million, down volume, from the impact foreign by X.X%, million of of Adjusted service billion of and sales and $XX quarter due was productivity Net inflation. wage down $X.X higher good U.S. drop-through increased of pricing of to with over currency, the exchange, Slide adjusted dollar. operating second seventh consecutive quarter commodity was the favorable up primarily was driven were were Service, morning, and impact operating XX results in offset both constant service segments benefit $XX on partially which annual

maintained over continued or repurchases of was versus reducing flat offset basis even A up economy. rate was on strong as XX our $XXX continued SG&A headwind year. benefit focus EPS exchange the tax R&D million a prior sales, also share And completed spend unrelenting the million year-to-date. adjusted translation other Zardoya transaction, from $X.XX business accretion foreign inflationary progress $XX were more cost the performance, and with was We Despite in or the the the XX% operational of investment in than strategic from by containment. Adjusted and percentage $X.XX. the environment, and on challenging in investments trends points the expense we down

to X. Moving Slide

we South were on East, up China sequential a strong Asia growth points orders both double EMEA equipment in quarter XX% orders XX.X% in Korea at orders basis. the up over with India, XX%, Middle Europe QX verticals and were and Orders by in than XX%. currency. of in outside of preceded up America were were double where Americas China backlog second was low up outperforming Asia, in top the were stayed growth the pricing market decline. New of was XXXX. which constant orders on growth Orders X new contributed China, was XX%. XX% and in in volume. approximately were of improved down bookings in that growth in at after and and Pricing quarters Americas, about down teens increasing Strong straight year-over-year constant on estimate equipment single up trends orders to EMEA new more was Backlog outside currency. regions. of backlog flat, X% year-over-year China North growth up all in in and orders strong and in about Driven Awards, and year's Globally, up last equipment low digits. XX% were all nearly digits the X

where China, pricing the was prior year. down Excluding versus digits single low

Service volume largely by regions, Service high to improvements China Maintenance as than was and nearly due the sixth improve in quarter. of up repair recovery related organic growth, first due helped in the was and strong down sales growth of a rates execution the volume started benefit at Modernization growth $XX X.X% construction, Maintenance for all in sales than X%. offsetting volume, to the results the and line China, close XX accelerated productivity mitigated from pricing, fourth earnings tenth absorption. share improvement. challenges comparable Service up with units Equipment with Modernization in and offset high like-for-like organic productivity favorable were equipment pricing are maintenance as installation a $XX growth consecutive XX.X% decade constant conversion New consecutive expectations improved and With to X.X% backlog half the and lines on consecutive the was X% profit growth. and a building grew with manage prior our Margins SG&A. the in conversion portfolio quarter. of in orders cancellations in in in constant organic $XX of up a sales quarter XXXX increases. in that Commodity outpaced These points, in that the was to pre-COVID the XX a half from the under continued in growth X% in portfolio at decline recapture inflation contributed period lower in growth annual the growth rates million was X.X%, million. growth the of China, a QX profit and Overall, in retention, from every about material expense. Benefit with new continued and units In $XXX low was teens up mid-single-digit continuing Adjusted growth quarter, XXXX. the were gain, on X% from was tough were FX single-digit by year-over-year in levels operational grew segment of low slowdown single-digit and Americas solid were Slide over for EMEA growth of XXX contractual million $XX unit first all and portfolio achieved margin and repair wage of results basis higher margins, Asia, and compare of first with X. and offset year to productivity more quarter lockdowns. reduction actions and XXXX. the to point basis sales SG&A basis. which impact basis through FX low million half constant recaptured from the up points single-digit decline of from best by growth excluding macroeconomic COVID-related and lower region. in reflect sales prior operating down partially growth Margins driving up quarter at that business. million up between the X.X% us of improvement adjusted currency, of cost more in point teens mostly of quarter,

dividends to through me for enabled First share XX% it repay by outlook. that, the over revised $XXX us debt, XXXX million generation of Anurag half in repurchases. to of million, turn year million free of to let cash walk With $XXX raise XX% our $XXX and flow guide the complete

Anurag Maheshwari

Judy, the here everyone. Rahul. done Thanks, morning, creating Rahul forward value advancing the Rahul excited look great good our and and for be for you, and driving work has strategy, kind our long-term and I'm to introduction, in operational to continuing shareholders. Thank execution

