Organic Volume for Service (percentage)

Organic Volume for Maintenance and Repair (percentage)

Organic Volume for Modernization (percentage)

Organic Volume for New Equipment (percentage)

1935c9c08bc470d1dc05d83fe50e85d92d4bd2fac5e683eddc00622cc001325a

| Geographical Segment | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 |
|----------------------|---------|---------|---------|---------|---------|---------|---------|---------|
| United States Operations (USD Million) | **976**  **[0001781335-23-000016_otis-20230331.htm:24]**  | **1,035**  **[0001781335-23-000029_otis-20230630.htm:27]**  | **1,004**  **[0001781335-23-000038_otis-20230930.htm:26]**  | N/A | **1,064**  **[0001781335-24-000022_otis-20240331.htm:23]**  | **1,065**  **[0001781335-24-000039_otis-20240630.htm:27]**  | **1,058**  **[0001781335-24-000057_otis-20240930.htm:29]**  | N/A |
| China (USD Million) | **501**  **[0001781335-23-000016_otis-20230331.htm:24]**  | **735**  **[0001781335-23-000029_otis-20230630.htm:27]**  | **596**  **[0001781335-23-000038_otis-20230930.htm:26]**  | N/A | **425**  **[0001781335-24-000022_otis-20240331.htm:23]**  | **542**  **[0001781335-24-000039_otis-20240630.htm:27]**  | **469**  **[0001781335-24-000057_otis-20240930.htm:29]**  | N/A |
| Other International Operations (USD Million) | **1,869**  **[0001781335-23-000016_otis-20230331.htm:24]**  | **1,950**  **[0001781335-23-000029_otis-20230630.htm:27]**  | **1,923**  **[0001781335-23-000038_otis-20230930.htm:26]**  | N/A | **1,948**  **[0001781335-24-000022_otis-20240331.htm:23]**  | **1,994**  **[0001781335-24-000039_otis-20240630.htm:27]**  | **2,021**  **[0001781335-24-000057_otis-20240930.htm:29]**  | N/A |
| Total Net Sales (USD Million) | **3,346**  **[0001781335-23-000016_otis-20230331.htm:24]**  | **3,720**  **[0001781335-23-000029_otis-20230630.htm:27]**  | **3,523**  **[0001781335-23-000038_otis-20230930.htm:26]**  | N/A | **3,437**  **[0001781335-24-000022_otis-20240331.htm:23]**  | **3,601**  **[0001781335-24-000039_otis-20240630.htm:27]**  | **3,548**  **[0001781335-24-000057_otis-20240930.htm:29]**  | N/A |

263d802c5f5774eb5b706a62be178fd3e42a977e33fee8ee8ec2811d8f8fa084

Total Revenue [USD, Millions]

Cost of Goods Sold (COGS) [USD, Millions]

SG&A Expenses [USD, Millions]

R&D Expenses [USD, Millions]

D&A [USD, Millions]

Interest Expense [USD, Millions]

Operating Income (EBIT) [USD, Millions]

Net Income [USD, Millions]

EPS - Basic [USD]

EPS - Diluted [USD]

5e1eeacb8100bee291fa2041636433c04237ae01ead5595b726b51d54696b9b4

| Metric [Unit: USD Million] | Q4 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 | Q3 2024 |
|----------------------------|---------|---------|---------|---------|---------|---------|---------|---------|
| New Equipment              | **1,500**  **[0001781335-24-000057_otis-20240930.htm:28]**  | **1,307**  **[0001781335-23-000016_otis-20230331.htm:24]**  | N/A     | **1,435**  **[0001781335-23-000016_otis-20230331.htm:24]**  | **1,500**  **[0001781335-24-000057_otis-20240930.htm:28]**  | **1,280**  **[0001781335-24-000022_otis-20240331.htm:23]**  | **1,421**  **[0001781335-24-000039_otis-20240630.htm:27]**  | **1,309**  **[0001781335-24-000057_otis-20240930.htm:28]**  |
| Service                    | N/A     | **2,039**  **[0001781335-23-000016_otis-20230331.htm:24]**  | N/A     | **2,088**  **[0001781335-23-000016_otis-20230331.htm:24]**  | **2,100**  **[OTIS_3371360_3]**  | **2,157**  **[0001781335-24-000022_otis-20240331.htm:23]**  | **2,180**  **[0001781335-24-000039_otis-20240630.htm:27]**  | **2,239**  **[0001781335-24-000057_otis-20240930.htm:28]**  |
| Total Net Sales            | N/A     | **3,346**  **[0001781335-23-000016_otis-20230331.htm:24]**  | **3,700**  **[0001781335-23-000026_a2023-06x308xkerexhibit99.htm:0]**  | **3,523**  **[0001781335-23-000038_otis-20230930.htm:26]**  | **3,600**  **[OTIS_3371360_3]**  | **3,437**  **[0001781335-24-000022_otis-20240331.htm:23]**  | **3,601**  **[0001781335-24-000039_otis-20240630.htm:27]**  | **3,548**  **[0001781335-24-000057_otis-20240930.htm:28]**  |

7bd6cc5a292744e987adf48029be9930c7a6f67718d6cc2c041fbf974edddc73

Otis is the world's leading elevator and escalator manufacturing, installation, and service company, organized into two main segments: New Equipment and Service. The company designs, manufactures, sells, and installs passenger and freight elevators, escalators, and moving walkways for various projects, while also providing maintenance, repair, and modernization services for these products **[0001781335-24-000013_otis-20231231.htm:3]** **[0001781335-24-000013_otis-20231231.htm:77]**. Otis operates globally, with a significant portion of its revenue coming from international operations, and focuses on converting new equipment installations into long-term service contracts to ensure a stable revenue stream **[OTIS_3373764_2]** **[OTIS_3373764_6]**.

1. **Service** - Provides maintenance and repair services for both Otis products and those of other manufacturers, as well as modernization services to upgrade elevators and escalators. Maintenance and repair services represent about 80% of Service sales revenue, with the modernization subsegment having high growth potential.
2. **New Equipment** - Involves designing, manufacturing, selling, and installing passenger and freight elevators, escalators, and moving walkways for residential, commercial, and infrastructure projects.

befdd6ead3b1c8e3efa398cdc0575bba79396f1bfa27bc10b66fb3196257fe03

- **KONE Oyj** - Major competitor globally in both the New Equipment and Service segments  **[0001781335-24-000013_otis-20231231.htm:7]** .
- **Schindler Group** - Major competitor globally in both the New Equipment and Service segments  **[0001781335-24-000013_otis-20231231.htm:7]** .
- **TK Elevator** - Major competitor globally in both the New Equipment and Service segments  **[0001781335-24-000013_otis-20231231.htm:7]** .

ac5e5265c526ff73fe680cda9b2f7d705fce5df0201d417b01c4a46c82932eb9

a47c229cd0e083acfc54bf84f3812a5c50c71723891e01b651b6fba685c58a9a

1. Given the significant decline in China's new equipment market to approximately 415,000 units and expectations of further declines, how does Otis plan to adapt its cost structure and strategy in China to maintain profitability in the face of prolonged market weakness?
2. With service margins remaining flat year-over-year despite high single-digit growth in service sales, what specific measures is Otis taking to improve service profitability amid wage inflation and increased repair and modernization activities?
3. Considering the competitive pricing environment and economic softness in China, is Otis contemplating any strategic shifts to protect margins, such as prioritizing service and modernization over new equipment sales, and how sustainable is this approach long-term?
4. Orders in EMEA declined by high single digits due to continued weakness in Western and Northern Europe; what challenges are you encountering in these markets, and what strategies are in place to reverse the declining trend in orders?
5. Despite generating $381 million in adjusted free cash flow and returning $800 million to shareholders, how does Otis justify significant share buybacks amid the need for investment in growth regions to offset the downturn in China and potential weaknesses in Europe?

