Otis Worldwide Corporation (OTIS) Morgan Stanley 11th Annual Laguna Conference - (Transcript)

Summary of Otis Worldwide Corporation Conference Call Company Overview - Company: Otis Worldwide Corporation (NYSE:OTIS) - Event: Morgan Stanley 11th Annual Laguna Conference Call - Date: September 14, 2023 Key Industry Insights - Strongest Market: Asia Pacific, with double-digit growth in India and mid-single-digit growth in the rest of the region [4] - Europe: Expected to decline by high single digits, with strong performance in Southern Europe (Italy and Spain) but challenges in Germany, France, and the UK due to interest rates and consumer confidence [4] - Americas: Latin America is strong, while North America is projected to decline by high single digits [4] - China: Market expected to decline by 10%, with uncertainty around consumer buying patterns and bank liquidity affecting property developers [4][6] Financial Performance - Backlog: Increased by 5% year-over-year and 3% sequentially, indicating strong order performance [4] - Revenue Guidance: New equipment revenue expected to grow by 3% to 5% for the year [4] Strategic Focus Areas - Key Accounts vs. Volume Business: Shift towards key accounts has resulted in doubled volume from these accounts since the spin-off, with a focus on predictability and service conversion [8][10] - Service Portfolio Growth: Increased service portfolio to 350,000 units, up 75% since the spin-off, with a target of reaching 60% conversion rate in China [10][12] - Modernization Market: Anticipated high-single-digit growth due to aging equipment, with 7 million units eligible for modernization [19][20] Competitive Landscape - Market Consolidation: Top 10 OEMs control about 90% of the new equipment market, with independent service providers servicing 75% of units in China [14][15] - Service Margins: Service margins in China are higher than new equipment margins, contributing positively to overall profitability [17] Technology and Innovation - Otis ONE: IoT-connected offering with a target of 60% penetration in the medium term, currently at 800,000 connected units [26] - Remote Service Pilots: Ongoing pilots to automate inspections and improve service efficiency [17] Capital Allocation Strategy - Shareholder Returns: Increased dividends by 70% since spin-off, with plans for $800 million in share buybacks this year [39] - M&A Strategy: Focus on acquiring small independent service providers, targeting $50 million to $70 million annually [39] Conclusion - Otis Worldwide Corporation is navigating a complex global market with a strong focus on service growth, modernization opportunities, and strategic capital allocation, while maintaining a robust backlog and positive revenue guidance for the upcoming year [4][19][39]