Let evolving productivity, sales. control, a with X me we that things tax with accelerating start service optimizing the on on our outlook, growth, continued the Starting and our reducing recalibrated can Slide combined count. headwinds, driving macroeconomic incorporates rate with share focus

basis of on and faster up expected $X.XX XX up outlook $X.XX, lower, points versus business. productivity. Adjusted outlook growth overall X.X% be margins exchange basis better We X.X the margins up the points, tax our the strong commodity in foreign prior be New decrease by are execution, the are than to point headwind by the single-digit to offset is to basis expectations progress volume, X.X%, to a rate prior lower expecting the transaction, repair The is is to point Zardoya year. offset of X% improved X% Service. of by unchanged EPS is new sales reduction prior the count XX.X%. segment remain from prior This up than lower in previous the be range the from the for versus Though expected approximately organic XX and adjusted remains to points guidance, outlook impact up year. be are the margin and of to expected maintenance growing a $X.XX lower to XX from more reducing high sales with to reflecting which equipment accretion basis be expected now share partially impact modernization a driven EPS at by operational unchanged, XX Equipment approximately versus sales to than inflation. Service driven XX translation and down mix

free X. Our XXXX have the million. organic increased to at remains on and unchanged million sales look Taking a share cash $XXX further year outlook we guidance flow from the for Slide billion $X.X repurchase target $XXX at the

to business and driven X%. Equipment X.X the New projected to is at revised the decrease Americas X.X% China. is be midpoint, in This outlook prior by down from points expectation

building to by shifting up XX%, activity year more our next shipments customers. While in the is backlog Americas than are from XXXX delayed from construction

expect As up organic single Americas a we now Equipment New about to sales be result, flat low versus digits previously.

by Pacific growth improved from the expected by be We approximately to driven driven of China 'XX, by lockdowns down single that offset sales be slightly the momentum from South partially expect digits New of of This market end down expect 'XX. Asia low orders low projects organic been now during in backlog XXXX. Outlook the to down from down is being mid-single to Despite and Equipment unchanged, organic right our guidance prior in lower and up of India EMEA remains be and sales XX% we outlook China. at expectations strong in versus in end expected be moved to on Otis digits flattish and to previously Korea. and benefit the now up impact QX prior digits into low to has our the mid-single have year Asia

in an order organic X%. by improvement Turning outlook maintenance modernization is that Service. to quarter confidence from convert and incrementally to be up repair to up to the second backlog of prior growth driven We points X%, of to and pricing, strong the X.X% sales a now expect basis robust X% X.X%, higher XX

Moving to XX. Slide

million last in X%, from Zardoya $XXX of of to at or resulting versus than dollar. strengthening both million share growth the other unprecedented The X reduction million midpoint. to through million from of midpoint. profit headwind at improvement $X.XX volume X% increase offset to We is expect containment of of adjusted cost higher headwind $X.XX billion $XXX more a than to million higher productivity outlook million actions in Accretion pricing, the the or is growth $X and commodities million $X.XX and segments service $XXX by points $XXX at $XXX rate $XXX operational EPS the year transaction, repurchases the the prior than from the constant $X.X spin the since is benefit This close of tax more our from currency. offsetting U.S. and

We driving at business, the XX.X% growth, full the projected the new challenges incremental Compared year of X.XX us year now euro have the reducing macro EUR than beyond. the or service now Overall, line the positions to organic EUR free please the FX the of ability midpoint. the half for for margin that half and outlook And point by and portfolio growth the rate Michelle an backlog our strong for second for X.XX cash offsetting reflects containing robust assumed additional the clearly and with will for to tax we questions. equipment the to and prior well headwinds year. on to of deliver mitigate at are solid more XXXX guidance, costs another importantly, year this open service I and line that, top expansion, be request

Operator

with from Partners. our question line [Operator Sprague Jeff comes the of first Vertical Instructions]. And Research

Jeffrey Sprague

on well. Congrats doing

actually if headlines what's that digit down for First, just backlog give of the on relative wonder okay. a update the us confidence the your to on China. of surprisingly down Obviously, the actually little ground, sounds the just and could you market outlook happening on year-end, you presented, XX level a lot as single I conversion there.

Judith Marks

growth lockdown recover market May, to and fully don't estimates market we felt in down It's just the Judy. that in XXXX. are we that we Jeff. and will our expect the impact really taking April Sure, Listen, due

for market China. XX%, our low end or in I the to the sure and factor our any disclose previous that will good not that, do of at decline health the or growth XXXX of any about taken in we've feeling Listen, which assume about I'm be range business stimulus. to So is to return

but our and in we gain than strategy not this And It's most initiatives are Our you've the on quarter. in us seen. track. grew QX, faster just market, helping as recent share, also

low orders down the was in new teens, Our were XX% but down the second quarter. equipment market

where confidence working. in that's quarter but And now donation that's our have service second we're our X is that strategy. X,XXX outperforming the are higher strategy what continued -- infrastructure representing the So up tier at both who that market, and and We're me agents and to continuing China. net in in gives we is agents were really doubled focused were and market. X on X, really have the share our strong product to And market cities, our focused strategy. And us general. and the what We've and the a through distributors yield. perform distributors, and in our and is for so really also industrial about Tiers services really we especially Residential, X

our As fourth continue quarter had going in -- to Rahul consecutive is where said, portfolio and we of it that's high teens growth China.