23402860eb3557a1919a28a9135b2263ea6a9cadaac79165b06768c538f60015

Current Assets

Cash and Cash Equivalents

Accounts Receivable

Inventory

Non-Current Assets

Property, Plant, and Equipment (PP&E)

Goodwill

Intangible Assets

Current Liabilities

Accounts Payable

Short-term Debt

Accrued Expenses

Non-Current Liabilities

Long-term Debt

Lease Liabilities

Deferred Tax Liabilities

Shareholders' Equity

Retained Earnings

Common Stock

Additional Paid-in Capital

2e55b1a1021310455dfe99a96e382124329846a2261268b7a4d79a125726f29d

Adjustments for Non-Cash Items

Stock-Based Compensation

Changes in Working Capital

Capital Expenditures (CapEx)

Proceeds from / Repayments of Debt

Share Repurchases

Dividend Payments

Net Change in Cash

bdf922d25c67fb7d6024755847dd0c8f66225486fbdc86e25b477694b858c2a5

New Equipment

- Maintenance and Repair

- Modernization

Service

Total Revenue

daf6d8b461853070511e55f9080a04d9560b21e30e90e08bc6feb35be71ad112

3b47fe56426f7633fbcfbf76c4f8b3ee2fd0b5c5757e8875bc231fddc00475e4

23794d91c53ae875c8e247d72561e35d9d06ee07c70c9e0dbcc977a6d161504a

### Q3 2024 Earnings Call
- **Issued Period**: Q3 2024
- **Guided Period**: FY 2024
- **Guidance**:
  1. **Adjusted EPS**: Approximately **$3.85**, growth of about **9%**  **[OTIS_3404629_7]** **[OTIS_3404629_5]** .
  2. **Sales**: Approximately **$14.2 billion**, organic sales growth of **1.5%**  **[OTIS_3404629_5]** .
  3. **Adjusted Operating Profit**: Increase by **$105 million** in actual currency, **$140 million** at constant currency  **[OTIS_3404629_5]** .
  4. **Adjusted Free Cash Flow**: **$1.4 billion to $1.5 billion**  **[OTIS_3404629_5]** .
  5. **Service Segment**: Organic sales growth of **6.5%**, maintenance and repair growth of **6%**, modernization growth of **9%**  **[OTIS_3404629_7]** **[OTIS_3404629_6]** .
  6. **New Equipment Segment**: Organic sales down mid- to high single digits, decline in China  **[OTIS_3404629_7]** **[OTIS_3404629_6]** .
  7. **Operating Profit Margin**: Expansion of **70 basis points**  **[OTIS_3404629_6]** .
  8. **Shareholder Returns**: **$1 billion** in share repurchases  **[OTIS_3404629_5]** .
  9. **China Market**: New equipment sales decline by **15%**  **[OTIS_3404629_5]** .
  10. **2025 Outlook**: Global new equipment market improvement, China decline by **5% to 10%**  **[OTIS_3404629_5]** .

### Q2 2024 Earnings Call
- **Issued Period**: Q2 2024
- **Guided Period**: FY 2024
- **Guidance**:
  1. **Sales**: **$14.3 billion to $14.5 billion**, organic sales growth of **1% to 3%**  **[OTIS_3394102_4]** .
  2. **Adjusted Operating Profit**: Up **$135 million to $175 million** at actual currency  **[OTIS_3394102_4]** .
  3. **Adjusted EPS**: **$3.85 to $3.90**, up **9% to 10%**  **[OTIS_3394102_4]** .
  4. **Adjusted Free Cash Flow**: **$1.5 billion to $1.6 billion**  **[OTIS_3394102_4]** .
  5. **Service Organic Sales**: Growth of **6% to 7%**  **[OTIS_3394102_5]** .
  6. **Operating Profit Margin**: Expansion of **80 basis points**  **[OTIS_3394102_5]** .
  7. **New Equipment Organic Sales**: Down mid-single digits, China down **20%**  **[OTIS_3394102_5]** .
  8. **Service Operating Profit Margin**: Expansion of **75 basis points**  **[OTIS_3394102_5]** .
  9. **New Equipment Operating Profit Margin**: Roughly flat  **[OTIS_3394102_5]** .
  10. **EPS Growth**: Approximately **10%**  **[OTIS_3394102_5]** .

### Q1 2024 Earnings Call
- **Issued Period**: Q1 2024
- **Guided Period**: FY 2024
- **Guidance**:
  1. **Organic Sales Growth**: **3% to 5%**  **[OTIS_3380441_5]** **[OTIS_3380441_4]** .
  2. **Operating Profit**: Growth of **$160 million to $190 million** at constant currency  **[OTIS_3380441_5]** .
  3. **Adjusted EPS**: **$3.83 to $3.90**, increase of **8% to 10%**  **[OTIS_3380441_4]** .
  4. **Free Cash Flow**: Approximately **$1.6 billion**  **[OTIS_3380441_5]** **[OTIS_3380441_4]** .
  5. **Share Repurchases**: **$1 billion**  **[OTIS_3380441_5]** .
  6. **Dividend**: 14.7% increase  **[OTIS_3380441_1]** .
  7. **Tax Rate**: Around **25.5%**  **[OTIS_3380441_11]** .
  8. **Market Outlook**: Asia down mid-single digits, China down **10%**  **[OTIS_3380441_4]** .
  9. **Service Margins**: Up **50 basis points**  **[OTIS_3380441_5]** .

### Q4 2023 Earnings Call
- **Issued Period**: Q4 2023
- **Guided Period**: FY 2024
- **Guidance**:
  1. **Adjusted EPS**: **$3.80 to $3.90**, growth of 7% to 10%  **[OTIS_3371360_6]** .
  2. **Organic Sales Growth**: **3% to 5%**  **[OTIS_3371360_7]** .
  3. **Operating Profit Margin Expansion**: **50 basis points**  **[OTIS_3371360_7]** .
  4. **Adjusted Operating Profit**: **$2.4 billion to $2.45 billion**  **[OTIS_3371360_6]** .
  5. **Adjusted Free Cash Flow**: **$1.6 billion**  **[OTIS_3371360_6]** .
  6. **Share Repurchases**: **$800 million**  **[OTIS_3371360_6]** .
  7. **New Equipment Organic Sales**: Flattish, China mid-single-digit declines  **[OTIS_3371360_7]** .
  8. **Service Organic Sales Growth**: **6% to 7%**  **[OTIS_3371360_7]** .
  9. **Maintenance and Repair Organic Sales Growth**: **5.5% to 6.5%**  **[OTIS_3371360_7]** .
  10. **Modernization Organic Sales Growth**: **8%**  **[OTIS_3371360_7]** .
  11. **Project Uplift Savings**: **$150 million**  **[OTIS_3371360_7]** .
  12. **New Equipment Profit Margin**: Flat to up **10 basis points**  **[OTIS_3371360_7]** .
  13. **Service Profit Margin Expansion**: **50 basis points**  **[OTIS_3371360_7]** .

