OTIS - Earnings call transcript Q2 2024 | Otis Worldwide Corporation

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Operator

Good morning, and welcome to Otis' Second Quarter 2024 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'll now turn it over to Michael Rednor, Vice President, Investor Relations.

Michael Rednor

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

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

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

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

Judith Marks

joining like as experienced us. well. been on hope safe Mike, and welcome this joining Cristina are to is I you, EMEA team our in the our look colleagues an value executive good program. and finance and evening, for growth, for Thank transformation all execution with I'd to operational Mendez, afternoon the earnings call. morning also shareholders. while our drive forward region us who's leading I morning, who Cristina Cristina CFO and past Uplift our my is our everyone. you under years, and leading Thank partnership global finance X.X to customers, for

services his I this our to in for and and leadership for his our want all take to long-term Anurag also company, growth to thank strategy. championing contributions our opportunity

within EPS the adjusted segment fourth QX strong margin the adjusted mid-single of delivered grew or solid drive points, in XXX a Overall greater earnings, as performance. growth. of XX% face starting marking Otis consecutive our Service adjusted Service with XX%, basis grew organic profit challenges expanded economic second Now EPS on by quarter highlights sales to X. Slide for continued current digits. and quarter China

the by future ourselves backlog have as our the well of X.X% and quarter. growth growth building up driver, for delivering our primary XX% maintenance we Service modernization in set portfolio With by

of As repurchases free allocation our flow year-to-date million generated shareholders quarter, the capital taking $XXX a business adjusted in $XXX and million. in to $XXX repurchases returned to steady through and cash execution share we result strategies, million

we June, for progress ESG progress goals, our published our driving outlining report, In stakeholders. while advances towards value our how XXXX business ESG explaining strategy XX our this

Importantly, receiving the towards make goals. description report reduction to requirements of X international Scope certification, Brazil. health X continued And in systems management practices detailed includes Sao a that ISO our our factory XXXXX X, specifies at safety good standard progress and and in gas greenhouse effective we've recently including the our goals Bernardo, this XXXX occupational emission for and

to Slide Moving X. performance our orders on

in growth single-digit the Asia was were New decline growth Equipment in High in quarter. to Americas down more orders East driven by Middle in second offset by mid-teens a double-digit the mid-teens growth and decline and in Pacific a in than low China. the XX% EMEA, mid-single-digit

the was constant Our year. New down Equipment X% at versus currency backlog prior

impact softness and of coverage due Pacific both and on Equipment China, continued the our investment In elevated orders. continues severely in to are our the In well. the strength economic in product as Asia to interest orders seeing Equipment Americas, we grew orders New region in our rates while impacted New EMEA perform

quarter, all backlog, In colleagues thanks of XX% dedication constant which modernization consecutive seventh for growth XX% the above our the pace with of increased We highlights had continued quarter, to growth in the regions. with our X% segment, portfolio several modernization at progress across our growth along and to in currency. Services exciting orders continued our customer second

Amaryllis The by SkyRise XX city the residential Otis of iconic tallest Delhi. at is units in the heart of Delhi, install Unity this will luxury Versace buildings Designed India, at Versace. of one Home, development the In the

segment our well by the the Francisco X States, West Airport. to perform expansion in continue United Infrastructure is next of as at highlights. X We Terminal Otis San supporting evidenced In International major the project

XX of X this Otis part elevators elevators. X while link As project, escalators will XX new install Gen modernizing and

escalators the XX currently SFO X City heavy-traffic served public and city use more center. escalators Germany, escalators upgrades customer, and in the in our in the install stations will these X access. than are passenger of million will XXXX passengers dismantle overall for installing In international long-established capacity that and non-Otis are our at metro increase Stuttgart we

Shanghai than XX. more our for continued that quarter line new XXX elevators of walks escalators the moving than Line XX, escalators and more an several extension we've contracts and elevators XX-year with XXX booking the units for Chongming Line relationship China, Metro, XXX XX In for XX and total in the including

Adjusted the benefits results to and by Slide segment. Turning sales exchange a share up count lower or $XX improvement a foreign headwind, minority performance in offset driven headwinds from increase in interest the million XX% expense. X%. and net translation by of on strong QX $X.X our foreign an interest approximately driven operating operational organic in and excluding from Service profit, EPS grew quarter $X.XX delivered million, exchange X. tax rate, down sales billion $XX with Adjusted was Otis

