Otis Worldwide Corporation · NYSE:OTIS
Otis Worldwide — Q3 2023 Earnings Presentation
29 slides from Otis Worldwide's earnings presentation, Oct 25, 2023
Slide 1: Q3 2023 Earnings Call
Q3 2023 Earnings Call October 25, 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: Q3 2023 highlights
Q3 2023 highlights Q3 Orders Third quarter demonstrates strength of Service-driven business model • Organic1 sales growth of 5.2%... driven by Service, up 8.4% • 15th consecutive quarter of adjusted Service operating profit margin expansion • Maintenance portfolio up 4.2%...4th consecutive quarter S
Slide 4: Q3 2023 update
Q3 2023 update • Organic1 sales up 5.2%…New Equipment up 1.0% and Service up 8.4% • Adjusted operating profit up $47M with 60 basis points of margin1 expansion Q3 2023 • Maintenance units up 4.2%…Mod orders up 13% at constant currency1 Results • New Equipment backlog up 2% at constant currency1 • Su
Slide 5: Q3 2023 results
Q3 2023 results ($ millions, except per share amounts) Sales Operating profit Diluted earnings per share GAAP 3,344 3,523 GAAP 529 571 GAAP $0.77 $0.91 Adjusted 1 Adjusted1 595 Adjusted 1 3,523 $0.95 3,326 543 16.9% Adjusted $0.80 margin1 16.3% Q3 2022 Q3 2023 Q3 2022 Q3 2023 Q3 2022 Q3 2023 Adjuste
Slide 6: New Equipment
New Equipment ($ millions) Net sales Q3 Results Y/Y GAAP 1,447 1,435 (0.8%) • Orders down 10% at constant currency 1… growth in EMEA and Asia Pacific offset by Adjusted1 0.1% decline in the Americas and China 1,433 1,435 Organic1 • 3Q23 New Equipment share ~flat 2 1.0% • New Equipment backlog up 2%
Slide 7: Service
Service ($ millions) Net sales Y/Y Q3 Results GAAP 1,897 2,088 10.1% • Maintenance units up 4.2% v ersus prior 2,088 year…growth in all regions Adjusted 1 10.3% 1,893 Organic1 • Modernization orders up 13% at constant 8.4% currency 1 • Organic1 sales up 8.4% Q3 2022 Q3 2023 – Maintenance & Repair up
Slide 8: 2023 financial outlook
2023 financial outlook Prior outlook Current outlook Otis up 4.5 to 6% Otis up ~5.5% Organic1 sales New Equipment up 3 to 5% New Equipment up ~3% Service up 6 to 7% Service up ~7.5% Constant currency up $155 to $175M up ~$170M adj. operating profit1 Otis up ~30 bps Otis up ~30 bps Adjusted operating
Slide 9: 2023 organic sales outlook
2023 organic1 sales outlook Prior outlook Updated outlook Outlook drivers (July 26, 2023) New Equipment up 3 to 5% up ~3% • Strong maintenance portfolio growth, up 4.2% Americas up mid single up mid single and Service pricing tailwinds EMEA up mid single up mid single • Continued strength of repair
Slide 10: 2023 adjusted EPS growth outlook drivers
2023 adjusted EPS1 growth outlook drivers +$170M at constant currency1 ($30M) ~$0.10 (~$0.05) Q4: ~$0.30 Zardoya2 ($0.04) EUR @ 1.05 CNY @ 7.30 Shares FY: Tax EUR @ 1.07 Volume CNY @ 7.10 I nterest / other $3.52 Productivity +11% Pricing $3.17 Commodities Wage / material inflation Mix & churn Corpor
Slide 11: Otis fundamentals…driving value creation
Otis fundamentals…driving value creation 1 Sales Operating Profit Cash & Capital Deployment • Invest in innovation • Drop through from volume • Reduce effective tax rate • Gain New Equipment share • Optimize supply chain & • Make targeted investments installation process • Accelerate portfolio growt
Slide 12: Slide 12
Slide 13: Appendix
Appendix © 2023 OT IS WOR L D WID E COR PORATION . 13
Slide 14: Backlog and orders
Appendix Backlog and orders ($billions, at constant currency 1) Remaining performance obligation Y/Y 17.8 17.6 + 5% 16.8 + 15% Modernization New Equipment orders Region Q3 2023 Y/Y YTD 2023 Y/Y 12-month rolling Total Otis (10.3%) (5.8%) (3.6%) Maintenance Americas (19.9%) (15.1%) (13.0%) & Repair +
Slide 15: Q3 2023 adjusted operating profit drivers
Appendix Q3 2023 adjusted operating profit1 drivers Actual currency + $1M + $66M ($15M) + $52M +$47M at constant currency1 ($16M) $5M $53M $10M Pricing Volume Productivity Pricing $595M Commodities Productivity $543M Regional & product mix Annual wage inflation SG&A Material costs Q3 2022 adjusted N
Slide 16: Year-to-date 2023 results
Appendix Year-to-date 2023 results ($ millions, except per share amounts) Sales Operating profit Diluted earnings per share GAAP 10,246 10,589 GAAP 1,542 1,664 GAAP $2.25 $2.60 Adjusted 1 10,589 Adjusted1 $2.68 1,703 Adjusted 1 $2.42 10,140 1,621 16.0% 16.1% Adjusted margin1 YTD 2022 YTD 2023 YTD 20
