Otis Worldwide (US:OTIS)2025-10-30 20:21Financial Performance - Net sales for the quarter ended September 30, 2025, were $3,690 million, representing a 4% year-over-year increase, driven by a 6% increase in Service sales[166] - The total cost of products and services sold for the quarter was $2,557 million, also reflecting a 4% year-over-year increase, primarily due to inflationary pressures and higher labor costs[169] - Gross margin for the quarter was $1,133 million, with a gross margin percentage of 30.7%, an increase of 30 basis points compared to the same period in 2024[170] - Net income for the nine months ended September 30, 2025, was $1.1 billion, down from $1.4 billion in the same period in 2024, representing a decrease of about 21.4%[224][225] - Consolidated operating profit for the nine months ended September 30, 2025, was $1,544 million, compared to $1,477 million in 2024, reflecting a margin increase from 14.0% to 14.5%[192] Expenses and Cost Management - Research and development expenses for the quarter were $36 million, accounting for 1.0% of net sales, remaining relatively flat compared to the previous year[172] - Selling, general and administrative expenses increased to $504 million for the quarter, up $49 million year-over-year, primarily due to higher restructuring costs and wage increases[173] - Selling, general and administrative expenses as a percentage of net sales increased by 90 basis points for the quarter compared to the same period in 2024[174] - UpLift restructuring costs increased significantly to $72 million in the nine months ended September 30, 2025, compared to $11 million in the same period of 2024[176] - Total restructuring costs for the nine months ended September 30, 2025, amounted to $113 million, up from $40 million in 2024[175] Revenue Segmentation - The New Equipment segment reported net sales of $3,696 million for the nine months ended September 30, 2025, down from $4,010 million in 2024[192] - Service segment net sales increased to $6,939 million for the nine months ended September 30, 2025, compared to $6,576 million in 2024[192] - Net sales for New Equipment decreased by $52 million (4%) in Q3 2025 compared to Q3 2024, and by $314 million (8%) for the nine months ended September 30, 2025 compared to the same period in 2024[194] - The organic sales decrease of (5%) in Q3 2025 was primarily driven by a (20%) decline in China and high single-digit decline in the Americas, partially offset by growth in Asia Pacific and EMEA[195] Cash Flow and Liquidity - As of September 30, 2025, cash and cash equivalents totaled $840 million, a decrease from $2.3 billion at December 31, 2024[214] - The company had a net cash outflow of $1.468 billion for the nine months ended September 30, 2025, compared to a decrease of $448 million in the same period of 2024[221] - Net cash provided by operating activities for the nine months ended September 30, 2025, was $779 million, a decrease from $873 million in the same period in 2024, reflecting a year-over-year decline of approximately 10.8%[224][225] - Net cash used in investing activities for the nine months ended September 30, 2025, was $376 million, compared to $210 million in the same period in 2024, indicating an increase of approximately 78.6%[227][228] - Net cash used in financing activities for the nine months ended September 30, 2025, was $1.9 billion, up from $1.1 billion in the same period in 2024, reflecting an increase of about 72.7%[231][232] 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[154] - The effective tax rate for the nine months ended September 30, 2025, was 23.9%, an increase from 11.2% in the same period of 2024[187] Future Outlook and Programs - The UpLift program is expected to generate approximately $200 million in annual run-rate savings by the second half of 2025, with total costs incurred to date amounting to $260 million[150] - The approved UpLift restructuring actions are expected to generate approximately $102 million in annual recurring savings by 2025, with $63 million realized during the nine months ended September 30, 2025[178] - The company anticipates a potential impact from new tariffs of approximately $25 million to $35 million during 2025 due to global macroeconomic conditions[157] Debt and Liabilities - Total debt as of September 30, 2025, was $8.084 billion, down from $8.324 billion at December 31, 2024[214] - Current liabilities excluding intercompany payables to non-guarantor subsidiaries as of September 30, 2025, were $703 million, down from $1.625 billion as of December 31, 2024[238] - Noncurrent liabilities excluding intercompany payables to non-guarantor subsidiaries increased to $5.407 billion as of September 30, 2025, from $5.1 billion as of December 31, 2024[238] Risk Management - The company utilized derivative instruments for risk management, which included forward contracts and options to manage foreign currency and commodity price exposures[229]