up we've drive and and trying and just our have really balance there feeling 'XX. future of find the about business, picked into the we're to good Europe seen in got are balance we're and global China quarter, globe, equipment the going our really, And the orders is to revenue well to new that continue across in of you've the Americas our Pacific, as in and pace. balance Asia backlogs then XX% our So mix. the second geography we China,

the lockdowns. else, a team QX Perry we're So the like but really by watching strong everyone post COVID and China

every quarter And the the service and a rates. we We've quarter rates, including capacity for Our have When got there tell our cancellation China, is factories globe, recaptures KPI peak metric manufacturing across are at are delivering. if having that team's indicators exceeded all are every managing cancellation strong. exceeded we and can really of rates, stimulus. the you second our first

Rahul Ghai

said I backlog everyone in that anything to to just add recognize my second And that, our year-over-year. flattish important for half just to to prepared add that China to in remarks, to is so that's getting

orders So down. down low were the sales kind were of teens,

of enter we year into flattish backlog. the with the half So second

take the sequential we as -- are our as So a guide improvement year, we revising in projecting for growth. year-over-year we're

down kind and mid-single down about quarter between the is So X% about down full second we're first digits. and year quarter, of we're

So that not down fiscal but extent first -- is does the second same down the as half to half.

revenue half and up sequentially a is slower. is So The first question be that's clearly conversion little the second bit to to between and case your half. going

all be will downs, projects the we in lock the that have completed Given XXXX. not projected

So into that demand pushes some XXXX.

down they're the very were our of are with So XXXX, still kind they digits single for going kind a to overall, conversions of be relative pre-COVID. we high where very, to in think line but year strong

conversions slower but last in year, with than So levels. line pre-COVID are

So that's where we are.

Jeffrey Sprague

large just the these brakes kind of perhaps then the comp the any of going job couple economic tapping I. I on be little is mean, there appreciated. issues there, Sounds address Americas, folks revenue great. Americas with give see growth that color the bit customers Just a site on just itself on the And a concerns? could if us context of primarily also things on orders what's versus especially your or headline but you then more wonder Is you additional lumpy of and slippage. kind the kind extraordinarily on really should strong

Judith Marks

Jeff. Americas Yes. orders Well, are kudos team, Jim lumpy, always to the and

industrials, huge major our in longer a to significant our all especially projects I Americas that but know in volume-driven is team. or for major peg this business, can't But which You orders. was cycle. quarter it

residential, it Tier the growth South what migration Western think cities. in So And residential the in the population in Americas we is was strength and and and reflects this in because we just it biggest was saw strength. U.S. we saw the X the actually uptick

through that in it thesis fitting the the others, it's seeing orders So hearing come you're from we're book. but

just awards, across really as and across delivering measure those into is everybody So all what converting which our of branches and orders. strong well board, we just the performance

the moving 'XX, beyond of 'XX, some we lot What the we that to not we're more that really of a of labor contractors a from especially labor. the We're it's and West. slowness just in general until the that have the of terms told projects it's And places, you sites. and last job right quarter because seeing revenue large 'XX. the fully labor a South staffed, happen our the expect In we in not construction is shift but some the right in cities, general into and didn't demand

So cycle it's -- going delay our and a some of come revenue of it's little bit but just the bode for normal seeing to should this time it's and on through, well certainly 'XX. happen

Operator

line next our of from with question is Research. And Wolfe Nigel Coe the

Nigel Coe

the all for thanks great. very much. Thank help and Rahul, you've you been And support

I on to wanted was your much some expected low and better China. back comments obviously to So teens the than of just just come lot we be maybe comps. better Obviously, decline a than

expected China through plan? kind gave remember you plan specific how compare quarter? did you curious, I of the behind that how if in out can't I So that tracked And your to what -- play versus know does you were that how a than you plan? importantly, your the did more for mid-May. just curve But did.

what July Just how tracked and so seen that we've June wondering through far. through

Judith Marks

Yes.