Slide 17: YTD New Equipment
Appendix YTD New Equipment ($ millions) Net sales Y/Y GAAP 4,403 4,346 (1.3%) Results Adjusted1 4,317 4,346 0.7% • Orders down 6% at constant currency 1 Organic1 3.6% • New Equipment share up ~50 bps2 YTD 2022 YTD 2023 • Organic1 sales up 3.6% – Americas up 3.8% Operating profit – EMEA up 8.1% GAAP
Slide 18: YTD Service
Appendix YTD Service ($ millions) Net sales Y/Y Results GAAP 5,843 6,243 6.8% Adjusted1 6,243 7.2% 5,823 • Modernization orders up 19% at constant currency 1 Organic1 • Organic1 sales up 8.0% 8.0% – Maintenance & Repair up 8.2% – Modernization up 7.3% YTD 2022 YTD 2023 Operating profit • Adjusted op
Slide 19: YTD 2023 adjusted operating profit drivers
Appendix YTD 2023 adjusted operating profit1 drivers Actual currency ($17M) + $136M ($37M) + $82M +$114M at constant currency1 ($37M) $145M ($32M) $6M Volume Volume Pricing Pricing $1,703M $1,621M Productivity Productivity Commodities Annual w age inflation Regional & product mix Material costs SG&A
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: Additional information
Appendix Additional information Actuals FY23 Outlook Prior 1Q23 2Q23 3Q23 YTD Updated (July 26, 2023) Restructuring expense $5M $10M $21M $36M ~$60M ~$60M Non-service pension expense $0M $1M $0M $1M <$5M <$5M Adjusted net interest expense (a) $33M $37M $39M $109M ~$150M ~$150M Adjusted effective tax
Slide 22: 2023 GAAP to adjusted financials reconciliation
Appendix 2023 GAAP to adjusted financials reconciliation ($millions) Otis New Equipment Serv ice Corporate/other Sales 1Q23 2Q23 3Q23 1Q23 2Q23 3Q23 1Q23 2Q23 3Q23 1Q23 2Q23 3Q23 Net sales 3,346 3,720 3,523 1,307 1,604 1,435 2,039 2,116 2,088 0 0 0 Income 1Q23 2Q23 3Q23 Net income attributable to Ot
Slide 23: 2022 GAAP to adjusted financials reconciliation
Appendix 2022 GAAP to adjusted financials reconciliation ($millions) Otis New Equipment Serv ice Corporate/other FY Sales 1Q22 2Q22 3Q22 4Q22 1Q22 2Q22 3Q22 4Q22 FY 2022 1Q22 2Q22 3Q22 Q422 FY 2022 1Q22 2Q22 3Q22 Q422 FY 2022 2022 Net sales 3,414 3,488 3,344 3,439 13,685 1,422 1,534 1,447 1,461 5,86
Slide 24: Organic sales reconciliation
Appendix Organic sales reconciliation Maintenance & Q3 2023 Total Otis New Equipment Service Modernization Repair Organic 5.2% 1.0% 8.4% 8.6% 7.6% FX 0.6% (0.9%) 1.8% 2.0% 0.9% Net acquisitions / divestitures (0.4%) (0.9%) (0.1%) (0.2%) 0.3% Total net sales growth 5.4% (0.8%) 10.1% 10.4% 8.8% Mainte
Slide 25: Adjusted operating profit at constant currency reconciliation
Appendix Adjusted operating profit at constant currency reconciliation ($millions) Q3 2022 Q3 2023 Y/Y YTD 2022 YTD 2023 Y/Y New Equipment Adjusted operating profit 103 104 1 309 292 (17) Impact of foreign exchange - 9 9 - 23 23 Adjusted operating profit at constant currency 103 113 10 309 315 6 - S
Slide 26: SG&A reconciliation
Appendix SG&A reconciliation ($millions) Q3 2022 Q3 2023 YTD 2022 YTD 2023 Adjusted Sales 3,326 3,523 10,140 10,589 SG&A expense 417 452 1,315 1,386 Restructuring (4) (12) (29) (25) One-time separation costs and other (2) (1) (5) (1) Russia (3) 0 (10) 0 Adjusted SG&A 408 439 1,271 1,360 Adjust ed SG
Slide 27: Diluted EPS and Tax reconciliations
Appendix Diluted EPS and Tax reconciliations Q3 2022 Q3 2023 YTD 2022 YTD 2023 GAAP diluted earnings per share $0.77 $0.91 $2.25 $2.60 Impact of non-recurring items on diluted earnings per share $0.03 $0.04 $0.17 $0.08 Adjusted diluted earnings per share $0.80 $0.95 $2.42 $2.68 Q3 2022 Q3 2023 YTD 2
Slide 28: Free cash flow reconciliation
Appendix Free cash flow reconciliation ($millions) Q3 2022 Q3 2023 YTD 2022 YTD 2023 Operating cash flow1 239 306 1,096 1,030 Capital expenditures (24) (34) (81) (96) Free cash flow 215 272 1,015 934 GAAP net income 324 376 956 1,083 FCF conversion 66% 72% 106% 86% 1 Operating cash flow excludes div
Slide 29: Other reconciliations
Appendix Other reconciliations Remaining performance obligation (RPO) ($billions) Q3 2022 Q2 2023 Q3 2023 RPO at actual currency (GAAP measure) 16.6 18.3 17.8 FX/other1 0.2 (0.5) (0.2) RPO at constant currency 16.8 17.8 17.6 New Equipment backlog Modernization backlog Growth % Q3 2023 Growth % Q3 20