Otis Worldwide Corporation · NYSE:OTIS
Otis Worldwide — Q1 2020 Earnings Presentation
26 slides from Otis Worldwide's earnings presentation, May 7, 2020
Slide 1: Q1 2020 Earnings Call
Q1 2020 Earnings Call May 7, 2020 © 2020 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: COVID-19 Response
COVID-19 Response • Health and safety of our 69,000 colleagues and the riding public is paramount Colleagues, • Continuing to provide critical and essential services Customers & • Actively monitoring and adopting measures in line with public health guidance Community • Engaged and serving our commun
Slide 4: Q1 2020 Update
Q1 2020 Update • Successfully returned to our roots as an independent company Standalone • Adequate liquidity…$1.4B of cash at separation with $1.5B of available credit revolver Operations • Financing in place…$250M planned 2020 debt repayment • Board approved $0.20 Q2 dividend per share…annualized
Slide 5: Q1 2020 results
Q1 2020 results ($ millions, except per share amounts) Sales Operating profit Earnings per share GAAP 415 329 GAAP $0.63 $0.38 3,101 2,966 Adjusted1 433 450 Adjusted1 $0.62 $0.60 14.0% 15.2% Adjusted margin1 Q1 2019 Q1 2020 Q1 2019 Q1 2020 Q1 2019 Q1 2020 Organic1 (2.1%) Adjusted operating profit1 u
Slide 6: New Equipment
New Equipment ($millions) • Orders at constant currency1 ~flat in Q1 Sales 2020; up 5.6% excluding China Y/Y 1,271 1,123 (11.6%) • Otis market share up ~25 bps2 • New Equipment backlog up 3% at constant currency1 Q1 2019 Q1 2020 • Organic1 sales down 9.8% Operating profit – Americas down 9% GAAP 59
Slide 7: Service
Service ($millions) • Maintenance units up 1% versus prior year Sales Y/Y • Modernization orders at constant 1,830 1,843 0.7% currency1 up 2.5% • Organic1 sales up 3.3% – Maintenance & Repair up 2.5% – Modernization up 6.8% Q1 2019 Q1 2020 Operating profit • Adjusted operating profit1 was up $14M at
Slide 8: Operational trends
Operational trends1 NE UNITS BOOKED NE FACTORY SHIPMENTS SERVICE SALES Otis ex. China (% Y/Y) (% Y/Y) (% Y/Y) 2020 Q1 April Q1 April Q1 April China 1 Based on Otis internal estimates. © 2020 OTIS WORLDWIDE CORPORATION. 8
Slide 9: Updated 2020 financial outlook
Updated 2020 financial outlook FY 2020 Assumptions Otis down 3 – 7% New Equipment Organic1 sales New Equipment down 5 – 10% Down 5% reflects 1H recovery trends Service down low to mid single digits continuing…varying rates of recovery at low end and mid point Service Adjusted operating Constant curr
Slide 10: 2020 organic sales outlook
2020 organic1 sales outlook Prior Outlook Updated Outlook Assumptions (February 11 2020) New Equipment Up low single digits down 5 – 10% down mid single • High end reflects job site closures in Q2; re-opening in Q3 Americas Up mid single to ~10% • Down ~10% reflects extended closures in 2H • High en
Slide 11: 2020 Adjusted operating profit drivers
2020 Adjusted operating profit1 drivers down $25 - 175M down ~$60M $85 – 235M $260 – 515M $235 - 340M $1,872M Volume Labor cost actions EUR @ 1.08 Under absorption Discretionary spend CNY @ 7.10 Pricing and bad Material and service debt productivity 2019 adjusted COVID-19 headwinds Tailwinds FX 2020
Slide 12: Capital structure
Capital structure At Spin 2020 Capital Deployment Plan Debt repayment ~$250M Cash ~$1.4B Dividends ~$260M ~$925 – 1,025M Noncontrolling interest ~$160M Debt ~$6.3B M&A ~$50M Net debt/EBITDA1,2 ~2.4x 2 2020 free cash flow outlook 1 2019 adjusted earnings before interest, taxes, depreciation and amort
Slide 13: Otis fundamentals
Otis fundamentals1 Iconic global brand in a large, growing industry Sustainable growth over the medium-term Gaining share in NE Expanding Service portfolio Expanding margins through productivity Investing through the cycle Sustainable level of R&D and Capex Robust free cash flow generation >100% FCF
Slide 14: © 2020 OTIS WORLDWIDE CORPORATION.
