Otis Worldwide Corporation · NYSE:OTIS
Otis Worldwide — Q2 2022 Earnings Presentation
29 slides from Otis Worldwide's earnings presentation, Jul 27, 2022
Slide 1: Q2 2022 Earnings Call
Q2 2022 Earnings Call July 27, 2022 © 2022 OTIS WORLDWIDE CORPORATION.
Slide 2: Forward-Looking Statements
Forward-Looking Statements Note: All results and expectations in this presentation reflect continuing operations unless otherwise noted. This communication contains statements which, to the extent they are not statements of historical or present fact, constitute “forward-looking statements” under th
Slide 3: Q2 2022 highlights
TBU Q2 2022 highlights Q2 Orders Solid second quarter…making progress on long-term strategy • Record New Equipment orders…New Equipment share up ~1 pt1 • Maintenance portfolio up nearly 3.5%... retention, conversion and recapture rates up year-over-year Terminal 4 at LAX Tour Triangle Los Angeles, C
Slide 4: Q2 2022 update
Q2 2022 update • New Equipment orders up 16.5% at constant currency1…up 8.5% on a rolling 12- month basis • New Equipment backlog up 6% and adjusted backlog up 10% at constant Q2 2022 currency1 Results • Organic1 sales up 0.4%... Service up 5.2%, New Equipment down 5.0% • Adjusted operating profit m
Slide 5: Q2 2022 results
Q2 2022 results ($ millions, except per share amounts) Sales Operating profit Diluted earnings per share GAAP 3,701 3,488 GAAP 561 487 GAAP $0.76 $0.76 Adjusted1 3,629 Adjusted1 562 Adjusted1 $0.86 3,454 541 $0.77 Adjusted 15.7% margin1 15.5% Q2 2021 Q2 2022 Q2 2021 Q2 2022 Q2 2021 Q2 2022 Adjusted
Slide 6: New Equipment
New Equipment ($ millions) Net sales Q2 Results Y/Y GAAP 1,727 1,534 (11.2%) • Orders up 16.5% at constant currency1… double digit growth in the Americas and EMEA Adjusted1 1,663 (9.3%) 1,509 • 2Q22 New Equipment share up ~1 pt2 Organic1 (5.0%) • New Equipment backlog up 6% and adjusted backlog up 1
Slide 7: Service
Service ($ millions) Net sales Y/Y Q2 Results GAAP 1,974 1,954 (1.0%) • Maintenance units up nearly 3.5% versus prior 1,966 1,945 year…growth in all regions Adjusted1 (1.1%) Organic1 • Modernization orders up 9.1% at constant 5.2% currency1…backlog up 4% • Organic1 sales up 5.2% Q2 2021 Q2 2022 – Ma
Slide 8: 2022 financial outlook
2022 financial outlook Prior outlook Current outlook Otis up 3 to 4% Otis up 2.5 to 3.5% Organic1 sales New Equipment flat to up 1.5% New Equipment down 0.5 to 1.0% Service up 5.0 to 6.0% Service up 5.5 to 6.5% Constant currency up $105 to $155M up $120 to $150M adj. operating profit1 Otis up ~30 bp
Slide 9: 2022 organic sales outlook
2022 organic1 sales outlook Prior outlook Updated outlook Outlook drivers (April 25, 2022) New Equipment flat to up 1.5% down 0.5 to 1.0% • Q2 New Equipment backlog up 10% at constant currency1… conversion Americas up low single ~flat slower than prior estimate due to construction delays and China m
Slide 10: 2022 adjusted EPS growth outlook drivers
2022 adjusted EPS1 growth outlook drivers + $120 to 150M at constant currency1 ~($0.18) (~$145M) $0.38 to $0.42 ~$0.05 ~$0.09 ~($0.24) ~$0.12 Volume 2H: $3.17 to $3.21 EUR @ 1.01 Productivity CNY @ 6.75 + 7 to 9% Pricing FY: $2.95 EUR @ 1.05 CNY @ 6.61 2021 adjusted Operational Commodities FX Zardoy
Slide 11: Otis fundamentals…driving value creation
Otis fundamentals…driving value creation1 Sales Operating Profit Cash & Capital Deployment • Invest in innovation • Drop through from volume • Reduce effective tax rate • Optimize supply chain & • Gain New Equipment share • Make targeted investments installation process • Accelerate portfolio growth
Slide 12: Slide 12
Slide 13: Appendix
Appendix © 2022 OTIS WORLDWIDE CORPORATION. 13
Slide 14: Backlog and orders
Appendix Backlog and orders ($billions, at constant currency1) Adjusted remaining New Equipment orders performance obligation1 Y/Y 18.3 + 7% Q2 2022 YTD 2022 12-month 17.1 17.6 + 4% Region Y/Y Y/Y rolling Modernization Total Otis 16.5% 12.1% 8.5% Maintenance + 4% Americas 56.6% 34.0% 18.6% & Repair
Slide 15: Q2 2022 adjusted operating profit drivers
Appendix Q2 2022 adjusted operating profit1 drivers Actual currency ($29M) + $4M + $4M ($21M) +$16M at constant currency1 $5M ($37M) $39M ($28M) Installation & material Volume productivity Pricing $562M Productivity SG&A Annual wage $541M Volume / under absorption inflation Commodities Q2 2021 adjus
Slide 16: H1 2022 results
Appendix H1 2022 results ($ millions, except per share amounts) Sales Operating profit Diluted earnings per share GAAP 7,109 6,902 GAAP 1,070 1,013 GAAP $1.47 $1.48 Adjusted1 6,984 Adjusted1 1,085 1,078 $1.62 6,814 Adjusted1 $1.47 15.8% Adjusted margin1 15.5% H1 2021 H1 2022 H1 2021 H1 2022 H1 2021
