Q1 2025 Earnings Call April 23, 2025 © 2025 OTIS WORLDWIDE CORPORATION. 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 the securities laws. From time to time, oral or written forward-looking statements may also be included in other information released to the p ...

Otis Worldwide Corporation (OTIS) is scheduled to report first-quarter 2025 results on April 23, before the opening bell.In the last reported quarter, the company’s adjusted earnings missed the Zacks Consensus Estimate by 2.1%, while net sales beat the same by 0.7%. On a year-over-year basis, earnings and revenues increased 6.9% and 1.5%, respectively.OTIS’ earnings surpassed the consensus mark in two of the trailing four quarters and missed on the remaining two occasions, with an average surprise of 0.2%. ...

Wall Street analysts expect Otis Worldwide (OTIS) to post quarterly earnings of $0.91 per share in its upcoming report, which indicates a year-over-year increase of 3.4%. Revenues are expected to be $3.4 billion, down 0.9% from the year-ago quarter.The consensus EPS estimate for the quarter has undergone an upward revision of 1.3% in the past 30 days, bringing it to its present level. This represents how the covering analysts, as a whole, have reassessed their initial estimates during this timeframe.Ahead o ...

FARMINGTON, Conn., April 9, 2025 /PRNewswire/ -- Otis Worldwide Corporation (NYSE: OTIS) will host a conference call on Wednesday, April 23, 2025, at 8:30 a.m. ET. Otis Chair, CEO & President Judy Marks and Executive Vice President & CFO Cristina Mendez will discuss the company's first quarter results and 2025 outlook. Otis is the world's leading elevator and escalator manufacturing, installation and service company. We move 2.4 billion people a day and maintain approximately 2.4 million customer units worl ...

Core Viewpoint - The analysis of Otis Worldwide (NYSE: OTIS) indicates a Hold rating due to its premium valuation and weak momentum, despite the strength of its business model [1] Company Analysis - Otis Worldwide has a strong business model that is central to its operations, which is a positive aspect noted in the analysis [1] - The analyst has a beneficial long position in Otis shares, indicating confidence in the company's potential [1] Investment Strategy - The focus is on identifying long-only opportunities that provide safe and growing dividends, aiming to outperform the broader market on a risk-adjusted return basis [1] - The analyst's background includes extensive experience in real estate investment, having sourced over $100 million in commercial real estate investments [1]

Core Insights - Otis Worldwide Corporation (OTIS) is experiencing positive international demand trends and is gaining market share through innovation and efficient service offerings [1][6] - The company has secured a project in Taiwan to supply 50 escalators and 15 Gen2 elevators for the Kaohsiung MRT Red Line RLC01, which will enhance the city's transportation network [2][3] Innovation as a Growth Driver - Otis Worldwide is focusing on organic growth through innovation, investing $152 million in research and development (R&D) in 2024, with $53 million allocated to digital and strategic initiatives [4][5] - The company operates 11 R&D centers and 17 factories globally, with advancements in its Gen3 and Gen360 digital elevators that emphasize energy efficiency and connectivity through the Otis ONE IoT platform [5] Market Performance - Otis shares have increased by 12.4% year to date, outperforming the Zacks Building Products - Miscellaneous industry's decline of 6.9% [6] - The company aims to continue expanding its digital ecosystem and solutions for both existing customers and new equipment shipments [6]

Core Viewpoint - Otis Worldwide reported mixed results for Q4 2024, with adjusted earnings missing estimates while net sales exceeded expectations, marking the second consecutive earnings miss after a strong performance in prior quarters [2][5]. Financial Performance - Adjusted earnings were 93 cents per share, missing the Zacks Consensus Estimate of 95 cents by 2.1%, but increased 6.9% year-over-year from 87 cents [5]. - Net sales reached $3.68 billion, slightly above the consensus mark of $3.65 billion, reflecting a 1.5% year-over-year growth, with organic sales increasing by 1.9% [5]. - Adjusted operating margin expanded by 30 basis points to 15.9%, driven by favorable performance in the Service segment [6]. Segment Analysis - **New Equipment Segment**: - Net sales were $1.36 billion, down 7.4% year-over-year, with organic sales declining 6.8% [7]. - Orders decreased by 4% at constant currency, with significant declines in China and EMEA [8]. - Operating margin contracted by 140 basis points to 4.7% due to lower volume and unfavorable mix [9]. - **Service Segment**: - Net sales increased by 7.6% year-over-year to $2.32 billion, supported by a 7.8% rise in organic sales [10]. - Operating margin improved by 50 basis points to 24.5%, aided by higher volume and favorable pricing [11]. Annual Highlights - For 2024, Otis Worldwide reported annual revenues of $14.26 billion, a 0.4% increase from $14.21 billion in 2023, with adjusted EPS rising to $3.83 from $3.54 [12]. - Adjusted operating margin for the year expanded by 50 basis points to 16.5% [12]. Financial Position - As of December 31, 2024, cash and cash equivalents were $2.3 billion, up from $1.27 billion at the end of 2023, while long-term debt increased to $6.97 billion [13]. - Net cash flows from operating activities were $1.56 billion, down from $1.63 billion a year ago, with adjusted free cash flow totaling $1.57 billion [13]. 2025 Outlook - Otis expects net sales between $14.1 billion and $14.4 billion, with organic sales growth projected between 2% and 4% [14]. - Adjusted EPS is anticipated to be between $4 and $4.10, indicating a year-over-year growth of 4-7% [15]. Estimate Trends - There has been a downward trend in estimates, with the consensus estimate shifting down by 5.23% [16]. VGM Scores - Otis Worldwide has a Growth Score of A but lags in Momentum with an F, resulting in an aggregate VGM Score of C [17].

