Otis Worldwide Corporation

Good morning, and welcome to Otis' third quarter 2021 earnings conference call. This call is being carried live on the Internet and recorded for replay. Presentation materials are available for download at Otis' website at www.otis.com. I will now turn over to Michael Redner, Senior Director of Investor Relations.

Thank you, Michelle. Welcome to Otis' third quarter 2021 earnings conference call. On the call with me today are Judy Marks, President and Chief Executive Officer, and Raul Guy, 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 risks 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, Mike, and thank you, everyone, for joining us. We hope that everyone listening is safe and well. Otis continued to make significant progress driving our long-term strategic priorities as reflected in the strong financial performance year to date. In the third quarter, we grew organic sales and expanded margins in both segments. We gained approximately one and a half points of new equipment share this quarter and year to date on top of 60 basis points in the prior year. On a year-to-date basis, new equipment orders were up mid-teens with growth in all regions, reflecting our continued focus on providing value for our customers and the recovery in our end markets throughout the year. In the quarter, new equipment orders were particularly strong in Asia, up mid-teens, where we secured an order for the Hong Kong International Airport, extending an over 20-year relationship with this customer. We will install over 100 escalators and moving walkways to keep passengers moving across the concourse. This is further progress of our sub-strategy to win in infrastructure. In China, we're seeing traction on our new Gen 3 connected elevators, reaffirming our investment in the innovation that OTIS 1 provides to our customers and passengers. Just a few months after officially launching our Gen 3 elevator, we secured our first repeat customer in China for the new platform. Jilin Longcheng Property Developer Company ordered an additional 123 Gen 3 elevator systems for four more commercial and residential projects in Northeast China. We're also making progress on deploying our Gen 360 connected elevator platform in EMEA. In the first few months after launch, we received several Gen 360 awards, adding more than 50% to the pilot phase volumes. Moving to service, In the quarter, we grew our industry-leading maintenance portfolio by 3%, a goal we set for ourselves entering the year, and grew organic service sales for the third consecutive quarter. In the Americas, Otis was selected to continue a 35-year partnership with One Commerce Square in downtown Philadelphia. Otis installed the building's original elevators in the 1980s and has been maintaining the unit since then. Otis will now modernize the building's elevators including the introduction of our Compass 360 destination dispatching system. On-portfolio modernization awards are a testament to Otis service excellence and long-standing customer relationships. This strong year-to-date company performance and robust cash flow generation in excess of 140% of net income enabled us to complete $725 million in share repurchases. In September, We announced a tender offer for the remaining interest in Zardoya Otis, a premier elevator business in Spain, Portugal, and Morocco with a strong service presence. The transaction will simplify our corporate structure and operations while optimizing alignment of assets and debt financing in Europe. We expect this transaction to be mid-single-digit percentage accretive in 2023. In parallel with this strong financial performance, we made additional progress on our ESG initiatives. Focusing on sustainability has always been an integral part of our operations culture, and achieving ISO 14001 certification for all of our factories is an important part of our existing efforts. We're pleased that this quarter we achieved this goal years ahead of schedule, adding our factories in Korea and Florence, South Carolina. We're proud to see several programs recognized at these two factories, including power consumption reduction programs, robust package recycling processes, and lubricant leakage prevention measures. In addition, in Florence, we launched a pilot for Zero Waste to Landfill program that will scale to other manufacturing sites next year as we work towards our goal of having all factories eligible for Zero Waste to Landfill certification by 2025. We also made progress on our social initiatives, launching the second year of our Made to Move Communities Signature CSR program. Participating colleagues will guide 200 student participants from 20 schools across 12 countries and territories to develop creative mobility solutions while also helping to close the STEM skills gap. This year, we aim to make a difference by helping communities adapt and leverage better design and newer technologies to address the mobility, health, and safety concerns of older populations. We look forward to sharing these solutions and highlights of the program with you during our Lift Our Communities Month in April of next year. Now turning to slide four, Q3 results in 2021 outlook. New equipment orders were up 3.8% in Q3 and up 10.3% on a rolling 12-month basis. Organic sales were up 8.1% in the third quarter with 14.1% organic growth in the new equipment segment and 3.6% organic growth in the service segment. Adjusted operating profit was up $63 million and margin expanded 20 basis points despite a 50 basis point impact from segment mix as a new equipment business grew faster than the service business. Year to date, we generated robust free cash flow of $1.4 billion or 141% conversion of GAAP net income. This positive momentum and our progress on our long-term strategy gives us the confidence to improve our 2021 outlook and positions us well to build upon this strong performance in 2022. We now expect sales for the year to be approximately $14.3 billion, up 11.8 to 12.3% versus the prior year, and up 8.5 to 9% organically. Adjusted operating profit is expected to be in the range of 2.18 billion to 2.19 billion dollars. up $260 to $270 million at actual currency, and up $195 to $205 million at constant currency. We're improving adjusted EPS from the prior outlook by 4 cents at the midpoint and 6 cents from the low end, and now expect it to be approximately $2.95, a 17% increase versus the prior year. Lastly, we're improving our free cash flow outlook to approximately $1.5 to $1.55 billion, with 125 percent conversion of GAAP net income. With that, I'll turn it over to Rahul to walk through our Q3 results and 2021 outlook in more detail.