OTIS - Earnings call 2 2023 | Otis Worldwide Corporation

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Operator

Good morning, and welcome to Otis' Second Quarter 2023 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 www.otis.com.

I'll now turn it over to Michael Rednor, Senior Director of Investor Relations.

Michael Rednor

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

today Marks, Maheshwari, Chair, the Vice call and Judy me with Anurag On CEO are President; and CFO. President Executive and

company note, of will operations, Please the restructuring nonrecurring measures webcast. of significant A and otherwise in can where noted, be excluding speak results found from except to continuing reconciliation these items. the the appendix

contains filings, forward-looking and also our statements, cause are factors the remind materially. We quarterly risks SEC listeners that differ subject XX-Q details and uncertainties. XX-K presentation Otis' Form provide including that Form to could on on to which reports results additional important

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

Judith Marks

listening is and and safe you, joining everyone, Thank Mike, everyone thank well. you, hope for us. We

Slide X% high of In the digits and delivered highlights the strong a with sales quarter year. points adjusted expanded half quarter our second organic a operating segments, single achieved Starting first grew execute X. strength our the again Otis strategy both successful growth. in and XX we on and of ability QX, profit second basis This demonstrates to performance and adjusted deliver. margin EPS

continue going up grow about in backlogs. as and second the equipment share to our half. We and Modernization new first the New and portfolio was momentum half and XX Maintenance have slightly We X.X% quarter into the points Equipment in beyond, up basis our grew

taking million repurchases in million. free shareholders to $XXX million in repurchases, quarter returned We flow year-to-date to generated the and through share cash $XXX $XXX

the South and Otis is building our Florence, off flat-belt also be core, and X- equipped this in we designed fall. GenX platform. being of latest segment. sales with while manufactured begin IoT GenX ONE, in in will Carolina, the X-story will GenX large North the standpoint, technology the GenX Otis' Core needs family innovation design proven quarter, customers this elevator an our Core of From specifically built to address to America, launched

at Here to exciting between customer from the Hôpital SkyRise highlights was In to selected XX second transportation our provide including with care require collaboration the be this open are excited XX expected health in of quarter. latest Canada Pomerleau. important initiative and reliable Hospitals to It's general some units, to in all floors a XXXX. Vaudreuil-Soulanges. contractor Montreal, times we're part Otis units Canada

Otis of XX XXX Egypt, units the a In as more GenX including Alamein and second the as this as At and services square tower be link well and provide of total in in leisure. Egypt as XXX,XXX will well tower will iconic SkyRise for escalators. tallest our offer will El elevators housing meters, meters than

people bring another the number XXXX. subway of network Metro to move keep In on network escalators XXX total has transportation Since the X. along since expanding more city's This country's Tianjin part Otis critical Line the elevators China, the New X,XXX. and from units Tianjin kept passengers Metro's project moving and been will than Otis of will Otis a it has Equipment opened, on

in escalators Madhya invest will passengers first the This XXX,XXX will units, heavy-duty line to elevators expected factory at our transportation including daily. and Bengaluru. the metro continues install manufactured government Indian our equipment state in public metro. serve and is All infrastructure, new the the as And in Indore and for of be to is Otis Bhopal GenX XXX Pradesh the

zero-waste-to-landfill goal AENOR, factory Spanish of and factories XXXX. received the for from achieving X eligibility ESG We towards made the of certification our certification for quarter, progress zero-waste-to-landfill important on Standardization XXX% and for progress This Association Spanish our all Certification. in by is priorities, second our

last system. to receive waste and operations Sebastian year Spain through the and control impact first facility In designed opened used reduce and to factory was Sebastian platinum LEED designation. is LEED its San our Spain received materials San to construction addition, certification. factory our in in is certification, The enviromental in achieve factory the this fifth

improve focus shareholders. we which of ways is environmental pursuing customers our and increasing colleagues, an can our impact, continue We

to sales prior and New Moving the down to our Service XX%. regions X.X%, XXXX outlook. quarter, organic tough since on Equipment compare X% constant to contributed of strong by quarter. X% growth Slide geographic adjusted Equipment We grew Overall, backlog our X. growth increased exhibiting prior Service, despite all year all in which equipment lines spin. performance the a at organic QX business with best results currency sales New in organic to were and new And orders, compared

of We backlog up by orders growth. the and XX% points. quarter a at basis free XXX% the net quarter. XX% GAAP operating XX second $XXX by strong We currency of We expanded greater grew in fourth with margin trend million rate cash modernization XX% flow, mod adjusted profit $XX of up consecutive and constant income. million of is continued a the conversion or This in orders generated

current there's Before on our new me change update geographic no sharing our XXXX let equipment to for previous outlook. markets. our outlook, In outlook you updated Asia Pacific,

new We better, market digits grow expect by the equipment or to led mid-single India.