63e443ba0b724d552b8d2278e78b5b3a81d8349a589e05b8eacdf16a55222481

| Name                   | Position                                                      | Start Date           | Short Bio                                                                                                                                                                                                 |
|------------------------|---------------------------------------------------------------|----------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Tracy A. Embree        | President, Otis Americas                                      | October 2023         | Tracy A. Embree is the President of Otis Americas since October 2023. Previously, she was Vice President and President of Distribution and Components at Cummins, Inc.  **[0001781335-24-000013_otis-20231231.htm:130]** **[0001140361-24-018332_ny20017136x1_def14a.htm:42]** **[0001781335-24-000013_exhibit10362023-12x3110xk.htm:0]** .                        |
| Neil Green             | Executive Vice President and Chief Digital Officer            | April 2020           | Neil Green has been the Executive Vice President and Chief Digital Officer at Otis since April 2020. He was previously Vice President, Transformation and Chief Digital Officer at Otis  **[0001781335-24-000013_otis-20231231.htm:130]** .              |
| Nora E. LaFreniere     | Executive Vice President and General Counsel                  | July 2021            | Nora E. LaFreniere has served as Executive Vice President and General Counsel since July 2021. She previously held roles as Executive Vice President, Chief General Counsel, and Corporate Secretary  **[0001781335-24-000013_otis-20231231.htm:130]** **[0001781335-23-000009_otis-20221231.htm:131]** . |
| Sally A. Loh           | President, Otis China                                         | March 2023           | Sally A. Loh is the President of Otis China since March 2023. She was formerly the Chief Operating Officer and Chief Financial Officer of Otis China  **[0001781335-24-000013_otis-20231231.htm:130]** . Her role as President officially starts on January 1, 2024  **[0001781335-24-000013_exhibit10392023-12x3110xk.htm:2]** . |
| Abbe Luersman          | Executive Vice President and Chief People Officer             | July 2021            | Abbe Luersman has been the Executive Vice President and Chief People Officer since July 2021. She was previously the Chief Human Resource Officer at Ahold Delhaize  **[0001781335-24-000013_otis-20231231.htm:130]** **[0001781335-23-000009_otis-20221231.htm:131]** .                               |
| Anurag Maheshwari      | Executive Vice President and Chief Financial Officer          | August 2022          | Anurag Maheshwari has been the Executive Vice President and Chief Financial Officer since August 2022. He previously served as Vice President, Finance, IT, and Chief Transformation Officer for Otis Asia Pacific  **[0001781335-24-000013_otis-20231231.htm:130]** **[0001781335-23-000009_otis-20221231.htm:131]** . |
| Judith F. Marks        | Chair, President, and Chief Executive Officer                 | February 2022        | Judith F. Marks has been Chair, President, and CEO since February 2022. She has led Otis as President since 2017 and was named CEO in 2019. She has been a director since Otis became independent in April 2020  **[0001781335-24-000013_otis-20231231.htm:130]** **[0001140361-24-018332_ny20017136x1_def14a.htm:15]** **[0001140361-24-018332_ny20017136x1_def14a.htm:32]** . |
| Enrique Miñarro Viseras| President, Otis EMEA                                          | October 2023         | Enrique Miñarro Viseras was appointed President of Otis EMEA on October 1, 2023. He previously held positions as Senior Vice President and General Manager at Ingersoll Rand  **[0001781335-24-000013_otis-20231231.htm:130]** **[0001140361-24-018332_ny20017136x1_def14a.htm:42]** .                      |
| Stephane de Montlivault| President, Otis Asia Pacific                                  | April 2020           | Stephane de Montlivault has been President of Otis Asia Pacific since April 2020. He previously served as President of Otis Northeast Asia and President of Nippon Otis Elevator Company  **[0001781335-24-000013_otis-20231231.htm:130]** **[0001781335-23-000009_otis-20221231.htm:131]** .           |
| Michael P. Ryan        | Senior Vice President and Chief Accounting Officer            | April 2020           | Michael P. Ryan has been Senior Vice President and Chief Accounting Officer since April 2020. He was previously Vice President and Assistant Controller at UTC  **[0001781335-24-000013_otis-20231231.htm:130]** **[0001781335-23-000009_otis-20221231.htm:131]** .                                     |
| Peiming Zheng (Perry)  | Executive Vice President, Chief Product, Delivery and Customer Officer | March 2023 | Peiming Zheng, also known as Perry, has been Executive Vice President, Chief Product, Delivery and Customer Officer since March 2023. He was previously President of Otis China  **[0001781335-24-000013_otis-20231231.htm:130]** **[0001140361-24-018332_ny20017136x1_def14a.htm:42]** .                   |
| Cristina Méndez        | Executive Vice President and Chief Financial Officer          | August 23, 2024      | Cristina Méndez will serve as Executive Vice President and CFO effective August 23, 2024. She was previously Senior Vice President, Chief Financial Officer, EMEA at Otis International in Geneva  **[0001781335-24-000045_otis-20240918.htm:1]** **[0001781335-24-000045_exhibit101.htm:0]** . |

7586ecb9aa5ec27c6853c87bd0b436d56d63861a46cc0a456aec63b01029ffe8

| Program Details         | Program 1       |
|-------------------------|-----------------|
| Approval Date           | December 1, 2022  **[0001781335-24-000057_otis-20240930.htm:45]** **[0001781335-24-000057_otis-20240930.htm:57]**  |
| End Date/Duration       | N/A             |
| Total additional amount | $2.0 billion  **[0001781335-24-000057_otis-20240930.htm:45]** **[0001781335-24-000057_otis-20240930.htm:57]**  |
| Remaining authorization | $400 million  **[0001781335-24-000057_otis-20240930.htm:45]** **[0001781335-24-000057_otis-20240930.htm:57]**  |
| Details                 | The program aims to return capital to shareholders, improve financial metrics such as earnings per share, and provide flexibility in managing the company's capital structure.  **[0001781335-24-000057_otis-20240930.htm:45]**  |

4b18648bb85bdd7143eb49482792c296205eba10ed028cfea928a0ef4441d0a7

United States

China

Other International

e50810d45de93485f69e7ca70e883d0d6e3171237a97b6e7e67bdfb305282096

**Annual guidance for FY 2024:**
- **Adjusted EPS**: $3.85  **[OTIS_3404629_7]** **[OTIS_3404629_5]**  (lowered from $3.85 to $3.90  **[OTIS_3394102_4]** )  
- **Sales**: $14.2B  **[OTIS_3404629_5]**  (lowered from $14.3B to $14.5B  **[OTIS_3394102_4]** )  
- **Adjusted Operating Profit**: Up $105M  **[OTIS_3404629_5]**  (lowered from up $135M–$175M  **[OTIS_3394102_4]** )  
- **Adjusted Free Cash Flow**: $1.4B–$1.5B  **[OTIS_3404629_5]**  (lowered from $1.5B–$1.6B  **[OTIS_3394102_4]** )  
- **Service Segment (Organic sales growth)**: 6.5%  **[OTIS_3404629_7]** **[OTIS_3404629_6]**  (no change from prior 6%–7%  **[OTIS_3394102_5]** )  
- **Maintenance and repair growth**: 6%  **[OTIS_3404629_7]** **[OTIS_3404629_6]**  (no prior guidance)  
- **Modernization growth**: 9%  **[OTIS_3404629_7]** **[OTIS_3404629_6]**  (no prior guidance)  
- **New Equipment Segment (Organic sales)**: Down mid- to high-single digits  **[OTIS_3404629_7]** **[OTIS_3404629_6]**  (lowered from down mid-single digits  **[OTIS_3394102_5]** )  
- **Operating Profit Margin**: Expansion of 70 bps  **[OTIS_3404629_6]**  (lowered from 80 bps  **[OTIS_3394102_5]** )  
- **Shareholder Returns**: $1B in share repurchases  **[OTIS_3404629_5]**  (no prior guidance)  
- **China Market (New Equipment sales)**: Decline by 15%  **[OTIS_3404629_5]**  (raised from decline of 20%  **[OTIS_3394102_5]** )  

be4aec229f04f59387c5d45ea038aea14c2a43af196420213b987c472ee9499d

| Name                          | Start Date | End Date | Reason for Change |
|-------------------------------|------------|----------|-------------------|
| PricewaterhouseCoopers LLP    | 2019  **[0001781335-24-000013_otis-20231231.htm:73]**    | Present  | Current auditor   |

