Group 1 - Otis Worldwide Corporation declared a quarterly dividend of $0.42 per share, payable on September 5, 2025, to shareholders of record by August 15, 2025 [1] - Otis is the world's leading elevator and escalator manufacturing, installation, and service company, moving 2.4 billion people daily and maintaining approximately 2.4 million customer units globally [2] - The company employs 72,000 people, including 44,000 field professionals, and operates in over 200 countries and territories [2] Group 2 - The company emphasizes its commitment to meeting diverse customer needs through its extensive service portfolio [2] - Otis maintains a strong market presence and is focused on innovation in manufacturing, installation, and maintenance of its products [2]

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents Otis Worldwide Corporation's unaudited condensed consolidated financial statements, including statements of operations, comprehensive income, balance sheets, changes in equity, and cash flows, accompanied by detailed explanatory notes [Condensed Consolidated Statements of Operations (Quarterly)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20(Quarterly)) This table presents Otis Worldwide Corporation's condensed consolidated statements of operations for the quarters ended June 30, 2025 and 2024, highlighting key financial performance metrics | Metric | Q2 2025 (millions) | Q2 2024 (millions) | Change (millions) | Change (%) | | :----- | :----------------- | :----------------- | :---------------- | :--------- | | Net Sales | $3,595 | $3,601 | $(6) | (0.17)% | | Product Sales | $1,276 | $1,421 | $(145) | (10.20)% | | Service Sales | $2,319 | $2,180 | $139 | 6.38% | | Operating Profit | $547 | $570 | $(23) | (4.04)% | | Net Income attributable to Otis | $393 | $415 | $(22) | (5.30)% | | Diluted EPS | $0.99 | $1.02 | $(0.03) | (2.94)% | [Condensed Consolidated Statements of Operations (Six Months)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20(Six%20Months)) This table presents Otis Worldwide Corporation's condensed consolidated statements of operations for the six months ended June 30, 2025 and 2024, detailing year-to-date financial performance | Metric | 6M 2025 (millions) | 6M 2024 (millions) | Change (millions) | Change (%) | | :----- | :----------------- | :----------------- | :---------------- | :--------- | | Net Sales | $6,945 | $7,038 | $(93) | (1.32)% | | Product Sales | $2,439 | $2,701 | $(262) | (9.70)% | | Service Sales | $4,506 | $4,337 | $169 | 3.90% | | Operating Profit | $958 | $1,114 | $(156) | (14.00)% | | Net Income attributable to Otis | $636 | $768 | $(132) | (17.19)% | | Diluted EPS | $1.60 | $1.89 | $(0.29) | (15.34)% | [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This table presents Otis Worldwide Corporation's condensed consolidated statements of comprehensive income for the quarters and six months ended June 30, 2025 and 2024 | Metric | Q2 2025 (millions) | Q2 2024 (millions) | 6M 2025 (millions) | 6M 2024 (millions) | | :----- | :----------------- | :----------------- | :----------------- | :----------------- | | Net income | $423 | $450 | $679 | $824 | | Foreign currency translation adjustments | $(170) | $0 | $(293) | $(25) | | Other comprehensive income (loss), net of tax | $(177) | $0 | $(299) | $(13) | | Comprehensive income attributable to Otis | $208 | $420 | $325 | $767 | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This table presents Otis Worldwide Corporation's condensed consolidated balance sheets as of June 30, 2025, and December 31, 2024, detailing assets, liabilities, and equity | Metric | June 30, 2025 (millions) | Dec 31, 2024 (millions) | Change (millions) | Change (%) | | :----- | :----------------------- | :---------------------- | :---------------- | :--------- | | Cash and cash equivalents | $688 | $2,300 | $(1,612) | (70.09)% | | Total Current Assets | $6,387 | $7,670 | $(1,283) | (16.73)% | | Total Assets | $10,495 | $11,316 | $(821) | (7.26)% | | Total Current Liabilities | $7,246 | $7,749 | $(503) | (6.49)% | | Total Liabilities | $15,699 | $16,044 | $(345) | (2.15)% | | Total Equity (Deficit) | $(5,270) | $(4,785) | $(485) | (10.14)% | [Condensed Consolidated Statements of Changes in Equity (Quarterly)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity%20(Quarterly)) This table presents Otis Worldwide Corporation's condensed consolidated statements of changes in equity for the quarters ended June 30, 2025 and 2024 | Metric | Q2 2025 (millions) | Q2 2024 (millions) | | :----- | :----------------- | :----------------- | | Balance as of March 31 | $(5,128) | $(5,024) | | Net income | $393 | $415 | | Other comprehensive income (loss), net of tax | $(185) | $5 | | Cash dividends declared | $(164) | $(157) | | Repurchase of Common Shares | $(302) | $(303) | | Balance as of June 30 | $(5,367) | $(5,046) | [Condensed Consolidated Statements of Changes in Equity (Six Months)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity%20(Six%20Months)) This table presents Otis Worldwide Corporation's condensed consolidated statements of changes in equity for the six months ended June 30, 2025 and 2024 | Metric | 6M 2025 (millions) | 6M 2024 (millions) | | :----- | :----------------- | :----------------- | | Balance as of Dec 31 | $(4,848) | $(4,924) | | Net income | $636 | $768 | | Other comprehensive income (loss), net of tax | $(311) | $(1) | | Cash dividends declared | $(319) | $(295) | | Repurchase of Common Shares | $(558) | $(605) | | Balance as of June 30 | $(5,367) | $(5,046) | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This table presents Otis Worldwide Corporation's condensed consolidated statements of cash flows for the six months ended June 30, 2025 and 2024, detailing operating, investing, and financing activities | Metric | 6M 2025 (millions) | 6M 2024 (millions) | Change (millions) | | :----- | :----------------- | :----------------- | :---------------- | | Net cash flows provided by operating activities | $405 | $479 | $(74) | | Net cash flows used in investing activities | $(320) | $(97) | $(223) | | Net cash flows used in financing activities | $(1,722) | $(679) | $(1,043) | | Net increase (decrease) in cash | $(1,618) | $(329) | $(1,289) | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanatory notes to the condensed consolidated financial statements, covering significant accounting policies and financial disclosures [Note 1: General](index=11&type=section&id=Note%201%3A%20General) This note discusses macroeconomic impacts, German tax litigation, and supplier finance programs, providing context for the financial statements - Management assesses macroeconomic developments (inflation, interest rates, tariffs) and geopolitical conflicts (Russia-Ukraine, Middle East) for potential material impacts, but none were material as of June 30, 2025. Future impacts from new tariffs could be **$25-$35 million** in 2025[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk)[151](index=151&type=chunk) - The Company received a favorable ruling in German tax litigation in August 2024, expecting **€307 million** (~**$355 million**) in refunds by end of 2025. An indemnity payable to RTX (former parent) related to this outcome is estimated at **$233 million** as of June 30, 2025, up from **$194 million** at Dec 31, 2024[35](index=35&type=chunk)[36](index=36&type=chunk)[101](index=101&type=chunk)[105](index=105&type=chunk) | Metric | June 30, 2025 (millions) | Dec 31, 2024 (millions) | | :----- | :----------------------- | :---------------------- | | Income tax receivable | ~$175 | ~$175 | | Interest receivable | ~$145 | ~$140 | | Indemnity payable to RTX | $233 | $194 | - Outstanding obligations under supplier finance programs were **$598 million** as of June 30, 2025, down from **$714 million** at December 31, 2024[38](index=38&type=chunk) [Note 2: Earnings per Share](index=12&type=section&id=Note%202%3A%20Earnings%20per%20Share) This