OTIS - Earnings call 3 2023 | Otis Worldwide Corporation

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Operator

Good morning, and welcome to Otis' Third 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 at www.otis.com.

I would now like to turn the conference over to Michael Rednor, Senior Director of Investor Relations. Please go ahead.

Michael Rednor

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

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

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

Now over like I'd turn the to call to Judy.

Judith Marks

everyone, in everyone hope you, Starting third segments, us. Thank Otis of and quarter, profit XX% organic Slide both in well. and the growth. points and for execution marking adjusted listening sales QX months safe strong growth achieved EPS XXXX. you, X expanded that XX We basis highlights on achieved with with X. thank We grew is solid in joining margin operating results Mike, X.X%,

XXth Service growth the operating strength nicely organic quarter quarter marks and backlog consistency up Service consecutive expanded, strategy. profit where With execution sales our demonstrating has ourselves and both the in This growth new and XXth the portfolio margin maintenance the the our have of in equipment X% set our of modernization, above our fourth of future. consecutive growth and we quarter for

This to largest building in sold the And our our announced the elevator we North core America. in our new the by X-story America. X- needs addresses quarter, quarter, North in launch of third the of we customers product segment, volume GenX Last the first units. in

drive progress commitments. to continued ESG our toward also We

us EcoVadis, all the second rating a assessed companies. a top ranking year row, in of achieved the within from we gold For X%

the world's one most named greenest been one of Newsweek America's trustworthy to proud companies. also and by We're companies of as have

In development British and Edge by me customer Let mixed-use a is SkyRise few elevators share Otis GenX Yards, Columbia, the third for a South Anthem properties. providing quarter. X highlights from X

include will square than park. office units a and of surrounding space, XX,XXX and feet community retail over X-acre Yards South residential more X,XXX

Hong supplied GenX to more complete XXXX. is Kong's XX universal to Construction be disabilities, In improved enhance for elevators expected units the to Kong of walkways. part were people a aging will of and SAR, XX initiative. These population access accessibility than July elevated key provide with accessibilities in Hong

headquarters modernize Saudi we elevators Arabia, to a the Saudi secured National at XX contract In Bank in Riyadh.

the in As IoT which existing relationship part units, units has Otis high-rise upgrade project ONE solution. with National controllers modernization, new Otis Bank while builds of on This we'll total. XX adding in Saudi our headquarters, our the the the

proud to a we roughly at critical XXX serving airport. Asia, these China, maintain as year. to to the say a units access returning East Pudong is passengers contract a in Otis We're at of each now while portfolio million all Pudong And Airport XXX Shanghai's recapture. in XX units also received Airport, point maintain cargo we with Otis the

spend to and We driving essential processes announced X across and areas: on optimization. gaining quarter, and program we our began global initiatives our generate efficiencies executing in to our Uplift QX last organization scale synergies, focused supplier unlock indirect standardizing

run midyear by $XXX our savings rate We XXXX. million track of to stated are expected on meet

for further effectiveness initiatives Taken profitable our sustainable together, these and drive customers, organizational growth. value

growth Asia Equipment up outlook. EMEA X%, the XXXX And sales Organic X, the QX in Pacific. up contributing. of grew Americas, business Service results and X.X%. in quarter with and all Slide was with $X.XX, to Moving lines New

the at X% Although at versus was backlog year, New XX% currency. prior Equipment orders constant up declined

share us gain leaving flat, relatively remained quarter points the of in year-to-date. approximately basis share Our at XX

the Order and backlog Service, orders In up quarter than modernization in line Pacific and mod Asia remained orders more to Mod QX, over growth by was strong, consecutive EMEA of XX% in and XX% up Americas growth performance declines in in China. and fifth offset was quarters. China the sight of us giving above XX% strong EMEA, Pacific. sales Asia next the drove several

flow, With higher adjusted We by service XX income. of operating profit quarter, margin net expansion. operating free points $XX points, million margins generated of the million in expanded of basis adjusted driven basis profit growth by driven cash by we $XXX XX

drive we portfolio X%, on expanding margins a increasing several base growth. summarize, Ultimately, in EPS execute us we're macro just strategy, mod the up to set while consistent as XX% which cadence relatively business, operating the for our we giving to I'll leading the Equipment executed next weaker profit To above under the strong backlogs, quarters, picture next. despite our a we we're facing, New growing well discuss believe ultimately and operating