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

Anurag Maheshwari

Southeast performance X% Thank to grew X% performances the single equipment, down Slide XX%, and you, low driven the with X. new digits. was year. India, organic quarter, Judy. QX prior Americas by Starting by in sales approximately APAC the compared strong which down Total in were while Asia segment grew on driven sales

due to while Europe, single-digit the China low double decline largely weakness due a digits, to declined in in conditions. experienced Central market deterioration continued EMEA

remains was although was it pricing to China pressure. under deflationary. remains up in Equipment New in China sequentially, China, year-over-year, intense strong flat outside the price while cost low environment And approximately mid-single pricing down digits. came of

marking volumes repair quarter. We and regions sales every in solid a churn. in in quarter of X% all greater $X.X in business, result was growth including all were of mid-single-digit of double-digit in which maintenance mix first excluding points lines with as and grew up billion X% over X.X%, X.X repair strong Asia continued or sales sales years the and Service impact mod Pacific, growth growth approximately of Driven increased X% in growth, of organic pricing about by and and the portfolio organic maintenance half. the X

operating segment Slide QX to Turning on performance X.

outside was offset mix the improved million operating benefits $X profit expectation. netting and of to mainly impacts tailwinds to $XXX to currency volume from Pricing our million basis uplift Equipment China, productivity, volume of the largely ahead XX lower New of due including headwinds. margins commodity constant at of and mix X.X%, and points impacts down of

$XX inflation. margin $XXX million on volume, XXX points This million as favorable at to constant of than higher basis Service offset currency and led the productivity, pricing annual more drop-through uplift operating profit expansion from wage including increased in benefits of quarter.

of year-over-year. Our focus on SG&A percent improving control, while as alongside drove dollars uplift ramp XX a SG&A our initiatives cost of the adjusted absolute basis points by lower sales

approximately dollars For improved inflationary by percent our sales. as a $XX SG&A basis environment, points and the half, an XX first million of despite by reduced

with our than with outlined pleased are benefits across we've ramping X We anticipated. and progress the quicker levers very uplift

scale XX%. is grew technology or solid indirect with our environment, operations while and our drive overall $X.XX to streamlined challenging functional a XXX With we savings, New while Equipment allowing service spend. adjusted points digital structure Our and cost margins EPS profit benefits us other and productivity by yielding especially to navigating global expanded performance leverage operating basis

up in Shifting first market. a to cash. Equipment half. half $XXX Despite Pacific, mid-single we helped the Service performance strong weakness second Americas, reverse cash in expand the to by grew good the and points the we had as in as tailwinds traction by orders, Overall, overcoming productivity, This digits flow commodity working year-end. in New we uplift, generated strength and lower XX% expect EMEA the us segment. performance second pricing margins by and XXX our free X.X%, EPS of and organic positioning in with capital led for largely us sales well very We well basis Asia conjunction were China grow build quarter growth on million which

it turn outlook. XXXX discuss our Judy now to me Let to back

Judith Marks

X. Now Slide on

Before turning outlook, briefly me you outlook. industry let XXXX our to on financial updated update our

our down New the as by Equipment no outlook expectations for single perform digit Asia versus digits For unchanged, in units. in market, the Pacific has low our in continued to down We the prior Americas to now change mid-single expect to remain units digits, outlook and Asia There for of China. high EMEA the driven weakness well. region single down be is

activity down We're XX% revising to expected. previously weaker is we be as than China XX% to down

EMEA the to continue see mid-single XXXX, in are single-digit rolling While in grow adding years under to units X the service expected off mid-single-digit and digits markets and is New roughly installed units with in in we and warranty market were growth X the low remain The Asia. pressure, from that now last Equipment global within period. base installed million strength the growth Americas

We sales X%. sales billion X% $XX.X with billion $XX.X Otis' growth to Turning the organic of to now XXXX financial to expect outlook. in of range

will remainder a outlook which While New we sales business see decrease is the strength of by in in year, driven the Anurag for the prior versus continued Service in our this organic moment. Equipment, discuss

range be to million of with guide, share profit with Adjusted strong prior $XXX line of the benefit end X% up the actual at $XXX operating Adjusted currency. in driven operational the constant prior the improvement to up is million million expectations, $X.XX lower XX%, $XXX now a still expected and to from at expected in and currency versus is performance count. million to up to low $XXX EPS $X.XX, $X.XX by

to anticipate flow of to within range billion $X.X a We billion. $X.X come cash free adjusted

update executing operating are prior digital in through date. Project we're model, it to made the and to the mid-XXXX, X to on our million solid me in versus of let and incremental optimization handing such program. more areas savings Slide by further infrastructure. areas spend $XXX outline benefit Before have to we indirect Two and our outlook technology We to rate additional provide an progress now as of global where progress detail, segment of back as streamlining Uplift our on seeing XXXX run turn anticipate Anurag expectations

are track, savings with million our to XXXX, in versus now and Anurag, we're you. exit XXXX approximately of to in-year you the we time sharing program anticipated look is be performing our to updates we rate million. a over Overall, $XX approximately exit internal with $XXX quarters. additional and benchmarks slated coming run well forward line, As on