of high Northern expectations in driven our This digits. the than single low EMEA, delays market now prior decisions by and mid-single to In customer XXXX, is digits as expected down to buying is persist. down Europe, decline be worse

over market. past by high market more over units. be expect resilient single driven X to Americas The slightly in from by high the multifamily the market digits now this offset decline end coming it past a commercial few an down has and is residential From perspective, months, years, a we level weakened down

giving sales a lack to China, good at quarter rate the we've guide XX% the weaker of backlog, us new This second to we now globally, than anticipated. strong our Despite future the And weakening X% a the XX%. run momentum markets had to exited a finally, by of visibility equipment driven is of maintained prior as growth. be compared in down we we market expect down primarily to decline

by On the Asia. outlook side, no for to X% Service base roughly our there's installed led growth global change of

the in improve performance progress expected range X% second and XXXX our gives in sales billion. to on strategic imperatives quarter to strong billion confidence of to of made now X.X% our are the net be with Our sales in $XX.X outlook. the to $XX Organic us range we've the

operating to million to currency. headwind be expected currency Adjusted million, billion $X.XX $X.XX $XXX actual up up from to constant million to profit $XXX at exchange foreign at million million to is is $XX $XX operating expected $XXX profit be million $XXX Adjusted to a including billion, translation.

of now to X% the prior adjusted $X.XX, range for versus up raising it's $X.XX We're to expected our in guidance and XX% the EPS year.

or for approximately to our unchanged net remains expectation cash XXX% $X.XX to Lastly, free income. billion of $X.X GAAP about XXX% flow at conversion billion

continue to prioritize repurchases We $XXX share million. our this shareholders returning cash and to pleased to year increasing we're I'm share to

X. Slide to Turning

may the earlier announced our resiliency transform launching cash new $X.X years in margins, called After we've designing we're as As a public drive to backlog, in ensure X-plus operating returned which performance phase we regardless to and today, the to of UpLift approximately expanded the future. environment profitable and in next model growth company, we're grown our face built program economic formidable to for within operating EPS, shareholders, high a Otis billion to business. a sustainable, equipment share, continue grown

continuing prioritize UpLift customer organization to drive the launching efficiency We're to the experience. while across

we a forward, cycles our our continue continue expect at customer to Going sales innovation accelerate growth, pace, and to to unabated. our specialization our continue to rapid intimacy

our a can ensuring laser-focused is base needed, our on team of achieve of chain supply rightsizing transformation the where through performance processes, and aspects that management improving our new among financial operating other procurement program. performance tier Our higher the cost our

approximately million efficiency the in across savings years, the to organization. program we Throughout the as drive $XXX next generate X expect we

ultimately, making Our plan on and program. update shareholders. performance, to results you'll the for this better profit, we're in progress regular growth, at see operating our the intervals returns our with is And shareholders

our With over to that, through more Anurag results detail. it in turn QX I'll walk to

Anurag Maheshwari

X. mix tough partially from offset $X.XX This headwind operations. offset compare. new higher a corporate Starting translation and by million and sales $X.XX, and $X.XX equipment EPS of up X.X%, inflationary were a result in foreign tailwinds share by strong on at exchange as billion and lines. on you, second by commodity both up currency. actual constant quarter FX were a and with were costs. Adjusted million driven X.X% tax from higher accretion pricing a unfavorable organic partially all reflecting in increased productivity results Drop-through segments count sales X% was or pressures, performance profit headwind including of operating Thank Judy. at up $X.X Adjusted wage annual were and a lower benefit volume, $XX and Slide increases, $XX business Net performance of strong from $X.XX operational

prior $XXX strong higher in Free or capital. was up million. million XXX% increase improved at flow conversion, cash versus and driven $XX net year working income changes in was by quarter the The

Moving down were constant as a XX% quarter, at the equipment to and second faced Slide we previously, compare noted In tough X. new currency. orders

for trend backlog, being with beyond. providing up and versus all sales sequentially up was constant half and equipment regions X% New visibility to however, and the higher at currency up, the continues year X% in second prior

in improved up on better was the pricing mid-single all from digits, improvements trends middle low building of Pricing orders excluding pricing or Globally, China. solid regions, new single year-over-year on equipment XXXX. digits

digits single China due market, deflationary to productivity. neutrality on we low While pricing and material softer in price/cost was the focusing by down pressure maintained

in site backlog. Americas regions and saw digits, inefficiencies as grew China sales Korea driven Southern up regions. were equipment we by New from job organic across delivered on nearly digits, field And EMEA all grew grew executing single all double with the execution growth contributing. performance quarter, high high mid-single-digit The stable APAC and by single in strong digits Europe. primarily solid eased. India. Overall, the XX% delays

productivity, volume, million profit from currency. and mix, The was price flow higher and from Adjusted partially offset unfavorable beginning operating continued the benefits FX were and up strong to product commodity higher transactional SG&A regional by at backlog, tailwinds $XX better-than-anticipated expense. constant

all X.X% segment teens of Modernization X. rates driven with led by Now business expanded in were turning strong to XX% by all all growth China, by the grew Slide units up spin organic we another results in in with Service lines. sales across growth high Service regions, where highest quarter of orders backlog quarter. growth growth regions, on growth. X.X%, with achieved the since Maintenance XX% portfolio

