Slide 1: Q4 2023 Earnings Call
Q4 2023 Earnings Call January 31, 2024 © 2024 OT IS WOR L D WID E COR PORATION .
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: Q4 & FY 2023 highlights
Q4 & FY 2023 highlights FY 2023 Strong fourth quarter and 2023 supports our long-term strategy… • Q4 organic1 sales up 3.8%...Service up 6.8%, New Equipment ~flat 5.6% • Q4 adjusted EPS1 up 16.0% organic sales growth 1 • Industry leading maintenance portfolio, ~2.3 million units…5th consecutive quar
Slide 4: Q4 orders & portfolio
Q4 orders & portfolio Q4 Orders New Equipment Y/Y New Equipment orders1 2.9% New Equipment Backlog1 2% Chongqing Metro 560 Mission Street China San Francisco, California Service Y/Y Portfolio units 4.2% Modernization orders 11.0% Modernization Backlog1 15% HKHA - Tin Yiu Estate2 Burj Khalifa Hong Ko
Slide 5: Q4 2023 results
Q4 2023 results ($ millions, except per share amounts) Sales Operating profit Diluted earnings per share GAAP 491 522 GAAP $0.71 $0.79 3,620 Adjusted 1 Adjusted 1 566 3,439 505 $0.87 Adjusted 15.6% $0.75 margin 1 14.7% Q4 2022 Q4 2023 Q4 2022 Q4 2023 Q4 2022 Q4 2023 Adjusted EPS1 drivers Organic1 3.
Slide 6: Q4 2023 net sales results
Q4 2023 net sales results ($ millions) New Equipment Service Otis Y/Y 2,154 Y/Y 1,978 1,461 1,466 0.3% 8.9% New Organic1 Organic1 Equipment ~flat 6.8% Service Q4 2022 Q4 2023 Q4 2022 Q4 2023 Organic1 sales ~flat Organic1 sales up 6.8% • Americas up 1.8% • Maintenance & Repair up 6.8% • EMEA ~flat •
Slide 7: Q4 2023 operating profit results
Q4 2023 operating profit results ($ millions) New Equipment Service Y/Y Y/Y Otis GAAP 66 81 22.7% 461 497 7.8% 518 472 New Adjusted 1 23.6% 9.7% Equipment 89 72 Adjusted 6.1% +120 bps +10 bps margin 1 23.9% 24.0% Service 4.9% Q4 2022 Q4 2023 Q4 2022 Q4 2023 Adjusted operating profit1 up $20 million
Slide 8: Full year 2023 adjusted EPS growth drivers
Full year 2023 adjusted EPS1 growth drivers +$166M ($23M) ~$0.12 (~$0.04) Q4: Zardoya2 ($0.04) ~$0.29 EUR @ 1.07 CNY @ 7.24 Shares FY: Tax EUR @ 1.08 Volume CNY @ 7.08 I nterest / other $3.54 Productivity +11.7% Pricing $3.17 Commodities Mix & churn Wage / material inflation Corporate / other 2022 a
Slide 9: Market & 2024 outlook
Market & 2024 outlook1 Industry new equipment unit growth1 Otis Down Down Down Down LSD LSD L-MSD L-MSD • Net sales of $14.5 to $14.8B, up 2 to 4% at actual currency; organic2 up 3 to 5% (4%) • Adjusted operating profit2 of $2.40 to $2.45B, up $150 to $190M at constant currency2; up $125 to Americas
Slide 10: 2024 New Equipment outlook
2024 New Equipment outlook1 Financial performance Profit drivers New Equipment 2023 2024E 6,208 ~flat 5,440 5,778 5,812 organic1 Volume + 5,136 442 381 381 Price /+ + 361 Commodities & 6.6% 292 7.1% 6.6% 6.6% +0-10bps Productivity ++ + 5.7% Mix ―― ―― Investments ― ― SG&A ― ― 2019 2020 2021 2022 2023
Slide 11: 2024 Service outlook
2024 Service outlook1 Financial performance Profit drivers Service 2023 2024E +M-HSD% organic1 8,397 Volume ++ ++ ++ + 7,837 7,801 7,434 Price 7,356 2,014 1,801 1,832 24.0% +40-50bps Productivity + + 1,665 1,605 23.0% 23.5% Wage inflation ―― ― 22.6% 21.6% Mix / Churn ― ― Investments ― ― SG&A ― ― 201
Slide 12: UpLift savings
UpLift savings Leverage enterprise scale Targeted savings Streamline operating model and reporting Cumulative in-year benefits ($ millions) structure 150 Optimize Digital Technology & infrastructure 100 Indirect and supply chain optimization Logistics & fleet efficiencies 50 Professional fees Real e
Slide 13: 2024 adjusted EPS growth outlook drivers
2024 adjusted EPS1 growth outlook drivers + $150 to 190M ($25) to ($15M) ($0.04) to ($0.03) $0.03 to $0.05 $0.27 to $0.34 Shares FY24: EUR @ 1.08 Tax Volume CNY @ 7.25 I nterest / other Productivity Pricing Commodities $3.80 to $3.90 $3.54 UpLift Mix & churn Wage inflation Corporate/other 2023 adjus
Slide 14: Otis fundamentals…driving value creation
Otis fundamentals…driving value creation • Invest in innovation Sales • Gain New Equipment share Sustainable FOCUS AND EMPOWER OUR • Accelerate portfolio growth growth ORGANIZATION • Deliver modernization value ACCELERATE ADVANCE SERVICE PORTFOLIO DIGITALIZATION • Drop through from volume GROWTH Ope
Slide 15: © 2024 OT IS WOR L D WID E COR PORATION .
