Otis Worldwide Corporation · NYSE:OTIS
Otis Worldwide — Q3 2022 Earnings Presentation
29 slides from Otis Worldwide's earnings presentation, Oct 26, 2022
Slide 1: Q3 2022 Earnings Call
Q3 2022 Earnings Call October 26, 2022 © 2022 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: Q3 2022 highlights
TBU Q3 2022 highlights Q3 Orders Solid Q3…Service strength mitigating macro headwinds • YTD New Equipment share up ~1 pt1 • Accelerated maintenance portfolio growth, up 3.8% • Organic2 sales growth, driven by Service • Adjusted EPS2 up 5.3%...Service operating profit growth Space Needle 81 Newgate S
Slide 4: Q3 2022 update
Q3 2022 update • New Equipment orders down 0.8% at constant currency1, up 7.4% excluding China…global New Equipment orders up 7.6% on a rolling 12-month basis • New Equipment backlog ~flat and adjusted backlog up 12% at constant currency1 Q3 2022 • Organic1 sales up 0.8%... Service up 6.2%, New Equi
Slide 5: Q3 2022 results
Q3 2022 results ($ millions, except per share amounts) Sales Operating profit Diluted earnings per share GAAP 3,620 3,344 GAAP 542 529 GAAP $0.77 $0.77 Adjusted1 3,555 Adjusted1 558 Adjusted1 543 $0.80 3,326 $0.76 Adjusted 16.3% margin1 15.7% Q3 2021 Q3 2022 Q3 2021 Q3 2022 Q3 2021 Q3 2022 Adjusted
Slide 6: New Equipment
New Equipment ($ millions) Net sales Q3 Results Y/Y GAAP 1,681 1,447 (13.9%) • Orders down 0.8% at constant currency1, up 7.4% excluding China… low single digit growth in the Adjusted1 1,624 (11.8%) Americas & low teens growth in EMEA & Asia Pacific 1,433 Organic1 • 3Q22 New Equipment share was ~fla
Slide 7: Service
Service ($ millions) Net sales Y/Y Q3 Results GAAP 1,939 1,897 (2.2%) • Maintenance units up 3.8% versus prior 1,931 1,893 year…growth in all regions Adjusted1 (2.0%) Organic1 • Modernization orders up 18% at constant 6.2% currency1 with growth in all regions…backlog up 7% Q3 2021 Q3 2022 • Organic1
Slide 8: 2022 financial outlook
2022 financial outlook Prior outlook Current outlook Otis up 2.5 to 3.5% Otis up 2.0 to 2.5% Organic1 sales New Equipment down 0.5 to 1.0% New Equipment down ~2.5% Service up 5.5 to 6.5% Service up 6.0 to 6.5% Constant currency up $120 to $150M up $120 to $140M adj. operating profit1 Otis up ~30 bps
Slide 9: 2022 organic sales outlook
2022 organic1 sales outlook Prior outlook Updated outlook (July 27, 2022) Outlook drivers New Equipment down 0.5 to 1.0% down ~2.5% • Q3 adjusted New Equipment backlog up 12% at constant Americas ~flat ~flat currency1 • Weaker China market outlook EMEA up low to mid single up low to mid single • Acc
Slide 10: 2022 adjusted EPS growth outlook drivers
2022 adjusted EPS1 growth outlook drivers + $120 to 140M at constant currency1 ~($0.18) (~$175M) $0.38 to $0.41 ~$0.05 $0.08 to $0.09 ~($0.29) ~$0.12 Volume $3.11 to $3.15 Productivity Q4: EUR @ 0.97 + 5 to 7% Pricing $2.95 CNY @ 7.20 Cost FY: containment EUR @ 1.04 CNY @ 6.74 2021 adjusted Operatio
Slide 11: Otis fundamentals…driving value creation
Otis fundamentals…driving value creation1 Sales Operating Profit Cash & Capital Deployment • Invest in innovation • Drop through from volume • Reduce effective tax rate • Optimize supply chain & • Gain New Equipment share • Make targeted investments installation process • Accelerate portfolio growth
Slide 12: Slide 12
Slide 13: Appendix
Appendix © 2022 OTIS WORLDWIDE CORPORATION. 13
Slide 14: Backlog and orders
Appendix Backlog and orders ($billions, at constant currency1) Adjusted remaining New Equipment orders performance obligation1 Y/Y 18.3 18.2 + 6% Q3 2022 YTD 2022 12-month 17.1 Region Y/Y Y/Y rolling Modernization + 7% Total Otis (0.8%) 8.0% 7.6% Maintenance Americas 3.3% 24.3% 23.0% + 2% & Repair E
Slide 15: Q3 2022 adjusted operating profit drivers
Appendix Q3 2022 adjusted operating profit1 drivers Actual currency ($23M) + $1M + $7M ($15M) +$35M at constant currency1 $7M ($50M) $49M ($21M) Productivity Volume SG&A Pricing $558M Volume / under Productivity $543M absorption Annual wage Commodities inflation Q3 2021 adjusted New Service Corporat
Slide 16: Year-to-date 2022 results
Appendix Year-to-date 2022 results ($ millions, except per share amounts) Sales Operating profit Diluted earnings per share GAAP 10,729 10,246 GAAP 1,612 1,542 GAAP $2.23 $2.25 Adjusted1 10,539 Adjusted1 Adjusted1 $2.42 10,140 1,643 1,621 $2.23 Adjusted margin1 16.0% 15.6% YTD 2021 YTD 2022 YTD 2021
Slide 17: New Equipment