Anurag Maheshwari

and remains range repair within unchanged, X% grow at be with a digits achieve Service up sales expect the sales approximately down XX% growth provide to be maintenance an outlook decline in now and prior to mid-single up Judy. to We more expected includes you, now guidance. Overall, down Americas, and X.X% X% XX%. X.X% backlog we XX. organic Slide now for approximately momentum New on of which are of mid-single Equipment digits X%, and we This our line good in growth expect Taking organic X% total anticipated to X% sales detailed look combined. Asia the orders from in EMEA half. are be to to and to with expanding and sales a outlook market-driven Thank organic starting modernization, China, to to of line The Pacific for second anticipate solid sight X%.

grow At $XXX million, New service XX. with constant expand including to the expect contributions offsetting versus from to XX and operating improving currency, margin we In Slide headwinds. Equipment XX by mix and Service, versus of should expectations and basis unchanged Uplift profit prior to approximately million profit points, solid better now productivity. prior productivity, Turning $XXX increase volumes points an guide basis even volume driven operating

weakness despite expansion outlook. in basis result our overall volume volume, flat expect are prior the operating expected adjusted a a is margin pricing prior of a to For as of XX Productivity added impact New be profit XX China, point year, outlook. points. basis tailwinds. This points change to versus represents a Service margin our and the weaker estimate roughly from operating pricing China now XX the prior flat and mix productivity improvement offsetting basis and versus up We profit Equipment, of versus

Turning to cash flow.

offset cash in expect of billion capital. billion, to free growth, flow achieve partially $X.X net adjusted $X.X in the We working to with changes range income by

Moving Slide bridge to XX. the on XXXX EPS

prior $X.XX by this have versus the performance. year, is end to our We driven outlook of low range adjusted midpoint, the a of raised of $X.XX. by for At $X.XX growth EPS the EPS $X.XX to operational

the second we effective the ForEx. offset first count approximately the tax profit level half. in At and headwinds constant between interest share expect loaded rate and currency, and higher from of operating Reductions $X.XX expense than the growth, more lower

first half a ability growing second performing headwinds. and half, lot our results to our are control In despite closing, leveraging in continue macro organization. throughout we mod portfolio, our to There our demonstrate expanding our on focused backlog outlook XX% while ramping the program well in achieve Uplift and This approximately medium-term on the up us full with our line guide. driving in the of growth EPS productivity sets is year

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

Operator

Instructions] [Operator

Partners. Your Vertical first with question the line from Research of comes Jeff Sprague

Jeffrey Sprague

about say really your going to you, I miss first going do you, are? to Anurag, we're plans guess, have we're guessing I'm to not but you miss what anything but

Anurag Maheshwari

focus a earnings on Cristina. question, for Jeff. with the here. transition Thanks So closing now more We smooth right come and call the to

Jeffrey Sprague

drill of there Awesome. But China? you we did, it. you digit a just China, kind are noted know Asia. into things was readily don't standpoint. it's more said macro a I Judy, from you in bit growing if missed I just apparent, mid-single little I Service if Obviously, can challenging think

a give support you're sort bit of profitability us color on So there kind actions of to drive counter country. maybe in more little just and the taking

Judith Marks

with and Yes. to great you be morning. Jeff, Thanks, this

really specifically, Our is now sales in another have with yield been on orders a China, And Service up Mod made. a greater are quarter. now to business digit. high pivot And in up the single teens high double we've multiyear we've for Service. digit. and strategy focus this are we're are Mod units implementing up pleased China

what that's now spun. our twice when and Almost X/X we of was revenue is in Service, China it in

portfolio said, and quarter, I high this has Our teens. than more is doubled as up again

into and of that China. So medium coming to nicely, anticipate in we're up China double we out to the acceleration mod our continue digit term Service as for move the is seeing and strategy look

The New what the But and XX%. quarter. saying from weak. first down second it Equipment the we're called the year, team We market to the XX% for for XX% be it's does to the ground on being down quarter after remain down know full going in Sally with we XX%

