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]