Appendix New Equipment ($ millions) Net sales Y/Y GAAP 4,866 4,403 (9.5%) YTD Results Adjusted1 (8.1%) • Orders up 8.0% at constant currency1 4,700 4,317 Organic1 • YTD New Equipment share up ~1 pt2 (3.9%) • Organic1 sales down 3.9% – Americas down 3.5% YTD 2021 YTD 2022 – EMEA up 3.6% – Asia down 7
Slide 18: Service
Appendix Service ($ millions) Net sales Y/Y GAAP 5,863 5,843 (0.3%) YTD Results Adjusted1 5,839 5,823 (0.3%) • Modernization orders up 6.5% at constant currency1 Organic1 • Organic1 sales up 5.7% 5.7% – Maintenance & Repair up 5.3% – Modernization up 7.8% YTD 2021 YTD 2022 • Adjusted operating profi
Slide 19: YTD 2022 adjusted operating profit drivers
Appendix YTD 2022 adjusted operating profit1 drivers Actual currency ($57M) + $22M + $13M ($22M) +$85M at constant currency1 $13M ($107M) $128M ($56M) Productivity Volume SG&A Pricing $1,643M Commodities Productivity $1,621M Volume / under Annual wage absorption inflation YTD 2021 adjusted New Servi
Slide 20: Additional information
Appendix Additional information Actuals FY22 Outlook Prior 1Q22 2Q22 3Q22 YTD Updated (July 27, 2022) Restructuring expense $14M $25M $6M $45M $75 to $80M ~$75M Non-service pension expense $0M $1M $1M $2M ~$3M ~$3M Adjusted net interest expense (a) $33M $35M $35M $103M ~$135M ~$135M Adjusted effecti
Slide 21: Use and Definitions of Non-GAAP Financial Measures
Appendix Use and Definitions of Non-GAAP Financial Measures Otis Worldwide Corporation (“Otis”) reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP"). We supplement the reporting of our financial information determined under GAAP with
Slide 22: 2022 GAAP to adjusted financials reconciliation
Appendix 2022 GAAP to adjusted financials reconciliation ($millions) Otis New Equipment Service Corporate/other Sales 1Q22 2Q22 3Q22 1Q22 2Q22 3Q22 1Q22 2Q22 3Q22 1Q22 2Q22 3Q22 Net sales 3,414 3,488 3,344 1,422 1,534 1,447 1,992 1,954 1,897 0 0 0 Russia (54) (34) (18) (47) (25) (14) (7) (9) (4) 0 0
Slide 23: 2021 GAAP to adjusted financials reconciliation
Appendix 2021 GAAP to adjusted financials reconciliation ($millions) Otis New Equipment Service Corporate/other Sales 1Q21 2Q21 3Q21 4Q21 FY 2021 1Q21 2Q21 3Q21 4Q21 FY 2021 1Q21 2Q21 3Q21 4Q21 FY 2021 1Q21 2Q21 3Q21 4Q21 FY 2021 Net sales 3,408 3,701 3,620 3,569 14,298 1,458 1,727 1,681 1,562 6,428
Slide 24: Organic sales reconciliation
Appendix Organic sales reconciliation Maintenance & Q3 2022 Total Otis New Equipment Service Modernization Repair Organic 0.8% (5.4%) 6.2% 5.4% 10.3% FX (7.2%) (5.8%) (8.5%) (8.8%) (7.6%) Net acquisitions / divestitures (1.2%) (2.7%) 0.1% 0.0% 0.9% Total net sales growth (7.6%) (13.9%) (2.2%) (3.4%)
Slide 25: Adjusted operating profit at constant currency reconciliation
Appendix Adjusted operating profit at constant currency reconciliation ($millions) Q3 2021 Q3 2022 Y/Y YTD 2021 YTD 2022 Y/Y New Equipment Adjusted operating profit 126 103 (23) 366 309 (57) Impact of foreign exchange - 2 2 - 1 1 Adjusted operating profit at constant currency 126 105 (21) 366 310 (5
Slide 26: SG&A reconciliation
Appendix SG&A reconciliation ($millions) Q3 2021 Q3 2022 YTD 2021 YTD 2022 Adjusted Sales 3,555 3,326 10,539 10,140 SG&A expense 479 417 1,445 1,315 Restructuring (4) (4) (16) (29) Russia (4) (3) (12) (10) One-time separation costs / other (2) (2) (14) (5) Adjusted SG&A 469 408 1,403 1,271 Adjusted
Slide 27: Diluted EPS and Tax reconciliations
Appendix Diluted EPS and Tax reconciliations Q3 2021 Q3 2022 YTD 2021 YTD 2022 GAAP diluted earnings per share $0.77 $0.77 $2.23 $2.25 Impact of non-recurring items on diluted earnings per share ($0.01) 0.03 $0.00 0.17 Adjusted diluted earnings per share $0.76 $0.80 $2.23 $2.42 Q3 2021 Q3 2022 YTD 2
Slide 28: Free cash flow reconciliation
Appendix Free cash flow reconciliation ($millions) Q3 2021 Q3 2022 YTD 2021 YTD 2022 Operating cash flow1 355 239 1,473 1,096 Capital expenditures (31) (24) (115) (81) Free cash flow 324 215 1,358 1,015 GAAP net income 331 324 965 956 FCF conversion 98% 66% 141% 106% 1 Operating cash flow excludes d
Slide 29: Other reconciliations
Appendix Other reconciliations Remaining performance obligation (RPO) ($billions) Q3 2021 Q2 2022 Q3 2022 RPO at actual currency (GAAP measure) 17.3 17.7 16.6 Russia (0.1) (0.2) 0.0 FX/other1 (0.1) 0.8 1.6 Adjusted RPO at constant currency 17.1 18.3 18.2 New Equipment backlog Growth % Q3 2022 Actual