14f9e907533697db838d1c226ad047cbe92837ea0becf829c3bdf8ec17d9c8ca

069bf4fa9b2da572b613230801713a7231cba61e18bb9186d74a4217ee4d0fed

a0ae47264ef9af4811da83af4250d11b329f735bc4ff1ecbb2b475ae7734d6e7

- **Otis is pivoting towards higher-margin Service and Modernization business in China**, targeting **more than 20% annual modernization order growth**.  **[OTIS_3413525_6]**  They have consolidated operations to improve efficiencies, expecting **$30 million run rate savings**, primarily in the New Equipment side.  **[OTIS_3413525_6]**  Their modernization orders in China **doubled in the quarter**  **[OTIS_3413525_6]** , and they are investing to grow their service portfolio, which ended the year with **435,000 units**, up mid-teens for the 13th straight quarter.  **[OTIS_3413525_9]** **[OTIS_3413525_6]**
- **Excluding China**, Otis's New Equipment orders **increased approximately 11%** in the quarter.  **[OTIS_3413525_19]**  In the Americas, New Equipment orders were **up 14%** in Q4, with sequential growth in absolute dollars every quarter in 2024.  **[OTIS_3413525_23]**  They have a strong backlog with **line of sight for 18 months** in the Americas  **[OTIS_3413525_23]** , and see positive construction activity, indicating potential future revenue growth.  **[OTIS_3413525_23]**
- **Otis is making strategic investments in its workforce and transformation programs** to drive future growth. They added **2,000 field mechanics and professionals** in 2024, increasing their field workforce by **5%**  **[OTIS_3413525_7]** **[OTIS_3413525_8]** , to support Service growth. They are executing a transformation program, targeting **$200 million run rate savings** by the second half of 2025  **[OTIS_3413525_12]** , which positions them well for stronger performance in 2026.  **[OTIS_3413525_12]**

64113425148e4296f510f06feeef76caff16dcc218aabf8fe46b483662686f71

- **Declining New Equipment Sales and Margin Pressure in China**: Otis anticipates a continued decline in China's new equipment market, expecting a 10% drop in 2025 after a 15% decline in 2024. This follows an approximate 35% reduction since the market peak in 2021. The company also faces pricing pressures, with 2024 pricing in China down 10%, leading to expected margin compression due to a lower backlog and the flow-through of prior pricing declines.  **[OTIS_3413525_18]** **[OTIS_3413525_5]** **[OTIS_3413525_20]** **[OTIS_3413525_6]** **[OTIS_3413525_22]**
- **Increased Costs from Workforce Investments and Restructuring**: Otis expanded its field workforce by 5% in 2024, adding 2,000 field professionals. While this is a strategic investment, the company underestimated the short-term productivity, leading to increased costs without immediate revenue benefits. Additionally, Otis plans to spend approximately $250 million on restructuring in 2025 to finalize its uplift program and transform its China operations, which may weigh on near-term earnings.  **[OTIS_3413525_7]** **[OTIS_3413525_12]**
- **First-Half 2025 Earnings Pressure and Uncertain Visibility**: The company expects adjusted EPS to be broadly flat in the first half of 2025, with growth weighted towards the second half. Challenges include executing a lower new equipment backlog and reflecting the impact of prior pricing declines. Given that visibility is similar to last year—when conditions worsened unexpectedly—there's a risk that earnings may be pressured more than anticipated in the near term.  **[OTIS_3413525_22]** **[OTIS_3413525_13]**

d659552c787163a0d167f40b0b26f51708824eac358b7348eb049eb95d6b3290

1. **China Market Outlook**  
   **Q:** What is the outlook for China market stabilization?  
   **A:** We expect the China new equipment market to stabilize between **350,000 and 400,000 units**, with potential stabilization toward the end of the year. This expectation is based on discussions with state-owned enterprises and local officials. We anticipate another **10% decline** in 2025 but see signs of improvement without assuming new stimulus.  **[OTIS_3413525_15]** 

2. **China Cost Initiatives**  
   **Q:** Can you expand on the China cost initiatives and savings target?  
   **A:** We're rightsizing our China operations due to structural changes, aiming for **$30 million** in annual run-rate savings by year-end, primarily in New Equipment. We're targeting a **low to mid-teens reduction** in indirect costs and a **30% reduction** in real estate.  **[OTIS_3413525_6]** 

3. **Modernization Margins and Growth**  
   **Q:** How are modernization margins expected to evolve?  
   **A:** Modernization margins have surpassed New Equipment margins, now exceeding **mid-single digits** and heading toward high single digits, with a goal of achieving **double-digit margins** over the medium term. We're executing a strong backlog and expect mod revenue to grow **high single digits** in 2025.  **[OTIS_3413525_11]** **[OTIS_3413525_12]** 

4. **Service Margin Impact and Workforce Investment**  
   **Q:** How is adding field professionals affecting service margins?  
   **A:** We've added **2,000** field professionals in 2024, increasing our workforce by **5%**, to support future growth in Service and Modernization. This investment impacted fourth-quarter Service margins due to the learning curve but is essential for meeting customer needs and addressing an aging workforce.  **[OTIS_3413525_7]** **[OTIS_3413525_8]** **[OTIS_3413525_9]** 

5. **Cost Savings and Restructuring**  
   **Q:** What are the expected cost savings and restructuring impacts?  
   **A:** We're completing the uplift program and China transformation, expecting around **$70 million** in gross savings from uplift and **$20 million** from China initiatives in 2025. Total restructuring costs are approximately **$250 million**, positioning us for significant cost reductions and margin improvement.  **[OTIS_3413525_11]** **[OTIS_3413525_12]** 

6. **Americas Orders and Outlook**  
   **Q:** Are Americas orders growing, and what's the outlook?  
   **A:** Americas New Equipment orders are increasing sequentially, up **14%** in Q4 2024, not just due to easier comps. However, due to strong revenue execution in 2024, New Equipment revenue in the Americas is expected to be down **low single digits** in 2025.  **[OTIS_3413525_22]** **[OTIS_3413525_23]** 

7. **New Equipment Backlog**  
   **Q:** Will New Equipment backlog be up exiting 2025?  
   **A:** Our New Equipment backlog is down **4%**, with Americas backlog down mid-single digits, EMEA up mid-single digits, and Asia Pacific up low teens. We expect to rebuild backlog over time as orders recover, but specific year-end projections are not provided.  **[OTIS_3413525_12]** **[OTIS_3413525_13]** 