Our market team between XXX,XXX for in done really units. but to to this year, side in a we're saying very has job manage is being market, the China able XXX,XXX that a going be nice cost competitive and

a in XXX,XXX Again, so our Service, units year able a to our to we to continuing in backlog I always to remains balancing is is sized on and nicely strategy XXX,XXX and growing out environment, deflationary that. cost market, but has focused still this price drive think but be very Service pivoted China. decreases. that of And the volume implementation third to that reflect make sure healthy

there. in model, you of seeing to top in It's our Equipment this being organic, just our after control. after this the But even all those several quarter expansion took that margin again, dollars our X% of I for be year why That see seeing as we items half, in think not resilience first revenue, we could down but in now Equipment. our quarter, performance quarter you're New down Despite sustained the you're million Service-driven profit year hundred New guide decline by driven is profitability terms line with to X%. revenue

Operator

comes with from Nigel question Coe next Your Wolfe the of Research. line

Nigel Coe

again, the I'm sure Cristina, pretty somewhere pop you'll soon. be Anurag, But missed. to congratulations going promotion. you're up on

share? is in I'm been pick has just there on want clearly gaining strategy, on your focused any just the question. the So up on China change baton to wondering, which

curious seems China there margin there? being a actually flat on preserving well. more NCI rather expense up I'm the that And million. just of indicate focus on $XXX at is to kind That of And now hold EBIT

and just that curious there's on if So a strategy in change margins. comment

Judith Marks

Yes.

to we the Anurag, take fighting one, we're one it to the me over it. turn both of Let because I'll first want and although second kind over answer

change it's Nigel, has, seeing continued the not is scenes behind how to no team you're What pivot. in probably So our strategy. again,

terms We orders drive our distributors. introductions our we continue product agents and in through to delivery to of continue do and

them agents taken distributors, also lot about again, Our as of them. modernization X,XXX of have on and think well. A

continue of their a to we Equipment New regardless mod-heavy so So prepare that for remit, side. structurally we've going be more the which the is what to on expanded future future, happens

for up not quarter now So the know sake track. talk something what I've telling units going on been there. loss-making strategies, it's you on We about share had spin, but share We take -- we're after and we're gain, quarter we've doing China and since with of gains the let significant to we that's price We the don't and Anurag, the business, that half. that consistent versus then think touch it's piece methodology our negative be just you for to and don't in -- on wise. giving that let backlog. going me that's But we think we're having don't need second

Anurag Maheshwari

Judy. Thanks,

the market if volume second on New Nigel, because all double look as not other line productivity, well, only headwind The through China, it also we're China And And our the the in digit, regions, it's you manage quarter in able down to So the see through all okay? is Service NCI said, as clearly was as business. growing you it's revenue challenging. well. the the don't at in is Equipment we across reason

can we So we do control. what

from So it. preserve been profit perspective margin a a perspective, and to we've able

Judith Marks

NCI remaining is a Nigel. in modernization EMEA for Middle of the including of East, on Middle and several Outside the are and NCI very Yes. is The EMEA Middle our good East in thing EMEA, It's orders for revenue last strong East. a is opportunity our highlights pace. EMEA picked one at has us, of up, business add is majority large I'll up see China, you the

Nigel Coe

for before works Anurag. he to quick want make leaves. that That's great sure he one And color. I then one

So to consider? weakness Is something headwind there advance tipped else customers. the we New billion. the on free payable to that cash seen what's Is really of we've kind happening a we're deposits Was flow seeing, $X.X here? need function a down therefore, from advanced Equipment and that of really --

Anurag Maheshwari

Yes.

working got you million In a half, think about primarily right? let due it reasons. pretty I more we much, X and give color, but the of first $XXX built me bit to little capital

first you The for down mentioned, typically obviously Equipment what and payments half. first orders, auto that the environment been receive reason has we challenging New

the largest Equipment business million second, is to we us in of we cash the Equipment I the The think perform the while to $XXX faster X build and of collect tend business, is be which These than New driver which grew Service work. got capital. we other drivers, that working Service ahead after New

the GAAP more $XXX And closer year, working reverse net in expect about will we the about half in back billion. for So we of if million million the generate $XXX get capital, to or us that $X.X to income.

will on Equipment be course, half of like to cash. second better a do we year could upside, free and a the and about same of to of of source then way in little than receivables orders look bit do in We, billion the and expected the this New last better get did us as especially $X.X to

Operator

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

Julian Mitchell

not New China. outlook the of first and globally Maybe on question that a to Congratulations and sort to sales then Americas, so on with just Anurag Cristina. I really suppose, much more my Equipment organic is focus

the in New in I year-on-year was back Equipment, digits. X% I think, half backlog, think, mid-single the So down, sales your in June, down are

the getting mid-single. orders XXXX. I of revenues now look a kind that at backlog for we're down year this lead up But example, Equipment, mid-teens revenue of I still into New TTM you're your Americas, wondered were your but how If for time in much guiding from

in broader almost XX the confluence color those So amount. of things any are on mean in global Americas, like of the down X that? certainly New something reasonable And then a Equipment sales sort

Judith Marks

Sure, Julian.

