Otis Worldwide Corporation

Good day and thank you for standing by. Welcome to the OTA second quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1-1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Michael Rednor, Senior Director of Investor Relations. Please go ahead.

Thank you, Michelle. Welcome to Otis's second quarter 2022 earnings conference call. On the call with me today are Judy Marks, Raul Guy, and Anurag Maheshwari. Please note, except where otherwise noted, the company will speak to results from continuing operations, excluding restructuring and significant non-recurring items. 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. I'd like to welcome Anurag Maheshwari in joining us this morning. Anurag is an experienced executive that many of you have worked with in his prior role leading investor relations at Harris. More recently, he's been leading our finance team as CFO in the Asia Pacific region since SPIN. I look forward to my partnership with Anurag in driving growth, operational execution, and value for our customers, colleagues, and shareholders. I want to also take this opportunity to thank Roel for his leadership and all of his contributions in transitioning Otis to an independent company, and in championing our long-term strategy. We wish him well in his future endeavors. Before I get into the results and outlook, on our Q1 call, we noted our growing concerns about the long-term sustainability of our operations in Russia. At that time, we removed Otis's Russian operations from our 2022 outlook and prior year compares. Amidst mounting regulations, we concluded that the best solution for our customers, colleagues, and shareholders was to divest this business, and we recently entered into an agreement to do so. Closing of the transaction is expected imminently. We remain hopeful for a return to peace and stability in the region, and we will continue to contribute to the ongoing relief and humanitarian efforts in Ukraine. This quarter and going forward, Otis's Russia operations and related non-recurring charges are excluded from our adjusted results, prior year compares, and our outlook. Moving to Q2 highlights on slide three. Otis delivered a solid second quarter, closing out a strong first half, especially considering the macro headwinds that we faced. We grew organic sales, expanded margins, and achieved 12% adjusted EPS growth. We had record new equipment bookings and continued to build our maintenance portfolio that was up nearly 3.5% in the quarter. Our service business continued to deliver this quarter where we grew sales in all lines of business and expanded margins due to favorable pricing and productivity. We generated $326 million in free cash flow while continuing to return cash to shareholders. completing another $200 million in share repurchases on top of the $200 million completed in Q1. In addition, as expected, Zardoja Otis was delisted in early May. We gained approximately one point of new equipment share in the second quarter, driven by high teams new equipment orders growth for Otis in a market that was down mid-single digits globally. New equipment orders in the Americas were particularly strong 57%, despite facing a difficult compare in the prior year. In Los Angeles, we're supporting the modernization of Terminal 4 at LAX. OTIS was selected to provide 13 Gen 3 elevators, further extending the long-term relationship with the general contractor, Hensel Phelps, and marking our latest project at LAX. In Paris, OTIS was selected to support the construction of the Tour Triangle, a 180-meter high tower that will include office, hospitality, and retail spaces. During the construction phase, an Otis SkyBuild self-climbing elevator will ascend as the floors are built, providing speed and simplified logistics to the building's construction teams. The building is designed to meet several environmental standards that Otis will help support, by providing space-saving digitally-native solutions like our Gen360 platform, Skyrise double-deck elevators, and Compass 360 destination dispatching. In South China's Greater Bay Area, OTIS is supporting several projects to fuel smart city development. In Guangzhou's Canton Fare Complex, we will provide more than 140 Skyrise and Gen3 elevators, as well as escalators, for Phase 4 of the Canton Fare Complex including IoT systems that will monitor performance in real time. In Shenzhen, the new China Life Insurance Tower in the Central Business District will be served by 20 Otis Skyrise elevators. And in Zhuhai, Otis will provide nearly 90 elevators and escalators for the Nanping Royal Times Square. This project will include Gen 3 elevators equipped with Otis' latest ambiance features and digital technologies serving passengers headed to offices, shopping centers, and hotels. And lastly, in Korea, Otis was selected to provide more than 45 elevators and escalators in the Teachers' Pension Tower, a landmark building in the Financial District of Seoul. This project will include our Compass 360 destination dispatching system to seamlessly move tenants between nearly 50 floors. Moving to slide four, Q2 results, and 2022 outlook. New equipment orders were up 16.5% at constant currency in the second quarter and up 8.5% on a rolling 12-month basis. Organic sales were up 0.4% and adjusted operating profit margin expanded 20 basis points and was up $16 million at constant currency, driven by strong performance in the service business. Free cash flow conversion was robust at 102% of GAAP net income. Looking ahead to our 2022 outlook, we're revising our full-year outlook and now expect organic sales growth of 2.5 to 3.5%, with net sales in a range of $13.6 to $13.8 billion. Adjusted operating profit is expected to be in a range of $2.1 to $2.2 billion, up $120 to $150 million, excluding the impacts from foreign exchange. After approximately $145 million in headwinds from foreign exchange translation, adjusted operating profit at actual currency is expected to be up $5 million to down $25 million. Adjusted EPS is expected in a range of $3.17 to $3.21, up 7% to 9% versus the prior year. Lastly, we still expect free cash flow to be robust at about $1.6 billion, or approximately 125% conversion of GAAP net income. We will remain disciplined and balanced on capital allocation, advancing our Bolton M&A strategy where it makes sense, and returning cash to shareholders through dividends and share repurchases, which we're now in a position to increase to $700 million versus the $500 million target announced previously. With that, I'll turn it over to Rahul to walk through our Q2 results in more detail.