© 2020 OTIS WORLDWIDE CORPORATION.
Slide 15: Appendix
Appendix © 2020 OTIS WORLDWIDE CORPORATION. 15
Slide 16: Backlog and orders
Appendix Backlog and orders ($billions, at constant currency1) Remaining performance obligation New Equipment orders Y/Y 16.2 16.2 16.5 + 2% (3%) Modernization Q1 2020 12 month Region Y/Y rolling Maintenance + 2% Total Otis (0.1%) 0.3% & Repair Americas 21.0% 3.4% EMEA 5.4% 1.2% New Equipment + 3% A
Slide 17: Q1 2020 operating profit drivers
Appendix Q1 2020 operating profit drivers ($millions) GAAP 415 329 operating profit + $27M at constant currency1 10 10 14 3 Material Volume Corporate productivity Price/mix expenses SG&A 450 Productivity Transactional FX 433 COVID-19/ SG&A other volume Cost inflation Q1 2019 adjusted New Service Cor
Slide 18: 2020 adjusted operating profit outlook
Appendix 2020 adjusted operating profit1 outlook Prior outlook (February 11, 2020) up $40 – 70M Volume - Under absorption - COVID-19 impact Pricing and bad debt - Labor cost actions + Discretionary spend + Material productivity + FX - Current outlook down $85 – 235M 1 See appendix for additional inf
Slide 19: Additional information
Appendix Additional information Prior FY20 Outlook (February 11 2020) FY20 Outlook Standalone cost ~$150M ~$150M (~$175M run rate) (~$175M run rate) Restructuring expense $70 – 80M Non-service pension expense/(benefit) $5 – 15M $5 – 15M Net interest ~$190M ~$160M Adjusted non-GAAP tax rate ~33% ~32%
Slide 20: Use and Definitions of Non-GAAP Financial Measures
Appendix Use and Definitions of Non-GAAP Financial Measures Otis Worldwide Corporation (“Otis”) reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP"). We supplement the reporting of our financial information determined under GAAP with
Slide 21: Pro forma standalone financials reconciliation
Appendix Pro forma standalone financials reconciliation (a) Reflects costs for certain functions and services performed by UTC organizations that are allocated to Otis for purposes of carve-out financial statements. (b) Adjustments have been made to 2019 to represent estimated standalone public comp
Slide 22: Organic sales reconciliation
Appendix Organic sales reconciliation New Maintenance Q1 2020 Total Otis Service Modernization Equipment & Repair Organic (2.1%) (9.8%) 3.3% 2.5% 6.8% FX (1.8%) (1.8%) (1.9%) (1.9%) (1.5%) Net acquisitions/divestitures (0.5%) 0.0% (0.7%) (0.4%) (2.2%) Total growth (4.4%) (11.6%) 0.7% 0.2% 3.1% © 202
Slide 23: SG&A reconciliation
Appendix SG&A reconciliation ($millions) Q1 2019 Q1 2020 SG&A expense 441 465 Restructuring (17) (6) One-time separation costs 0 (32) UTC allocated corporate expenses (a) (17) (16) Public company standalone costs (b) 22 0 Other 0 (1) Adjusted SG&A 429 410 (a) Reflects costs for certain functions and
Slide 24: Earnings per share reconciliation
Appendix Earnings per share reconciliation Q1 2019 Q1 2020 GAAP earnings per share $0.63 $0.38 Impact to earnings per share ($0.01) $0.22 Adjusted earnings per share $0.62 $0.60 © 2020 OTIS WORLDWIDE CORPORATION. 24
Slide 25: Free cash flow reconciliation
Appendix Free cash flow reconciliation ($millions) Q1 2019 Q1 2020 Operating cash flow1 297 159 Capital expenditures (28) (39) Free cash flow1 269 120 GAAP net income 273 165 FCF conversion 99% 73% 1 Operating cash flow excludes dividends paid to noncontrolling interests. © 2020 OTIS WORLDWIDE CORPO
Slide 26: Other reconciliations
Appendix Other reconciliations EBITDA reconciliation Remaining performance obligation (RPO) reconciliation ($millions) 2019 ($billions) Q1 2019 Q4 2019 Q1 2020 Net income attributable to Otis 1,116 RPO at actual currency 16.6 16.4 16.3 Noncontrolling interest 151 FX (0.4) (0.2) 0.2 Income tax expens