-- I right very, think analysis. it's a very great question and it's the

digit. Americas me the single and our obviously an globe, X.X%. though backlog give dive EMEA backlog X% New New The first Equipment me and single low of were into down then down Let is up orders up is XX-month specifically digit. low let you Equipment the We around Americas. rolling overview are

Asia Pac for is and is obviously, Asia the is down, up down China which broader mid-teens driving picture.

some Our at the line is the level, as And to Equipment half, New second second defined going Equipment slightly fall company other strong, really flattish especially now our expect the exit XXXX but outlook second we the sight could half regions. orders. to right in of in it's half to backlog by and to orders New down looks get Americas

we major of to as majority about performing just America The second the terms And We up Americas me the our let I digit. New North being single comps the it And tell have expected line projects. in in low as came in Americas low of anticipate in backlog. well in an the sight single-digit is the Equipment quarter sales of Americas, up XX-month year-on-year half. said, second the as backlog you, that picking as

on We see also be that second have on can the anticipate We believe see that We starting the the New come that half through Equipment positive. been third activity. to and based orders yet to in Americas we the proposal that haven't see we you'll booked for quarter. can awards in based

Julian Mitchell

just assume and outlook, on Anurag, kind both do of similar about to color near-term That's that maybe half sort second second QX that of think split? half degree. we is just QX a very question, down maybe then And for just Any quarters, sequentially as a more we fiddly sort intra-quarter helpful. EPS of

Anurag Maheshwari

half, and can as give Cristina off start on second color just first half, with more I'll QX the So well.

second EPS the of a So and the about implies in $X.XX $X.XX right? done so another the in which we've $X.XX, guidance midpoint half, of half first

little a from QX. So more first operational perspective, equal half. the the Cristina, an second it's on bit color and half give between

Cristina Mendez

Anurag. some you QX. give Thank color to Yes. on Happy you,

XX% in in probably the over rate dime QX. in mean flat a flat is expenses guide, in the quarter. and would run That in midpoint tax that the means first current of So QX. EPS $X.XX. expect QX [indiscernible] will up up That growing with interest the just go roughly would We half, full at the and that EPS rate year to and

Judith Marks

Yes. is up And single Americas quickly. me backlog down. correct Julian, ex is total low let myself China the but backlog The just digit,

Operator

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

C. Stephen Tusa

Anurag, for to everybody. there congrats on all the help, all the thanks Again, and promotions

on come backlog of but of then seeing to start to off pipeline that starts there price-wise there questions, that price question And your later risk small a impact where what installs to that basically point X What are growth margins years margin? market warranty a I then China. headwind you it those there? it part couple gets of Just portion, the growth. growth? is start the is to And still does Services guys be any it's impact impacting and a when you at that, Services just a and starts Services -- just stage know to then global

Judith Marks

are and say, Yes. when is and I'll I is margins. environment let down, China. the challenged XX%. me impacts down. in Well, Pricing would a It price Services, very competitive it Anurag take costs roughly and let coming on is comment But

again, a got deflationary on it's and productivity. in doing, pulling that So we're we've out, environment, tailwinds commodities, it's costs commodities, we're productivity we're whether driving the whether

to Steve. we'll continue So that, monitor

side. on are years X on saying there competitive it's don't I anticipate now our changing, that respond but -- been we've I well continues the cost team think to for we pricing. seeing

we units, In look nicely. terms We're were over of XXX,XXX now China, now portfolio you last when at that quarter, growing in about -- our XXX,XXX said Service units. again, how converts, we we're

But rates continuing doing our well move with up that's units. in China. to conversion also conversion guide. set are and adding on of non-Otis We're we've part medium-term that of as in our lot that's A recapturing and pleased

share. So X% at little got XXX,XXX a we've market units,

under units opportunity that aren't and bring there's back. So our units portfolio for ample non-Otis us to Otis