8. **Service Portfolio Retention and Conversion**  
   **Q:** What's happening with service retention and conversion rates?  
   **A:** Retention rates decreased to **92.5%**, partly due to focusing on higher-quality contracts and some involuntary churn. We're enhancing conversions by consolidating brands in China, aiming to improve the conversion rate from **51%** closer to the global average of **66%**; ex-China, it's approximately **90%**.  **[OTIS_3413525_16]** **[OTIS_3413525_17]** 

9. **First Half vs. Second Half Performance**  
   **Q:** Why is EPS flat in H1 and stronger in H2 2025?  
   **A:** The first half is challenged by lower New Equipment revenue and margin pressure from prior backlog and FX headwinds. The second half benefits from cost savings initiatives and margin improvements as transformation programs take effect.  **[OTIS_3413525_13]** **[OTIS_3413525_14]** 

10. **China Modernization Market Competitiveness**  
    **Q:** Will China's mod market become more competitive like New Equipment?  
    **A:** We believe modernization will be less competitive due to fewer independent service providers and our strong customer relationships. By leveraging our service portfolio and supply chain efficiencies, we expect better pricing and margins in China modernization.  **[OTIS_3413525_24]** 

8f0c05ae881709b706b893b196650eb7d8862d6e84c26431ceba5314e826d293

Otis’s China modernization orders doubled in Q4, fueling a shift to higher-margin service with 20%+ annual mod growth. Despite a 10% new equipment decline forecast in China for 2025, $30M run-rate savings and 14% NE order growth in the Americas show resilience.

eed94323f7175c976eff91969fa6c28e7f18ff66d9cdd3f0a4a064d3bfab0e08

344ded5826ae53f2350f9eaa956e50f750e8ffce894f9a5510266eb59f7e780e

**Annual guidance for FY 2025:**

- **Adjusted EPS**: $4.00–$4.10  **[OTIS_3413525_4]**   
  (raised from $3.85  **[OTIS_3404629_7]** **[OTIS_3404629_5]** )  
- **Net sales**: $14.1B–$14.4B (2%–4% organic)  **[OTIS_3413525_4]**   
  (raised from $14.2B (1.5% organic)  **[OTIS_3404629_5]** )  
- **Adjusted operating profit**: $2.4B–$2.5B (up $55M–$105M in actual currency, $120M–$150M in constant currency)  **[OTIS_3413525_4]**   
  (lowered from prior increase of $105M in actual currency, $140M in constant currency  **[OTIS_3404629_5]** )  
- **Adjusted free cash flow**: ~$1.6B  **[OTIS_3413525_4]**   
  (raised from $1.4B–$1.5B  **[OTIS_3404629_5]** )  
- **Share repurchases**: ~$800M  **[OTIS_3413525_4]**   
  (lowered from $1B  **[OTIS_3404629_5]** )  
- **China market (new equipment)**: 10% decline  **[OTIS_3413525_4]**   
  (lowered from 5%–10% decline  **[OTIS_3404629_5]** )  

- **Dividend payout**: Expected to grow  **[OTIS_3413525_4]**   
  (no prior guidance)  
- **Bolt-on M&A**: ~$100M  **[OTIS_3413525_4]**   
  (no prior guidance)  
- **Uplift program savings**: $200M run-rate by 2H 2025, $90M in-year for 2025  **[OTIS_3413525_5]**   
  (no prior guidance)  
- **China transformation cost savings**: $20M in 2025, exiting at $30M annual run rate  **[OTIS_3413525_5]**   
  (no prior guidance)  
- **Restructuring costs**: ~$250M total, including $40M for China  **[OTIS_3413525_12]**   
  (no prior guidance)  
- **Global new equipment market**: Mid single-digit decline, with China at 10% decline  **[OTIS_3413525_4]**   
  (lowered from prior outlook of “improvement”  **[OTIS_3404629_5]** )  
- **Global installed base**: Mid single-digit growth to ~23M units by year-end 2025  **[OTIS_3413525_4]**   
  (no prior guidance)  

b6f2874b1b5e3d008bec6ef4db3c7b586d3f78c62351b628ba00ab9041f38cf7

- Total Revenue: $3,675 million (+2% YoY vs. $3,620 million  **[0001781335-24-000013_otis-20231231.htm:52]** **[0001781335-24-000013_otis-20231231.htm:123]** )  
- **New Equipment: $1,357 million (-7% YoY)** vs. $1,466 million  **[0001781335-24-000013_otis-20231231.htm:52]** **[0001781335-24-000013_otis-20231231.htm:123]**   
- **Service: $2,318 million (+8% YoY)** vs. $2,154 million  **[0001781335-24-000013_otis-20231231.htm:52]** **[0001781335-24-000013_otis-20231231.htm:123]**   

deb7a4d60618c72db85c046fd332a4b929cf8a75416593686ab6cfdd40beaca4

56bb97fee89ac78020bcfd259b61fd1616bd19c8a61ad973fc759cbf73f62890

| Year  | Amount Due (in millions) | Debt Type                  | Interest Rate | % of Total Debt                                                                 |
|-------|---------------------------|----------------------------|---------------|---------------------------------------------------------------------------------|
| 2025  | $1,300                   | 2.056% Notes              | 2.056%        | 18.8% = (1,300 / 6,934) * 100 **[0001781335-24-000057_otis-20240930.htm:12]**                                          |
| 2026  | $149                     | 0.37% Notes               | 0.37%         | 2.1% = (149 / 6,934) * 100 **[0001781335-24-000057_otis-20240930.htm:12]**                                             |
| 2026  | $672                     | 0.318% Notes              | 0.318%        | 9.7% = (672 / 6,934) * 100 **[0001781335-24-000057_otis-20240930.htm:12]**                                             |
| 2027  | $500                     | 2.293% Notes              | 2.293%        | 7.2% = (500 / 6,934) * 100 **[0001781335-24-000057_otis-20240930.htm:12]**                                             |
| 2028  | $750                     | 5.250% Notes              | 5.250%        | 10.8% = (750 / 6,934) * 100 **[0001781335-24-000057_otis-20240930.htm:12]**                                            |
| 2030  | $1,500                   | 2.565% Notes              | 2.565%        | 21.6% = (1,500 / 6,934) * 100 **[0001781335-24-000057_otis-20240930.htm:12]**                                          |
| 2031  | $560                     | 0.934% Notes              | 0.934%        | 8.1% = (560 / 6,934) * 100 **[0001781335-24-000057_otis-20240930.htm:12]**                                             |
| 2040  | $750                     | 3.112% Notes              | 3.112%        | 10.8% = (750 / 6,934) * 100 **[0001781335-24-000057_otis-20240930.htm:12]**                                            |
| 2050  | $750                     | 3.362% Notes              | 3.362%        | 10.8% = (750 / 6,934) * 100 **[0001781335-24-000057_otis-20240930.htm:12]**                                            |