to low step single it although up now We grow, be quarter. For expectations. expect EMEA mid-single high that from bookings, prior decline unit continues Pacific in will our line digits, with last to global we for to our New anticipate Equipment digits, a down Asia expectations

ago XXX,XXX now to to remains challenging. mid-teens, this XX% we as total, the would approximately New Equipment decline down we and than expect units, versus worse global decline were anticipating around a China somewhere both just XX%, few In XXXX. macro bookings Americas, north While of leave months environment

off put the their year-end, Service, Service the smaller approximately booked that ago expect end of warranty maintenance X million this by X.X million units In and X Equipment will grow global although X.X X% as XX around portfolio. our X we to than units units unit to to nearly million we global X which million we installed still installed years to base were somewhere between XX periods. years year, maintain currently the year in New roll base expect are Service ago,and anticipated, to bookings installed This

outlook. Otis' that With on financial let as me global you now the backdrop, update

of of approximately a $X.XXX million sales be up to million, our raising EPS, $XXX year. still is with up billion actual flow $XXX prior for outlook currency, exchange constant about operating At now profit $X.X approximately share is million. foreign currency. the expected conversion growth up be of expected expect free $X.XX, of billion, organic operating expect headwind We of to including profit approximately versus about XXX% XX% billion. at sales adjusted net expected repurchases net We or adjusted Adjusted cash be X.X%, million. We're expect now $XXX We to of income. GAAP $XX $XX.X

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

Anurag Maheshwari

constant and up at up XX the wage operational to by in versus million, X.X%, an improvement billion fewer prior $XXX everyone. corporate which pressures, with by down results increased capital a tends lower business $XX versus currency, in $XX or in coming of and at increases the both Drop-through million Equipment Adjusted on XX.X% quarter Starting pricing higher on operating rate, including of Thank to in with sales basis service of quarter. our third XX% tailwinds you, work in outperformance year, profit Slide sales productivity expanding driven our repair actual grew areas. this cash X. flow we free Year-to-date, organic segments. generated morning, were higher growth XX.X%. million the with million from Free as be and effort and $XX came and reduce X.X% and combination lower strong year, on the inflationary paid Net with Judy, million by prior $XXX and came payments volume, flow from of tax net good segments ongoing annual of largely the and of orders allocation New at margins initiatives FX at costs. Adjusted performance rest points partially offset were $X.XX, commodity EPS this continued half income. to over $X.X cash driven

to X. Moving Slide

third Equipment declined Let In single-digit quarter orders outside giving backlog in increased on color flat. constant low New is with our me X%, New Despite Equipment backlog. stable year. start was XX% Americas by roughly this, QX regions. and China the China, digits. EMEA New our Equipment at prior Equipment growth and backlog orders versus currency, New some mid-teens Pacific, Asia all growth relatively of Sequentially backlog in down single in the

New was third quarter single year. the a on increase on Equipment prior up in low of orders the pricing similar building digits, Globally,

improved or digits in mid-single by pricing better regions. China, all Excluding

mid-single region from down the China neutral due continued on was our digits pricing in macro Although to material in cost price productivity. challenges, driving remain focus we

growth New strong Equipment organic quarter, sales outside were up X% in all in China. of the with regions

consecutive second with New East, tracking significant executing region low by as as Asia grew EMEA, high Equipment digits, while the on high In performance for in digits by the grew the Southern Americas teens single Europe its major multibillion-dollar well backlog. Pacific quarters single grew several and past orders projects. in continued over the underpinned India Middle the driven sales quarter

