Otis Worldwide Corporation · NYSE:OTIS
Otis Worldwide — Q4 2022 Earnings Presentation
36 slides from Otis Worldwide's earnings presentation, Feb 1, 2023
Slide 1: Q4 2022 Earnings Call
Q4 2022 Earnings Call February 1, 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: Full year 2022 results
Full year 2022 results Orders New Equipment orders up 7%...adjusted backlog up 11% versus prior year at constant currency1 Tianjin Metro Organic1 sales up 2.5%...NE down 1.7%, Service up 6.0% Tianjin, China Maintenance portfolio at 2.2 million units...growth continued to accelerate, up 4.1% City Cen
Slide 4: 2022: Strong momentum on strategic priorities
2022: Strong momentum on strategic priorities • ~1 pt1 of New Equipment share gain New Equipment • Returned to organic growth in 4Q22 • Launched Gen3™ in India and expanded Gen360™ deployment • Accelerated maintenance portfolio growth…units up 4.1% Service • 3 points like-for-like maintenance pricin
Slide 5: 2023 outlook
2023 outlook Industry new equipment unit growth1 Otis Americas EMEA Asia • Net sales of $13.8 to $14.1B, up 1.5 to 4% at Up L- Up Down actual currency; organic2 up 4 to 6% 2022 MSD LSD HSD • Adjusted operating profit2 of $2.20 to Down $2.25B, up $130 to $175M at constant 2023E ~ Flat ~ Flat MSD curr
Slide 6: Q4 2022 results
Q4 2022 results ($ millions, except per share amounts) Sales Operating profit Diluted earnings per share GAAP 3,569 3,439 GAAP 496 491 GAAP $0.65 $0.71 Adjusted 1 3,506 Adjusted1 Adjusted 1 3,439 $0.75 515 505 $0.72 Adjusted margin1 14.7% 14.7% Q4 2021 Q4 2022 Q4 2021 Q4 2022 Q4 2021 Q4 2022 Adjuste
Slide 7: New Equipment
New Equipment ($ millions) Net sales Q4 Results Y/Y GAAP 1,562 1,461 (6.5%) • Orders up 4% at constant currency 1…high-single digit growth in EMEA and APAC and mid-single Adjusted1 (3.1%) digit growth in China 1,508 1,461 Organic1 • 4Q22 New Equipment share was up ~1 pt 2 5.1% • New Equipment backlo
Slide 8: Service
Service ($ millions) Net sales Y/Y Q4 Results GAAP 2,007 1,978 (1.4%) 1,998 • Maintenance units up 4.1% v ersus prior 1,978 year…growth in all regions Adjusted 1 (1.0%) Organic1 • Modernization orders up 13% at constant 6.9% currency 1 with growth in all regions…backlog up 7% Q4 2021 Q4 2022 • Organ
Slide 9: Full year 2022 adjusted EPS growth drivers
Full year 2022 adjusted EPS1 growth drivers + $124M at constant currency1 ($0.18) ($156M) $0.39 $0.06 $0.09 ($0.26) $0.12 Volume $3.17 FY: Productivity EUR @ 1.05 + 7.5% Pricing CNY @ 6.72 $2.95 Cost containment Wage inflation Mix 1 1 2021 adjusted Operational Commodities FX Zardoya 2 Tax / Other Sh
Slide 10: 2023 New Equipment Outlook
2023 New Equipment Outlook1 Financial Performance Profit drivers New Equipment 2022 2023E 6,208 +4% ― + 5,778 Organic 1 5,440 Volume 5,136 442 361 7.1% 381 ~7% Price /+ + 6.6% 6.6% ― ― 292 Mix Commodities & + 5.7% Productivity Investments ― ― 2019 2020 Adj. Sales 1 2021 Adj. Profit 1 2022 Adj. Margi
Slide 11: 2023 Service Outlook
2023 Service Outlook1 Financial Performance Profit drivers +6% 7,837 Organic 1 Service 2022 2023E 7,801 7,434 7,356 1,801 1,832 ~24% Volume + + 1,665 + ++ 1,605 23.5% Price 23.0% 22.6% Productivity + + 21.6% Wage inflation ― ―― Investments ― ― 2019 2020 Adj. Sales 1 2021 Adj. Profit 1 2022 Adj. Marg
Slide 12: 2023 adjusted EPS growth outlook drivers
2023 adjusted EPS1 growth outlook drivers + $130 to 175M at constant currency1 ($60) to ($45)M ($0.10) to ($0.08) $0.05 to $0.10 $0.23 to $0.31 FY23: Zardoya2 ($0.04) EUR @ 1.05 Shares CNY @ 7.00 Volume Tax I nterest / other Productivity $3.35 to $3.50 Pricing $3.17 Commodities Corporate/other 2022
Slide 13: Otis fundamentals…driving value creation