Repair better-than-expected volume. Repair grew Maintenance from & X.X%

points continued and performance With sales with up strong X basis. XX.X%, pricing, the in in to particularly strong achieved a like-for-like strong China. Asia, conversion modernization X.X%, we quarter, including were portfolio Our up expand on backlog

in points, currency $XX annual partially material were with and Service full productivity million was Margins and pricing expanded favorable XX benefit as up basis higher offset volume, at constant increases higher line a profit by from wage our guidance. year costs.

we sales X%, basis share, X.X%, pleased our results, are again we half with approximately increased gained where grew by new and the organic first equipment Overall, of over XX points portfolio $XX million new improved several next operating growth our at constant quarters. visibility profit equipment provides continuing currency both the by This and modernization. in to while over good backlog grow

and volume. organic X.X% sales range to sales. profit moving to million that, Starting outlook With operating the the the X% of are at linked we at approximately strong expect prior versus momentum, of and raising expected guide is X be the to With the up increase to in with X% Service versus Adjusted growth revised $XXX Otis million and $XXX to constant Service to now prior outlook. guide million to Slide total $XX midpoint the be X%. better-than-expected currency

are margins basis to be XX expand to to the up points basis expected to end the approximately of expected points basis new to we XX% Service XX margins equipment still points X.X%. about anticipate previous margins range. expand Overall, to XX%, high are XX and

$X.XX within result up $X.XX expected XXX% share the midpoint increased operational increase to is of to $X.XX the conversion. billion, million target approximately performance. to a prior to $X.X largely Due flow to outlook, $X.XX, and the year free our $XXX we cash versus Adjusted EPS have versus and of for is X% strong roughly XX% outlook the to at range activities, the cash prior be repurchase the mobilization our continued billion

to there XX, equipment taking look Americas to EMEA expect to on no overall up By the a new Now and at the Within Asia, we organic change mid-single to our is led the China better guide. still be Slide we digits, continuing consistent further the demand performing expect India, sales prior outlook outlook. Asia decline anticipated, weak with region, in than is by a Pacific environment. which offset due

prior the expected to sales to points to X% outlook to in basis Turning all XX lines. with are improve business now Organic by X% a Service. versus of range improvement

a up 'XX by sales organic the the to the sales, our are range We Maintenance for our half increasing backlog, outlook in in by to strong to Repair of be which Repair & X.X% X.X% first now we expected mid-teens, up modernization, volume. robust are outlook X% increasing driven Supported X%. to is organic be

Moving to Slide XX.

expect increase a coming growth half first on of for service-driven are XX% the well-positioned and focus with excellence. we of We half $X.XX on second financial deliver outlook from $X.XX operations. strong the behind business and X% a adjusted Overall, year improve in $X.XX, our $X.XX to model EPS to with to performance a operational strength us, of the solid full range

Liz, the With questions. please open for line that,

Operator

Wolfe Research. [Operator comes Instructions] Our first with Nigel Coe question from

Nigel Coe

the the point small move, sorry, changed It feel mean, your changes. of all, but haven't like outlook. growth margins, XX clip you I the end, a guess, high on basis down to Equipment points, the basis New geographically XX mix it's first doesn't I

track wondering year? that just you the half of margin? still are will, I'm sort on view, the on price/cost we for And of So in moderate driving tailwind kind what's of if of back that more sort

Anurag Maheshwari

the is basis XX equipment for guess new I question. to the one just the done is tightened we've first Nigel, Thanks, what margin points. we

China low as a changed be noted, better able going for definitely market, sales to And for our we higher year, as offset aware, is haven't be we're you're equipment digits. that, But we to new So China, thought new profit going right, flattish which equipment. with you tailwinds. that the margin. within to was down but is commodity single outlook

expecting million. $XX is the second were in about to we better be million, first definitely, Pricing, the half $XX about half. Initially, million, $XX than now going

-- offset You I tied about into X think China. put more together, than we the which

XX points which Equipment the why on is So the into we New side. basis tied

Nigel Coe

] programs? That's Uprise to opportunities (sic) a thinking versus to the do to bottom initiatives, program, just million base. clear. the this productivity is million you the initiatives, this like [ streamline cost. Okay. come And is on where $XXX will think the additive your then on very much UpLift reinvested? modernization to see detail is Maybe I'm more programs? $XXX service And being then my of follow-up How further the that margin things other bit line cost And of those the you additive