Driving at operating from grew profit currency than margin pricing sales quarter. in in constant despite than tailwinds in million We China Equipment to expected. and the regional project flow coming offset the mix productivity, more backlog from commodities New leading headwinds, the a through X.X% $XX by weaker

in another up segment XX%, fourth China a Service delivered X. orders with from We including results strong offerings. to in Maintenance Turning all quarter high up new led double mod growing success row. growth regions, continued the on digits of orders, Slide product for X.X% of modernization quarter were units in by China growth

from and North major number project digits Asia. double grew also coming wins, of with Pacific Asia a performance due standout volume to

up orders in all mod with increase sales across grew X.X% highlighted was organic in lines At by to expected XX% contributing regions, repair Asia. X.X% in with quarter backlog our of growth end, Service volumes, business of driven was higher-than-anticipated X.X%. revenue mod EMEA regions. better than wins. was double-digit and project up Maintenance major all with all from by XX%, repair growth mod came and growth up

of wage a points. partially points XX last the offset volume, and material came costs pricing mix XX.X%. million currency. points, and increases mix and and X leading excluding pricing, expanded similar favorable by to in and adjusted higher margin profit to service churn, productivity performance, were churn, quarter Service $XX growth net profit quarter's X was around at operating to for basis constant in adjusted annual Service Higher

are with delivered grown and expanded we at over results well portfolio in Overall, as X% our XX% year-to-date. Equipment growth. We've as quarter pleased the New EPS more and the backlogs, our

guide's to be midpoint X up are $XXX million, with Moving operating $X of X.X%, to increase profit sales Total to is at our approximately growth by currency the consistent Adjusted be revised and prior slight including the result performance segment. segment. adjustments million in versus constant organic expected outlook. Service sales. prior the of expected the Slide midpoint guide, and with Starting Otis the a strong

and euro adjusted higher profit various by driven CNY. offset headwind in At is operating performance the a as operating currencies, actual of change slightly better as weakening and of such a the the exchange currency, the expect we $X.XXX billion foreign by Asian

margin to expectations expected unchanged, just with to margins points to approximately basis expand puts points XX expected at points. basis operating This XX%, XX Our New basis under XX%, remain overall X%. margins margins Service to up expand XX Equipment

guide, be now prior We force represents EPS, XX%. midpoint, have XX% at upgraded prior to adjusted improvements driven expected versus below-the-line the the operational $X.XX. tax, end up the and guide's This our performance largely including by expected to to to year increase in strong items, a

roughly of have We and repurchases. $X.XX free cash a it billion billion through share return approximately to XXX% of shareholders and substantially generate all in conversion to rate $X.X dividends flow,

the digits growth We of The still and sales sales we China, down look range, the organically. further equipment be prior driven larger-than-expected end the to which approximately a low in are expected X. new by Americas EMEA on outlook expect to headwinds Slide Taking now mid-single at at organic digits. organic X% grow expect mid-single of

us the which we Modernization up backlog, end. are pricing, by another XXX to with was prior Consistent prior to to the In midpoint up enabled as our versus quarter X.X% growth sales volume be strong quarter and point execute basis organic the unchanged, portfolio at guide XX% expected up approximately driven maintenance Service, X maintenance repair and of a organic of raise by on guide. X% outlook increase sales X.X%, versus up points remain the repair. together expectations

Slide XX. to Moving

by expectations our now operational and driven raised year, adjusted for of have increase XX% $X.XX the or $X.XX, We a expect growth of EPS, improvement. $X.XX approximately versus prior

our well In continue growth driving to closing, business uncertain and we an the is environment. Service we macro profitable control, can execute things in resilient on

positioning beyond. us gives and our EPS perform deliver raise performance to year-to-date us solid strong again and in quarter, Our while outlook a to confidence well fourth 'XX

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

Operator

The Instructions] Sprague comes [Operator Jeffrey Partners. question Research with first from Vertical

Jeffrey Sprague

of both into maybe bit on Judy could the downward just particular of trajectory XXXX in the China New those and view elaborate we Americas and as on just Equipment, on your a outlook, exit kind and XXXX regions. Anurag, tick even you kind thoughts little the more in

Judith Marks

to, Happy Jeff. Yes.