Core Insights - Otis Worldwide's international operations are crucial for understanding its financial strength and growth potential [1][2] - The company's total revenue for the quarter was $3.68 billion, reflecting a year-over-year increase of 1.5% [4] International Revenue Breakdown - China contributed $483 million, accounting for 13.14% of total revenue, which was below the consensus estimate of $526.59 million, marking a surprise of -8.28% [5] - Other International regions generated $2.14 billion, representing 58.23% of total revenue, exceeding expectations by +4.17% compared to the forecast of $2.05 billion [6] Future Revenue Projections - Analysts project Otis Worldwide will achieve revenues of $3.44 billion for the ongoing fiscal quarter, a slight increase of 0.1% from the previous year, with contributions from China and Other International expected to be $483.71 million and $1.98 billion, respectively [7] - For the full year, total revenue is projected at $14.3 billion, indicating a rise of 0.3% from last year, with China expected to contribute $2.06 billion (14.4%) and Other International $8.31 billion (58.1%) [8] Market Dependency and Earnings Forecasts - The company's reliance on global markets for revenue presents both opportunities and risks, making the monitoring of international revenue trends essential for predicting future performance [9] - Wall Street analysts closely observe these patterns, especially in light of global interdependence and geopolitical issues, which can influence earnings forecasts [10]