Judith Marks

we're Nigel, it calling me UpLift. let Yes, that, and take

think you it me let Uprise, I called but take that.

understand it's foremost, takeout where mainly First I'll we're then now, is which and kind I of cost G&A. to think going really be, important for doing the get to in to why people and this is

our as will modernization be well productivity it as additive our initiatives So to growth. other

quarter, new -- to that we But spun to after ago, a shareholders. I approaching is little team in expanded we're And quarter X-plus a where it's it think And since colleagues, over and and from important I executed We've know years cash returned share tremendous from UpLift margins. time, the that thanks We've in strength. billions gained operating we've mean, driven position and equipment. growth, strategy of comes our performed. to profit our our We've them.

I the the incumbent think us next leadership level. to an doing prepare what team that's leaders executive it's to across we're company on to take And company. as the

more to the speed to going areas: we're on and focus us model X itself operating give So really agility.

a serving we're tremendously our want X,XXX with customers agility organization to be offices speed distributed customer-centric. our know We You and globally. more that branch

from processes think sell learned really consistent to be to financial customers, to it's going our now of We're we be that. we way geographically, the can and we're spin that streamline processes. streamline performance we've to -- to through coming all I how processes That's and looking more we going and can extremely through out something forward

scale, And enterprise and the chain on is some and significant as element third taking especially our focus pretty of advantage an supply and acting implementing indirect.

more reinvesting our million up doing, we predominantly additive the which us to what we're G&A. Anything that to it's it you those So give X We're planning for in Again, business capabilities, many adds generate, as We $XXX the we to new take spin than new return, on to that, brought do invest market to going that together, future in years. above continue products had to going competencies and to Otis are connected through to continue we us add create to since we're of innovation. to we the level. next the is

Operator

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

Julian Mitchell

growing backlog down. the the sales the intact around first and outlook backlog orders various outlook down the but obviously, regions the because maybe market still is and question guide, Just even you market in took the with

So looking a out? to of that end-market called to exerted, starts expect market we of should shrink XXXX the expect do ahead, sequentially you entering sort just sort of backlog because start backlog pressure trying to lower to understand and pressure as be the you

Judith Marks

we Well, let 'XX as Yes. expect that growth. our the first 'XX. really good us us backlog, let drive a our we sales you saw, I'll if lower me enter just the backlog, for chart, the to Anurag helped have you go both a the line really record hit, exit with which of future in straight and appendix segments. X% not And pleased growth do organic Really gives sight we growth but backlog really backlog and on answer

to you But so I'll a just to then turn get give let more -- little Anurag, you color. me a and backlog talk the over to market

Asia-Pac. in Let me start

think But to market and markets. responding We're with mid-single. We double-digit India pleased how seeing seeing at actually still is Asia-Pac our We're continuing on strong equipment team of demand really there. in really itself expect new digits. the grow mid-single

we level mid-teens. was units the in first market the The Americas, down in the saw was half first at half what

to to flattish second is Our down. going slightly half the view be is

full the the are will high So single market market sequentially itself. down flat. The the but itself units Americas year be slowing for was

obviously, customers, the go looking looking our happy at Dodge, through the to again, talk to we're as watching well talking So about but there ABI, these watching we the as orders all Americas carefully indicators, at and questions.

make In digit The U.K. rate delays decision-making EMEA, of in that and France a uncertainty. 'XX. sluggish Northern they're when is watching resilient. down are The and Middle Spain our East impact, when itself, backlog, it's pretty especially with say Europe, scale. going market, single in. still of little a we Italy XX be the of going rest We're with backlog customers, to decisions. are XX those a it's digits. of we're for and low the months matter again, for Europe to you look Germany, at bit weaker, segment looking to second We're And the half. into proposals we're And the think the backlog this being high single in going going for a strong a up out

On QX XX%. itself. -- being was the market China, calling down volumes was with down in momentum We exited the May the and itself, market we weaker, started April really we're good.

So planning been had lower on ship of and for business has to second the taken we range. end book the that half that us lack the of acceleration really the in

Service still that It's developed markets. from is led digit, remind market The single-digit in only solid. very Equipment is thing everybody, again, the by I'll outlook mid-single New again, growing outlook, low Asia, which different

to talk to want you Anurag, backlog?