Let me start with the Americas.

in down data. -- now starts. the recent Americas high. Dodge the that It we're seeing So the mid-teens, highest the is remaining that going and we with now really project the we're Equipment being and market impact is believe ABI New seen really interest in We've to be most impacting new rates

we're worst performed the followed tell quarter the the So and you residential quarter, relatively for watching closely. that not would infrastructure great, third by I flat. the commercial being in

into to infrastructure expect as We pick 'XX. we go up

equipment. a conversion, performance to just of backlog quarter, we that's the it What later the really in majority the strong for in in especially beyond the infrastructure XX I performance, with site you Americas little gives is new position, but really which do fourth us North business. for terms had all strong early about in That have Americas is the the puts sight construction tend would us see on with not they XX -- backlog the like months activity good still the that America, of versus We tell in mid-single-digit a their in companies, next to really our cycle and the a our starting. Americas, I

happens will new there, rates. they If is with adjust. the think We're equilibrium or projects. does real. still So and we become out interest is It's see decline housing in people what demand we'll the when go seeing so interest not and with with normal, Because see have wait developers this a ahead proposals. and wait come to terms of we to this where going

people it's projects to start So conviction a we perspective. development really about the this point, -- at having from

remain that saying it's we a weak, north In saw see market and itself really inflection told China, it's down. point you China now The for it didn't somewhat Equipment down ago, worse really is and the when we New does ship. XX%. we quarter market book than of We're

China. well be done to China. managed scenario So team maintenance offset as And drive in I side that more continuing are in we focus what cost price of this, China terms pivot we've able in productivity really we've material our to on in as to our on proud the to of be couldn't neutral how

the picked up in year. share for have We China

fight introduction our will And key which backlog play, so strategy, even is been and for execute the on team state-owned expansion units continue, all and we in has new our though which down, is focusing on Otis product enterprises, continuing ONE. and to is accounts mainly continuing

our up digits. for or quarter So year, the this is straight up mod sorry, in double -- for fifth it's China

teens side straight Service So far ninth had single the in year. growth. service of We've quarter to mid- all on the -- high China high

of nice place this provider. of finding in becoming a to a we're So there terms more pivot service

other being X% quarter China. in China I you margins highest down, is with But to nicely is Equipment China for results our on despite picked it what be able up grow our for New hold the to with regions X%, fairly X down at us New margin even significantly. and the see organically Equipment And think really

watching So we'll sentiment taxes, policy we're see Obviously, that terms are really in support, but terms in easing X we seen for wait and postponing happens do of are monetary actions certain credit we've Those property China items what and mortgages, in liquidity. stimulus. loosening the of watching. already

Jeffrey Sprague

just a Great. direction. in shift to And different completely

million you're maybe see color. little in You that results the that kind Uplift conversation, of I of QX? it guess, of Is How getting pun do ground, intended. started off But talking just staging $XXX you bit about? with a of the the kind Judy, impacting

Judith Marks

no days We company kicked lot off lot spend. there -- and the process QX. the in of key on A We've us. model. just impact Yes, is including for operating and early activities, focus indirect now of the a redesign inside education

decisions taken really XXXX all as we'll We're when and $XXX very start comfortable the the You'll done, is rate. see QX, absolutely but in the through of run achievable. already that well start you'll million that the impact, we've analysis we've seeing slightly is some achieve that as coming with then

Operator

Nigel The Research. comes question with from Coe Wolfe next

Nigel Coe

update Just pricing I of rates, cancellations globe. now to So on the down digits. kind more maybe, understand that. And a the projects with seeing you'd mean like canceled across wondering any are -- want but the China the product rising the some just with we mid-single weakness out? dig it into then I bit

that there China kind lower. the I view was bad margins perhaps because not of think much as down-cycles be prior would are that as

risk price China. curious are seeing in just mentioned or margins Or in you there? further rather And see margins? how China in deterioration China, some cost positive deterioration are neutral So in you hold the of we remaining

Judith Marks

Yes.

start, Nigel, me any that seeing And There we in project the Let cancellations we're level different are small project retain that at but everywhere in cancellations there. not than say a occur, which the unusual advanced past. have amount Anurag. have then and of always we I'll nothing globe. the in can deposit, the we deposit,

of sure me everyone revenue. terms just China let our global that make XX% now understands represents China, of In about

are for several there reasons Now that.

