Financial Data and Key Metrics Changes - The company achieved record-adjusted free cash flow of $817 million in Q4 2025, reflecting a focus on working capital efficiencies and collections [4] - Adjusted EPS grew approximately 11% in Q4, marking the highest level this year and the strongest performance in the last six quarters [5][16] - For the full year, adjusted EPS increased by 6% to $4.05, with approximately $1.6 billion of adjusted free cash flow generated [9][22] Business Line Data and Key Metrics Changes - Organic sales grew 1% in Q4, with service sales up 5%, maintenance and repair up 4%, and modernization up 9% [5][17] - The modernization backlog increased by 30% at constant currency, indicating strong future growth potential [6][11] - Service operating profit margin expanded by 100 basis points to 25.5% in Q4, reflecting strong service execution [20] Market Data and Key Metrics Changes - Orders for combined new equipment and modernization increased by 10% in Q4, driven by solid performance in EMEA and the Americas [9] - New equipment orders at constant currency declined by 2% in Q4, with EMEA showing mid-single-digit growth while Asia Pacific experienced a high teens decline [10] - The modernization market grew by 13% in dollar terms in 2025, with expectations for continued growth due to aging units [25] Company Strategy and Development Direction - The company is focused on a service-driven business model, with a strong emphasis on modernization and operational excellence [3][5] - Investments in service excellence and customer-centric strategies are expected to drive improved retention rates and service growth [42] - The company anticipates a stabilization in the new equipment market and continued growth in modernization, with a target of low- to mid-single-digit organic sales growth for 2026 [24][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategy to deliver attractive results in 2026 and beyond, supported by a strong backlog and maintenance portfolio [5][30] - The outlook for 2026 includes expectations for adjusted EPS growth in the mid- to high-single digits, driven by service segment strength and modernization opportunities [29][35] - Management highlighted the importance of retaining key units in the service portfolio to enhance profitability [43] Other Important Information - The company launched several innovative products, including AI-driven tools and upgraded elevator systems, to enhance service quality and customer experience [7][8] - The company is committed to a shareholder-oriented capital allocation strategy, targeting a dividend payout ratio of 40% and executing approximately $800 million in share repurchases [30] Q&A Session Summary Question: Growth expectations for maintenance and repair within the services segment for 2026 - Management expects repair rates to ramp up to over 10%, contributing to higher maintenance and repair growth [38] Question: Follow-up on new equipment margins and structural versus cyclical factors - Management indicated that new equipment margins are expected to face headwinds in 2026 due to ongoing volume declines, particularly in China [45] Question: Service margin performance in Q4 and components driving margin expansion - Service margins expanded due to growth in repair volumes and modernization, with a one-time effect from asset sales also contributing [56] Question: Insights on the China stimulus program and its impact - The China stimulus program is expected to continue in 2026 at levels comparable to 2025, with the company prepared to capitalize on this opportunity [61] Question: Annual growth potential in modernization business - Management anticipates steady growth in the modernization market, with a focus on phased replacements and customer-centric solutions [69] Question: EPS outlook and factors influencing growth - Management chose a conservative approach for EPS guidance, with operational growth expected to be stronger in 2026 compared to 2025 [71]

Financial Data and Key Metrics Changes - Otis achieved record-adjusted free cash flow of $817 million in Q4 2025, with a total of $1.6 billion for the year, reflecting a strong focus on working capital efficiencies [4][9] - Adjusted EPS grew 11% in Q4, reaching $0.10, and increased 6% for the full year to $4.05 [5][21] - Adjusted operating profit margin expanded by 70 basis points to 16.6% in Q4, driven by a 100 basis points improvement in service margin [16][19] Business Line Data and Key Metrics Changes - Organic sales grew 1% in Q4, with service up 5%, maintenance and repair up 4%, and modernization increasing by 9% [5][17] - The modernization backlog increased by 30% at constant currency, indicating strong future growth potential [6][11] - Service organic sales grew 5% for the year, with notable growth in maintenance and repair [8][11] Market Data and Key Metrics Changes - Orders for combined new equipment and modernization increased by 10% in Q4, with total backlog growing by 8% at constant currency [9][10] - New equipment orders declined by 2% in Q4, with EMEA showing mid-single-digit growth while Asia Pacific experienced a high teens decline [10][19] - The modernization market grew by 13% in dollar terms in 2025, driven by an aging global installed base [24][66] Company Strategy and Development Direction - Otis is focused on a service-driven business model, emphasizing modernization and maintenance to drive growth [5][30] - The company aims to leverage its largest maintenance portfolio and continue investing in service excellence and customer-centric strategies [12][30] - Otis plans to maintain a flexible capital allocation strategy, targeting a dividend payout ratio of 40% and executing approximately $800 million in share repurchases [29][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategy to deliver attractive results in 2026 and beyond, supported by a strong backlog and service portfolio [5][22] - The global new equipment market is expected to stabilize in 2026, with growth anticipated in the Americas and EMEA [23][24] - Management highlighted the importance of modernization opportunities due to the aging installed base, projecting continued growth in this segment [24][66] Other Important Information - Otis unveiled several innovative products, including AI-driven tools and upgraded elevator systems, enhancing service capabilities and customer experience [7][8] - The company completed significant strategic projects, including a major new equipment project in Dallas and a contract for the London Underground [12][14] Q&A Session Summary Question: Growth expectations for maintenance and repair within the services segment for 2026 - Management expects repair rates to ramp up to over 10%, contributing to higher maintenance and repair growth [36] Question: Structural versus cyclical nature of new equipment margins - Management indicated that new equipment margins are expected to face headwinds in 2026 due to ongoing volume declines, particularly in China [42] Question: Service margin performance in Q4 - Service margins expanded due to growth in repair volumes and modernization, with modernization margins approaching medium-term targets [48][52] Question: EPS outlook and achieving higher growth rates - Management chose a conservative approach for EPS guidance, expecting mid- to high-single-digit growth while emphasizing strong operational performance [68]