Slide 1: Q2 2020 Earnings Call
Q2 2020 Earnings Call July 28, 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: Highlights
Highlights All factories open…~90% NE job sites open, up from a low of ~65%...providing essential services and proactively containing costs to mitigate the impact of COVID-19 Ended Q2 with a strong liquidity position…$1.9B cash balance and $1.5B undrawn revolving credit facility Executing on long-te
Slide 4: Q2 2020 update
Q2 2020 update • New Equipment orders down 6.8% at constant currency1…flat on a rolling 12-month basis • New Equipment backlog up 2% versus prior year at constant currency1 Q2 2020 • Organic1 sales down 6.5%...NE down 10.4%, Service down 3.3% Results • Adjusted operating profit margin1 expanded 30 b
Slide 5: Q2 2020 results
Q2 2020 results ($ millions, except per share amounts) Sales Operating profit Diluted earnings per share GAAP 481 416 GAAP $0.71 $0.52 3,351 3,029 Adjusted1 496 457 Adjusted1 $0.59 $0.56 14.8% 15.1% Adjusted margin1 Q2 2019 Q2 2020 Q2 2019 Q2 2020 Q2 2019 Q2 2020 Organic1 (6.5%) Q2 adjusted operatin
Slide 6: New Equipment
New Equipment ($ millions) • Q2 orders down 6.8% at constant Sales currency1…~flat on a rolling 12-month basis Y/Y 1,500 (13.7%) • Q2 share up ~110 bps2 …H1 share up ~90 1,294 bps2 • New Equipment backlog up 2% at constant currency1 Q2 2019 Q2 2020 • Q2 organic1 sales down 10.4% Operating profit – A
Slide 7: Service
Service ($ millions) Sales • Maintenance units up 1% versus prior year Y/Y 1,851 (6.3%) 1,735 • Modernization orders down 4.0% at constant currency1...up double digits in Asia Q2 2019 Q2 2020 • Q2 organic1 sales down 3.3% – Maintenance & Repair down 3.6% Operating profit – Modernization down 1.5% GA
Slide 8: Improving operational trends
Improving operational trends1 NE JOB SITE ACCESS MAINTENANCE ACCESS SERVICE CALLS Americas EMEA APAC China 2020 Q1 Apr May Jun Q1 Apr May Jun Q1 Apr May Jun 1 Based on Otis internal estimates. © 2020 OTIS WORLDWIDE CORPORATION. 8
Slide 9: 2020 financial outlook
2020 financial outlook Improving 2020 outlook across all metrics Prior outlook Current outlook Otis down 3 to 7% Otis down 2 to 4% Organic1 sales New Equipment down 5 to 10% New Equipment down mid to high single digits Service down low to mid single digits Service flat to down low single digits Adju
Slide 10: 2020 organic sales outlook
2020 organic1 sales outlook Prior outlook (May 7, 2020) Updated outlook Change vs. prior outlook New Equipment down 5 to 10% down mid to high single Americas down mid single to ~10% down mid single to ~10% • Unchanged, assumes 2H recovery • N. Europe job site access recovery to pre-COVID EMEA down h
Slide 11: 2020 adjusted operating profit drivers
2020 adjusted operating profit1 drivers Flat to down $50M down $(90) – (60M) ~$20M $(50) – (40M) $40 to 100M $20 – 40M Volume Cost containment Cost containment EUR @ 1.10 Under absorption actions actions CNY @ 7.10 $1,872M Pricing & bad debt Service productivity Transactional FX $1,772 - 1,832M Mate
Slide 12: Capital deployment outlook
Capital deployment outlook ($billions) 2020 Sources and uses of cash Q2 2020 Leverage Cash $1.9 ~ 0.35 ~1.0 – 1.1 ~ 0.26 Debt $6.3 ~1.6 – 1.7 1.4 ~ 0.20 Net debt / 2.2x EBITDA1,2 2019 Debt Dividends NCI / M&A / 2020 free cash 2020 ending cash repayment (Q2-Q4) other flow1outlook estimated balance ca
Slide 13: Otis fundamentals
Otis fundamentals1 Iconic global brand in a large, growing industry Sustainable growth over the medium-term Gaining share in NE2 Expanding Service portfolio Expanding margins through productivity Investing through the cycle Sustainable level of R&D and Capex Robust free cash flow generation >100% FC
Slide 14: © 2020 OTIS WORLDWIDE CORPORATION.
© 2020 OTIS WORLDWIDE CORPORATION.