note details basic and diluted earnings per share calculations, including the impact of anti-dilutive stock awards | Metric | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :----- | :------ | :------ | :------ | :------ | | Basic EPS | $1.00 | $1.03 | $1.61 | $1.90 | | Diluted EPS | $0.99 | $1.02 | $1.60 | $1.89 | | Basic shares (millions) | 393.7 | 402.9 | 395.1 | 404.0 | | Diluted shares (millions) | 395.8 | 405.5 | 397.3 | 406.8 | - Anti-dilutive stock awards excluded from diluted EPS computation decreased to **0.5 million** for Q2 and 6M 2025, from **1.1 million** for the same periods in 2024[40](index=40&type=chunk) [Note 3: Revenue Recognition](index=13&type=section&id=Note%203%3A%20Revenue%20Recognition) This note provides information on contract assets, liabilities, and remaining performance obligations related to revenue recognition | Metric | June 30, 2025 (millions) | Dec 31, 2024 (millions) | Change (millions) | | :----- | :----------------------- | :---------------------- | :---------------- | | Contract assets, current | $769 | $706 | $63 | | Total contract liabilities | $2,848 | $2,636 | $212 | | Net contract liabilities | $2,079 | $1,930 | $149 | - Total Remaining Performance Obligations (RPO) were approximately **$19.3 billion** as of June 30, 2025, with about **90%** expected to be recognized as sales over the following **24 months**[46](index=46&type=chunk) [Note 4: Accounts Receivable, Net](index=13&type=section&id=Note%204%3A%20Accounts%20Receivable%2C%20Net) This note details accounts receivable, net of the allowance for expected credit losses, as of June 30, 2025, and December 31, 2024 | Metric | June 30, 2025 (millions) | Dec 31, 2024 (millions) | Change (millions) | | :----- | :----------------------- | :---------------------- | :---------------- | | Accounts receivable | $3,817 | $3,553 | $264 | | Allowance for expected credit losses | $(121) | $(125) | $4 | | Accounts receivable, net | $3,696 | $3,428 | $268 | [Note 5: Inventories](index=14&type=section&id=Note%205%3A%20Inventories) This note provides a breakdown of inventories, including raw materials, work-in-process, and finished goods | Metric | June 30, 2025 (millions) | Dec 31, 2024 (millions) | Change (millions) | | :----- | :----------------------- | :---------------------- | :---------------- | | Raw materials and work-in-process | $129 | $134 | $(5) | | Finished goods | $473 | $423 | $50 | | Total Inventories | $602 | $557 | $45 | [Note 6: Business Acquisitions, Dispositions, Goodwill and Intangible Assets](index=14&type=section&id=Note%206%3A%20Business%20Acquisitions%2C%20Dispositions%2C%20Goodwill%20and%20Intangible%20Assets) This note details business acquisitions, dispositions, changes in goodwill, and intangible assets, including a loss on sale of a non-U.S. subsidiary - Acquisitions of businesses and intangible assets, net of cash, totaled **$82 million** in 6M 2025, up from **$40 million** in 6M 2024, primarily in the Service segment[49](index=49&type=chunk) | Metric | Dec 31, 2024 (millions) | Business Combinations (millions) | Foreign Currency Translation and Other (millions) | June 30, 2025 (millions) | | :----- | :---------------------- | :------------------------------- | :---------------------------------------------- | :----------------------- | | Goodwill - New Equipment | $277 | $0 | $22 | $299 | | Goodwill - Service | $1,271 | $51 | $86 | $1,408 | | Total Goodwill | $1,548 | $51 | $108 | $1,707 | - The Company recorded a total pre-tax loss on sale of **$28 million** from selling a non-U.S. subsidiary during the quarter ended June 30, 2025[53](index=53&type=chunk) [Note 7: Borrowings and Lines of Credit](index=15&type=section&id=Note%207%3A%20Borrowings%20and%20Lines%20of%20Credit) This note provides details on short-term and long-term borrowings, including commercial paper, debt repayments, and weighted average interest rates | Metric | June 30, 2025 (millions) | Dec 31, 2024 (millions) | Change (millions) | | :----- | :----------------------- | :---------------------- | :---------------- | | Commercial paper | $472 | $0 | $472 | | Total short-term borrowings | $528 | $51 | $477 | | Total principal long-term debt | $7,265 | $8,322 | $(1,057) | | Long-term debt, net of current portion | $7,074 | $6,973 | $101 | - On April 7, 2025, the Company repaid **$1.3 billion** of **2.056%** notes due in 2025, upon maturity, using cash on hand and commercial paper borrowings[57](index=57&type=chunk) | Metric | June 30, 2025 | Dec 31, 2024 | | :----- | :------------ | :----------- | | Weighted average interest rate on short-term commercial paper | 3.2% | —% | | Weighted average interest rate on total long-term debt | 2.8% | 2.7% | [Note 8: Employee Benefit Plans](index=16&type=section&id=Note%208%3A%20Employee%20Benefit%20Plans) This note outlines contributions to defined benefit, defined contribution, and multi-employer plans, along with stock-based compensation expense | Metric | 6M 2025 (millions) | 6M 2024 (millions) | Change (millions) | | :----- | :----------------- | :----------------- | :---------------- | | Defined benefit plans contributions | $27 | $24 | $3 | | Defined contribution plans contributions | $38 | $36 | $2 | | Multi-employer pension and postretirement plans contributions | $81 | $82 | $(1) | | Total net periodic benefit cost (defined benefit plans) | $17 | $15 | $2 | | Metric | 6M 2025 (millions) | 6M 2024 (millions) | Change (millions) | | :----- | :----------------- | :----------------- | :---------------- | | Stock-based compensation expense (Share Based) | $44 | $36 | $8 | | Stock-based compensation expense, net of tax | $40 | $32 | $8 | - As of June 30, 2025, approximately **$133 million** of total unrecognized compensation cost related to non-vested equity awards is expected to be recognized ratably over a weighted-average period of **1.9 years**[63](index=63&type=chunk) [Note 9: Stock](index=17&type=section&id=Note%209%3A%20Stock) This note details the share repurchase program, including shares repurchased and the remaining authorization - On January 16, 2025, the Board of Directors approved a new share repurchase program for up to **$2.0 billion** of Common Stock, of which **$1.5 billion** was remaining as of June 30, 2025[65](index=65&type=chunk) | Metric | 6M 2025 | 6M 2024 | | :----- | :------ | :------ | | Shares repurchased (millions) | 5.8 | 6.5 | | Value of shares repurchased (millions) | $553 | $600 | [Note 10: Accumulated Other Comprehensive Income (Loss)](index=18&type=section&id=Note%2010%3A%20Accumulated%20Other%20Comprehensive%20Income%20(Loss)) This note presents changes in accumulated other comprehensive income (loss), primarily driven by foreign currency translation adjustments | Metric | Dec 31, 2024 (millions) | June 30, 2025 (millions) | Change (millions) | | :----- | :---------------------- | :----------------------- | :---------------- | | Balance as of December 31 | $(745) | $(745) | N/A | | Other comprehensive income (loss) before reclassifications, net (6M) | $(314) | $(314) | N/A | | Balance as of June 30 | $(1,056) | $(1,056) | $(311) | - Foreign currency translation adjustments were the primary driver of the negative change in Accumulated other comprehensive income (loss), with a **$(305) million** impact for the six months ended June 30, 2025[68](index=68&type=chunk) [Note 11: Income Taxes](index=19&type=section&id=Note%2011%3A%20Income%20Taxes) This note discusses the effective tax rate and factors influencing its change, including the impact of the OBBBA | Metric | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :----- | :------ | :------ | :------ | :------ | | Effective tax rate | 18.8% | 17.3% | 23.4% | 21.1% | - The increase in the effective tax rate is primarily due to the absence of the reduction in a deferred tax liability related to the mitigation of future repatriation costs recorded in 2024, and the tax effect of the increase in our estimated nondeductible