a level in record of tremendous And They factories was shipments you. response actually, out month of China we was to great hit June. Nigel, a for the just our talk team. -- in So June phenomenal. shipments, our our to And

them never We shut down just factories based were -- location prepared. China. our on in we So of geo

to in ship and we cross So boundaries elevator then I to our able go. some just factories ready be escalator to we regions. both need think And had and to and we China produce in readiness, certain our needed

gotten team that. for the prepared had So

drop So guide June team for happening We gave now was prepared not market. cost to we're a May in our precipitous performance match in us we're and don't the But in quarter. we'll what July we're seeing we're expecting structure type before. the and to of to to what strong going don't We itself. April our happen that match -- an there's pause, it. going cost are drop a terms continues. the We've But but And saw was over again, our of done And we market we believe instantaneous July, the to obviously, seeing XXXX. there.

Nigel Coe

and And then equipment give through us we to that research maybe maybe what typically see Do we if outs? little would see of about bit you a backlog, Great. typically on the your slower helpful. of just can maybe be cancellations? backlog? a versus modernization, new taste What expect? we happens macro, a push Do And a should talk

Rahul Ghai

projects now, Yes. but we always there right that an seeing advance But we yes, Nigel, order. are we you what know, cancel, are some get it's case. the as an book

chain industrial So an there some order or industry. not other our an people escalator project. it's not orders. supply building I That through happen challenges, you're overall midway elevated a to like going or some our placing has that we're in booking the switch you're an the creating certain for companies, mean our been concern about doesn't -- the given and multiple designs

So in advance. -- and we get

any do we not material changes terms have way in change happen in thing typically not that to are in get And seeing I a any Projects the we small. massive So those like do cancellation seeing trends. of business, mean year-over-year year-over-year. in are deal canceled, that not but our are big the that any happen. with we it's cancellation of

of kind to I that in alluded are Projects do Judy trends the move, both. think So and similar.

EMEA and in shortage U.S. as I moving Americas into in out. and the Jeff's that in which question conversion, well think in to challenges. terms seen is as think I construction And China some that of are projects label then creating we've it's the

-- as track less more are having It's issues. rigorously. trying not we we are very, not best factories very chain supply can we or but as chain that issues, having Our are supply it to

that holding our is are projects. terms of are we building customers their are facing behind in We not challenges The construction.

and seeing the currency. at are mean I through up but other up backlog. is you revenue. we approximately are regions flowing So that slow combined our And and XX%. constant flattish China it's saw down, XX% our is -- that

really, bodes for well that So XXXX. really

Operator

Capital Our with line the next comes Nick of Markets. from Hudson RBC question

Nicholas Housden

The about this you're first percentage like which nice a was a on this to tax around levels next trying it or on been more X quite seen rate, that get tailwind quarter normal head this few level, should one whether working is down saying you've structural points quarter. the It I was obviously, my to And know, quarters? structural we've looks obviously expect is I'm the we just that reduce reduction in whether completely the but quarter-on-quarter.

Rahul Ghai

Nick. No, Yes.

rate. mean, on progress we XX.X%, tax guide midpoint. rate at reducing full our lowered year great tax I So the about XX.X% to our

prior So the point ended a X XXXX. points about that's where we in reduction guide down and about from

So within structural that point. are within reducing about obviously a provided on from quarter-to-quarter definitely the rate booked, our quarter, we and guide where to well good fluctuate rate, we but on really taking that we we are is tax is -- are terms and is tax get progress. of our and reduced there XX% have full does medium-term X XX% that Investor on now Day. they things our when the guide by always And in year working actions the we of timing that's the that team impact tax the And rate

reduction is So the this not year. given the year, beginning than the lower Obviously, continue through progress points front-end really we X loaded. kind now were of been but to which that of same. we're absolutely way made will be range, more we we going a made, are of rate end progress. pace anticipating And the the of get our has guidance. that year that And bit in to of work have progress are but the We've -- more every at we the not confident little to the will progress we good

So And think the rate to we improvement be are you're now see this within range. we I year, it's not next going going year. the same but to achieved some that

Nicholas Housden

could profitability Service provide how a like in My it's modernization sense equipment Any more just would probably as compares you on great. that new color question be the is profile margin second terms of is my that of gut and the That's helpful. there. the business whole to

Rahul Ghai

do working It's typically to business. new slightly years you renew And attractiveness. that's lower contract typically than attractiveness going project forward, that for we of that modernization. your right? is So on you the service the are get in equipment modernization, multiple When our

So a margins you at end on it's lower business. still modernization profitable highly new taking of but job equipment, a and it's up completed, line

not We make it's whole. money, are money So that a we decent on we on jobs it. modernization margins make as losing

that part of are healthy, lower. labor. other does they -- that margins contribution that it And with modernization does thing the Our are is fairly help help absorption other the but