45ad97e536782f3caa3928e59ebd5795d93396057d5f6c3219f1a37555478bd5

- **Significant decline in New Equipment sales, particularly in China, is negatively impacting revenues and operating profit margins**, with expectations of an approximate 8% decline in Q4 and operating profit margin below 5% for New Equipment due to volume and mix effects, and fading price and commodity benefits.  **[OTIS_3404629_12]**
- **Continued weakness and uncertainty in the China market could result in up to $0.05 EPS headwind**, with lower China volumes and mix impacts putting pressure on New Equipment margins into 2025. The New Equipment backlog in China is down mid-teens, and without policy stimulus, margins may remain under pressure.  **[OTIS_3404629_8]**
- **Competitive pricing pressures and regional mix shifts are impacting New Equipment margins**, with more than 75% of New Equipment revenue now driven by sales outside China, leading to margin pressure due to mix, and challenging market conditions in regions like Europe adding to the headwinds.  **[OTIS_3404629_8]** **[OTIS_3404629_12]**

6beed764993b94f26372af34b6a56d55b8a343359ea9e27694db7b07117d3c2f

1. **China Market Outlook**  
   **Q:** Is China market deteriorating, and will pricing become irrational?  
   **A:** The China New Equipment market remains weak, down **15%** this quarter, similar to Q2, and expected to finish the year at about **415,000 units**. While pricing remains competitive, we are not seeing irrational pricing. We continue to balance volume, price, and liquidity to maintain a strong China business into 2025. Despite a projected **$0.5 billion** decline in China revenue this year, we still expect organic top-line growth for the company.  **[OTIS_3404629_8]** 

2. **2025 New Equipment Margins**  
   **Q:** Will New Equipment margins remain at mid-single digits in 2025?  
   **A:** Yes, we expect New Equipment margins in 2025 to be similar to the second half of this year, around **5%**, due to the mix impact from lower China contribution. Our uplift program is on track and will continue to deliver savings. While we anticipate **50 to 100 basis points** of margin decline in New Equipment next year due to volume, mix, and fading commodities and price tailwinds, overall operating profit is expected to grow mid-single digit.  **[OTIS_3404629_13]** 

3. **Service Margins and Growth**  
   **Q:** Why are Service margins flat, and will they improve?  
   **A:** Service margins are in line with expectations, sequentially increasing from **24.7%** in Q2 to **24.8%** in Q4, driven by higher volumes and approximately **4** points of price increases, offsetting wage inflation. We anticipate Service margins to be above **25%** in Q4, and we remain focused on price, productivity, and uplift actions to continue margin expansion.  **[OTIS_3404629_9]** **[OTIS_3404629_12]** **[OTIS_3404629_19]** 

4. **Free Cash Flow and Working Capital**  
   **Q:** Why is free cash flow guidance reduced, and what about next year?  
   **A:** The free cash flow guidance was reduced to **$1.4 to $1.5 billion** due to lower down payments from New Equipment orders in China and a working capital build-up of approximately **$250 million**. We expect this working capital to unwind in Q4 as the business mix stabilizes. Next year, free cash flow should pick up at a faster pace than operating profit growth.  **[OTIS_3404629_18]** 

5. **Americas Market Improvement**  
   **Q:** Is the improvement in Americas orders sustainable or just due to comps?  
   **A:** While comps played a role, we are genuinely seeing better demand signals in the Americas, with New Equipment orders up **23%** in Q3. This indicates an inflection point, and we expect positive performance to continue into Q4 and next year.  **[OTIS_3404629_14]** **[OTIS_3404629_17]** 

6. **China Stimulus Impact**  
   **Q:** What is the impact of China stimulus on construction?  
   **A:** We are encouraged by the announced stimulus actions but await implementation details. The impact is more likely to be felt in **2025**, and we are prepared for potential benefits in both New Equipment and modernization.  **[OTIS_3404629_16]** 

7. **Cost Structure Adjustments in China**  
   **Q:** How are you adjusting costs in China given lower volumes?  
   **A:** We are optimizing costs in China by reviewing our operational footprint and workforce. For example, we have moved our modernization into New Equipment factories to improve efficiency. These actions aim to maintain profitability and prepare for growth in the modernization business.  **[OTIS_3404629_15]** 

8. **Modernization Business in China**  
   **Q:** Do modernization margins in China align with global strategies?  
   **A:** Yes, modernization margins in China are attractive and similar to new equipment margins relative to the rest of the world. We are optimistic about the growth potential in China's mod market and are seeing positive early indicators.  **[OTIS_3404629_10]** 

7524c518d3745946485db6f98dac18a38bd6a2c0c0991623202c0219c599cc27

1. **China Market Outlook**  
   **Q:** What's the outlook for the China market?  
   **A:** The New Equipment market in China remains weak, with a projected decline of **10% to 15%** for the full year, bringing it down to **425,000 to 450,000 units** from a peak of **650,000 units** three years ago.  **[OTIS_3394102_7]** **[OTIS_3394102_14]**  The company continues to focus on growing its Service business and managing costs in this challenging environment.

2. **China Pricing and Margins**  
   **Q:** How is pricing pressure affecting margins in China?  
   **A:** Pricing in China is down approximately **10% year-over-year on a like-for-like basis**.  **[OTIS_3394102_12]** **[OTIS_3394102_17]**  Despite this, the company is effectively managing costs through productivity gains and benefits from a deflationary supply chain, helping to preserve margins.  **[OTIS_3394102_12]** 

3. **Margin Expansion Despite Revenue Decline**  
   **Q:** How did margins expand despite revenue being down 9%?  
   **A:** Although China New Equipment revenue was down double digits, leading to a mix headwind, the company offset this through positive pricing in other regions, commodity tailwinds, productivity improvements, and benefits from its Uplift program, resulting in margin expansion.  **[OTIS_3394102_19]** 

4. **Modernization Growth and Margins**  
   **Q:** Can you discuss the growth and margin expansion in the modernization backlog?  
   **A:** Modernization orders are up **13.8%**, with backlog up **17%**, and margins now exceeding New Equipment margins.  **[OTIS_3394102_13]** **[OTIS_3394102_15]**  The company is on track to achieve modernization margins of at least **10%**, driven by industrialized processes and leveraging its extensive service portfolio.  **[OTIS_3394102_13]** 

5. **Free Cash Flow Guidance**  
   **Q:** Why was free cash flow guidance lowered to $1.6 billion?  
   **A:** Free cash flow was impacted by a **$300 million** build in working capital due to lower New Equipment orders and faster growth in the Service business, which collects cash after performing work.  **[OTIS_3394102_9]**  The company expects to reverse over **$200 million** in working capital in the second half to achieve its **$1.6 billion** free cash flow target.  **[OTIS_3394102_9]** 

6. **Maintenance and Repair Growth**  
   **Q:** Why did maintenance and repair growth slow to 4.9%?  
   **A:** The growth rate reflects a tough comparison to the prior year's second quarter, which saw the highest repair growth.  **[OTIS_3394102_16]**  While repair growth has exceeded **10%** for almost three years, it is expected to return to high single-digit or double-digit growth in the second half.  **[OTIS_3394102_16]** 

7. **New Equipment Orders and Backlog**  
   **Q:** What's the outlook for New Equipment orders and backlog globally?  
   **A:** The New Equipment backlog is down **3%** overall, with a 12-month rolling order decline of **7.7%**.  **[OTIS_3394102_10]**  However, orders in EMEA and Asia Pacific (excluding China) are performing well, and the company anticipates positive New Equipment orders in the Americas in the second half based on strong proposal activity.  **[OTIS_3394102_10]** **[OTIS_3394102_18]** 

8. **EPS Guidance and Outlook**  
   **Q:** How is EPS expected to trend in the second half?  
   **A:** With interest expenses at the current run rate and the tax rate increasing to **27%** in Q3, EPS is expected to be roughly flat in Q3.  **[OTIS_3394102_11]**  The full-year EPS is guided to increase by **$0.34** at the midpoint, with growth occurring predominantly in Q4.  **[OTIS_3394102_11]** 