X is $XX.X down and but One us the growth. can now X.X%, regions impact China of you outlooking billion pickup in and a see organic second of the is their of growth market, revenue in the with terms other

Americas, So traditionally. revenue, XX% in now growth, Asia presentation. nice EMEA, saw that Pacific, from of revenue is down really call our as you about total Anurag's China good out, But

now. are don't price So cost, why that's just the reality Anurag, of numbers where you On comment? the right

Anurag Maheshwari

Yes.

coming in pricing material the productivity. driving a as there right? price but well. are New China, neutral it's we Equipment either mentioned, over economy on And So Nigel, as are on you is deflationary side we definitely In down, cost, hard positive, or

pricing China with all even in in the margin market, of though China Equipment there's you discipline if And together, we Equipment you saw going look And quarter to now X% outlook, is as right able New about that to a even is be third and quarter, margin you the at at the implied of going So the being New fourth X.X%. to combination are is that cost down. be mix put offset favorable.

through is pricing of XX, is that started other in And price So quarter over markets to second, backlog, that our all a flushing the to up in months, has the couple of cost. commodity past saw reasons. it a P&L. obviously the which One in gone pickup is We're next, tailwind. going see pricing. similar $XX this million again another the We the and XX

if So XX to still overall, snap on tailwind next backlog so year. today, which at we should probably if in I right, basis another is XX million look we $XX points. pricing up line the or And the commodity see

for these New us things add more China the a up You believe together, is of I margin rate. sustainable that to X makes kind at mix it think than for our Equipment

Nigel Coe

Okay. there's there. Great. I I follow-on. a more And questions as can know get If about one X

to program a on on by question Jeff's Uplift follow time. [indiscernible] Just this the

exit associated run And that the of I'm run be rate. in million obviously, of $XXX you a with 'XX 'XX terms that restructuring rate, saving? savings? would in what So comfortable sort assuming What feel FY down would cost

Judith Marks

what's so get obviously, our 'XX be going going back Uplift that. We'll for -- we you late be to not January. guide yes, guide we're need when to savings, that to not you, in we're to to know we do Well, let do prepared just to 'XX yet

In think terms we've I of been... restructuring,

Anurag Maheshwari

Exactly.

give off mentioned, us, year. update next we'll program to an Judy is great a for as start, So

about cost to the achieve -- $XXX restructuring million savings, million. terms of the In of $XXX is

next going savings It's to to quarter. obviously, in And so seeing right? going start But year. one this coming on start the we're one,

Operator

next with The from comes Mitchell Julian Barclays. question

Julian Mitchell

start Equipment outlook. global to wanted off New Just with revenue the

to feed the you've Equipment of off. flat I of half the the slower It's down we out the been look orders down that X%, good off organic sort assumption about year-to-date, and there down you at the the very world. in are backlog how start XX So Equipment of sort the then though, year. Is just base as when up year-on-year rest New sales New nature feeding X% XX%, quickly New current next think weaker fast a in back water those sort year sales of backlog in rolling and through? as X%, the then wondered orders on maybe Equipment months China, it down wears we of of

Anurag Maheshwari

We are the the orders even question, do Julian. Thanks backlog low is X% quarter, New on up to firstly, Yes, for that side. Yes. mid-single so fourth our the digit down our think Equipment projects. some couple And backlog flattish reason over to up. be book major the of of than to is past to revenue we in because tend going more them years, is slightly the orders if

by should year. end our backlog assumption to the of So is that flattish be up

Now Pacific, of within about together, that X/X digit, is up that, our and we to Americas, Asia that mid-single roughly low if revenue. backlog put that Europe and represents New Equipment

be of should low that to next So mid-single year. kind digit up

where low happens down So what China variable, know is to The single end now, could digit digit. it not mid-single Right by market be flattish, to XX%, down right? And digit. over there, that, X/X be China. big that's happen. say, of of down be could be up, It could low single going it do the we the Let's revenue, of to as it with is could year. the is backlog course, which

revenue But is China be that equipment let's and goes year our next the flattish. probably mean down could X%, that down new assume market that then would so

X% but million, So $XX $X.XX a X%, in up X% or could or about profit, Equipment of dollar about $X.XX all margin, $XX which be it is revenue. we if million, at is could EPS. -- of couple look be of revenue flattish, things million could hundred X%. million $XX it's And I New it down if put it perspective, be But our

-- of If of to why this overcame every Service. more we and at up our you guide back we did than what went the we look because is the Service back year, which business,

we business. next able should be year our think through up service that make we to So

Julian Mitchell

margins helpful. very Service my be just perhaps. the maybe follow-up around And would That's

is element on I QX margin one So in looks is despite increase sequentially in sales year-to-date. flattish of Service maybe guide and the like year-on-year matter, just a some if big flat down incorrect it sort the

that's are if of conservatism just a next about how have tailwind Just Service thinking into margin, please? price wanted cost getting net sort service year and what the we of wages if or right it's cost of out? to sort And narrowing secondly, as or you. and check Is playing then or price material that larger on context around that,

Anurag Maheshwari

Absolutely.