So business others, overall. margins growth, attribute of the us may one modernization it absolute we that to be helps that absorption with while line definitely but lower than

that to worked our X% year. our the It's for growth. year, issues from of X% that third mind the but are to guide good it's to the quarter issues, modernization. the which challenged get is for up, -- get had year given and fact have raising our couldn't able we in a were raising last now And see consecutive Keep the of to ramped year. see we way supply were not chain chain it's that. guide good So last kind modernization. absolutely And on our are we we through fantastic we growth We we all supply had we

Judith Marks

spun very we the when the We all want before than mode -- you mod but we said. market about is in as was stickiness so telling just is we for for growing that -- every attractiveness progress. older got pleased it's follow-on business, with service Yes. Nick, of now a years X Rahul and We've the just been this it's while -- some -- discretionary, also elevator the but there of is delayed, Judy. is

Operator

question from Tusa And our the JPMorgan. Steve line next of with comes

Charles Tusa

Rahul, congrats a and help new again, said the right? and give service. thanks in X% -- I you Can kind years. we for think last all equipment? you couple the just Is over flattish guys assume Should of that price little of

Judith Marks

Yes.

So service up was X%. pricing

of terms pricing. in digits single low up actually was equipment New

got both segments, price Steve. in So we

Charles Tusa

I Okay. commodities the should $XXX guess, the -- of of that inflation headwinds. What And number that, was we What kind out of $XXX now that quarter? you're were million, million guiding assume year-over-year. year-over-year commodity most the for in

Rahul Ghai

Steve, million for year. The the quarter, the $XX for $XX million

half. for the $XX So million first

the half -- can see second year-over-year you XX and about So basis. on [indiscernible] first of in kind half a

Charles Tusa

right? And the vast New majority in of that is coming Equipment,

Rahul Ghai

Equipment. of it in is New coming All

Charles Tusa

Yes.

half. just question a a in on X anything between of perspective? we China the quarters fourth? considered do then in the the the little And the from third a fourth? of that think that assume and you second just how for the seasonality trajectory X more and about more Okay. the should fade bit EPS within third we in then on Or a quarter And Should we catch-up

Anurag Maheshwari

Anurag Yes. here, Yes. It's Thanks, Steve. right?

you think QX. cadence QX So you're I the between -- for asking look if and

similar If right? the bit growth. to that due FX second at both you look and a reported 'XX our large give will more look little impact half you of at Let details sales and very is year, the to in the profit XQ on currency, organic the me XQ,

organically half If you about X% we at about for current to both guide, our growth was Service. strong QX NE expect look in year, where us, by X%. organically Last second we grow positive and grew extremely the with

With mid-teens growing in equipment digits quarter the low third fourth the in and quarter. new single

will growth compare. it we the sequential [indiscernible] given New down strong be will in though QX, see in Equipment So

X.X%. half, organic On do we as up fourth an and growth. As the we growth to Service, into sequential easier the for get expect last we to versus quarter, face compare we are year see first return also

X%. guide is Our

about between of assumes that should service the terms the and So second QX for consistent growth be growth. QX in It pretty half. X.X%

Now to moving the down profit side.

year-on-year But organic in Given expansion see year-on-year under some absorption. just equipment, expect what about fourth contraction should to quarter related quarter, you modest third margin the the we increase. as sales margin I in said new will

say margin than into quarter but a than expansion the we For see we probably the the fourth QX. fourth quarters, repair both in service, in I more would bit the the see on will work expansion Simply just got revenue repair little Overall, more we just margin based coming quarter. because timing of quarter. QX third more in

in So rate, out see if rest balanced in we couple the for were for the for down growth line the of coming of EPS of take pretty after to year, EPS QX. QX growth in it terms normalizing tax a you'll And you pennies remaining the and the quarter. the

Operator

comes the question with from Julian Barclays. of And line our Mitchell next

Julian Mitchell

a know the touched environment the all maybe in sort that's best help in was on also but construction. mix you big the question Maybe on And ago on comfortable the a you had terms picture order so you decade construction of first forth? looking concern feel of wish what's understand Europe you around Rahul of a New intake as been Equipment going I that's too service role. don't sort a European in when from on updates downturn companies on the new pricing And on how a how EMEA there. us from think that side, I business, in as Any other much, and