Anurag Maheshwari

no by more some is digit we larger assume be expect year projects book we end nature. there's to backlog would for our ship Absolutely. than are any the the in orders Even of given single the reason we orders year. in as Julian, tend of And that, we multiyear up and the orders low if because Judy. growth, Thanks, to

look our far analogy, I mean clearly, at it's not definitely right X. you the book-to-bill, higher but it's than if been So

we we here. digit, worsen more with decline conditions year orders even mid-single than even is and being the So from even we definitely orders backlog here But over will to there end new ship I let's higher. equipment booked at least if assume think -- slightly

that at you look a is Americas, our mix if fairly which backlog importantly, multiyear still in backlog we high, have. it's today, More

revenues Pacific is highest to the And that fairly book China with into next good. year, should Asia being ship. convert

of confidence it us of to year guidance. growing go So we kind gives equipment into in revenue as our next medium-term see line new

Judith Marks

year backlog even EMEA, our last And is modestly Julian, in versus versus up quarter. and last

watch for this -- really we're shareholders be watching backlog line So of next shared top best to year-end. line, expect you and with year we're year indicator at It's us bottom in and We've -- always different. the closely. the that that's no our terms should our we

Julian Mitchell

And then follow-up and that a just was a answer. very quick thorough

down seasonality sequentially within looking in QX. your the half, Just earnings normally, second slightly are at

sort I think up QX in consensus of as you sequentially.

versus on maybe anything out price/cost QX there So just is sort of something this because year like earnings of you're calling QX different or that?

Anurag Maheshwari

Yes.

kind of I it's the year, months, the the $X.XX and about you of which of pretty Julian, we means EPS, QX, half. of $X.XX first the think QX in if terms for half So X our in And look back did at between EPS second split. split equally

go on growth If half you Equipment with equipment, the percent and the look second New just and expect about we X-ish year. I'll Service, at in to start of new

kind towards million, think than commodity about rate, should between should see it quarters. QX between QX a which be -- between tailwind that of margin Obviously, Around little be that, bit I million going a equal $XX the no tune should to at we're more $XX difference in be QX. X pricing the But of X%, is that. of QX, should be about

are of $XX we million, increase if $XX doing Service, you look profit every Now at operating quarter. million

the do QX. the QX to expect converting again portfolio we're and with backlog. that as growth pricing We the and well as well mod in Maintenance continues

more bit I in So corporate rate we're QX. in pretty QX there's And run a versus think obviously, a headwind of expense there. over little good

an pretty all perspective puts there, think and QX similar. be EPS put should the from takes QX, between you I over the So cadence

Operator

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

C. Stephen Tusa

off cut got I for thought I a Sorry, there second.

Just a question China. on

how to seems There first down on I I seems stimulus. revised whatever to mixed what's of mean, just was going be this your view is So guess, all, be to will getting this on come market -- that messaging seemingly in market evolve 'XX? deferred. recovery

isn't on if of can to little bit later, a this the bleed is growing when And into market And those if like that down, your do so services to versus tweak at there those you lag coming a the more a opportunities to as after be lag kind XX X-year this aggressive you negative as you're up we thinking market? units years conversion continues go Because service remains conversion? converting stage, units if agreements, side, have for should to market still like to up still couple mean get about what management equation obviously, lower. the thing of down of of and conversion, that could under a

how Just equation. curious evaluating you're that

Judith Marks

Yes.

Let and multiple address there. me kind of items try

let eighth me that. This been to high teens China. we organization straight driving business. really the in she's leads the had was And and portfolio China First, Sally Service with start quarter growth now mid- Loh our

when made which XXX,XXX China, at portfolio our commitment pretty big up our business. to we is Service in units from a now are this step on We grow

it is we conversion increasing go. and returns as we're the And -- rates it's driving

down even the quarter, Steve, though X%. Our were in China -- segment the was down we second XX%

even though had Otis we GenXs gain rates new X-year because what had to equipment with strategy the at quarter well well our time, for in which conversion traditionally the less accelerating versus shipping be us another in then warranty as open our yet to of and the bodes So the the past. service conversion, connected for depots for there is, may units, ONE to market conversion share we're service have same ability drive the

So rates the even our volume will if that. a goes offset down little,

get really concerned. doesn't that So me

we the up, tick -- especially excuse and just really business the what the was bill things -- terms our and exited the to me, expected half, and half, changed seen ship we as in hadn't on book momentum. we we second In second of it had business, book

we've Now the like Monday different out heard out a you, tone. of [indiscernible], of

tone changes. from see translates and being there's positive outlook in But starts that we're happens, Beijing, especially prepared that I'm got doing are got got enterprises to well. and the And sales that, happening why, able again, and They're think the that cities strategy that to still buying the land. still once if We If as The share. state-owned that assume that not the capacity, that's picks the well key cautiously and We've obviously, have They when our to again, really for deliver potential to. as we've -- channel, it. up. be larger-tier product set -- we've on and did with that. growing. our we've optimistic that is growing optimistic, cautiously are sentiment really we soon what innovation accounts done

C. Stephen Tusa

flow think then in liability or second And we the orders how -- the statement? just half, Anurag. about one last with one The progress here cash should for Great. down potentially the flow the contract flow through

Anurag Maheshwari

some orders with down. -- were be I Yes. mean, being orders there's to obviously, if down, It's --