TMA indemnity obligation payable to RTX recorded in Q1 2025[69](index=69&type=chunk)[181](index=181&type=chunk) - The One Big Beautiful Bill Act (OBBBA), enacted on July 4, 2025, is being evaluated but is not expected to have a material impact on the Condensed Consolidated Financial Statements[70](index=70&type=chunk) [Note 12: Restructuring and Transformation Costs](index=19&type=section&id=Note%2012%3A%20Restructuring%20and%20Transformation%20Costs) This note details UpLift and other restructuring costs, transformation expenses, and accruals related to operational reorganizations | Metric | Q2 2025 (millions) | Q2 2024 (millions) | 6M 2025 (millions) | 6M 2024 (millions) | | :----- | :----------------- | :----------------- | :----------------- | :----------------- | | UpLift restructuring costs | $25 | $6 | $45 | $7 | | Other restructuring costs | $12 | $5 | $35 | $24 | | Total restructuring costs | $37 | $11 | $80 | $31 | - UpLift transformation costs, primarily for consultants and third-party service providers, increased to **$18 million** for Q2 2025 and **$41 million** for 6M 2025, from **$15 million** and **$27 million** respectively in 2024[78](index=78&type=chunk) - The reorganization of operations in China, announced in January 2025, is expected to result in approximately **$40 million** in restructuring actions, primarily severance-related, to be mostly completed and cash paid by the end of 2025[80](index=80&type=chunk) | Metric | Dec 31, 2024 (millions) | Net restructuring costs (6M 2025) (millions) | Utilization, foreign exchange and other costs (6M 2025) (millions) | June 30, 2025 (millions) | | :----- | :---------------------- | :------------------------------------------- | :--------------------------------------------------------------- | :----------------------- | | Total Restructuring accruals | $37 | $80 | $(52) | $65 | [Note 13: Financial Instruments](index=20&type=section&id=Note%2013%3A%20Financial%20Instruments) This note provides information on derivative instruments, including those designated as hedging and de-designated net investment hedges | Metric | June 30, 2025 (millions) | Dec 31, 2024 (millions) | | :----- | :----------------------- | :---------------------- | | Total asset derivatives (cash flow hedging) | $3 | $9 | | Total liability derivatives (cash flow hedging) | $(9) | $(5) | | Total asset derivatives (not designated as hedging) | $17 | $59 | | Total liability derivatives (not designated as hedging) | $(28) | $(45) | - During the six months ended June 30, 2025, the Company de-designated derivative instruments that qualified as net investment hedges in certain European and Asian businesses with notional amounts of **€150 million** and **¥2.1 billion** respectively[90](index=90&type=chunk) | Metric | Q2 2025 (millions) | Q2 2024 (millions) | 6M 2025 (millions) | 6M 2024 (millions) | | :----- | :----------------- | :----------------- | :----------------- | :----------------- | | Gains (losses) recognized in OCI related to net investment hedges | $(15) | $6 | $(16) | $13 | [Note 14: Fair Value Measurements](index=22&type=section&id=Note%2014%3A%20Fair%20Value%20Measurements) This note presents fair value measurements for marketable securities, derivative assets and liabilities, and long-term debt | Metric | June 30, 2025 (millions) | Dec 31, 2024 (millions) | | :----- | :----------------------- | :---------------------- | | Marketable securities (Level 1) | $48 | $44 | | Derivative assets (Level 2) | $20 | $68 | | Derivative liabilities (Level 2) | $(37) | $(50) | | Metric | June 30, 2025 (millions) | Dec 31, 2024 (millions) | | :----- | :----------------------- | :---------------------- | | Fair Value of Long-term debt, including current portion (excluding leases and other) | $(6,676) | $(7,600) | [Note 15: Guarantees](index=24&type=section&id=Note%2015%3A%20Guarantees) This note details service and product guarantees and stand-by letters of credit, including potential payment obligations | Metric | June 30, 2025 (millions) | Dec 31, 2024 (millions) | | :----- | :----------------------- | :---------------------- | | Service and product guarantees | $12 | $16 | - Otis has stand-by letters of credit with a maximum potential payment totaling **$130 million** as of June 30, 2025, and has determined there are no estimated costs probable under these guarantees[98](index=98&type=chunk) [Note 16: Contingent Liabilities](index=24&type=section&id=Note%2016%3A%20Contingent%20Liabilities) This note discusses contingent liabilities, including German tax litigation refunds, indemnity payable to RTX, and asbestos claims - Otis expects to receive total refunds of approximately **€307 million** (approximately **$355 million** as of June 30, 2025) from a favorable German tax litigation ruling, with the refund process anticipated to continue through the end of 2025[101](index=101&type=chunk) | Metric | June 30, 2025 (millions) | March 31, 2025 (millions) | Dec 31, 2024 (millions) | | :----- | :----------------------- | :------------------------ | :---------------------- | | Indemnity Payable (in Accrued liabilities) | $233 | $246 | $194 | - The estimated range of total liabilities to resolve all pending and unasserted potential future asbestos claims through 2059 is approximately **$11 million** to **$21 million**, with **$10 million** accrued as of June 30, 2025. An insurance recovery receivable of approximately **$3 million** is also recognized[108](index=108&type=chunk) [Note 17: Segment Financial Data](index=26&type=section&id=Note%2017%3A%20Segment%20Financial%20Data) This note provides detailed financial data for the New Equipment and Service segments, along with corporate and unallocated expenses | Segment | Q2 2025 Net Sales (millions) | Q2 2024 Net Sales (millions) | Q2 2025 Operating Profit (millions) | Q2 2024 Operating Profit (millions) | | :------ | :--------------------------- | :--------------------------- | :--------------------------------- | :--------------------------------- | | New Equipment | $1,276 | $1,421 | $68 | $110 | | Service | $2,319 | $2,180 | $578 | $538 | | Total segment | $3,595 | $3,601 | $646 | $648 | | Segment | 6M 2025 Net Sales (millions) | 6M 2024 Net Sales (millions) | 6M 2025 Operating Profit (millions) | 6M 2024 Operating Profit (millions) | | :------ | :--------------------------- | :--------------------------- | :--------------------------------- | :--------------------------------- | | New Equipment | $2,439 | $2,701 | $134 | $181 | | Service | $4,506 | $4,337 | $1,115 | $1,061 | | Total segment | $6,945 | $7,038 | $1,249 | $1,242 | - Corporate and Unallocated expenses increased significantly for 6M 2025 to **$291 million** from **$128 million** in 6M 2024, driven by UpLift restructuring (**$45M** vs **$7M**), other restructuring (**$35M** vs **$24M**), UpLift transformation costs (**$41M** vs **$27M**), and separation-related adjustments (**$61M** vs **$(16)M**)[119](index=119&type=chunk) [Note 18: Accounting Pronouncements](index=29&type=section&id=Note%2018%3A%20Accounting%20Pronouncements) This note outlines the adoption and evaluation of new accounting pronouncements and their expected impact on financial statements - Adoption of ASU 2020-04 (Reference Rate Reform) and ASU 2022-04 (Supplier Finance Programs) did not have a material impact on the Condensed Consolidated Financial Statements[124](index=124&type=chunk)[125](index=125&type=chunk) - ASU 2023-07 (Segment Reporting) was adopted effective December 31, 2024, resulting in additional disclosure[127](index=127&type=chunk) - ASU 2023-09 (Income Tax Disclosures) and ASU 2024-03 (Expense Disaggregation Disclosures) will result in additional disclosures but will not impact the condensed consolidated financial position, results of operations, or cash flows[128](index=128&type=chunk)[129](index=129&type=chunk) - ASU 2025-03 (Accounting Acquirer in VIEs) is currently being evaluated but is not expected to have