Judith Marks

team of there. Yes, is we're skewed service Middle But Africa. a in the our that seeing some important. is now some in there, pricing Southern And than is pricing pricing job, and towards has portfolio you again, portfolio really our which The in by the Europe, know, majority more Julian, after more why in the Western more done so developed quarter great we've been far itself. half pleased service Service, quarter as with the heavily East, of far, Europe, service Europe

a the X So EMEA. -- and they had growth row there in in in the portfolio quarters for

right trajectory by Bernardo So all the and showing team.

itself, Equipment are XX.X% markets the Equipment, XX-month And of for this X.X%. that New quarter really roll we In orders of of core the side, terms a had the New strong. on European market

seeing of projects are So whether all and some major Paris business major other be seeing those indicators the nice or nice as well. coming to the volume a there. lot objects, it some We're around Olympics places. We're

Eastern headwinds based the seeing on right we're surprising not so are in Europe, there. And only conflict the now,

is construction fine. So

I in think is his unemployment our of Rahul some mentioned labor responses, always of that of in with a installation in and terms challenge one Europe subcontractors.

labor that our some intra-Europe to larger of And and projects. these we're managing around able be we're to very country-to-country, very handle moving own closely. So region-to-region, tightly

Rahul Ghai

things maybe good come to second. to that points, what construction the months -- -- building back Julian, over still it in I but what And probably add. is we a outlook just that, to level so. index highest to construction a construction level more the outlook, first, pricing to couple couple on the last I'll of on permits up. the but the in see is or importantly, see add XX confidence then on and a mean of -- the But just is is outlook, at

sequentially good latest is prior still is that from fact, hanging the and in the of that versus So the there kind in permit output up report.

good. that So is

up Our proposals single high are digits EMEA. in

fairly So is our activity baseline strong.

And up pricing second we an our not got So just but in that price Equipment, both the kind underlying consecutive digits the then also we improvement own trends on quarter. it's quarter New mid-single as activity of from of orders, in our industry got are and in the EMEA, strong well. now

year-over-year were sequentially, first we quarter. So the than in better

on And game. but it's on that as is single-digit well. we equipment quarter pricing the that Service, on we're EMEA, as in think it, orders. low up kind the level saw that was it's well getting same new good It's So the of pricing our first that in that good I said Judy thing

basis seeing have where So Europe, we be you're because we would that's through service grow were come on in good, on and able is That pricing service pricing expansion service not margin the points if right? not won't XX our to margins happened. seeing

important an expansion. that's So margin of our component

Julian Mitchell

year degree roll you just the And tailwind you to again, trying the think I out, That's Remind roll suppose, helpful. not think prior. we year, hedging that quick into as But spot speed, of also, from at And be, your impact really a us, which practices quickly maybe. on And changes suppose, you my changing next into sold? commodities. follow-up things prices on bit And steel looking of is commodity how just this in I then of COGS? those the of sort would color the on understand what sort lower goods little costs like will at speed gave prices think I your further some cost which benefit from through today? might steel

Rahul Ghai

Julian. question, great No, Yes.

we've preferred with we but We're either several lock always which option, rates use is at that our -- buy, strategies And suppliers. the our that our of or in it the futures, there, I to index. we get we we lock just So suppliers, corresponding before, our little is discussed we prices. think always locking steel locking a at grades have hedging with our also we a bit don't challenging, hedge in spot given don't definitely

risk mark-to-market accounting the So our we of hedges. run on sometimes

would overall, just do just about we for almost widely QX. what year, can't use like, XX% as the we it we given locked locked are But as use of we the for XXX% So buy. hedges. We nature

is QX open. Our still spend slightly

been So they're -- China, down. like QX. we I mean seeing, the to if year-over-year have XX% clearly coming and our about down in second in quarter, XX% prices were go you're -- could prices in you down

down. we're seeing come prices So the definitely

that in. we have we but small for tailwind definitely want that the could, been We a So market QX. to bake million fluid so single-digit has don't

through. have substantially come year-over-year where down I were. the a prices the you're definitely on basis, from Now come seeing benefit mean they

QX XX% So U.S. if you down year-over-year. look right now, QX, the steel is in at

will buy the come as that as we QX, impact. definitely will favorable see we get through to should we XXXX. we definitely definitely some favorability yes, in buy So And

Operator

from And our Cowen. line Cai von of question Rumohr next comes the with

Anurag Maheshwari

Michelle, question. let's move to the next

Operator

with Walsh next Credit question John of Our comes line the from Suisse.

John Walsh

Rahul and Congratulations, Anurag.

Rahul Ghai

Thanks, John.

