Otis Worldwide Corporation

Good morning, and welcome to the Otis' fourth 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 Michael Redner, Senior Director of Investor Relations.

Thank you, Catherine. Welcome to Otis' fourth quarter 2021 earnings conference call. On the call with me today are Judy Marks, President and Chief Executive Officer, and Raoul 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 everyone listening is safe and well. We delivered a strong close to an excellent year despite ongoing macro challenges. These results are a testament to the strength of our strategy and the dedication of our colleagues to execute and deliver results for our customers and shareholders. We achieved broad-based organic sales growth, grew adjusted operating profit for the third year in a row, delivered 19% adjusted EPS growth, and generated $1.6 billion in free cash flow while introducing new, innovative solutions for our customers and passengers. We remained committed to shareholder value creation and strategically deployed capital, completing $450 million in debt repayment, distributing over $390 million in dividends after raising the dividend 20% versus the prior year, and repurchasing $725 million of OTIS shares. Given the strength of our balance sheet, we also announced our tender offer for the remaining interest in Zardoya OTIS and a creative transaction for OTIS. New equipment orders were up 7.3% in the fourth quarter and up 13.2% for the year with broad base growth. In Asia Pacific, we received an order for nearly 280 units supporting Taiwan Taoyuan International Airport's new Terminal 3 building and concourse. This includes 92 escalators, 60 moving walkways, and more than 120 Gen 2 elevators equipped with regen drive technology that will support the terminal's smart and green design. In November, we received an order for Sawyer's Landing in Miami, Florida. This project extends a decade-long relationship with the developer and Otis will install over 20 elevator and escalator units. Additionally, Concord Pacific, one of the largest developers in Canada, has selected Otis to support its King Landing project in Toronto, Ontario, extending our nearly decade-long relationship. We'll provide more than a dozen elevators for this mixed-use high-rise. These orders demonstrate the power of long-lasting relationships and our continued investments in providing innovative solutions for our customers. Our strong orders momentum throughout the year led to approximately 115 basis points of new equipment share gain, on top of 60 basis points in the prior year. In addition to executing on our financial priorities, we remain committed to advancing our ESG initiatives. Our Gen 360 next generation digitally native elevator platform was awarded two environmental product declarations. This platform is positioned to revolutionize our customer and passenger experience while providing energy efficiency benefits that help to reduce the impact on our planet. Gen360 joins our existing suite of energy efficient products, such as the RegenDrive, which can distribute power back into a building. Also in China, we received several awards that recognize our team's achievements in leadership, innovation, and sustainability. including recognition as a 2022 Top Employer by the Top Employers Institute. And finally, last week, Otis was recognized for the second year in a row as a Best Place to Work for LGBTQ Equality by the Human Rights Campaign. This award demonstrates our leadership in creating an inclusive culture where all voices feel safe, welcomed, and heard. Now moving to slide four. This year, we grew our industry-leading maintenance portfolio by 3%, our best portfolio growth rate in over a decade. This accelerated maintenance portfolio growth is a key part of our long-term strategy. Equally important is the digital connectivity of units in our service portfolio, and this year we deployed approximately 100,000 OTIS 1 units. bringing total portfolio connectivity to about one-third of our approximately 2.1 million units under our service. Over the medium term, we plan to increase connectivity to approximately 60 percent of units, up from roughly 25 percent at the end of 2020. Our operational initiatives also progressed as we rationalized adjusted SG&A expense, down 40 basis points as a percentage of sales, and reduce the adjusted effective tax rate by 190 basis points. This represents significant progress in right-sizing our costs and optimizing our tax structure as an independent company. I'm pleased with our performance in our second year as an independent company as we delivered strong financial results and advanced our ESG initiatives. You can expect to hear more in the coming months with the publishing of our first ESG report. Now turning to slide five and starting with the 2022 industry outlook. While market dynamics remain fluid, the industry's long-term fundamentals are solid. We're encouraged by the strong recovery experience during 2021 and have confidence this momentum will continue into 2022 in many regions. The new equipment market is expected to be up mid to high single digits in the Americas, low single digits in the MEA, and down mid to high single digits in Asia, driven by uncertainty in China, where we expect the market to be down 5 to 10 percent. While the China new equipment market faces headwinds, this will not detract from solid growth in the service installed base, where approximately 1 million units are added each year to the global base, a mid single-digit growth rate annually. Industry installed base in the Americas and EMEA are expected to grow low single digits, And in Asia, we're expecting high single-digit growth driven by China. Service is the foundation of our business, and we expect to grow our service units by more than 3% in 2022 and to eclipse 2.2 million units under maintenance, remaining the largest service portfolio in the industry. Here's our 2022 financial outlook. For the year, we expect organic sales growth of 2.5% to 4.5%. Net sales will be in a range of $14.4 to $14.7 billion, up 1% to 3%, accounting for FX headwinds. Adjusted operating profit is expected to be in a range of $2.24 billion to $2.3 billion, up $95 to $165 million, excluding the expected impacts from foreign exchange. At actual currency, Adjusted operating profit is expected to be up $50 to $120 million. Adjusted EPS is expected in a range of $3.20 to $3.30, up 6% to 10% versus the prior year, and $0.24 at the midpoint. Lastly, we expect free cash flow to be robust at about $1.6 billion, or approximately 115% to 120% conversion of gap net income. We remain highly disciplined in our capital allocation strategy, committed to meeting the needs of all stakeholders through dividends, debt paydown, bolt-on M&A, and share repurchases once we complete our deleveraging plans associated with the acquisition of the remainder of Zardoya. With that, I'll turn it over to Raul to walk through our 2021 results and 2022 outlook in more detail.