a material impact[130](index=130&type=chunk) [Report of Independent Registered Public Accounting Firm](index=31&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) This report confirms PricewaterhouseCoopers LLP's limited review of the interim financial information and their unqualified opinion on the December 31, 2024 balance sheet - PricewaterhouseCoopers LLP performed a limited review of the interim financial information for the periods ended June 30, 2025 and 2024, and is not aware of any material modifications that should be made for it to be in conformity with U.S. GAAP[134](index=134&type=chunk) - The firm previously audited the consolidated balance sheet as of December 31, 2024, expressing an unqualified opinion, and confirmed the accompanying condensed consolidated balance sheet as of December 31, 2024, is fairly stated[135](index=135&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and operational results for the quarter and six months ended June 30, 2025, covering business overview, critical accounting estimates, segment performance, and liquidity [BUSINESS OVERVIEW](index=32&type=section&id=BUSINESS%20OVERVIEW) This section provides an overview of Otis's business segments, strategic initiatives, and the impact of global macroeconomic conditions and ongoing conflicts [Business Summary](index=32&type=section&id=Business%20Summary) This section summarizes Otis's two operating segments, New Equipment and Service, and its global strategy to grow the maintenance portfolio - Otis operates two segments: New Equipment (design, manufacture, sell, install elevators, escalators, moving walkways) and Service (maintenance, repair, modernization for own and other manufacturers' products)[139](index=139&type=chunk)[140](index=140&type=chunk) - The Company functions under a centralized operating model, pursuing a global strategy to grow its maintenance portfolio by converting new installations into service contracts[141](index=141&type=chunk) [UpLift](index=32&type=section&id=UpLift) This section details the UpLift program's objectives, expected savings, and incurred restructuring and transformation costs - The UpLift program, announced in July 2023, aims to transform the operating model, standardize processes, and improve supply chain procurement, expecting approximately **$200 million** in annual run-rate savings by H2 2025, with total costs of approximately **$300 million**[144](index=144&type=chunk) | Metric | Q2 2025 (millions) | Q2 2024 (millions) | 6M 2025 (millions) | 6M 2024 (millions) | | :----- | :----------------- | :----------------- | :----------------- | :----------------- | | UpLift restructuring costs | $25 | $6 | $45 | $7 | | UpLift transformation costs | $18 | $15 | $41 | $27 | | Total UpLift costs | $43 | $21 | $86 | $34 | - Total UpLift costs incurred to date are **$223 million**, including **$101 million** of UpLift restructuring costs and **$122 million** of UpLift transformation costs[145](index=145&type=chunk) [German Tax Litigation](index=33&type=section&id=German%20Tax%20Litigation) This section discusses the favorable German tax litigation ruling, related income tax benefits, and the indemnity payable to RTX - A favorable ruling in German tax litigation in August 2024 led to income tax benefits and related interest income recorded in 2024[148](index=148&type=chunk) - Indemnification expense of **$6 million** for Q2 2025 and **$58 million** for 6M 2025 was recorded due to adjustments to the indemnity payable to RTX, with the estimated payable now at **$233 million**[149](index=149&type=chunk) [Impact of Global Macroeconomic Conditions on Our Company](index=33&type=section&id=Impact%20of%20Global%20Macroeconomic%20Conditions%20on%20Our%20Company) This section addresses the ongoing impact of global macroeconomic conditions, including inflation, interest rates, and potential tariffs, on the Company's operations - Global macroeconomic conditions, including inflationary pressures, high interest rates, tighter credit, and changes in global trade policies (tariffs), continue to impact operations[151](index=151&type=chunk)[153](index=153&type=chunk) - New tariffs currently in effect could have an estimated potential impact of approximately **$25 million** to **$35 million** during 2025[151](index=151&type=chunk) [Risks Associated with Ongoing Conflicts](index=34&type=section&id=Risks%20Associated%20with%20Ongoing%20Conflicts) This section discusses geopolitical and macroeconomic uncertainties arising from ongoing conflicts, including potential impacts on commodity markets and supply chains - Ongoing conflicts in Russia-Ukraine and the Middle East create geopolitical and macroeconomic uncertainty, including volatile commodity markets, foreign exchange fluctuations, and supply chain disruptions[154](index=154&type=chunk)[155](index=155&type=chunk) - Otis has no operations in Russia and Ukraine represents less than **1%** of revenue and operating profit for 6M 2025. No material impact is currently expected from Middle East conflicts[155](index=155&type=chunk) - These conflicts could heighten various risks, including adverse macroeconomic conditions, cyber-incidents, changes in international trade policies, and supply chain disruption[156](index=156&type=chunk) [CRITICAL ACCOUNTING ESTIMATES](index=34&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) This section confirms no material changes to the Company's significant accounting policies, except for newly adopted pronouncements - There have been no material changes in the Company's significant accounting policies described in the 2024 Form 10-K, except for the adoption of new accounting pronouncements as disclosed in Note 18[158](index=158&type=chunk) [RESULTS OF OPERATIONS](index=34&type=section&id=RESULTS%20OF%20OPERATIONS) This section details the Company's financial performance, analyzing net sales, cost of sales, gross margin, operating expenses, and net income drivers [Net Sales](index=34&type=section&id=Net%20Sales) This section analyzes net sales performance, including organic volume changes, foreign currency translation, and the impact of acquisitions and divestitures | Metric | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :----- | :------ | :------ | :------ | :------ | | Net sales (millions) | $3,595 | $3,601 | $6,945 | $7,038 | | Percentage change year-over-year | 0% | N/A | (1)% | N/A | | Component of Net sales change | Q2 2025 | 6M 2025 | | :---------------------------- | :------ | :------ | | Organic volume | (2)% | (1)% | | Foreign currency translation | 1% | (1)% | | Acquisitions and divestitures, net and other | 1% | 1% | | Total % change | 0% | (1)% | - The organic volume decrease was driven by **(11)%** in New Equipment for Q2 and **(9)%** for 6M, partially offset by a **4%** increase in Service for both periods[161](index=161&type=chunk) [Cost of Products and Services Sold](index=35&type=section&id=Cost%20of%20Products%20and%20Services%20Sold) This section examines the total cost of products and services sold, highlighting the impact of organic volume changes, productivity, and inflationary pressures | Metric | Q2 2025 (millions) | Q2 2024 (millions) | 6M 2025 (millions) | 6M 2024 (millions) | | :----- | :----------------- | :----------------- | :----------------- | :----------------- | | Total cost of products and services sold | $2,506 | $2,522 | $4,855 | $4,931 | | Percentage change year-over-year | (1)% | N/A | (2)% | N/A | - The organic volume decrease of **(2)%** for Q2 and **(1)%** for 6M in total cost of products and services sold was primarily driven by organic sales changes, with productivity partially offset by inflationary pressures[163](index=163&type=chunk) [Gross Margin](index=35&type=section&id=Gross%20Margin) This section analyzes gross margin and gross margin percentage, attributing changes to sales mix, productivity, and inflationary pressures | Metric | Q2 2025 (millions) | Q2 2024 (millions) | 6M 2025 (millions) | 6M 2024 (millions) | | :----- | :----------------- | :----------------- | :----------------- | :----------------- | | Gross margin | $1,089 | $1,079 | $2,090 | $2,107 | | Gross margin percentage | 30.3% | 30.0% | 30.1% | 29.9% | - Gross margin percentage increased due to the increase in Service sales and decrease in New Equipment sales, and benefits from productivity, partially offset by inflationary pressures[164](index=164&type=chunk) [Research and Development](index=35&type=section&id=Research%20and%20Development) This section presents research and development expenses and their percentage of net sales for the reported periods | Metric | Q2 2025 (millions) | Q2 2024 (millions) | 6M 2025 (millions) | 6M 2024 (millions) | | :----- | :----------------- | :----------------- | :----------------- | :----------------- | | Research and development | $38 | $39 | $75 | $75 | | Percentage of Net sales | 1.1% | 1.1% | 1.1% | 1.1% | [Selling, General and Administrative](index=36&type=section&id=Selling%2C%20General%20and%20Administrative) This section analyzes selling, general, and administrative expenses, noting increases due to restructuring and wage costs, offset by productivity savings | Metric | Q2 2025 (millions) | Q2 2024 (millions) | 6M 2025 (millions) | 6M 2024 (millions) | | :----- | :----------------- | :----------------- | :----------------- | :----------------- | | Selling, general and administrative | $499 | $449 | $963 | $911 | | Percentage of Net sales | 13.9% | 12.5% | 13.9% | 12.9% | - Selling, general and administrative expenses increased due to higher restructuring costs, annual wage increases, and other employment costs, partially offset by savings from UpLift and lower credit loss reserves[167](index=167&type=chunk) [Restructuring Costs](index=36&type=section&id=Restructuring%20Costs) This section details UpLift and other restructuring costs, transformation expenses, and cash outflows related to reorganization actions | Metric | 6M 2025 (millions) | 6M 2024 (millions) | Change (millions) | | :----- | :----------------- | :----------------- | :---------------- | | UpLift restructuring | $45 | $7 | $38 | | Other restructuring | $35 | $24 | $11 | | Total restructuring costs | $80 | $31 | $49 | - UpLift transformation costs were **$41 million** for the six months ended June 30, 2025, compared to **$27 million** in the same period of 2024, primarily for consultants and third-party service providers[170](index=170&type=chunk) - Cash outflows related to restructuring actions were **$51 million** during the six months ended June 30, 2025, with **$126 million** in expected cash payments remaining to complete announced actions[172](index=172&type=chunk) - The reorganization of operations in China, announced in January 2025, is expected to result in approximately **$40 million** in restructuring actions, primarily severance-related, to be mostly completed and cash paid by the end of 2025[174](index=174&type=chunk) [Other Income (Expense), Net](index=37&type=section&id=Other%20Income%20(Expense)%2C%20Net) This section explains changes in other income (expense), net, driven by separation-related adjustments, transformation costs, and litigation settlements | Metric | Q2 2025 (millions) | Q2 2024 (millions) | 6M 2025 (millions) | 6M 2024 (millions) | | :----- | :----------------- | :----------------- | :----------------- | :----------------- | | Other income (expense), net | $(5) | $(21) | $(94) | $(7) | - The change in Other income (expense), net, for the six months ended June 30, 2025, was primarily driven by separation-related adjustments (**$61M**), UpLift transformation costs (**$41M**), litigation-related settlement costs (**$21M**), and impairment loss related to net assets held for sale (**$10M**), partially offset by gains on the sale of fixed assets (**$14M**)[177](index=177&type=chunk) [Interest Expense (Income), Net](index=37&type=section&id=Interest%20Expense%20(Income)%2C%20Net) This section analyzes interest expense (income), net, highlighting the impact of new debt, debt repayments, and interest rate changes | Metric | Q2 2025 (millions) | Q2 2024 (millions) | 6M 2025 (millions) | 6M 2024 (millions) | | :----- | :----------------- | :----------------- | :----------------- | :----------------- | | Interest expense (income), net | $26 | $27 | $71 | $71 | - Interest expense (income), net, was relatively flat due to higher interest expense from new debt (November 2024) being offset by interest reserve adjustments related to non-recurring tax items, lower interest expense from the repayment of **$1.3 billion** debt in April 2025, and higher interest income[179](index=179&type=chunk) - The average interest rate on long-term debt increased to **2.8%** for the quarter and six months ended June 30, 2025, from **2.5%** for the same periods in 2024[180](index=180&type=chunk) [Income Taxes](index=38&type=section&id=Income%20Taxes) This section discusses the effective tax rate and the factors contributing to its increase, including deferred tax liability and indemnity obligations | Metric | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :----- | :------ | :------ | :------ | :------ | | Effective tax rate | 18.8% | 17.3% | 23.4% | 21.1% | - The increase in the effective tax rate is primarily due to the absence of the reduction in a deferred tax liability related to the mitigation of future repatriation costs recorded in 2024, and the tax effect of the increase in our estimated nondeductible TMA indemnity obligation payable to RTX recorded in Q1 2025[181](index=181&type=chunk) [Noncontrolling Interest in Subsidiaries' Earnings and Net Income Attributable to Otis Worldwide Corporation](index=38&type=section&id=Noncontrolling%20Interest%20in%20Subsidiaries'%20Earnings%20and%20Net%20Income%20Attributable%20to%20Otis%20Worldwide%20Corporation) This section analyzes noncontrolling interest in subsidiaries' earnings and net income attributable to Otis, explaining the drivers of their changes | Metric | Q2 2025 (millions) | Q2 2024 (millions) | 6M 2025 (millions) | 6M 2024 (millions) | | :----- | :----------------- | :----------------- | :----------------- | :----------------- | | Noncontrolling interest in subsidiaries' earnings | $30 | $35 | $43 | $56 | | Net income attributable to Otis Worldwide Corporation | $393 | $415 | $636 | $768 | - Noncontrolling interest in subsidiaries' earnings decreased primarily due to increased ownership of a subsidiary in Japan during Q2 2024 and lower net income from non-wholly owned subsidiaries[183](index=183&type=chunk) - Net income attributable to Otis Worldwide Corporation decreased due to lower operating profit (including foreign exchange impact) and a higher effective tax rate, partially offset by lower noncontrolling interest in subsidiaries' earnings[184](index=184&type=chunk) [Segment Review](index=39&type=section&id=Segment%20Review) This section provides a detailed review of the financial performance for the New Equipment and Service segments, along with corporate and unallocated expenses [New Equipment](index=40&type=section&id=New%20Equipment) This section reviews the New Equipment segment's net sales, operating profit, and margin, highlighting regional performance and cost impacts | Metric | Q2 2025 (millions) | Q2 2024 (millions) | 6M 2025 (millions) | 6M 2024 (millions) | | :----- | :----------------- | :----------------- | :----------------- | :----------------- | | Net sales | $1,276 | $1,421 | $2,439 | $2,701 | | Operating profit | $68 | $110 | $134 | $181 | | Operating profit margin | 5.3% | 7.7% | 5.5% | 6.7% | - Organic sales decreased by **(11)%** for Q2 and **(9)%** for 6M, primarily driven by a greater than **(20)%** decline in China, high single-digit decline in Americas, and low single-digit decline in Asia Pacific, partially offset by high single-digit growth in EMEA[188](index=188&type=chunk)[190](index=190&type=chunk) - Operating profit decreased due