Otis fundamentals…driving value creation 1 Sales Operating Profit Cash & Capital Deployment • Invest in innovation • Drop through from volume • Reduce effective tax rate • Optimize supply chain & • Gain New Equipment share • Make targeted investments installation process • Accelerate portfolio growt
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Slide 15: Appendix
Appendix © 2023 OT IS WOR L D WID E COR PORATION . 15
Slide 16: Backlog and orders
Appendix Backlog and orders ($billions, at constant currency 1) Adjusted remaining New Equipment orders performance obligation1 Y/Y 18.2 18.2 + 6% Q4 2022 2022 17.1 Region + 7% Y/Y Y/Y Modernization Total Otis 4.3% 7.1% Maintenance Americas (4.1%) 17.5% + 3% & Repair EMEA 9.9% 14.6% Asia 6.4% (0.9%)
Slide 17: Q4 2022 adjusted operating profit drivers
Appendix Q4 2022 adjusted operating profit1 drivers Actual currency ($4M) + $9M ($15M) ($10M) + $39M at constant currency1 ($15M) $51M ($49M) $3M Productivity Volume SG&A Pricing $515M Volume Productivity $505M Commodities Annual w age Unfavorable mix inflation Q4 2021 adjusted New Service Corporate
Slide 18: Full year 2022 results
Appendix Full year 2022 results ($ millions, except per share amounts) Sales Operating profit Diluted earnings per share GAAP 14,298 13,685 GAAP 2,108 2,033 GAAP $2.89 $2.96 Adjusted 1 14,045 13,579 Adjusted1 Adjusted 1 $3.17 2,158 2,126 $2.95 Adjusted margin1 15.7% 15.4% FY 2021 FY 2022 FY 2021 FY
Slide 19: New Equipment
Appendix New Equipment ($ millions) Net sales Y/Y GAAP 6,428 5,864 (8.8%) FY Results Adjusted1 (6.9%) • Orders up 7% at constant currency 1 6,208 5,778 Organic1 • New Equipment share up ~1pt 2 (1.7%) • Organic1 sales down 1.7% – Americas ~flat FY 2021 FY 2022 – EMEA up 5.7% – Asia down 6.0% Operatin
Slide 20: Service
Appendix Service ($ millions) Net sales Y/Y GAAP 7,870 7,821 (0.6%) FY Results Adjusted1 7,837 7,801 (0.5%) • Modernization orders up 8% at constant currency 1 Organic1 • Organic1 sales up 6.0% 6.0% – Maintenance & Repair up 5.6% – Modernization up 8.1% FY 2021 FY 2022 • Adjusted operating profit up
Slide 21: Full year 2022 adjusted operating profit drivers
Appendix Full year 2022 adjusted operating profit1 drivers Actual currency ($61M) + $31M ($2M) ($32M) + $124M at constant currency1 ($2M) $179M ($156M) ($53M) Productivity Volume SG&A Pricing $2,158M Commodities Productivity $2,126 Volume / under Annual w age absorption inflation 2021 adjusted New S
Slide 22: 2023 financial outlook
Appendix 2023 financial outlook 2022 actuals 2023 outlook Otis up 2.5% Otis up 4 to 6% Organic1 sales New Equipment down 1.7% New Equipment up 3 to 5% Service up 6.0% Service up 5 to 7% Constant currency up $124M up $130 to $175M adj. operating profit1 Otis up 30 bps Otis up 20 to 30 bps Adjusted op
Slide 23: 2023 organic sales outlook
Appendix 2023 organic1 sales outlook 2022 Actual Outlook Outlook drivers New Equipment down 1.7% up 3 to 5% • 2022 adjusted New Equipment backlog up 11% at constant Americas ~flat up mid single currency 1 • Accelerated maintenance EMEA up 5.7% up mid single portfolio growth, up 4.1% in 2022, and Ser
Slide 24: Strong geographic diversification
Appendix Strong geographic diversification FY22 metrics Adj. New Equipment sales1 Adj. Service sales1 $5.8B $7.8B China China Americas Asia Pacific Americas Asia Pacific EMEA EMEA Adj. operating profit1 Maintenance units $2.1B ~2.2M Adj. margin1 ~110K New Asia connected 6.6% Equipment Pacific ~465K
Slide 25: Accelerating portfolio growth
Appendix Accelerating portfolio growth >4% Retention: portfolio growth 4.1% Serv ice improv ement Growth driv er portfolio growth and digital roll-out >2.5M ~64% global initiativ es Net-positiv e 2.2M conv ersion rate Conversion: 2.1M ~6% global ~48% China China improv es to 60% cancellation Convers
