Otis Worldwide Corporation

Good morning and welcome to OTIS first quarter 2023 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, Didi. Welcome to OTIS's first quarter 2023 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, 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. OTC'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 first quarter highlights on slide three. Otis delivered a solid first quarter to start 2023, driving strong financial performance and executing on our capital allocation strategy despite continued market uncertainty. We achieved organic sales growth driven by our service business and expanded adjusted service operating profit margins by 40 basis points, leading to mid single digit adjusted EPS growth. Our service segment performance in addition to our maintenance portfolio growth of more than 4%, reinforces the strength of our business model. We continue to execute our balanced capital allocation strategy with $175 million of share repurchases in the first quarter. Yesterday, we announced a 17.2% increase to our quarterly dividend. Since SPIN, we have increased our dividend 70%, emphasizing the importance we place on disciplined capital management and delivering value to our shareholders. In the Americas, building on our strong track record of major project execution and service across Canada, Otis was selected by the Montreal Metro System to replace escalators at 17 stations while providing units for five new Blue Line stations. In total, 97 Otis escalators will keep Metro passengers on the move daily. In China, Hefe Metro placed a new order of 250 Otis One connected escalators and elevators across three new lines. Real-time data insights, remote monitoring, and predictive maintenance will all help bring the Hefe Metro into the future and add to our growing infrastructure installed base. In Germany, Otis has been selected by Cigna Group to modernize the iconic Dusseldorf Department Store Karch House as part of a larger renovation. Otis will provide 17 units, including our energy-efficient link escalators and Gen 2 stream elevators with regen drives. The elevators will also feature eView and car displays. After the modernization is completed in 2024, Otis will service the units as part of our long-standing framework contract with Katowice Group, which operates Karsh House and other leading department stores in Germany. In South Korea, we're providing 51 of our signature Gen 2 elevators for the Sunshine Churamache Luxury Apartment Complex. The campus includes more than 2,000 units and buildings up to 29 stories. And we continue to drive progress toward our ESG goals, as shared in our 2022 ESG report published earlier in April. Just this month, we announced the installation of solar panels at our Nippon Otis Logistics and Engineering Center in Japan. This upgrade is expected to reduce greenhouse gas emissions at the facility by 27% compared to 2022 and represents our eighth manufacturing site globally with solar panel arrays. Moving to slide four, Q1 results in 2023 outlook. New equipment orders were up 7.4%, driven by strong growth in the Americas and Asia Pacific, and we ended the quarter with adjusted backlog of 10% at constant currency. We continue to drive share gains in new equipment with 70 basis points of improvement in the quarter led by our outperformance in China where our orders were down modestly in a market where we estimate was down approximately 10%. We continue to perform well across all other regions. We're especially encouraged by our modernization performance in the quarter with nearly 30% orders growth driven by strong performance in the Americas and Asia. This growth is driven by our continued rollout of standardized packages for our mod offerings, coupled with improvements in our Salesforce coverage. Our mod backlog is up double digits in all regions, as mod demand continues to remain robust. Organic sales were up 3.6%, and adjusted operating profit was up $7 million at constant currency, driven by performance in the service segment. Before I discuss our 2023 financial outlook, let me briefly update you on our global market outlook, which largely remains unchanged. Entering the year, we expected global new equipment to be down mid-single digits to approximately 900,000 units, largely due to China, which we expected to be down 5% to 10%. and our outlook in that key region remains the same. We also expected Asia-PAC to be up mid-single digits or better, and both the Americas and EMEA to be flat. With the first quarter in the books, we now expect Asia-PAC to come in closer to high single digits, offsetting a reduction in our EMEA outlook, which we now expect to be down low to mid-single digits. Our outlook for global install-based growth remains unchanged at roughly 5%, which will add close to a million maintenance units, bringing the install base to roughly 21 million units with high single-digit growth in Asia and low single-digit growth in the Americas and EMEA. Turning to OTIS's 2023 financial outlook, we now expect net sales to be in the range of $13.9 billion to $14.2 billion, up 2.5% to 4.5% versus the prior year. which is a 75 basis point improvement from the prior outlook at the midpoint driven by FX. We still expect organic sales to be up 4% to 6% with new equipment up 3% to 5% and service up 5% to 7%. Adjusted operating profit is expected to be up $90 to $150 million at actual currency and up $130 to $175 million at constant currency with adjusted EPS in a range of $3.40 to $3.50, a 7% to 10% increase versus the prior year, and an approximately $0.03 improvement from the prior outlook at the midpoint. We expect free cash flow to come in as we guided in February, in a range of $1.5 billion to $1.55 billion, with 105% to 115% conversion of GAAP net income. We remain disciplined in our capital allocation strategy and will continue to return the vast majority of our cash generation to shareholders through dividends and share repurchases. We will also continue advancing our bolt-on M&A strategy to add density to our growing maintenance portfolio. With that, I'll turn it over to Anurag to walk through our Q1 results and full year outlook in more detail.