© 2024 OT IS WOR L D WID E COR PORATION . 15
Slide 16: Appendix
Appendix © 2024 OT IS WOR L D WID E COR PORATION . 16
Slide 17: Backlog and orders
Backlog and orders ($billions, at constant currency 1) Remaining performance obligation1 New Equipment orders Region Q4 2023 Y/Y 2023 Y/Y Y/Y 4% Total Otis 2.9% (3.9%) 17.6 17.5 16.8 Americas 6.1% (11.0%) +15% Modernization EMEA 11.4% 0.6% Maintenance Asia (2.9%) (0.9%) +4% & Repair New Modernizatio
Slide 18: Q4 2023 adjusted operating profit drivers
Q4 2023 adjusted operating profit1 drivers Actual currency + $17M + $46M ($2M) + $61M +$52M ($1M) $9M $33M $20M Pricing Pricing Productivity Productivity $566M Commodities Volume $505M Regional & product mix Annual wage inflation SG&A Material costs Q4 2022 adjusted New Service Corporate / FX Q4 202
Slide 19: FY 2023 results
FY 2023 results ($ millions, except per share amounts) Sales Operating profit Diluted earnings per share GAAP 13,685 14,209 GAAP 2,033 2,186 GAAP $2.96 $3.39 Adjusted 1 Adjusted1 Adjusted 1 2,269 $3.54 14,209 13,579 $3.17 Adjusted 2,126 margin1 16.0% 15.7% FY 2022 FY 2023 FY 2022 FY 2023 FY 2022 FY
Slide 20: FY 2023 net sales results
FY 2023 net sales results ($ millions) New Equipment Service Y/Y Y/Y GAAP 5,864 5,812 (0.9%) 7,821 8,397 7.4% Otis Adjusted1 0.6% 8,397 7.6% 5,812 5,778 7,801 New Organic1 Organic1 Equipment 2.6% 7.7% Service FY 2022 FY 2023 FY 2022 FY 2023 Organic1 sales up 2.6% Organic1 sales up 7.7% • Americas up
Slide 21: FY 2023 operating profit results
FY 2023 operating profit results ($ millions) New Equipment Service Y/Y Y/Y GAAP 358 358 0% 1,789 1,972 10.2% Otis 2,014 Adjusted 1 0% 1,832 9.9% New Equipment 381 381 24.0% +50 bps Adjusted 0 bps 23.5% margin 1 6.6% 6.6% Service FY 2022 FY 2023 FY 2022 FY 2023 Adjusted operating profit1 up $26 mill
Slide 22: 2024 organic sales outlook
2024 organic1 sales outlook 2023 actuals 2024 Outlook Outlook drivers New Equipment up 2.6% ~flat • Strong maintenance portfolio growth, up 4.2% Americas up low single up low single and Service pricing tailwinds EMEA up mid single up low single • Accelerating modernization and Asia up low single dow
Slide 23: 2024 financial outlook
2024 financial outlook 2023 actuals 2024 outlook Constant currency up $166M up $150 to $190M adj. operating profit1 Otis up 30 bps Otis up ~50 bps Adjusted operating New Equipment ~flat New Equipment flat to up 10 bps profit1 margin Service up 50 bps Service up 40 to 50 bps Adjusted free cash $1.53B
Slide 24: Accelerating portfolio growth
Accelerating portfolio growth 4.2% ~2.8M Growth driver portfolio growth ~65% global 2.3M ~net-neutral conv ersion rate 2.2M ~6.5% global ~51% China cancellation conversion rate in 2023 rate ~93.5% global retention rate (~95% excl. China) 2022 Retention Recapture NE Conversion 2023 portfolio units po
Slide 25: Strong geographic diversification
Strong geographic diversification FY23 metrics Adj. New Equipment sales1 Adj. Service sales1 $5.8B $8.4B China China Americas Asia Pacific Americas Asia Pacific EMEA EMEA Adj. operating profit1 Maintenance units $2.3B ~2.3M Adj. margin1 ~100K Asia New 6.6% connected Pacific Equipment ~505K ~220K EME
Slide 26: Use and Definitions of Non-GAAP Financial Measures