9. **Impact of China's Market on Service Growth**  
   **Q:** Will the decline in China's market affect future Service growth?  
   **A:** The company believes Service growth in China will continue, driven by improved conversion rates and capturing non-Otis units.  **[OTIS_3394102_12]**  The Service portfolio in China has grown to about **415,000 units**, up from over **400,000 units** last quarter.  **[OTIS_3394102_12]** 

10. **Americas New Equipment Outlook**  
    **Q:** How are New Equipment orders trending in the Americas?  
    **A:** While the Americas backlog is currently down, the company expects orders to improve in the second half, with positive signs in proposal activity and anticipated bookings starting in Q3.  **[OTIS_3394102_10]** 

11. **Strategy in China**  
    **Q:** Has there been a strategic shift in China?  
    **A:** The company continues its strategy of not accepting loss-making units for the sake of market share in China.  **[OTIS_3394102_8]**  The focus remains on growing the Service business and managing costs, with no change in overall strategy.  **[OTIS_3394102_8]** 

12. **Leadership Transition**  
    **Q:** What are Anurag Maheshwari's plans after leaving?  
    **A:** Anurag did not disclose his future plans but emphasized a smooth transition with Cristina Mendez taking over his role.  **[OTIS_3394102_6]** 

f448b2cb8494cf43e317004e1f902f49d09ef6055cb02391b07b8ec5ac7bfe0e

- **Weak market conditions in China**: The China market remains weak, with the market down over **10%** in 2023.  **[OTIS_3371360_14]**  There is significant **price pressure** due to a deflationary environment, which could impact margins.  **[OTIS_3371360_11]** **[OTIS_3371360_10]**  Additionally, **order value declined mid-single digits** in China.  **[OTIS_3371360_14]**
- **Weakness across segments in North America and Europe**: In North America, **none of the segments are strong**, with **multifamily being the weakest** due to several years of outpaced growth.  **[OTIS_3371360_13]**  Central Northern Europe is also **weak**.  **[OTIS_3371360_13]**
- **Global New Equipment market expected to decline in 2024**: The New Equipment market is expected to be **down in every region** in 2024, with the global market down low to mid-single digits in units.  **[OTIS_3371360_12]**

131b83fddbbd010d2b2d005a889c383c7ff27216ac6e4dbfbe47f06fd32c1a58

- **Strong Service Growth:** Otis delivered **maintenance portfolio growth of 4.2%** and expects **repair growth to return to high single-digit or double-digit** in the second half, driven by robust demand and effective pricing strategies  **[OTIS_3394102_20]** ,.  **[OTIS_3394102_16]**
- **Margin Expansion Despite China Headwinds:** Despite a **double-digit decline in China**, which is a high-margin market, Otis expanded **New Equipment margins** through **pricing improvements in other regions**, productivity gains, and benefits from the Uplift program  **[OTIS_3394102_19]** ,.  **[OTIS_3394102_8]**
- **Successful Pivot to Modernization and Service in China:** Otis significantly grew its Service business in China, with **units up high teens**, **mod orders up high single digits**, and **mod sales up double digits**, making Service **almost one-third of China's revenue**, **double** what it was at spin-off  **[OTIS_3394102_7]** ,.  **[OTIS_3394102_13]**

aa69d0f4d4089ba70ab190951ff8026c867f628bb76457077446122adf862c27

- Otis's modernization backlog is up **15%**  **[OTIS_3371360_15]** , driven by refurbishment demand due to aging equipment across all regions, particularly in Asia Pacific and China, leading to strong growth prospects in modernization.
- Despite a declining Chinese market, Otis has increased its bookings in China by nearly **20%** since pre-spin, while the market declined **10% to 15%** over the same period, indicating significant market share gains.  **[OTIS_3371360_14]**
- The company's UpLift initiatives are expected to deliver net savings of **$40 million** in 2024, contributing directly to operating profit, with modernization margins projected to surpass new equipment margins soon.  **[OTIS_3371360_9]** **[OTIS_3371360_10]**

04146ce7805678b4aeb419a6a3885ba969e8a8669daced9b0337ccb57a35b279

- **Modernization margins have surpassed New Equipment margins**, indicating improved profitability in this segment.  **[OTIS_3380441_7]**  Otis reports that modernization margins are now higher than new equipment margins, driven by productivity improvements and standardization efforts.
- **Strong growth in high-potential markets like India**, where Otis is seeing significant demand and investing in operations.  **[OTIS_3380441_21]**  India is described as the highest growth market globally, with Otis well-positioned to capitalize on this growth.
- **Robust Service pricing and margin expansion**, with **Service pricing up over 3 points** and **Service margins expanding by 70 basis points** in the first quarter.  **[OTIS_3380441_18]** **[OTIS_3380441_9]**  This demonstrates Otis's ability to drive profitability in its Service business through pricing and productivity.

aaef751301a8f78b1c5e0c747fb6ae4a49b743bceb172520361a333189edf712

1. **China Market and Strategy**  
   **Q:** Is there increased pricing pressure in China's New Equipment market?  
   **A:** Management notes that China's market remains weak and highly competitive, but they believe they gained market share in 2023 despite the market being down over **10%**. Costs, including commodity costs, are coming down, allowing them to be price-cost neutral. They have focused on growing their Service business, with Service sales increasing at a mid-teens CAGR and now representing **25%** of China sales, up from mid-teens a few years ago. Overall, their China business contributed significantly, with profit up year-over-year.  **[OTIS_3371360_11]** ,  **[OTIS_3371360_14]** 

2. **UpLift Savings Impact**  
   **Q:** How will UpLift savings contribute to 2024 profit?  
   **A:** UpLift is expected to contribute **$40 million** in net savings to the 2024 P&L, fully flowing through to operating profit. This is part of an anticipated **$170 million** constant currency operating profit growth, with **$140 million** coming from price-cost benefits. Approximately **70%** of UpLift savings will come from Service, with the rest from New Equipment and corporate functions.  **[OTIS_3371360_10]** 

3. **Modernization Growth and Margins**  
   **Q:** What's driving growth in modernization, and how will margins evolve?  
   **A:** The modernization market is growing across all regions, driven by the need to refurbish aging equipment and meet safety regulations. Otis's modernization backlog is up **15%**, marking the sixth consecutive quarter of orders increasing over **10%**. Management expects modernization margins to surpass New Equipment margins soon, with further improvements as they standardize products and optimize the supply chain.  **[OTIS_3371360_15]** 

4. **New Equipment Outlook and Backlog**  
   **Q:** How is the New Equipment backlog expected to trend in 2024?  
   **A:** Strong orders in Americas and EMEA have resulted in a New Equipment backlog up **2%** entering 2024. Management anticipates a book-to-bill ratio similar to 2023 and expects to finish 2024 with a backlog that is flat to slightly higher. This outlook is supported by a planned **50 basis point** share gain in New Equipment.  **[OTIS_3371360_12]** 

5. **North America and EMEA Market Conditions**  
   **Q:** What is the current market environment in North America and Europe?  
   **A:** In North America, the New Equipment market ended 2023 at its lowest unit levels since the Global Financial Crisis, with all segments weak and multifamily being the weakest. Infrastructure is performing the best. In Europe, Southern Europe remains strong, led by Spain, while Central and Northern Europe are weak. Residential is performing better in Europe than in North America. Management remains confident due to their investments, new products catering to low-rise markets, and a strong backlog in North America, which is up mid-single digits.  **[OTIS_3371360_13]** 

