Otis Worldwide Corporation

Good morning and welcome to Otis' first quarter 2021 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'll now turn it over to Stacey Lacheski, Vice President of FP&A and Investor Relations. Please go ahead.

Thank you, Stephanie, and good morning, everyone. Welcome to Otis' first quarter 2021 earnings conference calls. 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 where otherwise noted, the company will speak to results from continuing operations, excluding restructuring and significant non-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 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 risk and uncertainties. OTIS's SEC filings, including our Form 10-K and quarterly reports on Form 10-Q, provide details on 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.

Thank you for joining us, and we hope that everyone listening is safe and well. I'm pleased to share that OTIS had an outstanding first quarter, demonstrating the power of our strategy and the global execution strength of our company, and the capability of all our colleagues. Our new equipment business was robust, and we gained close to two points of new equipment share with orders up high teens globally in a market that was up mid-teens. In Korea, Otis was selected to provide approximately 170 elevators, escalators, and moving walkways to support the fourth phase of the Incheon International Airport project. This addition will expand Otis's presence at the airport to over 650 units. In China, we continue to support key infrastructure projects throughout the country, including in Chang'an, new area, a new metropolis being built near Beijing. More than 1,000 Otis elevators and escalators have already been ordered in support of projects in the area that will be a new home to administrative services and residential communities being relocated from Beijing. In Munich, we're continuing an over 35-year relationship with Stadtwerke München. We have been selected to install 92 escalators for the Munich Metro's modernization project, bringing the total number of Otis escalators provided to the Metro system to over 500 units. Using custom-made controllers, these escalators will seamlessly integrate with the Stadtwerke Mobility Act, to provide passengers and maintenance crews with real-time data on escalator operational status. And finally, in New York City, we received an order to modernize three Times Square, the Thomson Reuters building. We'll provide new controls, drives, and Compass 360 destination dispatching on several units. This extends our long-term relationship with the building. We installed the original equipment nearly 20 years ago. and have been providing maintenance services ever since. Our high margin recurring service business also grew in all lines of business, including modernization, while achieving adjusted operating profit margins of 22.6%. Our strategy is based on our service model, which drives approximately 80% of our profit. This is the model that proves our resilience year after year, including during COVID. The global service market grows faster than the global new equipment market, and pricing tends to be more consistent in service. Data and technology-based innovations help us attract and retain customers, and in Q1, we continued to deploy OTIS 1 units in the field and are shipping IoT-enabled units in both China and North America. We drove profit growth in both segments, largely from the drop-through benefit of higher volume with organic growth in both segments and continued benefits from our material and service productivity initiatives. Our strong performance allows us to create more value for our shareholders. In January, we completed the remaining $150 million of debt repayment we had committed to ahead of schedule, and just last week, we announced a 20% increase in our quarterly dividend. In addition, we're now in a position to increase our planned share repurchases for the year to half a billion dollars after completing $300 million in the first quarter. And we're equally dedicated to delivering on our commitments as a global corporate citizen. In March, we shared additional details with you on our important ESG initiatives, including becoming a signatory of the UN Global Compact, and we continue to make progress towards our goals. Our ESG programs are integral to bringing our vision to life. This month, we completed the inaugural year of Made to Move Communities, our signature global corporate social responsibility initiative. This pioneering program focuses on two principal goals, advancing STEM education and supporting young innovators in the development of inclusive mobility solutions for underrepresented communities. Students from around the world put their knowledge and skills to work alongside Otis mentors to come up with many creative solutions The winners were announced in April. We look forward to extending this program geographically and to more students and mentors in the coming years. Turning to slide four, Q1 results and 2021 outlook. First quarter new equipment orders were up high teens at constant currency with mid-teens growth in the Americas, low single-digit growth in EMEA, and double-digit growth in Asia driven by China. On a rolling 12 months, Total ODIS orders were up 1.4%. This strong order performance led to continued growth in new equipment backlog, up 8%, and 2% at constant currency versus the prior year. Organic sales were up 10.3% in the first quarter, with 25.1% organic growth in the new equipment segment and 1.3% organic growth in the service segment. Adjusted operating profit was up $83 million, and margin expanded 40 basis points. Overall, margin expansion was impacted by segment mix as the new equipment business grew faster than the service business. Free cash flow was robust at $541 million with 176% conversion of GAAP net income. I'm encouraged by this positive momentum and we're confident in our revised 2021 outlook improving across all key metrics. We now expect net sales to be in the range of $13.6 to $13.8 billion, up 6.5% to 8.5% versus prior year, and up 4% to 6% organically. This is a two-point improvement from the prior outlook at the midpoint, driven by faster-than-expected recovery in the new equipment segment. Adjusted operating profit is expected to be up $170 to $210 million in actual currency, and up $120 to $160 million at constant currency, with adjusted EPS in a range of $2.78 to $2.84, a 10% to 13% increase versus the prior year, and a $0.09 improvement from the prior outlook at the midpoint. Lastly, we expect free cash flow to be robust in a range of $1.35 to $1.45 billion, with approximately 120% conversion of GAAP net income. With that, I'll turn it over to Raul to walk through our Q1 results and 2021 outlook in more detail.