I'll So it separate up X break into over questions here.

yes, very we largely by implies side, where basis very for sticking. It's X the mean is, XX.X% We at because I XX, a pricing at XX from growing, what mix. It's there's XX% first XX% the we down -- actually the was XX in rate. we quarter look the is -- you basis which is guided It's exit we're margins portfolio maintenance reason a same margin is quarter, going difference year third year, points -- is the full the fourth we portfolio fantastic. margin mean I things. grew guide and if I last margin are between in a encouraged. the quarter. And mean, performance But last healthy year. the Service in compare year So the it's sequentially tough points. to

and slow strategy portfolio, the We team penetrating the the are it's down, it's flushing not. very of after because we And going revenue. repair backlog to that of thought mix quarter. of high business, the is which And third years mod was in high into growth of

us flattish fourth quarter between And mod which to the obviously, that growing is QX to repair get and the productivity, XX.X%. be digit. The and now difference double big helped in we're QX assuming

the mix what about a it is that lower. side. the year for on exiting But Service be feel margins is at to the so we're good leading pretty guided, So which impact we

Judith Marks

we've especially is pricing question, price the while And productivity. with Julian, Yes, talking up another we again had have mainly we negotiate for year, with about with for And we on be wages to which the this first, contracts high, Service able points. 'XX. inflation, levels in on able that the doing to EMEA get and inflation, what backward-looking has our Inflation quarter know comparable inflation. as had majority our We've pretty maintenance next second X been wage to, we year's where staying Americas, need that to price fairly and inflation be side, are offset Service we second at in been we're to significant. should like-for-like we quarter the expect of

have majority of X.X of else our everything now. sight books, prices the line in -- left go go in contracts we commodity maintenance as are months We our to as and now. with The XX

globe. So to we're actually that we've both And the in and of and treated feeling bargaining negotiated fairly, our price next recover know collective cost. we're year are Most able productivity. and we've majority And for our price pretty good I across about Service the mechanics pricing with them of represented. I think

Operator

from Fargo. next Wells The O'Dea Joe with comes question

Joseph O'Dea

back months into expand the of could revenue to you next you I just on visibility backlog. wanted circle to XX how on comments, much have and backlog generally based

of in particular, would in and be coming seeing China, booked that and talk that and then China. trends Europe, in some in and in out And mix mix the then shipped, backlog be would then Let's of what and you're recently. about those Americas book-and-ship the

Anurag Maheshwari

Yes. Absolutely.

earlier, enter major America EMEA at year converting. said kind particular if and of it Americas projects have than We low digit of very more confidence the backlog, we any of a year and line in got very -- -- long-tail as We coming out next we growing XX-month visibility projects we with revenue, Europe the of is there, reason even kind snap backlog. look single you that why is of today, quickly have XX%, well. we XX% I If high because of significantly our other we have revenue

Pacific, depending and backlog China where ex very double lower the upon higher digit one is only a which mix. is is the we geography probably is that right? bit But China, that have ship. little Then Asia Followed up, book by probably up healthy, it's

say is for for would low X X/X over of year. So of the we when which from the and to is we and probably to backlog X/X growth go. need that year, next few the the the that single-digit months book China from the next only ship, X comes I feel it's why see we enter comes revenue regions, variable

Joseph O'Dea

market helpful. on up some Got for perspective several you they're perspective Can over the -- on last think softness about are. How it's total in have then where talk relative some you volumes for setting it. And trending to terms the been China this just That's year years, volumes constraint? the next where year? current of where