So term. we activities mid-teens believe the all to growth portfolio and for high simultaneously, we in China those going happen to medium teens are can continue

So that's us. into believe Anurag? we to roll going impact a don't -- for I don't Service

Anurag Maheshwari

Service. mentioned, So side, so of sure margin volume biggest us to as the for the for be Judy on is drivers on going right, one

improving. as the over years, our at down. you come look If around. the conversion goes But conversion more past of been is And still rates the X market portfolio it's the to there's rates because on grew reason it

fairly think confident we volume over feel the So on there. I growth

our on maintain On side, at question the that be the as was how supply in we a of clearly, where because in in our asked fortunate China is economy to Nigel the the are was, the cost chain. it -- profitability base. reason One of NCI is well, deflationary to cost we're earlier is able looking terms

So us. the look also, facilities, we've of looked But terms in in at both take it kind continue to we we'll branches, that and have, at helps down. the to of terms of cost a the that footprint bring

So we maybe And productivity. volume keep or on us and will margins side, of combination feel help a margins going expand the cost the the forward.

Operator

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

Joseph O'Dea

pricing you kind have the about of backlog if over could about what of see within sight few of that that continued expansion the margin you in And the next to quantification and talk ask any modernization wanted could to we backlog. I mod, line quarters?

Judith Marks

where company New added starting guide We digit this and a on that last not them. mod quarter to where really quarter and our did from with least XX% fifth mod We've at we up industrialize mod would margins but as doing delivering were repeated a you Equipment first to quarter. place exceed we're position Equipment get the Joe. as and to point. year only to double Yes, last margins imperative mobilize margins strategic us modernization that how below a New know take to Listen, value a they to that meet medium-term

progress. are with pleased on trajectory. I'm We that that

to mod do well. for are continuing orders The

customer that What is pace company were pace we're which we regions. And we up the to responding orders, in our installers. our in orders with XX%, being and meet kits we new very backlog, those And needs pick XX.X% need We sales kits take is significantly. that with growth up supplied signal do while the the is that need demand the need modernization. grow We're to now processes. to right and to industrialized Our is to well. together all as from continuing -- orders up to putting with the need up conversion we to pick grow need to growing

days going early to there, see continue to you're but It's that.

and So and direction we beyond. mod and and margins believe, see we heading modernization in we quarter after intact, is going continue the on growth medium to significant to year in you're term strategy year as the the shared, trajectory right after continue quarter, to had through go see the I

Joseph O'Dea

a XXX,XXX China XXX,XXX, to And kind then talk years a few you can units talk just cycle and you now. down market of about for perspective when

Just any go? comfortable around that get get kind at much worse? volume doesn't How -- see of where level, least you any indications with, market you at a can

Judith Marks

Yes.

X couldn't structure, across to of profitability at straight XXX,XXX So significant again, you a to branch out, peaked it's taken this facilities, I be look about these Anurag organization XXX,XXX look team's year, XXX,XXX years. a more been continuing uplift, drop and at how pretty year, is X now from they're as and structural, team, return our our cost which for areas, units alluded guiding China if years to the at proud we're and We yet they've to.

with we've our well simultaneously So growing Service dealt that business. while

third what stimulate are local put more There and plenary activities. I rates multiple this simultaneous more as see that to can't week. has many both the to well The know a PBOC bottom. I going time. Listen, as over activities won't financing service as Chinese reduced the try government and you're So don't call play is. as recent government into to there

change, for To of or sentiment to rural consumer move date, Chinese millions There in to we not hundreds from urban. a yet. that is demand sentiment still property the of residents have seen buying

the change. and plan we now will and X we've has the the decades, that moved we got and believe to the able to that's Modernization business that. believe Chinese And path for government Service don't That's to we and been the that be on think handle to So right going and we've sized more strategy, continue.

was this at all -- Joe, fall. the our week, of earlier of actually beyond proud a years the have China, Otis Tita, region. of us share, we'll you Li automation on, It we as this the can XX will in and I we what in how Premier to one be host And we Premier. Tianjin imagine, part there celebrating has facilities a moment was for been we hosted focused

on modernizes. energy-efficient and especially in base significant demand did tell drive and ready I renewal million to you, modernization for installed would as a China we in and that that Ten ability continue to our we're China aging units preparing and for, to now. going create We are focus the solutions, it's now urban modernization are