Firstly, of in second half lower saying down we're come with advanced payments the to are sure. will for be going year. not the it orders Obviously,

receivables So we think revenue, unwind a in into up there, will kind -- I the higher the second of we of built because as that of half the from perspective, right? year, of can a first However, half you be should and fair the fine over cash Steve. amount

Operator

Our Vertical next question comes from with line of Research the Partners. Sprague Jeffrey

Jeffrey Sprague

price Just price, you think back color on orders us on gave some on Anurag, to equipment. new around good I coming

over next how Just and on color build point or that on give this quarters. new a equipment wondering revenues might us the if what's coming X you X at little side in through could

Anurag Maheshwari

Great.

you second me if let the at start So quarter look -- with first now.

the it the expect coming On to the through. million of of bottom expect through more the to to new encouraging. line, we equipment in side, which second saw about half, $XX about pricing And million half. of that did second We $X was come we come in

flush done, consecutive of been points older we've the by course we go increase that a see So if year, by the we and up X older and XXX through of orders end the if some tick price back as with up over backlog kind should our you mid-single-digit new margin of margin more out is it's that the now, and the continues. backlog this little price -- quarters look increases prices basis we today. of the bit And

that $XX basis $XX If about about points basis in to XX increase XXX every points year. million happens, next should of price backlog million, or for bode

of that So we through kind more see come year. next should

beginning equipment we're So the see tick the next think new few I into and quarters. up that to of just revenue, for should the price coming

Jeffrey Sprague

margin you mods. as Obviously, a Great. get And could it's then just do little color on more very that work. creates headwind maybe and some we robust

that You kind end, looking like is into you retention of the end seeing effectively. service of strategy? how the per what more Just mods higher your is Are overall playing mods. around managing seem growth on back on really back the is on the Service end? revenue the quite my higher question kind back unit to be portfolio really But

Judith Marks

see it's Listen, come it Yes, for -- equipment even right with much company pleased though quarters in as our as it in how something focused And fifth our something added really month many on Jeff. May the about now, like mod margins new you're making it's it's I a we've imperative to talking just and or be segment. which Service means dilutive think last we're at I going going to developing. business, and more very expand actually to it's strategic know we're

would XX%. fourth mod. in up Asia volume quarter, mod projects backlog. MX Japan, the China call India. as we that orders great China. Pacific continue the in with you're Hong Strong accelerating a our to Korea, and to the highly path their of quarter consecutive We Asia Again, grow see to continue as in some major had is MX standout quarter. in in I volume, have, So pleased units due to age going on Kong, product or And over

So optimistic we're mod. about

in of benefit I the and going in As think custom. I going it. Equipment said New us more everything last drive And production-ready we're to expansion it through approach by it to we revenue call, terms we've versus margin and Service, taking more that's learned as making in

high the that XXs. we that our on mod, Once to -- is Otis Service a do put in that ability keep and retain

much conversion even significant the more retention than our in rates rate. So industry-leading

customer important It portfolio, us that's not about multiple additional customer to as for back our repurposed. us. opportunity our drives to gives other multiuse. for buildings another that for that units all now is the why a lets There's portfolio, offices So as you both value, huge them changing units years, gets on us only are were efficiency, being think especially the bring intimacy, it energy great with mod ready amount of the well us to

over quarter, we for going a see the and going and in continue deliver starting that, then So service be mods to the you're now almost for consistently all about us importantly, orders, on that going again. talk clock every to to something while most backlog both

Operator

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

Nicholas Housden

where now remind wondering of couple I and you of piece from surprised it's strong to upside. It's specifically if quarters I & Maintenance the performance been how Repair another the us was growth been could growth Repair. the much a is. sustainable just the how think has Repair is Because

maybe just if a wondering than That's thought one. you structurally I'm the maybe stronger previously. first market So it's

Judith Marks

going from you. Maintenance this the it's a don't keep for down. go where in we When between difference Really had quarter the We back quarter. Repair to good hear a quarters, a up COVID disclose when strong Nick, waiting use post-COVID Repair. picking we and to bit the downturn And slow of Yes, we started saw days. little early probably bounce back office X because you

potentially as But again, a quarters. still some strong been your need discretionary more repair. it's off even good and are units So decisions, to put X aging mod X people

with up. really was how region, and in keep not strong globally. So It sure can Repair long every we're this pleased

but got Anurag let outlook, appropriately from that we've tuned perspective. it to an outlook in the I'll think talk we So

Anurag Maheshwari

Yes.

just -- there. of a think over I couple points add to

we I after think low X entered years the team well this Repair has I side. a executed would on as very mean, single-digit we double-digit that of the thought growth, really Repair year, be growth.

because largely So our the think it's on performance Repair. business, of if you at Service I look

is X.X%. Our Maintenance growing at portfolio

of We price have a on basis like-to-like X%.