to lower volume, unfavorable price, and regional and product mix, partially offset by productivity, including benefits of UpLift and other restructuring actions[189](index=189&type=chunk)[191](index=191&type=chunk) [Service](index=41&type=section&id=Service) This section reviews the Service segment's net sales, operating profit, and margin, driven by increases in maintenance, repair, and modernization | Metric | Q2 2025 (millions) | Q2 2024 (millions) | 6M 2025 (millions) | 6M 2024 (millions) | | :----- | :----------------- | :----------------- | :----------------- | :----------------- | | Net sales | $2,319 | $2,180 | $4,506 | $4,337 | | Operating profit | $578 | $538 | $1,115 | $1,061 | | Operating profit margin | 24.9% | 24.7% | 24.7% | 24.5% | - Organic sales increased by **4%** for Q2 and **4%** for 6M, driven by increases in maintenance and repair (**4%** Q2, **3%** 6M) and modernization (**5%** Q2, **7%** 6M)[194](index=194&type=chunk)[197](index=197&type=chunk) - Operating profit increased due to higher volume, improved pricing on maintenance contracts, and productivity (including UpLift benefits), partially offset by inflationary pressures and mix[196](index=196&type=chunk)[199](index=199&type=chunk) [Corporate and Unallocated](index=43&type=section&id=Corporate%20and%20Unallocated) This section details corporate and unallocated expenses, including restructuring, transformation, and separation-related adjustments | Metric | Q2 2025 (millions) | Q2 2024 (millions) | 6M 2025 (millions) | 6M 2024 (millions) | | :----- | :----------------- | :----------------- | :----------------- | :----------------- | | General corporate expenses and other | $34 | $35 | $77 | $68 | | UpLift restructuring | $25 | $6 | $45 | $7 | | Other restructuring | $12 | $5 | $35 | $24 | | UpLift transformation costs | $18 | $15 | $41 | $27 | | Separation-related adjustments | $9 | $(1) | $61 | $(16) | | Litigation-related settlement costs | $0 | $18 | $21 | $18 | | Held for sale impairment | $0 | $0 | $10 | $0 | | Total Corporate and Unallocated | $99 | $78 | $291 | $128 | - The significant increase in Total Corporate and Unallocated for 6M 2025 was primarily due to higher UpLift restructuring, other restructuring, UpLift transformation costs, and separation-related adjustments[200](index=200&type=chunk)[202](index=202&type=chunk) [LIQUIDITY AND FINANCIAL CONDITION](index=43&type=section&id=LIQUIDITY%20AND%20FINANCIAL%20CONDITION) This section discusses the Company's cash flows, borrowings, lines of credit, and share repurchase program, outlining its overall financial liquidity and condition [Borrowings and Lines of Credit](index=44&type=section&id=Borrowings%20and%20Lines%20of%20Credit) This section outlines the Company's revolving credit facility, commercial paper program, and recent long-term debt repayments - As of June 30, 2025, Otis had a **$1.5 billion** unsecured, unsubordinated five-year revolving credit facility with no outstanding borrowings, which serves as a backstop for commercial paper[208](index=208&type=chunk) - There were **$472 million** borrowings outstanding under the Company's **$1.5 billion** commercial paper program as of June 30, 2025[209](index=209&type=chunk) - On April 7, 2025, the Company repaid its **$1.3 billion** principal amount of **2.056%** notes due in 2025, upon maturity, using cash on hand and commercial paper borrowings[209](index=209&type=chunk) [Share Repurchase Program](index=44&type=section&id=Share%20Repurchase%20Program) This section details the Board-approved share repurchase program, including the total authorized amount and remaining capacity - On January 16, 2025, the Board of Directors approved a new share repurchase program for up to **$2.0 billion** of Common Stock, with approximately **$1.5 billion** remaining as of June 30, 2025[210](index=210&type=chunk) [Discussion of Cash Flows](index=44&type=section&id=Discussion%20of%20Cash%20Flows) This section analyzes net cash flows from operating, investing, and financing activities, highlighting key drivers of changes | Metric | 6M 2025 (millions) | 6M 2024 (millions) | Change (millions) | | :----- | :----------------- | :----------------- | :---------------- | | Net cash flows provided by operating activities | $405 | $479 | $(74) | | Net cash flows used in investing activities | $(320) | $(97) | $(223) | | Net cash flows used in financing activities | $(1,722) | $(679) | $(1,043) | - The decrease in net cash provided by operating activities was primarily driven by lower net income and changes to working capital balances, including a larger decrease in Accounts Payables and higher UpLift-related payments (**$52 million** vs. **$35 million**)[215](index=215&type=chunk)[216](index=216&type=chunk) - Net cash used in investing activities increased primarily due to **$200 million** of net cash payments from derivative settlements, **$82 million** of acquisitions of businesses and intangible assets, and **$70 million** of capital expenditures[219](index=219&type=chunk) - Net cash used in financing activities increased primarily due to repayments of long-term debt of **$1.3 billion**, repurchases of Common Stock of **$561 million**, and dividends paid on Common Stock of **$319 million**[223](index=223&type=chunk) [Guaranteed Securities: Summarized Financial Information](index=47&type=section&id=Guaranteed%20Securities%3A%20Summarized%20Financial%20Information) This section provides summarized financial information for Highland Holdings S.à r.l., a subsidiary whose Euro Notes are fully guaranteed by Otis Worldwide Corporation - Highland Holdings S.à r.l. (Luxembourg), a wholly-owned indirect consolidated subsidiary of OWC, issued Euro Notes that are fully and unconditionally guaranteed by Otis Worldwide Corporation (OWC)[226](index=226&type=chunk)[227](index=227&type=chunk) - Highland is subject to Luxembourg insolvency and bankruptcy laws, which may be less favorable to creditors than U.S. bankruptcy law[227](index=227&type=chunk) | Metric | OWC 6M 2025 (millions) | Highland 6M 2025 (millions) | | :----- | :--------------------- | :-------------------------- | | Revenue | $0 | $0 | | Income (loss) from operations excluding income from consolidated subsidiaries | $(72) | $0 | | Net income (loss) excluding income from consolidated subsidiaries | $(135) | $(122) | | OWC Current assets (excluding intercompany receivables) | $99 | $0 | | Highland Noncurrent assets (investments in consolidated subsidiaries) | N/A | $15,711 | | OWC Current liabilities (intercompany payables) | $6,652 | $0 | | Highland Noncurrent liabilities (intercompany payables) | N/A | $4,018 | [Off-Balance Sheet Arrangements and Contractual Obligations](index=48&type=section&id=Off-Balance%20Sheet%20Arrangements%20and%20Contractual%20Obligations) This section confirms no material changes to the Company's off-balance sheet arrangements or contractual obligations, except as disclosed in Note 7 - There have been no material changes to the Company's off-balance sheet arrangements and contractual obligations as of June 30, 2025, outside the ordinary course of business, except for those disclosed in Note 7, 'Borrowings and Lines of Credit'[232](index=232&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there have been no material changes to the Company's market risk during the quarter and six months ended June 30, 2025 - There have been no material changes to the Company's market risk during the quarter and six months ended June 30, 2025[233](index=233&type=chunk) [Item 4. Controls and Procedures](index=49&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the Company's disclosure controls and procedures were effective as of June 30, 2025, ensuring timely and accurate financial reporting, with no material changes in internal control during the quarter - Management concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance that information required to be disclosed is recorded, processed, summarized, and reported timely[234](index=234&type=chunk) - There have been no material changes in the Company's internal control over financial reporting during the quarter ended June 30, 2025[235](index=235&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=52&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 16: Contingent Liabilities for a discussion of material legal proceedings and states that no other material developments in legal proceedings have occurred since the last report - Material legal proceedings are discussed in Note 16: Contingent Liabilities to the Condensed Consolidated Financial Statements[241](index=241&type=chunk) - Except as noted, there have been no material developments in legal proceedings[241](index=241&type=chunk) [Item 1A. Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) This section directs readers to the 'Recent Developments' and 'Cautionary Note Concerning Factors That May Affect Future Results' sections within Management's Discussion and Analysis for additional risk factor information, noting no material changes from the 2024 Form 10-K except as specified - No material changes in the Company's risk factors from those disclosed in Item 1A 'Risk Factors' in the 2024 Form 10-K, except as noted in 'Recent Developments' and 'Cautionary Note Concerning Factors That May Affect Future Results' sections[242](index=242&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=52&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2025, Otis repurchased **3.142 million** shares for an average of **$95.48** per share, with **$1.5 billion** remaining under the **$2.0 billion** share repurchase program approved in January 2025 | Period | Total Number of Shares Purchased (thousands) | Average Price Paid per Share | | :----- | :----------------------------------------- | :--------------------------- | | April 1 - April 30 | 2,063 | $94.48 | | May 1 - May 31 | 1,079 | $97.39 | | June 1 - June 30 | — | — | | Total Q2 2025 | 3,142 | $95.48 | - As of June 30, 2025, the maximum dollar value of shares that may yet be purchased under the current **$2.0 billion** share repurchase program (approved January 16, 2025) was approximately **$1.5 billion**[244](index=244&type=chunk) [Item 5. Other Information](index=52&type=section&id=Item%205.%20Other%20Information) This section explicitly states 'None,' indicating that there is no other information to report under this item for the current period - No other information to report under this item[246](index=246&type=chunk) [Item 6. Exhibits](index=53&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including various certifications, an offer letter, and XBRL documents for the condensed consolidated financial statements - The exhibits include an offer letter, Rule 13a-14(a)/15d-14(a) Certifications, Section 1350 Certifications, and XBRL Instance, Schema, Calculation, Definition, Label, and Presentation Linkbase Documents for the financial information[247](index=247&type=chunk)[248](index=248&type=chunk) [SIGNATURES](index=54&type=section&id=SIGNATURES) The report is officially signed by the Executive Vice President and Chief Financial Officer, Cristina Méndez, and the Senior Vice President and Chief Accounting Officer, Michael P. Ryan, on behalf of Otis Worldwide Corporation, dated July 24, 2025 - The report was signed by Cristina Méndez (Executive Vice President and Chief Financial Officer) and Michael P. Ryan (Senior Vice President and Chief Accounting Officer) on behalf of Otis Worldwide Corporation on July 24, 2025[251](index=251&type=chunk)

Okay, let's talk about some moves uh that we have on our desk today. Josh Brown bought more Otus Worldwide. Why so.>> Yeah, Otis reported yesterday and uh it was slightly disappointing, but I really like the stock as at least an intermediate term hold. And uh I think the thing that was weak was the thing I care the least about selling new elevators. It's part of the business, but it's not the better part of the business. The better part of the business is the service and maintenance contracts.This is recess ...

Core Insights - The article expresses a personal affinity for Otis Worldwide (NYSE: OTIS) and highlights the author's disappointment in encountering a different elevator brand during a recent hotel visit [1]. Company Overview - Otis Worldwide is recognized as a leading company in the elevator industry, with a focus on quality and innovation [1]. Investment Perspective - The author emphasizes a long-term investment strategy, particularly in high-quality, dividend-paying companies, indicating a belief in the stability and growth potential of Otis Worldwide [1].

Core Viewpoint - Otis Worldwide (OTIS) is experiencing significant selling pressure, with a recent decline of 8.4% over the past four weeks, but is now positioned for a potential trend reversal as it enters oversold territory, supported by analyst consensus for better-than-expected earnings [1] Group 1: Technical Indicators - The Relative Strength Index (RSI) is a momentum oscillator that indicates whether a stock is overbought or oversold, with readings below 30 typically signaling an oversold condition [2] - OTIS has an RSI reading of 29.49, suggesting that the heavy selling may be exhausting, indicating a possible bounce back towards equilibrium in supply and demand [5] Group 2: Fundamental Indicators - There is a strong consensus among sell-side analysts for OTIS, with earnings estimates for the current year being raised, resulting in a 0.6% increase in the consensus EPS estimate over the last 30 days [6] - An upward trend in earnings estimate revisions is generally associated with price appreciation in the near term [6] Group 3: Analyst Ratings - OTIS holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate revisions and EPS surprises, indicating a strong potential for a turnaround [7]

Core Insights - Otis Worldwide Corporation (OTIS) reported mixed results for Q2 2025, with adjusted earnings exceeding estimates while net sales fell short [1][4] - Year-over-year, both top line and bottom line experienced declines [1] Financial Performance - Adjusted earnings were $1.05 per share, surpassing the Zacks Consensus Estimate of $1.02 by 2.9%, but down 1% from $1.06 in the prior year [4] - Net sales totaled $3.6 billion, missing the consensus mark of $3.69 billion by 2.4% and showing a slight decline of 0.2% year-over-year [4] - Organic net sales decreased by 2% year-over-year, with currency headwinds impacting sales by 1% [4] Segment Analysis - The New Equipment segment saw net sales drop by 10% year-over-year to $1.28 billion, with organic sales declining 11% [7] - The Service segment reported a 6% increase in net sales to $2.32 billion, driven by a 4% rise in organic maintenance and repair sales and a 5% increase in organic modernization sales [6] - Modernization backlog at constant currency increased by 16% year-over-year [6] Operational Metrics - Adjusted operating margin remained flat at 17%, with reduced contributions from the New Equipment segment offset by growth in the Service segment [5] - Segment operating margin for Service expanded by 20 basis points to 24.9%, while New Equipment's margin contracted by 240 basis points to 5.3% [7][8] Guidance and Outlook - OTIS revised its 2025 guidance, now expecting net sales between $14.5 billion and $14.6 billion, indicating 1-2% year-over-year growth [13] - Organic sales growth is projected at approximately 1%, down from a previous expectation of 2-4% [13] - Adjusted free cash flow is now expected to be between $1.4 billion and $1.5 billion, reduced from an earlier estimate of approximately $1.6 billion [16] Financial Position - As of June 30, 2025, cash and cash equivalents stood at $688 million, down from $2.3 billion at the end of 2024 [11] - Long-term debt increased to $7.07 billion from $6.97 billion at the end of 2024 [11] - Net cash flows from operating activities were $405 million for the first half of 2025, down from $479 million a year ago [11]