Operator

comes Your of next Rob with Research. Melius from line the Wertheimer question

Justin Pellegrino

congratulations Anurag and and This Pellegrino on is Rob again. for to Cristina Justin

market know, question Can in outreach? more it mods of you Our And and us growth. around you Is growth? I Is you continued kind tell of that is well been touched there's for just effort? conversions? as driving more on Judy, product? that impressive just the awareness of impressive sales of what's context put better that looking kind Can

Judith Marks

of obsolescence offerings largest the and Yes. demand. literally and I in the XX-plus in I The with Justin, years X equipment XX over mean, older. our units that clear million there. million those market mean and installed one excited years now is right the million, we're for base, XX-plus is are of many aging EMEA, XX-plus older of and just areas,

just Equipment New a it's that then package globally China, Gen globe, now What whether have makes we that when as we vision bespoke opportunity. year introduced modernization to X and or getting product available now X custom Gen the with across ago, market XXX that we we're would connected industrializing fulfill us could Gen this. from X offering mod different it that EMEA and away modular mod the a we not X also drives in And did and offering is the our would but

brought as products, we is, of these educating the out educating sales mod the New Equipment as team, beauty So we're it team. the we're sales

from Gen more our And X, crews are installation with as now they're X mod. Gen familiar Equipment doing New

and is the part we're the side scale ourselves, margins. all our subsuppliers we elements of driving X is attacking So we're at buying do every while nicely, Gen it and this manufacturing attacking the cost of coming together which from because now

we've a from standpoint, sales But it. simplified

our relationships Think these just X.X service on units, have We our with million customers. portfolio. portfolio at about

We reactive more help of when when our -- proactive create growing. of can customers. plan. service on about. We every have most mod day. talk together we can portfolio, them be we than are We Those demand relationships if can work And go with that capital customers these coming We there's be time it is all a can can is and more at that obsolescence. the

you're So see to to them. you're seeing continue I those seeing I mod going you're think know we're ready for results And this. and -- in

Operator

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

Nicholas Housden

and to maintenance business. about like I'd repair ask the

does mean, but growth organic few X.X% it's bad it not like the number So in quarters. a look a quite I growth, the slowest overall,

whether been you of if the wondering off. some provide growth and the just seeing that I'm it's maybe repair going we've what's color So in coming maybe business can on there about above-trend some

Judith Marks

Yes.

I answered it, somewhat you think Nick.

seen year. going it repair repair believe now snapback, but We seeing half the business Originally, years. to growth grow have we've really second was then again -- been quarter the We of double-digit X healthy growth. is post-COVID just for the that second in

So on past it's We've XX% not grow the point maintenance repair that our again, but than X-plus growth in repair now you as grows, is X portfolio as percent, should think X-plus of say would lumpy, percent. been guided in X for that. That exceeding repairs. higher should years almost grows occasion, we've

fair digit half, it's think a expectation. I that's So a and high think little single to the for second more fair

Anurag Maheshwari

in has just digit very the comp was second I one a thing only the of half The add mentioned, last repair if highest I at growth. year, that if back not double Repair, good at growing is still as if thing, Judy look of quarter could from you year. terms where the high digit, -- just to single is the in Yes.

Nicholas Housden

Okay. to I'm Great. guessing XX% I Or out competitors think price one number China, prices you XX% Judy, mentioned what in then comment? called mix? lower the that think and And the I like-for-like a recently. is Because of is that similar Is year-over-year.

Judith Marks

and it's like-for-like. year-over-year It's Yes.

Operator

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

Jack Ayers

This is the Jack been you, a Ayers transitions on with for Gautam today. Anurag and pleasure working Cristina, yes, on congrats It's here. Anurag. everyone

Judy, quick good in can geography. and understand So on you looks EMEA Equipment square the if New Pacific by a up trends But maybe ex Totally pretty China. America Asia some China and just of order just, weakness. question,

the to China? kind you down? pricing divergence be there. Just influencing if comment. organic Are there And pricing you would like-for-like? is any can pricing poor of maybe So to XX% just us that's trends then I share maybe if back Is down the just maybe that guess hit like helpful. or just square trying any that kind ISPs, seeing maybe on in color of the gain actors just

Judith Marks

Yes, Jack, ISPs on play your New the the second in don't question, Equipment pricing.

what the -- past. seeing any we operate differently them in than the the of we're we've So not in OEMs from operating see any other market seen any can X

