Otis Worldwide Corporation · NYSE:OTIS
Otis Worldwide — Q3 2020 Earnings Presentation
28 slides from Otis Worldwide's earnings presentation, Oct 26, 2020
Slide 1: Q3 2020 Earnings Call
Q3 2020 Earnings Call October 26, 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 Q3 orders • Executing on long-term strategy • New Equipment share gain, up ~70 bps1 year-to- date • Bolt-on M&A, innovative new products, productivity and IoT expansion Salesforce Tower The Link • Strong liquidity position Chicago, Illinois Puteaux, France • $1.7 billion cash balance • Re
Slide 4: Q3 2020 update
Q3 2020 update • New Equipment orders up slightly at constant currency1…down ~1% on a rolling 12- month basis • New Equipment backlog up 3% versus prior year at constant currency1 Q3 2020 • Organic1 sales down 1.2%...NE down 1.0%, Service down 1.4% Results • Adjusted operating profit margin1 expande
Slide 5: Q3 2020 results
Q3 2020 results ($ millions, except per share amounts) Sales Operating profit Diluted earnings per share 3,313 3,268 GAAP 482 454 GAAP $0.73 $0.61 503 $0.69 Adjusted1 470 Adjusted1 $0.55 15.4% Adjusted 14.2% margin1 Q3 2019 Q3 2020 Q3 2019 Q3 2020 Q3 2019 Q3 2020 Organic1 (1.2%) Q3 adjusted operatin
Slide 6: New Equipment
New Equipment ($ millions) Q3 Results Net sales • Orders up slightly at constant currency1 Y/Y …down ~1% on a rolling 12-month basis 1,450 1,423 (1.9%) • Share up ~40 bps2 …YTD share up ~70 bps2 • New Equipment backlog up 3% at constant currency1 Q3 2019 Q3 2020 Operating profit • Organic1 sales dow
Slide 7: Service
Service ($ millions) Net sales Q3 Results Y/Y 1,863 (1.0%) • Maintenance units up 1% versus prior year 1,845 • Modernization orders down 7.3% at constant currency1...up double digits in Asia Q3 2019 Q3 2020 • Organic1 sales down 1.4% Operating profit – Maintenance & Repair down 1.3% GAAP 407 409 0.5
Slide 8: 2020 financial outlook
2020 financial outlook Improving 2020 outlook across key metrics Prior outlook Current outlook Otis down 2 to 4% Otis down 2 to 3% Organic1 sales New Equipment down mid to high single digits New Equipment down mid single digits Service flat to down low single digits Service flat to down slightly Adj
Slide 9: 2020 organic sales outlook
2020 organic1 sales outlook Prior outlook (July 28, 2020) Updated outlook Sequential improvement in Q4 New Equipment down mid to high single down mid single at the midpoint & high-end Americas down mid single to ~10% down mid single • Faster than expected New Equipment recovery in all EMEA down high
Slide 10: 2020 adjusted operating profit drivers
2020 adjusted operating profit1 drivers up $30 to $40M up ~$(25M) $5 to $15M $30 – 40M $(60) – (70M) $60 – 70M Volume & mix Cost containment Cost containment Under-absorption Service productivity Transactional FX $1,877 - 1,887M $1,872M Pricing & bad debt Volume Material productivity Price concessio
Slide 11: Capital deployment outlook
Capital deployment outlook ($billions) 2020 Sources and uses of cash Q3 2020 Leverage Cash $1.7 ~ 0.35 ~ 1.15 ~ 0.26 ~ 1.75 Debt $6.1 ~ 1.4 ~ 0.2 Net debt / 2.1x EBITDA1,2 2019 Debt Dividends NCI / M&A / 2020 free cash 2020 ending cash repayment (Q2-Q4) other flow1outlook estimated balance cash bala
Slide 12: Otis fundamentals
Otis fundamentals1 Iconic global brand in a large, growing industry Sustainable growth over the medium-term Gaining share in NE2 Expanding Service portfolio Expanding margins through productivity Investing through the cycle Sustainable level of R&D and Capex Robust free cash flow3 generation >100% F
Slide 13: © 2020 OTIS WORLDWIDE CORPORATION.
© 2020 OTIS WORLDWIDE CORPORATION.