John Walsh

back circling China. just to Maybe

talked internal China. a geographies within little bit about You

to that? maybe gains gained? relates by just portion what or as if it around impacted normalizes as wasn't sustainable keep think how of others Shanghai it China. thoughts lockdown. you manufacturing curious you think about in and share you the But any the the you your to of Just Do saw Just kind they're the a only due likely quarter

Judith Marks

on with it our you -- our China, tell and would operationally. And in is executing strategy excellence. track I team it's John, is

sales have We've invested out coverage. and our offering. in GenX in with We innovation figured invested product

We our have factories.

working. it's these for with had sustainable. at right most X.X. at and all are strategies quarters. and off. investments paying already of innovative industry the now distributors, China agents point through it's the customer And price of them with we our Some right in together relationships and and are believe we're multiple share gain absolutely We've products all We coming the think And

gain be able So even if should declines, to segment the still we share.

John Walsh

obviously, lot you then allocation, on cash. And touched generating Great. capital of a

any as opportunities, just there curious should we have think service more you color the portfolio and about you kind Just equipment, of should of kind what software, expect? acquisition, at look we

Judith Marks

more great the squeeze of only Our we're out, million And we later no and we density places book got right with us a you're year. and us gain we it a doing million transaction capital bolt-on EPS at doing as And was next gives $XX opportunity, there'll really able a not about and a for deal we've been it what to this for the allocation it M&A to see across But $XX X. from business. strategy executed globe year the doing our price. us. Service that's continue have have to bolt-on opportunity really, execute Zardoya it. years, our make we as that little seeing where appropriate benefit a $X.XX the going for at M&A. in well. for it, good than We've allocates the playbook the fair Obviously, And time, be year revolves this we're with to But and possible. adding around accretive to strategy it quickly And year the

Operator

BNP with question Paribas. line from Borrega And our the comes Miguel next of

Miguel Borrega

the of give comes can residential then you talk about on contribute timing specifically The first the orders? they a times I volumes. new suppose, Do residential are said to in one, from just backlog margin? us flavor shorter. order where the And you you for Can Americas, these in mostly of pricing a delivery. and lead intake, follow-up positively

Judith Marks

said and word, can hear. I Miguel, I second -- Yes, didn't clarify? you Could you quite residential a

Miguel Borrega

orders Yes, the the U.S. residential in

Judith Marks

okay. residential, just Okay, Yes.

typical traditional projects. buildings our cycle So have for time time. a apartment of of residential in the in U.S. and like. we our all is the that kind It's lead It's

for again, Americas So continue to you our we want the fill Rahul, backlog strong to touch a group do anticipate pipeline, on? will execute. that, to that with

Rahul Ghai

months, XX about it's Yes, Miguel.

the So these same I think are months that's going Judy in range be saying it's like well. we orders and new typically as to see XX

getting in of And probably we've pricing. is next really the second into overall, orders I see Americas, are year. should that we half the revenue good we translating think some So in now got

In was fact, good. pricing

pricing New up. Equipment was

in single it low remarks, said digits. kind up of think I my prepared

you points, digits. and down basically Asia China we implies outside China mid-single So up was EMEA, if and -- a of that couple but regions, was other Americas, of said all that Pac

and pricing we and seen getting Pac we're implemented of the EMEA. these last in turnaround So year, in good Asia QX and have actions we pricing

Americas. So of better, is would really as grand would have to It's the was pricing in say, good the just see overall But scheme turnaround I we expected. things. slightly in the coming it

down, is to the China, second comment prices while the just quarter, pricing, commodity keep we commodity in So In question, China want respond mind are Julian's the I XX% the while is pricing seeing in that quarter. to pricing to good. in prices down on third there XX% the

down, pricing are second So even price New Equipment seeing quarter in cost we is China. prelim in China VR

kind good So overall way led pricing pricing. Americas on Equipment us on of and New for Equipment the is New

Judith Marks

you're SG&A XX just it what as Yes. of points still cost team continue quarter, a investing in think we while focused other side. reduction. reinforces basis sales is and as the entire on can will. sales on is seeing, absolutely And I this down we're low as business the a we of control, is everything said percent percent Miguel to spun, to absolutely we've be possible drive to And this going as we've since SG&A our

Miguel Borrega

hit? That's on to flavor you you've Can whether Equipment when your with give passed labor unions, will what expect us this a great. New just for maintenance? And both And negotiated in and inflation. you then that be

Judith Marks

negotiations. in works times. many Obviously, cancels They have come for labor up different we agreements at all So Europe.

be agreement, labor been will on a concluded. has Our It's and January. effective those U.S. X multi-employer negotiation rates

So -- we agreement. it's and the have X-year a

So importantly, and we that the productivity. to offset with most knowledge ability, the have

productivity the as volume New has pass with So on raised we best and price offset the for drop and to through the on obviously side Service should and cover we increases but our to prices, side, as installation through. inflation then Equipment, that that but ability wage of well