Let that really watching in me of because Europe for We're APAC they though, nice everything to our quarter, a in EMEA well. well challenging performing business color, It's on give see some there. EMEA and and Obviously, rates interest on you market. deserve orders. Central been performed terms color. really the But going

has our and well, well. performed performed business business East Middle Europe very Southern Our

really whether EMEA and we market little control. think months, is a weaker, trends doing now our were about again, U.K. that job, a is -- and France in other quarter, XX there you've you it's team when challenging quarter, seen, don't backlog this a nice last solid the but macro

quarter, Our up elections, ongoing going second because that pick is the slowing the year. we Asia Pacific business half in significantly some of the in India, saw of the was second for but that to

up Korea, were but up still backlog Australasia Japan very down, and our orders little and challenges. some the Taiwan, healthy. is in a

half we orders. So quarter third and to back Americas in second expect year the snap in of

sales business, on growth And I'm XXX our products really Gen team, very our by the infrastructure and doing pleased We whether significant Pacific. units, segments our orders volume team, by in our EMEA expect continued operating again, Asia well, it's globally. major projects,

You out, that again, or mid-rise, our Metro, that opportunity, Francisco, San or saw Shanghai or and high-rise jobs it's, infrastructure many whether there it's line. called more whether winning, X the are product been Stuttgart, the we it's full gives low-rise, we've escalators, us

And jobs, to with Service commitments as longer well. we get infrastructure those tend

the 'XX I of think the well we as will China looks. remain snap So is all year. businesses even will one Julian, it half we'll the is was will was shared, this again, see trends, of other I know back. where and perform And of how second continue to early questions, it those maybe Americas and X the challenged as

in and based in for exit the backlog we'll 'XX know a little the look second based So on as backlog, we we 'XX orders how those 'XX on half.

Operator

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

Miguel Nabeiro Ensinas Serra Borrega

why one China mentioned there higher revenues being would the Is outside China of on and give China? was first something better Equipment. despite within purely mid-single Can else to The X%? the I us -- New margin down not of a on contribute expanded down up of Equipment is Equipment QX New lifted Did the margin that with digits double a to some color on New you margin being kind Americas up? that mix is this of outside Or digits. China margin? up. pricing you imagine And low back

Anurag Maheshwari

Equipment everyone, margin New largest So region to just Otis. China is our in ground firstly,

for side, at team goes the tailwind look a able not and too in quite you dollars for the It's is a when down -- a if hundred million, it's for a volume down, about $XX because that mix actually it's was of us. mix quarter a headwind million on couple $XX China which headwind. Where to So offset essentially causes substantial China mix million the and Equipment revenue that New us.

able other from Uplift. and was of positive, were We because offset pricing that the of in the regions, benefits to our which commodities, productivity backlog

New saw appreciate you market. And the plus through gone than a think control have all we important result the as able what We regions as other of that call, this more I productivity is control. we can expansion. to China what that. Equipment But we've So margin offset been an

Judith Marks

Judy. Miguel, this is Yes.

I Otis think as year, less. for know important to is or thing it's China be XX% revenue that this versus at in other revenue China one will all Just we look

obviously regions run while that to what Equipment. says growing, is economic to we're it's X% means some grow So New into denominator the going headwinds, continued -- continues revenue. while China growing, that in is especially are China in organically the and X% other And to X

Miguel Nabeiro Ensinas Serra Borrega

organic That's portfolio the growth great. little to bit understand growth second was maintenance, And in X.X% that then given one, the X.X%. just a the better

growth is changed price else aside provide anything to has over other XX some churn? contributed the So the how portfolio The color relative above slower to can on that mix quarters? quarters? points there growth, you from And repairs, that and previous the basis

Anurag Maheshwari

relative on and Yes. business. a because portfolio The reason consistent. it's X.X% driven of the consistent previous without the a by year, from at churn, adjusting The little comp that's pricing quarters. repair bit mix from growth level also slower in pretty is growth, X.X%, previous X.X% The

to X%. looks combination at -- half, So back towards the to good, continue X-plus will pricing get look into the as we second go repair that of X.X%, percent, single And digit. a will grow double if at portfolio be you should us high digit,

Operator

question-and-answer concludes turn to This the session. call closing the for Judy remarks. I'll

Judith Marks

Thank you, Sarah.

together, XXXX in focused Our of our I beyond. on value the our results once Anurag Service-driven delivering of and strength as in the first him reflect the thank half shareholders remain want model, we wish business again we and excitement balance look for to please both future investors to in the future. with partner my and with well very also to well. in forward safe while Cristina Thank stay Everyone, near meeting endeavors, analysts you expressing his and much. as

Operator

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

your lines. disconnect now may You

Otis Worldwide (OTIS) 24 Jul 242024 Q2 Earnings call transcript