Use and Definitions of Non-GAAP Financial Measures Otis W orldwide Corporation (“Otis”) reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP"). W e supplement the reporting of our financial information determined under GAAP with certai
Slide 27: Additional information
Additional information Actuals FY24 1Q23 2Q23 3Q23 4Q23 FY23 outlook UpLift restructuring expense $0M $0M $0M $25M $25M $75M Other restructuring expense $5M $10M $21M $6M $42M to $100M UpLift transformation costs $0M $0M $4M $12M $16M Non-service pension expense $0M $1M $0M $4M $5M ~$5M Adjusted net
Slide 28: 2023 GAAP to adjusted financials reconciliation
2023 GAAP to adjusted financials reconciliation ($millions) Otis New Equipment Serv ice Corporate/other Sales 1Q23 2Q23 3Q23 4Q23 FY 2023 1Q23 2Q23 3Q23 4Q23 FY 2023 1Q23 2Q23 3Q23 4Q23 FY 2023 1Q23 2Q23 3Q23 4Q23 FY 2023 Net sales 3,346 3,720 3,523 3.620 14,209 1,307 1,604 1,435 1,466 5,812 2,039 2
Slide 29: 2022 GAAP to adjusted financials reconciliation
2022 GAAP to adjusted financials reconciliation ($millions) Otis New Equipment Serv ice Corporate/other FY Sales 1Q22 2Q22 3Q22 4Q22 1Q22 2Q22 3Q22 4Q22 FY 2022 1Q22 2Q22 3Q22 Q422 FY 2022 1Q22 2Q22 3Q22 Q422 FY 2022 2022 Net sales 3,414 3,488 3,344 3,439 13,685 1,422 1,534 1,447 1,461 5,864 1,992 1
Slide 30: Organic sales reconciliation
Organic sales reconciliation Maintenance & Q4 2023 Total Otis New Equipment Service Modernization Repair Organic 3.8% (0.2%) 6.8% 6.8% 7.0% FX 1.4% 0.4% 1.9% 2.0% 1.4% Net acquisitions / divestitures 0.1% 0.1% 0.2% 0.2% 0.0% Total net sales growth 5.3% 0.3% 8.9% 9.0% 8.4% Maintenance & FY 2023 Total
Slide 31: Adjusted operating profit at constant currency reconciliation
Adjusted operating profit at constant currency reconciliation ($millions) Q4 2022 Q4 2023 Y/Y FY 2022 FY 2023 Y/Y New Equipment Adjusted operating profit 72 89 17 381 381 0 Impact of foreign exchange - 3 3 - 26 26 Adjusted operating profit at constant currency 72 92 20 381 407 26 - Service Adjusted
Slide 32: SG&A reconciliation
SG&A reconciliation ($millions) Q4 2022 Q4 2023 FY 2022 FY 2023 Adjusted Sales 3,439 3,620 13,579 14,209 SG&A expense 448 498 1,763 1,884 UpLift Restructuring 0 (25) 0 (25) Other Restructuring (9) (11) (38) (36) Other 2 1 (3) 0 Russia (1) 0 (11) 0 Adjusted SG&A 440 463 1,711 1,823 Adjust ed SG&A % o
Slide 33: Diluted EPS and Tax reconciliations
Diluted EPS and Tax reconciliations Q4 2022 Q4 2023 FY 2022 FY 2023 GAAP diluted earnings per share $0.71 $0.79 $2.96 $3.39 Impact of non-recurring items on diluted earnings per share $0.04 $0.08 $0.21 $0.15 Adjusted diluted earnings per share $0.75 $0.87 $3.17 $3.54 Q4 2022 Q4 2023 FY 2022 FY 2023
Slide 34: Free cash flow reconciliation
Free cash flow reconciliation ($millions) Q4 2022 Q4 2023 FY 2022 FY 2023 Operating cash flow1 464 597 1,560 1,627 Capital expenditures (34) (42) (115) (138) Free cash flow 430 555 1,445 1,489 UpLift restructuring payments 0 12 0 12 UpLift transformation payments 0 6 0 8 Separation-related payments
Slide 35: Other reconciliations
Other reconciliations Remaining performance obligation (RPO) ($billions) Q4 2022 Q3 2023 Q4 2023 RPO at actual currency (GAAP measure) 17.2 17.8 18.0 FX/other1 (0.4) (0.2) (0.5) RPO at constant currency 16.8 17.6 17.5 New Equipment backlog Modernization backlog Growth % Q4 2023 Growth % Q4 2023 Actu