Slide 15: Appendix
Appendix © 2020 OTIS WORLDWIDE CORPORATION. 15
Slide 16: Backlog and orders
Appendix Backlog and orders ($billions, at constant currency1) Remaining performance obligation New Equipment orders Y/Y 16.3 16.5 16.3 0% Modernization (3%) Q2 2020 12-month Region Y/Y rolling Maintenance Total Otis (6.8%) 0.1% (1%) & Repair Americas (12.8%) 5.6% EMEA (16.6%) (2.6%) New Equipment +
Slide 17: Q2 2020 operating profit drivers
Appendix Q2 2020 operating profit drivers ($millions) GAAP 481 ($24M) at constant currency1 416 operating profit (46) 8 (15) 14 COVID-19 / other Productivity Cost 496 volume Cost containment containment Under absorption COVID-19 / other Transactional FX Material volume 457 productivity Under absorpt
Slide 18: Otis end-market exposure
Appendix Otis end-market exposure1 New Equipment Service (2019 booked units) (2019 maintenance units) Other commercial Infrastructure / Other Infrastructure / Hospitality / Other Retail Hospitality / Retail Other commercial Office Residential Residential Office 1 Based on Otis internal estimates. ©
Slide 19: H1 2020 results
Appendix H1 2020 results ($ millions, except per share amounts) Sales Operating profit Diluted earnings per share 6,452 5,995 GAAP 896 745 GAAP $1.34 $0.90 Adjusted1 929 907 Adjusted1 $1.21 $1.17 14.4% 15.1% Adjusted margin1 H1 2019 H1 2020 H1 2019 H1 2020 H1 2019 H1 2020 Organic1 (4.4%) H1 adjusted
Slide 20: New Equipment
Appendix New Equipment ($ millions) Sales Y/Y 2,771 2,417 (12.8%) • H1 orders down 3.8% at constant currency1 • H1 share up ~90 bps2 • H1 organic1 sales down 10.1% H1 2019 H1 2020 – Americas down 14.3% Operating profit – EMEA down 12.9% GAAP 197 143 (27.4%) – Asia down 5.5% Adjusted1 206 (24.3%) 156
Slide 21: Service
Appendix Service ($ millions) Sales Y/Y 3,681 3,578 (2.8%) • H1 Modernization orders down 0.7% at constant currency1 • H1 organic1 sales down 0.1% H1 2019 H1 2020 – Maintenance & Repair down 0.6% – Modernization up 2.6% Operating profit GAAP 774 781 0.9% • H1 adjusted operating profit1 up $28M at Ad
Slide 22: Additional information
Appendix Additional information Prior FY20 outlook (May 7, 2020) FY20 outlook Standalone cost ~$150M ~$150M (~$175M run rate) ($175M run rate) Restructuring expense $70 – 80M $70 – 80M Non-service pension expense / (benefit) $5 – 15M $5 – 15M Net interest expense ~$160M ~$135M Adjusted non-GAAP tax
Slide 23: Use and Definitions of Non-GAAP Financial Measures
Appendix Use and Definitions of Non-GAAP Financial Measures Otis Worldwide Corporation (“Otis”) reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP"). We supplement the reporting of our financial information determined under GAAP with
Slide 24: Pro forma standalone financials reconciliation
Appendix Pro forma standalone financials reconciliation ($millions) (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
Slide 25: Organic sales reconciliation
Appendix Organic sales reconciliation New Maintenance Q2 2020 Total Otis Service Modernization Equipment & Repair Organic (6.5%) (10.4%) (3.3%) (3.6%) (1.5%) FX (2.6%) (3.2%) (2.2%) (2.4%) (1.8%) Net acquisitions / divestitures (0.5%) (0.1%) (0.8%) (0.5%) (1.9%) Total growth (9.6%) (13.7%) (6.3%) (6
Slide 26: SG&A reconciliation
Appendix SG&A reconciliation ($millions) Q2 2019 Q2 2020 H1 2019 H1 2020 SG&A expense 444 441 885 906 Restructuring (7) (10) (24) (16) One-time separation costs (3) (21) (3) (53) UTC allocated corporate expenses (a) (19) 0 (36) (16) Standalone public company costs (b) 36 0 58 0 Other (2) 1 (2) 0 Adj
Slide 27: Diluted earnings per share reconciliation
Appendix Diluted earnings per share reconciliation Q2 2019 Q2 2020 H1 2019 H1 2020 GAAP diluted earnings per share $0.71 $0.52 $1.34 $0.90 Impact of non-recurring items on diluted earnings per share ($0.12) $0.04 ($0.13) $0.27 Adjusted diluted earnings per share $0.59 $0.56 $1.21 $1.17 © 2020 OTIS W
Slide 28: Free cash flow reconciliation
Appendix Free cash flow reconciliation ($millions) Q2 2019 Q2 2020 H1 2019 H1 2020 Operating cash flow1 354 664 651 823 Capital expenditures (35) (36) (63) (75) Free cash flow1 319 628 588 748 GAAP net income 308 224 581 389 FCF conversion 104% 280% 101% 192% 1 Operating cash flow excludes dividends
Slide 29: Other reconciliations
Appendix Other reconciliations Trailing 12-month EBITDA Remaining performance obligation (RPO) Q3 Q4 Q1 Q2 ($billions) Q2 2019 Q1 2020 Q2 2020 ($millions) 2019 2019 2020 2020 RPO at actual currency 16.6 16.3 16.4 Net income attributable to Otis 317 218 165 224 Noncontrolling interest 44 36 37 41 FX