Judith Marks

currently we this to market. we would you probably of past the Still having XXX,XXX XXX,XXX to to we obviously, XXXX-ish Equipment that year. XXX,XXX, for the down to peaked market healthy if large, go X had, about units. about now at have so That's go units, Joe, years back China, back coming still and XXX,XXX peaked at years, we're a global XXX,XXX New for to this. like -- the segment probably where And in time frame peak tell been you you a pre-COVID

about strategies than China, agents distributors, we and spun. and which year still share we we there this a and in we being it's of X,XXX as to very our we think gained have more agents will now since continue partners, look attractive execute our so And market. We've distributors, twice our

on an that are also We really our cities focused tier impact. the accounts. key focus And on having we've

the the as market are then way segments. trailed off Beijing, you at cities And quarter, all look Shanghai to Tier X. X if third Tier best obviously, it the So you -- got

helpful, support are why those as we've internal our relationships again, strong us. sales key yielding The our accounts, and are distributors and our strategy. they're So as adjusted that agents for so folks them. That's well

Operator

The with Stephen JPMorgan. next Tusa question from comes

C. Stephen Tusa

China. trends on in the mentioned of what's You going

had down. one be? good I But think any some think of numbers tie reconcile to But share X you maybe I -- you could just Obviously, difference reconcile lumpiness. curious just those perspective your Can orders that? together. there you what things trying maybe quarter, just the there, help some a might from you there's competitors guys pretty today. help -- were I Because obviously think don't were I maybe

Judith Marks

Yes.

the have you're has strategy. organization tell I a level is orders what going productivity our in information. basis doing, to -- -- in terms on competitors when And more cost you we're And but China is argue, you'd can an team of the material our China on to so and are can't kind annual New out quarterly I of comment our think both for to lumpy are like something hard I would downmarket, our also that. on board driven across both some executing I team of and Equipment. share fidelity in really mean, do I that a you measure kind again,

Again, China modernization we look Service. if tough And you spun. lines in -- digits double regions has China. back, Service of our in seeing XXX,XXX all team growth environment driving year. New in step a China But more has in our macro We're in we're when good at especially than Equipment, which Otis, we're now double component, our and in of this business from on really business units outside this grown added despite you portfolio really China, has growth X and

we're mod finding into the So -- factories. we're moving

take So and to we're going optimizing really, the globally, well basis there, as business as that you're in China modernization off. cost see

And Service for because units commented getting But know for that that we mix. worth to actually bring business it's our portfolio. fourth watch quarter think us, -- That's what will to Anurag we on more margins. modernization need it for we

million And think million the our a you going portfolio -- quarters X.X X%, X spun, growth at we X% So strategy X of X.X in we're of year it's lots million XX this end globally is for to it's end But now this us throughout us we're million when strongest. Service-driven million, answer straight segment, leaves room still at why going decade units to that And shareholders. X.X portfolio. over about the right XX at we're and the convinced growth the before units year growth. is units, our and for and that's

C. Stephen Tusa

service very strong. the is Clearly, Yes.

on Just question that cash. call, on part for but the a first of cash missed any tweak the reason I specifically?

Anurag Maheshwari

-- okay. It's absolutely. Yes,

would single-digit thought work. But are second growing downpayments end on reasons. a got been is the is question our X be little lower million, P&L because the which for -- $XXX we orders, in it's I clearly year new One of have a sales, So the million. guidance, firstly, to also guess we is paid is profit cash, a for Great rate. tweaking about low repair, lower. there's this And bit at get of repair your we equipment business, we $XXX low at on very do which we great good side, complete but after

little So receivable of it's a a drag. bit

flow see bit it's why in of reasons you think combination these little a of tweak cash the I guide. a X a

Judith Marks

of when get repair, collect. back then any to what world. customers repair need we we're for I Steve, it's going an we really that gotten know customers know them that in that's listening, down, they and sure think they've happens make we repair. up. important elevator do And And bill And the follow-up Yes. our We they to a if

C. Stephen Tusa

the in last on kind impact one one. is answers U.S., a going. questions. the thanks the multifamily where to for And you Any quick guys Sorry, to that lot volatility tell A in lot hard of from business of that?

Judith Marks

Yes.