Financial Performance - Net sales for 2024 reached $14,261 million, a slight increase of 0.4% compared to $14,209 million in 2023[332]. - Product sales decreased to $5,367 million in 2024, down 7.7% from $5,812 million in 2023, while service sales increased to $8,894 million, up 5.9% from $8,397 million[332]. - Operating profit for 2024 was $2,008 million, a decrease of 8.1% from $2,186 million in 2023[332]. - Net income attributable to Otis Worldwide Corporation increased to $1,645 million in 2024, up 17.0% from $1,406 million in 2023[332]. - Basic earnings per share rose to $4.10 in 2024, compared to $3.42 in 2023, reflecting a 19.9% increase[332]. - The company reported a comprehensive income attributable to Otis Worldwide Corporation of $1,650 million in 2024, compared to $1,248 million in 2023, an increase of 32.2%[334]. - Net income for 2024 was $1,734 million, an increase from $1,498 million in 2023 and $1,369 million in 2022[342]. - The company reported net cash flows provided by operating activities of $1,563 million in 2024, compared to $1,627 million in 2023[342]. - The effective income tax rate for 2024 was 15.0%, a decrease from 26.2% in 2023 and 27.5% in 2022[493]. Assets and Liabilities - Total assets increased to $11,316 million in 2024, up from $10,117 million in 2023, representing a growth of 11.9%[337]. - Total liabilities rose to $16,044 million in 2024, compared to $14,837 million in 2023, an increase of 8.1%[337]. - Cash and cash equivalents significantly increased to $2,300 million in 2024, up from $1,274 million in 2023, a growth of 80.1%[337]. - As of December 31, 2024, restricted cash balances were $21 million, up from $6 million in 2023[362]. - Current and long-term accounts receivable included retainage of $57 million and unbilled receivables of $129 million as of December 31, 2024[364]. - Total long-term debt increased from $6,866 million in 2023 to $8,273 million in 2024, with a significant portion due in 2025[450]. Cash Flow and Investments - The company completed the acquisition of all outstanding shares of its consolidated subsidiary in Japan for approximately $70 million in 2024[348]. - Business acquisitions totaled $87 million in 2024, compared to $36 million in 2023, indicating a significant increase in investment activity[438]. - The company repurchased $1,007 million of common stock in 2024, an increase from $800 million in 2023[342]. - The company repurchased 10.6 million shares of Common Stock for approximately $1.0 billion in 2024, compared to 9.6 million shares for $800 million in 2023[487]. Revenue Recognition and Contracts - The Company recognized $5.4 billion and $1.7 billion of revenue from new equipment and modernization contracts for the year ended December 31, 2024[327]. - The Company recognized revenue from maintenance contracts on a straight-line basis, aligning with the continuous nature of these services throughout the year[389]. - Revenue recognized from contract liabilities was approximately $2.0 billion for each of the years 2022, 2023, and 2024[431]. - The outstanding obligations confirmed under supplier finance programs were $714 million as of December 31, 2024, an increase from $627 million in 2023[398]. Taxation - A favorable ruling in German tax litigation resulted in income tax benefits of approximately $185 million and related interest income of approximately $200 million in 2024[345]. - The provision for income taxes in 2024 included a current tax expense of $336 million, down from $594 million in 2023[493]. - The company recognized a tax benefit related to the resolution of German tax litigation, contributing to the lower effective tax rate in 2024[494]. Pension and Employee Benefits - Contributions to employer-sponsored defined contribution plans were $71 million in 2024, up from $65 million in 2023[457]. - The actual return on plan assets for 2024 was $57 million, significantly higher than $13 million in 2023, contributing to an ending balance of $637 million in 2024 compared to $609 million in 2023[459]. - The net periodic pension cost for the employer in 2024 was $32 million, a slight decrease from $34 million in 2023[461]. - Total contributions to multiemployer defined benefit pension plans were $143 million in 2024, compared to $137 million in 2023 and $120 million in 2022[474]. Stock and Equity - Stock-based compensation expense for 2024 was $73 million, an increase from $64 million in 2023 and $66 million in 2022[479]. - The total intrinsic value of stock options and stock appreciation rights exercised during 2024 was $78 million, compared to $65 million in 2023 and $35 million in 2022[482]. - The company has $200 million remaining under its share repurchase program as of December 31, 2024[486]. - The company was authorized to purchase up to $2.0 billion of Common Stock under a new share repurchase program approved on January 16, 2025[488]. Risk Management - The Company utilizes derivative instruments, including forward contracts, as risk management tools to manage foreign currency and commodity price exposures[298]. - The Company does not enter into hedging contracts for speculative purposes, focusing instead on risk management[307]. - The Company’s derivative instruments are primarily used for risk management, with no speculative purposes involved[400]. Economic Conditions - The Company assesses the impact of macroeconomic conditions, including inflation and interest rates, on its financial statements[359]. - A 100 basis points increase in interest rates would have resulted in an approximate $400 million reduction on the fair value of fixed-rate debt as of December 31, 2024 and 2023[309].

Core Insights - Otis Worldwide Corporation reported mixed results for Q4 2024, with adjusted earnings missing estimates while net sales exceeded expectations, marking the second consecutive earnings miss after 18 prior quarters of beating estimates [1][3][4] - Year-over-year growth was observed in both top and bottom lines, driven by the Service segment, although the New Equipment segment faced challenges due to declining sales in China [2][4] Financial Performance - Adjusted earnings were reported at 93 cents per share, missing the Zacks Consensus Estimate of 95 cents by 2.1%, but increased 6.9% from the previous year's EPS of 87 cents [4] - Net sales reached $3.68 billion, slightly above the consensus mark of $3.65 billion, reflecting a 1.5% year-over-year growth, with organic sales increasing by 1.9% [4] - Adjusted operating margin expanded by 30 basis points year-over-year to 15.9%, driven by favorable performance in the Service segment [5] Segment Analysis - New Equipment segment net sales were $1.36 billion, down 7.4% year-over-year, with organic sales declining 6.8% and impacted by foreign exchange headwinds [6] - Service segment net sales increased by 7.6% year-over-year to $2.32 billion, supported by a 7.8% rise in organic sales [9] - The operating margin for the New Equipment segment contracted by 140 basis points to 4.7%, while the Service segment's operating margin expanded by 50 basis points to 24.5% [8][10] Annual Highlights - For the full year 2024, Otis reported revenues of $14.26 billion, a 0.4% increase from $14.21 billion in 2023, with adjusted EPS rising to $3.83 from $3.54 [11] - Adjusted operating margin for the year expanded by 50 basis points to 16.5% [11] Financial Position - As of December 31, 2024, Otis had cash and cash equivalents of $2.3 billion, up from $1.27 billion at the end of 2023, while long-term debt increased to $6.97 billion [12] - Net cash flows from operating activities were $1.56 billion, down from $1.63 billion a year ago, with adjusted free cash flow totaling $1.57 billion, up from $1.53 billion [12] 2025 Outlook - Otis expects net sales for 2025 to be between $14.1 billion and $14.4 billion, with organic sales growth projected between 2% and 4% [13] - Adjusted EPS is anticipated to be between $4.00 and $4.10, indicating a year-over-year growth of 4-7% [14]