6. **Maintenance and New Equipment Pricing**  
   **Q:** Is there evidence of pricing deflation outside of China?  
   **A:** Management confirms there is no pricing deflation outside of China. Maintenance pricing is expected to increase by **1%**, adjusted for mix and churn, and **3%** on a like-to-like basis. New Equipment saw good price increases in 2023 in Americas, EMEA, and Asia-Pacific, with some of that expected to continue into 2024. In China, despite price pressure, costs are coming down, making it price-cost neutral.  **[OTIS_3371360_9]** 

0f63bf8b172f1f510a9631ee2303898950e4ed395e05878a4abc969c32b2bd94

- Otis's **Service segment** continues to show strong performance, with **operating profit margins reaching 24.8% in Q3** and expected to exceed **25% in Q4**, driven by growth in maintenance, repair, and modernization, as well as favorable pricing and productivity improvements.  **[OTIS_3404629_12]** **[OTIS_3404629_9]** **[OTIS_3404629_19]**
- In the **Americas**, Otis is experiencing an **inflection point**, with **New Equipment orders up 23% in the quarter**, improved pricing, and strong growth in repair (up **10%**) and modernization sales (up **low teens**).  **[OTIS_3404629_14]**
- Despite challenges in China, Otis is successfully pivoting to its **Service and Modernization business**, with **service units up high teens** and **service revenue up 1%** in China; the modernization market is growing and picking up nicely, contributing to future margin expansion.  **[OTIS_3404629_8]**

6306caed52195be0513a48094e5ddf7cebbcfd68763098f85fd2df54f0cf3730

- **OTIS is experiencing continued pricing pressure in the China New Equipment market, with no expectation of recovery in 2024.**  **[OTIS_3380441_19]**
- **The China New Equipment market is expected to decline by high single digits to down 10% in units, posing a challenging environment for OTIS.**  **[OTIS_3380441_19]**
- **Persistent pricing declines in China may impact OTIS's profitability, even as the company attempts to maintain margins through cost reductions and productivity improvements.**  **[OTIS_3380441_19]**

01be8e5deae0016e9dee3258febc99d23e6d5fd7e147213aba6b8afd5b6b7a1d

- **Significant decline in the China New Equipment market**, which is Otis's largest margin region, leading to volumes being down double digits and pricing down **10% year-over-year**, resulting in a **$40 million to $50 million headwind**.  **[OTIS_3394102_17]** **[OTIS_3394102_19]**
- **Slower growth in maintenance revenue**, with maintenance organic sales growth at **4.9%**, lower than previous quarters, partly due to tough comparisons from elevated repair business in the prior year.  **[OTIS_3394102_20]** **[OTIS_3394102_16]**
- **Decline in New Equipment orders in the Americas**, with a **mid-teens decline**, contributing to an **11% decrease in total New Equipment orders in Q2**.  **[OTIS_3394102_0]**

ac663dd3f53fa30d50fe2016c724bb5d8aec0b4aa5dd75c7652ae6abeb71d295

1. **China Sales and Pricing Pressure**  
   **Q:** Can you clarify what's happening with China sales and pricing?  
   **A:** China is our most competitive market, with the New Equipment market down **10%** in the quarter  **[OTIS_3380441_13]**  and expected to be down **high single digits to 10%** for the year.  **[OTIS_3380441_13]**  We're not getting price for New Equipment in China  **[OTIS_3380441_13]** , but we've offset this with productivity and lower commodity costs.  **[OTIS_3380441_13]**  We expect New Equipment pricing to remain competitive, with the China segment for 2024 at about **450,000 units**.  **[OTIS_3380441_13]**  Service pricing is flattish, but we're driving productivity through initiatives like Otis ONE, now covering over **400,000 units**.  **[OTIS_3380441_13]** 

2. **Modernization Growth and Margins**  
   **Q:** Could you talk about margins and demand in Mod orders and backlog?  
   **A:** Mod orders were up **almost 13%** in the quarter  **[OTIS_3380441_7]** , with backlog up **15%**.  **[OTIS_3380441_7]**  Mod margins have now surpassed New Equipment margins  **[OTIS_3380441_7]** , driven by productivity initiatives, standardization, and cost reductions in supply chain and installation.  **[OTIS_3380441_7]**  We anticipate significant growth across all regions, with the Mod market potential of several million units.  **[OTIS_3380441_7]** 

3. **New Equipment Orders and Backlog Outlook**  
   **Q:** What's your outlook for New Equipment orders and backlog?  
   **A:** New Equipment orders were down **10%** in Q1  **[OTIS_3380441_8]** , expected to be down mid- to high single digits in Q2.  **[OTIS_3380441_8]**  By year-end, the New Equipment backlog could be flattish to down low single digits.  **[OTIS_3380441_8]**  Over the next few years, we expect New Equipment to be flattish, with growth coming from Mod, whose backlogs are up **15%**.  **[OTIS_3380441_8]** 

4. **Service Margins and Growth**  
   **Q:** Service margins were strong in Q1; can you update on margin outlook and wage inflation?  
   **A:** Service margins were up **70 basis points year-on-year** in Q1  **[OTIS_3380441_9]** , with portfolio growth of **4%** and service pricing over **3%**.  **[OTIS_3380441_9]**  We're comfortable with a **50 basis points** margin increase for the year  **[OTIS_3380441_9]** , considering mix impacts from Mod revenue growing faster than maintenance and repair.  **[OTIS_3380441_9]**  We're not seeing unusual wage inflation and focus on productivity to offset costs.  **[OTIS_3380441_9]** 

5. **Cash Flow and Share Buyback**  
   **Q:** Is there anything affecting free cash flow and AR timing? Also, can you discuss share repurchase plans?  
   **A:** The increase in accounts receivable is due to timing.  **[OTIS_3380441_12]**  We're confident of achieving **100% conversion** this year.  **[OTIS_3380441_12]**  Reflecting our confidence in cash flow, we're increasing our share repurchase from **$800 million to $1 billion**.  **[OTIS_3380441_12]** 

6. **North America Market Outlook**  
   **Q:** How does recent softening in lead indexes align with your North America outlook?  
   **A:** The North America New Equipment market remained weak but at a lesser pace than in the second half of '23.  **[OTIS_3380441_15]**  We expect more New Equipment stability in '24 than in '23  **[OTIS_3380441_15]** , though the latest ABI data at **43.6%** indicates contraction.  **[OTIS_3380441_15]**  All verticals were down, but residential is becoming more stable, and infrastructure has been stable.  **[OTIS_3380441_15]** 

7. **Capital Allocation and M&A**  
   **Q:** After upping dividend and buyback, how are you thinking about M&A opportunities?  
   **A:** We continue to pursue bolt-on acquisitions where they make sense, focusing on adding density and integrating well.  **[OTIS_3380441_19]**  We have a strong balance sheet but don't feel the need for large-scale M&A.  **[OTIS_3380441_19]**  We recently decided to buy out the minorities in our Nippon Otis business in Japan.  **[OTIS_3380441_19]** 

c867179258cd57c237aeb42f4d17ffd186883094ac56eed9432180a88fc9c43a

Otis Worldwide Corp (OTIS)

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