maybe adjust digits. points for a Maintenance and is basis more you high single than mix churn, If or XXX it's

So coming work, good over double-digit of very grown executing not And there. just strategy Repair because the on year. the has back only of definitely a in half first to it's

we're Maintenance to the to is see reason you continues the assuming second revenue because be the In converts, Repair flattish. same grow a going step-down is Service just in half, the backlog modernization at clip,

little to Now continue be a we could we half bit If bit cautious may there little be a there. second well, over in the execute more year. upside of the

Nicholas Housden

might that's Otis been Whether with feeding and and of That's an retention on more or it and maybe update kind you've for great. And into the when Because already. some pricing metrics pricing if of haven't Can slightly us general strategy. of that your on a like It's already? connectivity conversion? got profitability one just peers impact efforts any bit directly just of ONE. how a know then who's on provide I your different on we there's you see we maybe kind

how going. curious the just IoT to operation So hear is

Judith Marks

making pleased. really a ONE units Otis We're Yes. are The difference.

driving have this GenX the we shipping all conversions the with Otis are happening of We're Core ONE the of because Otis quarter. happening. ONE all all of year of in in volume that are shipments are our GenXs that and new and America, because We much will announced this China product a new our that larger North

you number the about would significantly So that which to in XXX,XXX that medium-term going a is we more past is us in guide. continues up tell where our in what be along journey XXXX, year,

difference. just bigger is ONE, our making units see more a a year got ONE general, of far picking more is Right up this and you'll over Otis than in connecting. Otis now, proportion we've connected now of It XXX,XXX than but units XXX,XXX that,

would not or that's by If of can't out part want are and to their offer to eView China how driven being a the screen come got same arrivals significant it's the into tell that but to across ONE really have convert is maintain elevator Otis we -- are figure ISPs anytime globe an connectivity. majority to product, productivity, Otis the we look that, our especially and of I don't who alone, an they from they on that running connected down at just retain you, that Service ability -- that. you getting And

on pricing. an working. We'll of but And basis. an integral said, it numbers is in It strategy. those helping we're on fourth part do annual our Service points. all as like-for-like It's X pricing, up quarter, provide is that we Service us with Anurag So

we're So up from last year.

being And honestly, I've that. digits mid-single doing with incredible this a in But few got is that pricing, in the their Service They're great Service team a are on to portfolio year EMEA there are is was our I and and a of kudos. of team, connected. ago half part outstanding. more Bernardo than job up give weeks connected and Portugal big their margins

it So difference. makes a

We're chose customers strategy, going to to again, that connection you, subscription subscription. were -- we Service how our it chose from deploy CapEx too. services,, people define invest seeing versus Otis opt-in having tell to ONE. Our would again, But we and the in you're getting I a And we margins.

Operator

from comes question Morgan Josh next with Our Pokrzywinski Stanley.

Joshua Pokrzywinski

the so apologize on how downstream a of will late, Judy, for you seeing to volume question. you things you weakness on I more the up divergence Obviously, But and might already little in of implications kind look pressure that national coming. jumped a where the the pick like. of the I on and covered terms of business is this it's on, have China I or conversion pricing are couple between where want accounts what maybe touched

Judith Marks

key developers. Listen, which we Josh. accounts, the them question, fair No, Yes. large call are

continued fact, those of that enterprises national accounts. now of private or developers. is are key key our Our a to And team as portion develop significantly state-owned accounts larger matter than the has

making really that's for So us. a difference

Tier it to but for outperform volume us. and the performed our cities. And outperform in The Tier just Otis But cities, cities lower-tier well. the was continue X not team also pretty segment, X for versus the lower-tier

at positive in segments same the quarter, infrastructure second the commercial. quarter, look weakness first in industrial. and were was as the the you more And China the and As resi

versus think we're like government to again, policy, set those we'll we going it's policy I tone houses. state-owned whether -- many these the again, phrase that's is being housing the happen was and again on, with years. enterprises investment. It's having with rates for just I -- then living lending what's mortgages, That used how the eases, then and no after the But whole philosophy strategy Monday on of longer we're seeing or

If stimulus it we're just second we've watching tuning volumes, carefully. sentiment through. the is half. upturn got ready or see flow it either there think an right for helping So the We you'll with on we're and

Joshua Pokrzywinski

over your or just question. conversion to And discipline? this more [workforce] Jeff's a of of business scale us ramping attachment more up simply have to to helpful. volume customization? the this that do business initiatives getting shifting on need good That's know are what bring I on time. and up aspirations of end. of the sort margins or Obviously, waiting back it. just are Got that rates your it margins backlog? a you it game standard you those price is versus Is Is through to rates up? mod the and Or milestones key Sort guys either over the then function the bring