I our worst the quarter. multifamily from past the perspective, So a perspective, the mean was U.S. was segment this in that a -- performing market

for demand answer. seeing multiple off it's cash the when about But years, talking developers still advances it. and down highs was for on his Now which just that Anurag button, in the record those we're get slowdown is start we there's

is the for demand and wait out will see. there still we'll this math developer where stay they So are, rates for If figure because housing.

and strong in in of we're -- multifamily North mid-single a America, is But a digit, including in backlog So lot wait see. logs. our especially and

come. as we're then team keep and So going they to drive our will them performing

Operator

The with comes next from Housden question RBC. Nick

Nicholas Housden

flow go that yes, back looks I So China mean, like on are free to it going XXX,XXX just cash mark. unit point, that to

wondering the that of the the over medium needs That's a already to you've to target So conversion reset first just XXX% there got? on for I'm be the term, means sort current XXX% if from permanent that expectations that, one.

Judith Marks

Well, no. reset. No I can take that one. The is answer

Nicholas Housden

Okay.

Anurag Maheshwari

Theres also executing X high lower no lower backlog. new the -- -- reset definitely but on we're because the orders,

also converting So more all revenue start And will the normalize. kind cash. -- repair these into will of will

there's don't yes. So reset target, the to reason I any for us think

Nicholas Housden

clear. in dynamics the a Very second question competitive just Great. on of Then Okay. modernization. some

you're especially some be competitors Or kind So a else's unit, it of the your the European that does modernizing you almost one someone China, are always sounds your case like it moving unit. or modernization? seem in competitors when you And units guys own Asian into eating on modernize of it's very and guys often, it's there? lunch portfolio. focused their Are the then to that why just not Asian of

Judith Marks

Service low, remember, Well, by is your in of China share units most of that all market -- our non-Otis the is hypothesis accurate. pretty XX% -- our ISPs. is in of the share our equipment But China are on is modernization because maintained segment

it's necessarily wouldn't many I back European. they not on say specifically are but can't some So we're they're portfolio, on of -- Japanese getting are who comment units, Otis units units are that non-Otis the I or not are.

and portfolio. hardware able it, convert to very created our to packages to what done innovative we've on to equipment new be our to But then into technology it modernize put a we've add non-Otis

Operator

Gautam from comes Cowen. with TD question next Our Khanna Instructions] [Operator

Gautam Khanna

had questions. I X

this seems I wondering comparable just why region, the inflation last your of that have on comment was if year so First, next this year? that's you of about elaborate And by to that level below of escalators Anurag, and then I maybe given follow-up. year, a being could year

Anurag Maheshwari

Sorry.

on price business, escalation? mean the Service the You

Gautam Khanna

Yes.

Anurag Maheshwari

Yes.

listen, obviously yes, index. start pretty from in Europe, about let's portfolio most linked of Europe. is they're contracts high still right got our of are Not not in year, over And as our there. we Inflation but there. high half an and off as with last where negotiation, far too now So to

be pretty next pricing Europe feel could we about increase level the in again. around the mid-single-digit year good So

Inflation So greater that's coming in so also not is the extent, should we down a that. really see encouraging. Americas to

these been on The I pricing low has us Service escalator there price think, rest more of a So will price give discipline, is And side. the never confidence continue. Asia mentioned a X always that on price increase, earlier, I mid-single-digit but definitely to as going it's up. China, market been

going there's confidence good put that top another portfolio which us increase gives So of grow of our together, it mean that be year should mid-single plus. growth, digit all to maintenance business next that price our should on

Gautam Khanna

coming year-to-date Okay. Service in a talk follow-up. about renewals? a in little quarter churn on And maybe you down bit the quick any just trends Could and

Judith Marks

an annual next that no So we'll there's share our we but at seen, but share changes We earnings. that basis, will our statistics significant quarter on that do we've quarter.

Operator

the Judy remarks. further no now show closing back time, I At turn I like questions. for to to would this Marks call

Judith Marks

you, Thank Yes. Michelle.

the indicative Our remainder unit. by portfolio we Service-driven continue each for our creation to as and is we beyond. the working additional the are as strategy model with tied of our to business unit shareholders compounding strength Year-to-date million year-end, approach life of for prioritize X.X XXXX results value of

and Thank joining And today. well. you for safe stay us

Operator

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

now may disconnect. You

Otis Worldwide (OTIS) 25 Oct 232023 Q3 Earnings call transcript