Otis Worldwide Corporation · NYSE:OTIS
Otis Worldwide — Q2 2023 Earnings Presentation
30 slides from Otis Worldwide's earnings presentation, Jul 26, 2023
Slide 1: Q2 2023 Earnings Call
Q2 2023 Earnings Call July 26, 2023 © 2023 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: Q2 2023 highlights
Q2 2023 highlights Q2 Orders Strong second quarter in both segments • Organic1 sales growth of 9.5%... both segments up HSD • Best Service organic growth since spin • New Equipment share up slightly, up ~50 bps in 1H2 • Maintenance portfolio up 4.2%...growth in all regions • Adjusted EPS1 up 7% Hôpi
Slide 4: Q2 2023 update
Q2 2023 update • Organic1 sales up 9.5%...New Equipment up 9.5% and Service up 9.4% • New Equipment adjusted backlog up 5% at constant currency1 Q2 2023 • Mod orders up 16% at constant currency1… Mod backlog up 14% Results • Adjusted operating profit up $60M with 20 basis points of margin1 expansion
Slide 5: UpLift raising Otis for sustainable long-term performance
UpLift raising Otis for sustainable long-term performance Improving operating model 2020 – 2022 2023+ to drive performance • ~3% organic1 growth CAGR • Accelerate growth Streamline and optimize through improved processes • ~140bp adj. operating customer centricity profit margin1 expansion Accelerate
Slide 6: Q2 2023 results
Q2 2023 results ($ millions, except per share amounts) Sales Operating profit Diluted earnings per share GAAP 3,488 3,720 GAAP 487 580 GAAP $0.76 $0.90 Adjusted 1 3,720 Adjusted1 590 Adjusted 1 $0.92 3,454 $0.86 541 15.9% Adjusted margin1 15.7% Q2 2022 Q2 2023 Q2 2022 Q2 2023 Q2 2022 Q2 2023 Adjuste
Slide 7: New Equipment
New Equipment ($ millions) Net sales Q2 Results Y/Y GAAP 1,534 1,604 4.6% • Orders down 12% at constant currency1… strong growth in Asia Pacific more than offset by tough Adjusted1 6.3% compares in the Americas and EMEA 1,604 1,509 • 2Q22 New Equipment share up slightly2 Organic1 9.5% • New Equipmen
Slide 8: Service
Service ($ millions) Net sales Y/Y Q2 Results GAAP 1,954 2,116 8.3% • Maintenance units up 4.2% v ersus prior 2,116 year…growth in all regions Adjusted 1 8.8% 1,945 Organic1 • Modernization orders up 16% at constant 9.4% currency 1…backlog up 14% • Organic1 sales up 9.4% Q2 2022 Q2 2023 – Maintenanc
Slide 9: 2023 financial outlook
2023 financial outlook Prior outlook Current outlook Otis up 4 to 6% Otis up 4.5 t o 6% Organic1 sales New Equipment up 3 to 5% New Equipment up 3 to 5% Service up 5 to 7% Service up 6 to 7% Constant currency up $130 to $175M up $155 to $175M adj. operating profit1 Otis up 20 to 30 bps Otis up ~30 b
Slide 10: 2023 organic sales outlook
2023 organic1 sales outlook Prior outlook Updated outlook Outlook drivers (April 26, 2023) New Equipment up 3 to 5% up 3 to 5% • Q2 New Equipment backlog up 5% at Americas up mid single up mid single constant currency1 • Strong maintenance EMEA up mid single up mid single portfolio growth, up 4.2% i
Slide 11: 2023 adjusted EPS growth outlook drivers
2023 adjusted EPS1 growth outlook drivers + $155 to 175M at constant currency1 ($30M) to ($20M) ($0.05) to ($0.03) ~$0.06 2H: $0.27 to $0.31 Zardoya2 ($0.04) EUR @ 1.08 CNY @ 7.08 Shares FY: Tax EUR @ 1.08 Volume CNY @ 7.00 I nterest / other $3.45 to $3.50 Productivity Pricing + 9 to 10% $3.17 Commo
Slide 12: Otis fundamentals…driving value creation
Otis fundamentals…driving value creation 1 Sales Operating Profit Cash & Capital Deployment • Invest in innovation • Drop through from volume • Reduce effective tax rate • Optimize supply chain & • Gain New Equipment share • Make targeted investments installation process • Accelerate portfolio growt
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Slide 14: Appendix
Appendix © 2023 OT IS WOR L D WID E COR PORATION . 14
Slide 15: Backlog and orders
Appendix Backlog and orders ($billions, at constant currency 1) Adjusted remaining performance obligation1 New Equipment backlog at record levels2 (Index, 1Q 2021 = 100) Y/Y 17.4 17.8 + 5% 120 16.9 + 14% 110 Modernization 100 90 Maintenance 80 & Repair + 4% 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q
Slide 16: Q2 2023 adjusted operating profit drivers
Appendix Q2 2023 adjusted operating profit1 drivers Actual currency + $6M + $50M ($7M) + $49M +$60M at constant currency1 ($7M) ($11M) $52M $15M Volume Volume Pricing Pricing $590M Productivity Productivity $541M Commodities Annual wage inflation Regional & product mix Material costs SG&A Transactio
Slide 17: H1 2023 results