Slide 26: Additional information
Appendix Additional information Actuals FY23 1Q22 2Q22 3Q22 4Q22 FY22 outlook Restructuring expense $14M $25M $6M $15M $60M ~$60M Non-service pension expense $0M $1M $1M $0M $2M <$5M Adjusted net interest expense (a) $33M $35M $35M $36M $139M ~$150 Adjusted effective tax rate (b) 27.4% 22.4% 28.2% 2
Slide 27: Use and Definitions of Non-GAAP Financial Measures
Appendix Use and Definitions of Non-GAAP Financial Measures Otis Worldwide Corporation (“Otis”) reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP"). We supplement the reporting of our financial information determined under GAAP with
Slide 28: 2022 GAAP to adjusted financials reconciliation
Appendix 2022 GAAP to adjusted financials reconciliation ($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 29: 2021 GAAP to adjusted financials reconciliation
Appendix 2021 GAAP to adjusted financials reconciliation ($millions) Otis New Equipment Serv ice Corporate/other Sales 1Q21 2Q21 3Q21 4Q21 FY 2021 1Q21 2Q21 3Q21 4Q21 FY 2021 1Q21 2Q21 3Q21 4Q21 FY 2021 1Q21 2Q21 3Q21 4Q21 FY 2021 Net sales 3,408 3,701 3,620 3,569 14,298 1,458 1,727 1,681 1,562 6,42
Slide 30: 2019 & 2020 segment operating profit reconciliation
Appendix 2019 & 2020 segment operating profit reconciliation ($millions) New Equipment Serv ice Sales FY19 FY20 FY19 FY20 Net sales 5,648 5,371 7,470 7,385 Russia (208) (235) (36) (29) Adjusted net sales 5,440 5,136 7,434 7,356 GAAP operating profit 393 318 1,603 1,611 Rest ruct uring 19 30 35 47 U
Slide 31: Organic sales reconciliation
Appendix Organic sales reconciliation New Maintenance & Q4 2022 Total Otis Service Modernization Equipment Repair Organic 6.1% 5.1% 6.9% 6.5% 8.8% FX (8.2%) (8.1%) (8.3%) (8.4%) (8.5%) Net acquisitions / divestitures (1.5%) (3.5%) - (0.2%) 1.1% Total net sales growth (3.6%) (6.5%) (1.4%) (2.1%) 1.4%
Slide 32: Adjusted operating profit at constant currency reconciliation
Appendix Adjusted operating profit at constant currency reconciliation ($millions) Q4 2021 Q4 2022 Y/Y FY 2021 FY 2022 Y/Y New Equipment Adjusted operating profit 76 72 (4) 442 381 (61) Impact of foreign exchange 7 7 8 8 Adjusted operating profit at constant currency 76 79 3 442 389 (53) Service Adj
Slide 33: SG&A reconciliation
Appendix SG&A reconciliation ($millions) Q4 2021 Q4 2022 FY 2021 FY 2022 Adjusted Sales 3,506 3,439 14,045 13,579 SG&A expense 503 448 1,948 1,763 Restructuring (18) (9) (34) (38) Russia (5) (1) (17) (11) One-time separation costs / other (2) 2 (16) (3) Adjusted SG&A 478 440 1,881 1,711 Adjust ed SG
Slide 34: Diluted EPS and Tax reconciliations
Appendix Diluted EPS and Tax reconciliations Q4 2021 Q4 2022 FY 2021 FY 2022 GAAP diluted earnings per share $0.65 $0.71 $2.89 $2.96 Impact of non-recurring items on diluted earnings per share $0.07 $0.04 $0.06 $0.21 Adjusted diluted earnings per share $0.72 $0.75 $2.95 $3.17 Q4 2021 Q4 2022 FY 2021
Slide 35: Free cash flow reconciliation
Appendix Free cash flow reconciliation ($millions) Q4 2021 Q4 2022 FY 2021 FY 2022 Operating cash flow1 277 464 1,750 1,560 Capital expenditures (41) (34) (156) (115) Free cash flow 236 430 1,594 1,445 GAAP net income 281 297 1,246 1,253 FCF conversion 84% 145% 128% 115% 1 Operating cash flow exclud
Slide 36: Other reconciliations
Appendix Other reconciliations Remaining performance obligation (RPO) ($billions) Q4 2021 Q3 2022 Q4 2022 RPO at actual currency (GAAP measure) 17.1 16.6 17.2 Russia (0.1) - - FX/other1 0.1 1.6 1.0 Adjusted RPO at constant currency 17.1 18.2 18.2 New Equipment backlog Growth % Q4 2022 Actual currenc