Otis Worldwide Corporation

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

Thank you, Norma. Welcome to Otis's third quarter 2022 earnings conference call. On the call with me today are Judy Marks, Chair, CEO, and President, and Anurag Maheshwari, Executive Vice President and CFO. Please note, except where otherwise noted, the company will speak to results from continuing operations including 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. Starting with Q3 highlights on slide three, Otis delivered a solid third quarter and strong year-to-date results, especially considering the macro headwinds we're facing. We grew organic sales, expanded margins, and achieved mid-single-digit adjusted EPS growth, all largely driven by strong performance of our resilient service business. By executing our strategy, we continue to set ourselves up for the future. This quarter, we demonstrated that performance through accelerating maintenance portfolio growth, which was up 3.8% in the quarter, growing modernization backlog 7%, and gaining about one point of new equipment share year to date, with share about flat in the quarter. Year to date, the new equipment market was down mid-single digits, driven by China, which was down about 15%. In the Americas, we are honored to be selected for a modernization project at the iconic Space Needle in Seattle. Otis installed the original elevators in the early 1960s and has been maintaining the units ever since. We will now modernize the landmark's three elevators, including introducing new technologies such as custom-designed cabs and Compass 360. In Suzhou, part of the greater Shanghai metropolitan area, the urban rail network is being expanded once again with the support of Otis. The new Line 8 will be served by nearly 140 Otis escalators and 38 Gen 3 and Skyrise elevators when it begins operations in late 2024. In London, Otis was selected to help modernize an office block into a modern mixed-use development that strives to be the first net-zero carbon-enabled office development in London. OTIS will provide vertical transportation solutions, including several escalators and elevators equipped with Compass 360 destination dispatching to allow tenants and visitors seamless and efficient access to the building's floors. And lastly, in Korea, we're extending an over 30-year relationship with GS Engineering and Construction to provide more than 55 elevators to the Opuji apartment complex. These units will be outfitted with RegenDrive technology, helping to maximize energy efficiency for the elevators serving 1,500 apartments in the complex. Year-to-date, free cash flow conversion was 106% of GAAP net income, and we kept our capital allocation plans on track with another $300 million of share repurchases in the quarter, completing the $700 million in repurchases we had planned for 2022. With a quarter to go, we feel confident in our cash flow outlook and are increasing our full-year share repurchase outlook to $850 million. And we continue to drive important ESG initiatives, a key priority for Otis. This quarter, our efforts resulted in achieving a gold rating with Ecovatus. Now moving to slide four, Q3 results and 2022 outlook. New equipment orders were down 0.8% at constant currency in the third quarter. Excluding China, orders were up 7.4% with growth in all regions. On a rolling 12-month basis, total Otis orders were up 7.6%. Organic sales were up 0.8%, and adjusted operating profit was up $35 million at constant currency with 60 basis points of margin expansion. driven by segment mix and strong performance in the service business. In the quarter, we generated $215 million of free cash flow, which was down versus prior year, driven by an increase in inventory to support backlog conversion and the timing of supplier payments. This brings us to $1 billion year-to-date with 106% conversion of GapNet income. Looking ahead to our 2022 outlook, We're revising our full-year outlook and now expect organic sales growth of 2 to 2.5% with net sales in a range of $13.4 to $13.5 billion. Adjusted operating profit is expected to be approximately $2.1 billion, up $120 to $140 million, excluding the impacts from foreign exchange. After approximately $175 million in headwinds from foreign exchange translation, Adjusted operating profit at actual currency is expected to be down $35 to $55 million. Adjusted EPS is expected in the range of $3.11 to $3.15, up 5% to 7% versus the prior year. Lastly, we still expect free cash flow to be robust, between $1.5 and $1.6 billion, or approximately 125% conversion of GAF net income. We will remain disciplined and balanced on our capital allocation, advancing our bolt-on M&A strategy where it makes sense, and returning cash to shareholders through dividend and share repurchases, expected to be $850 million versus the $700 million target announced previously. With that, I'll turn it over to Anurag to walk through our Q3 results in more detail.