Miguel Borrega

just QX? already just quick quantify Can in question recovered you EBIT last Great. fully And China. sales one the and be on this And from lost whether QX? then will

Rahul Ghai

sales Yes, XX% would quantification say was it, quarter the mean can right? in slightly. the down is QX Miguel, overall, debate -- I are what slight you about -- down I

can X, right? is the focus maybe I important So you part for average the year, I moving I think that's guide guidance say, X more our But around. would to stuff year. is the provided we've for on points, think the you

We from haven't just shifting lost QX QX. sales. revenue to It's

to able most quarter. projects. timing to expect we've rates and about softer at of capture spoken fact the slower we were we Clearly, point we on of they market depends conversion in the the but think it I the the last all be to be China than that -- be should that expect same

rates slower. are conversion So

year. think So focus on part overall, some demand guide is is the shifting to But a the to right. important for the I

Operator

Spungin line from the comes question Berenberg. Joel of last And our with

Joel Spungin

space is second, are in Why was if the market why longer the just I to I XXXX, advocate what's XXXX, the well, inventory wondering situation going asking could about are similar was the rates to outlook I if more a catering. that comments as don't Chinese on high play new you about devil's mean a earlier Judy, made I China one of start in for question high you alarmingly question on you as the sanguine levels would are XXXX. answer in floor think I say, by of in run? for sales the housing on to another you

Judith Marks

Yes.

drove that that listen, was our seeing. impact we China overcapacity, -- eventually then. industry will and not there there structural far it pricing the So certainly, was that less I will industry, are actions believe, entire do changes believe significant But there as property be was as tremendous -- precipitous Joel, made don't market. supply the which then in that profitable, we're it

the public new is companies. XX Almost -- pricing competitive from They're see we and rationally. all fulfillment top think the Otis a are you, had position. by is we're in will I equipment providers. providers XX% I can far tell all more we best And of today those the of

did. factories We than have less we

We we have a in better did innovation. offering terms than of

[indiscernible] XXXX than aligned there a to gradual far from is so network this where off. and with buildup have and the drop just sharp -- better We control a we have was ability better that we that, then better until XXXX are a potential slowing drop sales far

performed there's for team Absolutely. time? the our I So prepared far that, better and will coming multiple structural peers. for and just I believe we do past changes over have like our actually we're But than expect quarters better perform

Rahul Ghai

Just just Judy look data to a you it's to points you at I couple from XXXX, I in to now, to that different there. inventory, add, go add And right? hanging residential inventory, it's mean, look been -- of X said. things to back X what if the you XXXX, at if if at first, months, believe,

so it is I believe X In from the fact, have at last the today, And I it's think it X.X which over don't me, this I maybe X.X a down inventory. back months go is bit lower or it the but levels 'XX of you it's think if inventory, of numbers to came front April. X.X 'XX, little quarters, months like point, X, in was of double I than

X%. that space under construction estate is good. investment, -- the And you about is down X%. that's investments, about about look real down X Slow if even the at So

great. levels we So yes, back they're same not but the decline and 'XX things in that saw 'XX. to of definitely are not pointing

Judith Marks

differentiator our And our well that customers. impact. a and and for performance you, bodes state-owned relationships the well And our our last Joel, the enterprises as base that larger have is we're I'll installed far give seeing as

ready. we've not watching our to for strategy watching again, just been So and but -- trends, been prepare this, we're has the

Joel Spungin

just I very could in quickly. another If great. one squeeze That's

Just new your comments North to market. on regards equipment clarify with really the American to

issues delays saying as seeing function it with sounds you're labor. such a on You're the construction purely are the side of like that factors

You're or not the because economic outlook delaying about increased of that. projects like anything people seeing concern

Judith Marks

cement market the the on site in availability trades the the from the labor It's contractors. job pouring correct. right the the to That's hoistway general people from all with

Operator

to over any conclude today's remarks. I And Judy like for would Marks does conference session. the further turn question-and-answer to back This

Judith Marks

ability you, to Michelle. execute of strength demonstrates Thank first and challenges. solid adapt the mitigate to This significant strategy macroeconomic the our and half our

single-digit Everyone, in 'XX for stay safe XXXX We on with deliver continued well. will strong high us today. to growth execution adjusted growth beyond. continue to and focus in EPS joining Thank and you

Operator

call. you for for today's in conference you Thank conference today's participating participating. Thank This concludes call.

Otis Worldwide (OTIS) 27 Jul 222022 Q2 Earnings call transcript