Slide 17: New Equipment
Appendix New Equipment ($ millions) Net sales Y/Y GAAP 3,185 2,956 (7.2%) Adjusted1 3,076 2,884 (6.2%) H1 Results • Orders up 12.1% at constant currency1 Organic1 (3.2%) • New Equipment share up ~1 pt2 H1 2021 H1 2022 • Organic1 sales down 3.2% – Americas down 3.2% Operating profit – EMEA up 2.2% GA
Slide 18: Service
Appendix Service ($ millions) Net sales Y/Y H1 Results GAAP 3,924 3,946 0.6% Adjusted1 3,930 3,908 0.6% • Modernization orders up 1.7% at constant currency1 Organic1 • Organic1 sales up 5.5% 5.5% – Maintenance & Repair up 5.2% – Modernization up 6.7% H1 2021 H1 2022 • Adjusted operating profit1 up $
Slide 19: H1 2022 adjusted operating profit drivers
Appendix H1 2022 adjusted operating profit1 drivers Actual currency ($34M) + $21M + $6M ($7M) +$50M at constant currency1 $6M ($57M) $79M ($35M) Installation & material Volume productivity Pricing $1,085M Bad debt Productivity $1,078M Commodities Annual wage Volume / under inflation absorption H1 20
Slide 20: Additional information
Appendix Additional information Actuals FY22 Outlook Prior 1Q22 2Q22 1H22 Updated (April 25, 2022) Restructuring expense $14M $25M $39M $70 to $75M $75 to $80M Non-service pension expense $0M $1M $1M ~$5M ~$3M Adjusted net interest expense (a) $33M $35M $68M $130 to $135M ~$135M Adjusted effective t
Slide 21: Use and Definitions of Non-GAAP Financial Measures
Appendix Use and Definitions of Non-GAAP Financial Measures Otis Worldwide Corporation (“Otis”) reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP"). We supplement the reporting of our financial information determined under GAAP with
Slide 22: 2022 GAAP to adjusted financials reconciliation
Appendix 2022 GAAP to adjusted financials reconciliation ($millions) Otis New Equipment Service Corporate/other Sales 1Q22 2Q22 1Q22 2Q22 1Q22 2Q22 1Q22 2Q22 Net sales 3,414 3,488 1,422 1,534 1,992 1,954 0 0 Russia (54) (34) (47) (25) (7) (9) 0 0 Adjusted net sales 3,360 3,454 1,375 1,509 1,985 1,94
Slide 23: 2021 GAAP to adjusted financials reconciliation
Appendix 2021 GAAP to adjusted financials reconciliation ($millions) Otis New Equipment Service Corporate/other Sales 1Q21 2Q21 3Q21 4Q21 FY 2021 1Q21 2Q21 3Q21 4Q21 FY 2021 1Q21 2Q21 3Q21 4Q21 FY 2021 1Q21 2Q21 3Q21 4Q21 FY 2021 Net sales 3,408 3,701 3,620 3,569 14,298 1,458 1,727 1,681 1,562 6,428
Slide 24: Organic sales reconciliation
Appendix Organic sales reconciliation Maintenance & Q2 2022 Total Otis New Equipment Service Modernization Repair Organic 0.4% (5.0%) 5.2% 4.9% 6.4% Russia (1.0%) (1.9%) 0.1% 0.1% 0.0% FX (5.3%) (3.8%) (6.5%) (6.5%) (6.1%) Net acquisitions / divestitures 0.1% (0.5%) 0.2% 0.2% 0.0% Total net sales gr
Slide 25: Adjusted operating profit at constant currency reconciliation
Appendix Adjusted operating profit at constant currency reconciliation ($millions) Q2 2021 Q2 2022 Y/Y H1 2021 H1 2022 Y/Y New Equipment Adjusted operating profit 142 113 (29) 240 206 (34) Impact of foreign exchange - 1 1 - (1) (1) Adjusted operating profit at constant currency 142 114 (28) 240 205
Slide 26: SG&A reconciliation
Appendix SG&A reconciliation ($millions) Q2 2021 Q2 2022 H1 2021 H1 2022 Adjusted Sales 3,629 3,454 6,984 6,814 SG&A expense 484 439 966 898 Restructuring (1) (14) (12) (25) One-time separation costs (3) 0 (12) (3) Russia (3) (2) (8) (7) Adjusted SG&A 477 423 934 863 Adjusted SG&A % of adjusted sale
Slide 27: Diluted EPS and Tax reconciliations
Appendix Diluted EPS and Tax reconciliations Q2 2021 Q2 2022 H1 2021 H1 2022 GAAP diluted earnings per share $0.76 $0.76 $1.47 $1.48 Impact of non-recurring items on diluted earnings per share $0.01 $0.10 $0.00 $0.14 Adjusted diluted earnings per share $0.77 $0.86 $1.47 $1.62 Q2 2021 Q2 2022 H1 2021
Slide 28: Free cash flow reconciliation
Appendix Free cash flow reconciliation ($millions) Q2 2021 Q2 2022 H1 2021 H1 2022 Operating cash flow1 533 353 1,118 857 Capital expenditures (40) (27) (84) (57) Free cash flow 493 326 1,034 800 GAAP net income 326 321 634 632 FCF conversion 151% 102% 163% 127% 1 Operating cash flow excludes divide
Slide 29: Other reconciliations
Appendix Other reconciliations Remaining performance obligation (RPO) ($billions) Q2 2021 Q1 2022 Q2 2022 RPO at actual currency (GAAP measure) 17.5 17.5 17.7 Russia (0.1) (0.2) (0.2) FX/other1 (0.3) 0.3 0.8 Adjusted RPO at constant currency 17.1 17.6 18.3 New Equipment backlog Growth % Q2 2022 Actu