Anurag Maheshwari

build you level mod right? great bit it's if So sort answered and you it kind think to of already margins Repair I New we sustained up strategy, everyone, set our even and lowest And But and those business a obviously, a relative it look A we seeing of as and firstly, is question, to the we're get Maintenance. products just because as everything, our we're today standardize scale, of scale. Josh. go-to-market segment getting kind we pick Equipment of margin as at more

X the over confident you as should next X and now the that pick overtake fairly that margin see months right that are well. to New the are Equipment we trajectory on we mod up margins So

right on a it's now. So track good

Operator

Our Fargo. comes next line O'Dea from question Joe the with of Wells

Joseph O'Dea

just back really orders thinking end And some the the wanted about thinking of changes market if views the you in understand obviously, of how circling revenue not it's think what revenue impacting impacting the how start implications not I'm you're year of about even in for the really 'XX. dynamic. sure the 'XX. -- on you're just to on with terms kind to I backlog about

to how happening rates of what's advance and order maybe things chain and out think supply I'm is you execution there, not interest improving, that as in don't this so project versus folks through just like And far improving, as much credit. need sure

and you the revenue sort few about you trends past markets, in months of can of the kind implications And on revised just that views if the to then the so as any some now. of translate right think demand

Judith Marks

Yes.

that's ship, let seeing and you're few with volumes we're that the top me touch being helpful. is at a able and come just level. to chain been So improving, through on Supply the

well. As a outlook million for remarks, quarter, about we've second Anurag said and in tailwind had upped commodities his well. as commodities our in We $XX as the improving opening are

positive. So chain price up, that's up, supply is commodities all fairly improving, is is

-- is bounces question backlog, certainty what the a probably China, again, Our and/or and when really -- at XXXX record. And it with China us being mark we back with see some at level. will or through on

slightly price/cost in Our price/cost And in China China, have neutral at China first productivity. even we material is team has done job an of on incredible least the competitive through pricing extremely though half positive to year. hit the

to no our structure. it ready. we're So we'll there's -- change If cost market back, come change stimulus, and if does adapt to doesn't the continue that's and going

Anurag Maheshwari

mean... I

Joseph O'Dea

And go then ahead. --

Anurag Maheshwari

No, ahead, Joe. you go

Joseph O'Dea

wanted pricing I on touch to well. comment as the just

also in improve? as And demand bit indication so seeing developed of maybe you as to costs patterns well pricing implications just just of any from pricing in there And a then China, starting markets, lower trajectory has been recently? any are little stabilization

Judith Marks

So being down is one has China to yet no pricing it or very unrealistic competitive. But taken undisciplined.

market-wide. the challenging doing seeing matured markets, emerging I price, we're that rational the same in things. it is and to most that's Everywhere get -- the So seeing we're good you And else for competitors and see the price. us place think

Anurag Maheshwari

Americas EMEA are we mean and to Asia. I in seeing digit exactly. in still price low increases and mid-single Yes. mid-single-digit

a coming the key going But let's down. productivity are. be as it trend if more we so I And Now bit commodity But far, do positive now seems here how And this is down, could we're of the continues. little see to pricing to metric down, think costs quite come material rational. you neutral see comes price/cost.

Operator

of line question next comes TD with Khanna the from Gautam Our Cowen.

Gautam Khanna

relative where Just to indications you might backlog of in the head do have pricing stretching, extending 'XX. lines seen early just it's softer? any then curious have time bit any on or across you follow portfolio-wide dynamics of a been up orders was to markets have on 'XX. I decommits read just secondly, of these 'XX And an where whether

Judith Marks

Yes.

decommits our So on nonrefundable deposits business. don't in of kind really happen based

that people XX,XXX globally day. do in order keep there's So every installations a lot double a not world at the and most single -- that are going careful small don't decommit. of somewhere -- we that and jobs the we eye on low percentage a jobs measure It's very digit on

Are there the away have where labor challenges trades seems we some times to slowed Americas. gone past That from down. there -- and in this the the have have in experienced been other and jobs

stretch out. So that seeing we're not

we've a when got So that we potentially verbally it at go the booking get we've carefully it rates like that, proposal, as that either done of a we're and because deposit well. watching things and when beginning we to doesn't them awarded, been but see

strong our to on that backlog 'XX building for on We're talk and the half think to executing focus I us too second early going backlog. about and keep it's pricing.

Operator

That I'd the concludes session. closing to for to turn back like today's question-and-answer call Judy remarks. Marks

Judith Marks

Thanks, Liz.

in shareholders XXXX first as delivering continue the execution Our results of joining beyond. Thank well. call we continued stay our we of the safe value focused please strategy in today, remain our you the reflect half and the on and and for all ensuring for balance

Operator

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

You may now disconnect.

Otis Worldwide (OTIS) 26 Jul 232023 Q2 Earnings call transcript