Appendix H1 2023 results ($ millions, except per share amounts) Sales Operating profit Diluted earnings per share GAAP 6,902 7,066 GAAP 1,013 1,093 GAAP $1.48 $1.70 Adjusted 1 7,066 Adjusted1 1,108 1,078 $1.72 6,814 Adjusted 1 $1.62 15.8% 15.7% Adjusted margin1 H1 2022 H1 2023 H1 2022 H1 2023 H1 202
Slide 18: New Equipment
Appendix New Equipment ($ millions) Net sales Y/Y GAAP 2,956 2,911 (1.5%) Adjusted1 2,884 2,911 0.9% H1 Results • Orders down 4% at constant currency 1 Organic1 4.9% • New Equipment share up ~50 bps2 H1 2022 H1 2023 • Organic1 sales up 4.9% – Americas up 1.4% Operating profit – EMEA up 8.8% GAAP 192
Slide 19: Service
Appendix Service ($ millions) Net sales Y/Y GAAP 3,946 4,155 5.3% H1 Results Adjusted1 4,155 3,930 5.7% • Modernization orders up 22% at constant currency 1 Organic1 • Organic1 sales up 7.9% 7.9% – Maintenance & Repair up 8.0% – Modernization up 7.1% H1 2022 H1 2023 • Adjusted operating profit1 up $
Slide 20: H1 2023 adjusted operating profit drivers
Appendix H1 2023 adjusted operating profit1 drivers Actual currency ($18M) + $70M ($22M) + $30M +$67M at constant currency1 ($21M) $92M ($37M) ($4M) Volume Volume Pricing Pricing Productivity Productivity $1,108M $1,078M Commodities Annual w age inflation Regional & product mix Material costs SG&A T
Slide 21: Additional information
Appendix Additional information Actuals FY23 Outlook Prior 1Q23 2Q23 1H23 Updated (April 26, 2023) Restructuring expense $5M $10M $15M ~$60M ~$60M Non-service pension expense $0M $1M $1M <$5M <$5M Adjusted net interest expense (a) $33M $37M $70M ~$150M ~$150M Adjusted effective tax rate (b) 26.6% 25
Slide 22: Use and Definitions of Non-GAAP Financial Measures
Appendix Use and Definitions of Non-GAAP Financial Measures Otis Worldwide Corporation (“Otis”) reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP"). We supplement the reporting of our financial information determined under GAAP with
Slide 23: 2023 GAAP to adjusted financials reconciliation
Appendix 2023 GAAP to adjusted financials reconciliation ($millions) Otis New Equipment Serv ice Corporate/other Sales 1Q23 2Q23 1Q23 2Q23 1Q23 2Q23 1Q23 2Q23 Net sales 3,346 3,720 1,307 1,604 2,039 2,116 0 0 Income 1Q23 2Q23 Net income attributable to Otis 331 376 Noncont rolling int erest in subsi
Slide 24: 2022 GAAP to adjusted financials reconciliation
Appendix 2022 GAAP to adjusted financials reconciliation ($millions) Otis New Equipment Serv ice Corporate/other FY Sales 1Q22 2Q22 3Q22 4Q22 1Q22 2Q22 3Q22 4Q22 FY 2022 1Q22 2Q22 3Q22 Q422 FY 2022 1Q22 2Q22 3Q22 Q422 FY 2022 2022 Net sales 3,414 3,488 3,344 3,439 13,685 1,422 1,534 1,447 1,461 5,86
Slide 25: Organic sales reconciliation
Appendix Organic sales reconciliation Maintenance & Q2 2023 Total Otis New Equipment Service Modernization Repair Organic 9.5% 9.5% 9.4% 9.1% 10.9% FX (2.1%) (3.4%) (1.1%) (1.0%) (1.6%) Net acquisitions / divestitures (0.7%) (1.5%) 0.0% (0.2%) 0.8% Total net sales growth 6.7% 4.6% 8.3% 7.9% 10.1% Ma
Slide 26: Adjusted operating profit at constant currency reconciliation
Appendix Adjusted operating profit at constant currency reconciliation ($millions) Q2 2022 Q2 2023 Y/Y H1 2022 H1 2023 Y/Y New Equipment Adjusted operating profit 113 119 6 206 188 (18) Impact of foreign exchange - 9 9 - 14 14 Adjusted operating profit at constant currency 113 128 15 206 202 (4) - S
Slide 27: SG&A reconciliation
Appendix SG&A reconciliation ($millions) Q2 2022 Q2 2023 H1 2022 H1 2023 Adjusted Sales 3,454 3,720 6,814 7,066 SG&A expense 439 479 898 934 Restructuring (14) (10) (25) (13) One-time separation costs 0 0 (3) 0 Russia (2) 0 (7) 0 Adjusted SG&A 423 469 863 921 Adjust ed SG&A % of adjust ed sales 12.2
Slide 28: Diluted EPS and Tax reconciliations
Appendix Diluted EPS and Tax reconciliations Q2 2022 Q2 2023 H1 2022 H1 2023 GAAP diluted earnings per share $0.76 $0.90 $1.48 $1.70 Impact of non-recurring items on diluted earnings per share $0.10 $0.02 $0.14 $0.02 Adjusted diluted earnings per share $0.86 $0.92 $1.62 $1.72 Q2 2022 Q2 2023 H1 2022
Slide 29: Free cash flow reconciliation
Appendix Free cash flow reconciliation ($millions) Q2 2022 Q2 2023 H1 2022 H1 2023 Operating cash flow1 353 446 857 724 Capital expenditures (27) (37) (57) (62) Free cash flow 326 409 800 662 GAAP net income 321 376 632 707 FCF conversion 102% 109% 127% 94% 1 Operating cash flow excludes div idends
Slide 30: Other reconciliations
Appendix Other reconciliations Remaining performance obligation (RPO) ($billions) Q2 2022 Q1 2023 Q2 2023 RPO at actual currency (GAAP measure) 17.7 17.9 18.3 Russia (0.2) - - FX/other1 (0.6) (0.5) (0.5) Adjusted RPO at constant currency 16.9 17.4 17.8 New Equipment backlog Modernization backlog Gro