Slide 14: Appendix
Appendix © 2020 OTIS WORLDWIDE CORPORATION. 14
Slide 15: Backlog and orders
Appendix Backlog and orders ($billions, at constant currency1) Remaining performance obligation New Equipment orders Y/Y 16.2 16.3 16.5 + 2% Modernization + 1% Q3 2020 12-month Region Y/Y rolling Maintenance Total Otis 0.1% (1.2%) + 1% & Repair Americas (4.7%) 1.2% EMEA 4.2% (1.7%) New Equipment + 3
Slide 16: Q3 2020 adjusted operating profit drivers
Appendix Q3 2020 adjusted operating profit1 drivers +$30M at constant currency1 $3M $20M $19M $(9)M Under absorption / Productivity Cost containment field inefficiencies Cost containment Transactional FX $503M Mix Volume $470M Material productivity Pricing concessions Cost containment Q3 2019 adjust
Slide 17: Year-to-date 2020 results
Appendix Year-to-date 2020 results ($ millions, except per share amounts) Sales Operating profit Diluted earnings per share GAAP 1,378 1,199 GAAP $2.07 $1.51 9,765 9,263 $1.86 Adjusted1 1,399 1,410 Adjusted1 $1.77 15.2% Adjusted 14.3% margin1 YTD 2019 YTD 2020 YTD 2019 YTD 2020 YTD 2019 YTD 2020 Adj
Slide 18: New Equipment
Appendix New Equipment ($ millions) Net sales Y/Y YTD Results 4,221 3,840 (9.0%) • Orders down 2.4% at constant currency1 • Share up ~70 bps2 YTD 2019 YTD 2020 • Organic1 sales down 7.0% – Americas down 9.7% Operating profit – EMEA down 9.4% GAAP 312 238 (23.7%) – Asia down 3.5% 320 Adjusted1 258 (1
Slide 19: Service
Appendix Service ($ millions) Net sales Y/Y 5,544 YTD Results 5,423 (2.2%) • Modernization orders down 2.9% at constant currency1 • Organic1 sales down 0.5% YTD 2019 YTD 2020 – Maintenance & Repair down 0.8% Operating profit – Modernization up 0.9% GAAP 1,181 1,190 0.8% Adjusted1 1,216 3.1% • Adjust
Slide 20: Additional information
Appendix Additional information Prior FY20 outlook (July 28, 2020) FY20 outlook Standalone cost ~$150M ~$130M (~$175M run rate) (~$175M run rate) Restructuring expense $70 – 80M $70 – 80M Non-service pension expense $5 – 15M ~$5M Net interest expense ~$135M ~$125M Adjusted effective tax rate ~31.5%
Slide 21: Use and Definitions of Non-GAAP Financial Measures
Appendix Use and Definitions of Non-GAAP Financial Measures Otis Worldwide Corporation (“Otis”) reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP"). We supplement the reporting of our financial information determined under GAAP with
Slide 22: Pro forma standalone financials reconciliation
Appendix Pro forma standalone financials reconciliation ($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 23: Organic sales reconciliation
Appendix Organic sales reconciliation New Maintenance Q3 2020 Total Otis Service Modernization Equipment & Repair Organic (1.2%) (1.0%) (1.4%) (1.3%) (2.1%) FX 0.2% (0.3%) 0.7% 0.7% 0.6% Net acquisitions / divestitures (0.2%) (0.1%) (0.3%) (0.1%) (0.9%) Other (0.2%) (0.5%) 0.0% 0.0% 0.0% Total net s
Slide 24: Adjusted operating profit at constant currency reconciliation
Appendix Adjusted operating profit at constant currency reconciliation ($millions) Q3 2019 Q3 2020 Y/Y YTD 2019 YTD 2020 Y/Y New Equipment Adjusted operating profit 114 102 (12) 320 258 (62) Impact of foreign exchange 3 3 10 10 Adjusted operating profit at constant currency 105 (9) 268 (52) Service
Slide 25: SG&A reconciliation
Appendix SG&A reconciliation ($millions) Q3 2019 Q3 2020 YTD 2019 YTD 2020 SG&A expense 444 481 1,329 1,387 Restructuring (1) (11) (26) (27) One-time separation costs (7) (18) (10) (69) UTC allocated corporate expenses (a) (20) 0 (56) (16) Standalone public company costs (b) 37 0 95 (1) Other 2 (1)
Slide 26: Diluted earnings per share reconciliation
Appendix Diluted earnings per share reconciliation Q3 2019 Q3 2020 YTD 2019 YTD 2020 GAAP diluted earnings per share $0.73 $0.61 $2.07 $1.51 Impact of non-recurring items on diluted earnings per share ($0.18) $0.08 ($0.30) $0.35 Adjusted diluted earnings per share $0.55 $0.69 $1.77 $1.86 © 2020 OTIS
Slide 27: Free cash flow reconciliation
Appendix Free cash flow1 reconciliation ($millions) Q3 2019 Q3 2020 YTD 2019 YTD 2020 Operating cash flow1 364 348 1,015 1,171 Capital expenditures (35) (37) (98) (112) Free cash flow1 329 311 917 1,059 GAAP net income 317 266 898 655 FCF conversion 104% 117% 102% 162% 1 Operating cash flow excludes
Slide 28: Other reconciliations
Appendix Other reconciliations Trailing 12-month EBITDA Remaining performance obligation (RPO) Q4 Q1 Q2 Q3 Q3 Q2 Q3 ($millions) ($billions) 2019 2020 2020 2020 2019 2020 2020 Net income attributable to Otis 218 165 224 266 RPO at actual currency 16.2 16.4 16.9 Noncontrolling interest 36 37 41 44 FX