Otis Worldwide (US:OTIS)2025-04-24 20:12Financial Performance - Net sales for the quarter ended March 31, 2025, were $3,350 million, a decrease of 3% compared to $3,437 million in the same period of 2024[147]. - The organic volume for the quarter was flat, with a 4% increase in Service offset by a 7% decrease in New Equipment[147]. - Total cost of products and services sold decreased by 2% year-over-year, totaling $2,349 million compared to $2,409 million in 2024[149]. - Gross margin for the quarter was $1,001 million, maintaining a gross margin percentage of 29.9% compared to the same period in 2024[150]. - Net income attributable to Otis Worldwide Corporation decreased to $243 million for the quarter ended March 31, 2025, down from $353 million in the same period in 2024[168]. - The New Equipment segment reported net sales of $1,163 million for the quarter ended March 31, 2025, a decrease of 9% compared to $1,280 million in 2024[172]. - The Service segment achieved net sales of $2,187 million for the quarter ended March 31, 2025, reflecting a 1% increase from $2,157 million in 2024[176]. - The consolidated operating profit margin decreased to 12.3% for the quarter ended March 31, 2025, down from 15.8% in the same period in 2024[170]. - The company reported a net income of $256 million for the quarter ended March 31, 2025, which includes various non-cash expenses[196]. Expenses and Costs - Research and development expenses were $37 million, representing 1.1% of net sales, slightly up from 1.0% in 2024[152]. - Selling, general and administrative expenses increased to $464 million, accounting for 13.9% of net sales, up from 13.4% in 2024[153]. - UpLift restructuring costs for the quarter were $20 million, with total restructuring costs amounting to $43 million, compared to $20 million in 2024[155]. - The company expects to achieve annual recurring savings of $27 million for both 2024 and 2025 restructuring actions, with approximately 80% related to Cost of products and services sold[159]. - The reorganization of operations in China will incur restructuring costs of approximately $40 million, expected to be mostly completed by the end of 2025[160]. Tax and Legal Matters - The company recorded a favorable ruling in German tax litigation, resulting in income tax benefits of approximately $185 million and related interest income of approximately $200 million[135]. - The effective tax rate increased to 30.1% for the quarter ended March 31, 2025, compared to 25.2% in 2024, primarily due to nondeductible obligations[166]. - The company anticipates variability in the tax rate quarter to quarter due to potential discrete items[167]. Cash Flow and Debt - As of March 31, 2025, the company had cash and cash equivalents of approximately $1.9 billion, with 37% held by foreign subsidiaries[185]. - As of March 31, 2025, cash and cash equivalents decreased to $1,918 million from $2,300 million on December 31, 2024[187]. - Total debt increased to $8,406 million as of March 31, 2025, compared to $8,324 million on December 31, 2024[187]. - Net cash provided by operating activities for the quarter ended March 31, 2025, was $190 million, an increase from $171 million in the same period of 2024[193]. - Net cash used in investing activities was $161 million for the quarter ended March 31, 2025, compared to $79 million in the same period of 2024[199]. - Net cash used in financing activities was $428 million for the quarter ended March 31, 2025, down from $467 million in the same period of 2024[203]. - Total debt to total capitalization ratio increased to 251% as of March 31, 2025, from 235% on December 31, 2024[187]. - Net debt to net capitalization ratio improved to 452% as of March 31, 2025, compared to 486% on December 31, 2024[187]. Future Outlook - The UpLift program is expected to generate approximately $200 million in annual run-rate savings by the second half of 2025, with transformation costs estimated at $300 million[131]. - Global macroeconomic conditions, including inflation and high interest rates, are expected to impact financial performance, with potential tariff impacts estimated between $45 million to $75 million[138]. - The company intends to permanently reinvest certain undistributed international earnings unless tax effective to repatriate[187]. - The company has a new share repurchase program approved for up to $2.0 billion, with approximately $1.8 billion remaining as of March 31, 2025[190].