Otis Worldwide Corporation

Good morning and welcome to OTIS third quarter 2020 earnings conference call. This call is being carried live on the internet and recorded for replay. Presentation materials are available for download from OTIS website at www.otis.com. I will now turn it over to Stacey Lachefsky, Vice President of FP&A and Investor Relations.

Thank you, Sonia. And good morning, everyone. Welcome to OTIS's third quarter 2020 earnings call. On the call with me today are Judy Marks, President and Chief Executive Officer, and Rahul Gai, Executive Vice President and Chief Financial Officer. Please note, except for otherwise noted, the company will speak to results from continuing operations, excluding restructuring and significant recurring items. The company will also refer to adjusted results where adjustments were made, as though Otis was a standalone company in the current period and the prior year. A reconciliation of these measures can be found in the appendix of the webcast. We also remind listeners that the presentation contains forward-looking statements which are subject to risks and uncertainties. OTIS's SEC filings, including our Form 10 and quarterly report on Form 10Q, provide details on the important factors that could cause actual results to differ materially. With that, I'd like to turn the call over to Judy.

Thank you, Stacey, and good morning, everyone. Thanks for joining us, and we hope that everyone listening is safe and well. To start, I want to thank each of our colleagues around the world for their unwavering dedication as we continue to deliver on our commitments to passengers, customers, and shareholders. Overall, as you'll see in our results, our business is trending back towards pre-COVID levels, improving sequentially across all metrics. I'm pleased to share that we had a very strong quarter. We gained share in new equipment, paid down debt, and are raising our outlook with Roel providing additional details. Our strategy is robust, despite the unique environment we're in, and as an example of our ability to continue to execute, This quarter, we completed the acquisition of Bay State Elevator, expanding our scale and density in the Northeast United States. We're delighted to have the Bay State colleagues join the OTIS team, and we remain focused on accelerating growth of the service portfolio, both organically and inorganically. Our bolt-on M&A strategy is working and serves as an accretive source of growth. Innovation is core to OTIS. COVID accelerates the need for new health and safety solutions, which we expect to continue post-COVID. Otis is a leader in this space, continuing to bring new products to market, and during the quarter, we commissioned an elevator airflow study, examining the risk of airborne transmission in elevators and how to best mitigate those risks through science-based safety protocols. This study is being led by a Purdue University expert in the spread and prevention of infectious disease through indoor air systems. We look forward to sharing these findings in the coming months. Furthering our ability to provide innovative, cutting-edge products, we opened a new Industry 4.0 escalator factory in East China that incorporates intelligent manufacturing, advanced automation, and digital technologies such as 3D modeling, custom engineering, and real-time quality management. This move continues to rationalize our footprint and build on our legacy of excellence while upgrading our smart manufacturing capabilities for a new era. We continue to deploy iPhones to our field professionals, adding four more countries during this quarter, and the adoption of our suite of apps continues to expand, driving service productivity within the organization. In addition, Our IoT deployment continues to build momentum, and we have plans in place to enhance the capability of OTIS 1 solutions over the next several months to drive productivity in our organization. Despite the challenges introduced by the pandemic, we continue to deploy these units in the U.S., Europe, and China during the first nine months and expect the pace of deployment to accelerate. OTIS also receives several key orders across each of the regions highlighted on slide three. In Chicago, we received an order to outfit the new Salesforce Tower Chicago office building with over 30 Skyrise and Gen 2 elevators. Each of the passenger elevators will have our new, innovative Compass 360 dispatching system, allowing for seamless travel in a 60-story building. In China, Otis was selected to support Tenjin's metro expansion project. will add approximately 120 elevators to Line 6, bringing the total number of OTIS elevators and escalators throughout the Tianjin metro to approximately 1,400 units. This award extends OTIS's involvement in infrastructure development in the region, a key strategy for us. And in France, we're helping bring La Défense, the business area of Paris, to new heights with an order to deliver 60 elevators and several escalators to the link, the next tallest building in France. This project will include Compass Plus, eCall, and OptiSense technologies, creating a faster, safer, and more seamless trip for the passengers. These are just a handful of examples that led to the approximate 70 basis points of new equipment share gain during the first nine months. In terms of liquidity, we ended Q3 with $1.7 billion of cash and continue to maintain a revolving credit facility which serves as a backstop for our commercial paper issuances and an additional source of liquidity if needed. We also made progress on our debt repayment goal of $350 million in 2020, repaying $250 million in the quarter. And as we remain dedicated to delivering results for our customers and shareholders, our commitment to global corporate citizenship has not wavered. Last quarter, I shared with you the launch of our commitment to change. In just three months, we've begun to make OTIS a more diverse, equitable, and inclusive culture and identify and prioritize actions we need to take to get there. For example, in the quarter, we enlisted an outside diversity, equity, and inclusion expert to independently assess our practices and provide recommendations to guide future decisions and programs. Later during the quarter, we launched Made to Move Communities, a CSR program focused on advancing youth STEM education and providing inclusive mobility solutions for communities in need. This extends Otis's ongoing commitment to the communities where we live and work, and we look forward to providing the avenue and resources to help young minds explore new ways to give people freedom to connect and thrive in a taller, faster, smarter world. Turning to slide four, Q3 results in 2020 outlook. New equipment orders were up slightly at constant currency, with low single-digit growth in EMEA in Asia partially offset by low single-digit decline in the Americas. China orders were up high single digits as the business continued its rapid recovery from the impacts of COVID-19. On a rolling 12 months, total Otis orders were down approximately 1%. New equipment backlog continued to grow, up 3% versus the prior year at constant currency. In the third quarter, organic sales were down 1.2%, with the new equipment segment down 1% and the service segment down 1.4%. Adjusted operating profit was up $33 million, and margin expanded 120 basis points. driven by continued expansion in the service segment on strong contribution from productivity and the benefit from cost containment actions in favorable transactional foreign exchange. Free cash flow was robust at $311 million with 117% conversion of GAAP net income. While there remains uncertainty around the global recovery from the pandemic, we are encouraged by these strong year-to-date results and the trends we're experiencing giving us confidence to revise our 2020 outlook. We are improving the organic sales range, now expected to be down 2 to 3 percent. Adjusted operating profit is now expected to be in the range of up $30 to $40 million, a $60 million improvement versus the prior outlook at the midpoint. We now expect adjusted earnings per share to be approximately $2.42, up 17 cents versus the prior midpoint. This reflects our improved adjusted operating profit outlook, lower adjusted tax rate, and lower net interest costs. Lastly, we expect free cash flow to be robust at approximately $1.15 billion with full-year free cash flow conversion at approximately 135% of GAAP net income. With that, I'll turn it over to Rahul to walk through our results and outlook in more detail.