Financial Data and Key Metrics Changes - Otis reported net sales of $3.6 billion, flat year-over-year, with organic sales down 2% [18] - Adjusted EPS for the first half of the year was $1.97, growing 2% compared to the same period last year [9] - Adjusted operating profit margin remained flat at 17% year-over-year [18] Business Line Data and Key Metrics Changes - Service segment organic sales grew 4%, driven by maintenance and repair growth of 4% and a repair business growth of 6% [20][21] - New equipment organic sales declined 11%, with EMEA sales growing 7% but offset by declines in China, Americas, and Asia Pacific [22] - Modernization organic sales grew 5%, with notable growth in China exceeding 20% [21] Market Data and Key Metrics Changes - Combined new equipment and modernization orders grew 4%, with orders in the Americas and Asia Pacific increasing significantly [12][13] - In China, new equipment orders declined by more than 20%, while the rest of the world saw an 11% increase [13] - The backlog for new equipment remained flat year-over-year, but excluding China, it increased by 10% [12] Company Strategy and Development Direction - The company is focused on achieving $200 million in run rate savings by year-end through initiatives like Uplift and China transformation [7] - Otis aims to enhance customer centricity and invest in growth despite economic challenges, particularly in China [7][30] - The modernization opportunity is driven by an aging installed base of 22 million units, expected to support multiyear growth [14] Management's Comments on Operating Environment and Future Outlook - Management anticipates a low single-digit decline in the Americas and a high single-digit decline in Asia, primarily due to challenges in China [25][26] - The global new equipment market is expected to decline mid-single digits in 2025, with service organic sales growth expected to ramp up [26][30] - Management remains optimistic about the service business, which represents approximately 90% of total operating profit [30] Other Important Information - The company completed approximately $300 million in share repurchases in Q2, totaling $550 million year-to-date [9] - Otis has been recognized for its sustainability efforts, being included in various climate leader lists [10] Q&A Session Summary Question: Can you unpack service growth and retention? - Management noted that service revenue growth is equal to portfolio growth, with churn and mix affecting results. Repair sales increased significantly, and they expect further growth in the coming quarters [45][49][51] Question: What is the outlook for new equipment orders in the Americas and China? - Management reported strong performance in North America with a 15% increase in new equipment orders, while China remains weak but is expected to stabilize [60][62] Question: How will free cash flow look in the second half of the year? - Free cash flow is expected to align with the second half of 2024, with a focus on stabilizing new equipment and improving collections in service [84][86] Question: What are the dynamics around operating margins and tariff impacts? - Management indicated that while tariffs will be a headwind, improvements in service margins and productivity from ongoing initiatives will help offset these impacts [113][115]

Financial Data and Key Metrics Changes - Otis reported net sales of $3.6 billion, flat year-over-year, with organic sales down 2% [17] - Adjusted EPS for the first half of the year was $1.97, growing 2% compared to the same period last year [7] - Adjusted operating profit margin remained flat at 17% year-over-year [17] - Adjusted free cash flow was $243 million for the quarter [18] Business Line Data and Key Metrics Changes - The Service segment saw organic sales growth of 4%, driven by maintenance and repair [19] - New equipment organic sales declined by 11%, with EMEA growing 7% but offset by declines in China, Americas, and Asia Pacific [21] - Modernization organic sales grew 5%, with a strong backlog up 16% at constant currency [20] Market Data and Key Metrics Changes - Orders in The Americas increased by 15%, while China saw a decline of over 20% [58][62] - Excluding China, new equipment orders grew by 11% [62] - The global new equipment market is expected to decline mid-single digits in 2025, with China anticipated to decline approximately 10% for the remainder of the year [25][26] Company Strategy and Development Direction - Otis is focused on customer-centric initiatives and cost-saving measures, targeting $200 million in run rate savings by year-end [6] - The company is executing a transformation in China to adapt to market conditions, with a focus on modernization and service growth [80] - The modernization opportunity is driven by an aging installed base of 22 million units, expected to create a multi-year growth cycle [13] Management's Comments on Operating Environment and Future Outlook - Management noted continued economic challenges in China but expressed optimism for future growth in the region [60] - The service business is expected to remain resilient, representing approximately 90% of total operating profit [28] - Adjusted EPS outlook for 2025 remains unchanged at $4 to $4.1 per share, indicating a growth of 4% to 7% compared to 2024 [29] Other Important Information - Otis completed approximately $300 million in share repurchases in the second quarter, totaling $550 million year-to-date [7] - The company received several sustainability awards, highlighting its commitment to environmental performance [9] Q&A Session Summary Question: Can you unpack service growth and retention during this economic period? - Management indicated that service revenue growth is aligned with portfolio growth, with churn and mix affecting overall performance. Retention improved slightly in Q2 compared to Q1 [44][52] Question: What are the growth pockets in The Americas despite multifamily drag? - North America saw a strong performance in infrastructure projects, with new equipment orders up 15%. Multifamily orders were flat year-over-year, which is seen as a positive sign [58][59] Question: What is the outlook for China and its impact on next year's performance? - The new equipment market in China remains weak, but management expects sequential improvement. The focus is on value and retaining service portfolio [60][62] Question: How will free cash flow and operating margins be affected in the second half? - Free cash flow is expected to stabilize, with service growth offsetting declines in new equipment. Operating margins are anticipated to improve due to strong service performance and cost-saving initiatives [82][110]

Q2 2025 Financial Performance - Service organic sales increased by 4%[6, 7] - Modernization orders grew by 22%[7, 8] - Adjusted operating profit margin remained flat at 17%[15, 58] - The company repurchased approximately $300 million of shares in Q2, and about $550 million year-to-date[7] - Adjusted EPS was $1.05[84] Orders and Backlog - New Equipment orders decreased by 1%, but increased by 11% excluding China[7, 8] - Modernization backlog increased by 16% at constant currency[7, 8] - New Equipment backlog decreased by 3%[8, 50] Segment Results - Service segment organic sales increased by 4%[19] and operating profit increased by $26 million at constant currency[20] - New Equipment segment organic sales decreased by 11%[24] and operating profit decreased by $41 million at constant currency[25] Outlook - The company expects organic sales to increase by approximately 1%[30, 33] - Adjusted operating profit is projected to be between $2.4 billion and $2.5 billion[32] - Adjusted EPS is expected to be between $4.00 and $4.10, representing a 4% to 7% increase[32, 41]

智通财经7月23日电，全球最大电梯供应商奥的斯(OTIS)二季度净销售额36亿美元，低于市场预期的 37.1亿美元；调整后每股收益1.05美元，略高于市场预期的1.03美元。奥的斯维持全年业绩指引，预计 调整后每股收益4.00-4.10美元，市场预期4.07美元。 ...