Otis Worldwide Corporation

Good morning and welcome to Otis's second quarter 2024 earnings conference call. This call is being carried live on the internet and recorded for replay. Presentation materials are available for download from Otis's website at www.otis.com. I'll now turn it over to Michael Redner, Vice President, Investor Relations.

Thank you, Sarah. Welcome to Otis's second quarter 2024 earnings conference call. On the call with me today are Judy Marks, Anurag Maheshwari, and Christina Mendez. 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. Now I'd like to turn the call over to Judy.

Thank you, Mike, and good morning, afternoon, and evening, everyone. Thank you for joining us. I hope all are safe and well. I'd like to welcome Christina Mendez, who's joining us this morning on our earnings call. Christina is an experienced executive who's been leading our finance team at CFO in the EMEA region for the past two and a half years. while also leading our global finance transformation under our Uplift program. I look forward to my partnership with Christina to drive growth, operational execution, and value for our customers, colleagues, and shareholders. I want to also take this opportunity to thank Anurag for his leadership and for all his contributions to our company, our services growth, and in championing our long-term strategy. Now for earnings. starting with Q2 highlights on slide three. Otis delivered a solid second quarter in the face of current economic challenges within China as the service segment continued to drive strong performance. Service organic sales grew mid-single digits, overall adjusted profit margin expanded by 110 basis points, and adjusted EPS grew 15%, marking our fourth consecutive quarter of 10% or greater adjusted EPS growth. With service as our primary growth driver, we have set ourselves up well for the future by delivering maintenance portfolio growth of 4.2% and building our modernization backlog by 17% in the quarter. As a result of our steady business execution and capital allocation strategies, we generated $353 million in adjusted free cash flow and returned $300 million to shareholders through share repurchases in the quarter, taking year-to-date repurchases to $600 million. In June, we published our 2023 ESG report, outlining our progress towards our 13 ESG goals, explaining how this progress advances our business strategy while driving value for stakeholders. Importantly, This report includes a detailed description of our Scope 1, 2, and 3 greenhouse gas emission reduction goals. And we've continued to make progress towards our goals in 2024, including recently receiving ISO 45001 certification, the international standard that specifies the requirements and good practices for effective occupational health and safety management systems at our factory in São Bernardo, Brazil. Moving to our orders performance on slide four. New equipment orders were down 11% in the second quarter. High single-digit growth in EMEA, driven by mid-teens growth in the Middle East, and low to mid-single-digit growth in Asia Pacific was more than offset by a mid-teens decline in the Americas and a double-digit decline in China. Our new equipment backlog at constant currency was down 3% versus the prior year. In the Americas, we are seeing the impact of elevated interest rates on our new equipment orders. In China, economic softness severely impacted our new equipment orders, while orders grew in both Asia Pacific, due to continued strength in the region, and EMEA, as our investment in product and coverage continues to perform well. In our services segment, progress continued to pace portfolio growth above 4% for the seventh consecutive quarter, along with 14% modernization orders growth and continued growth in our modernization backlog, which increased 17% at constant currency. We had several exciting customer highlights in the second quarter, thanks to the dedication of our colleagues across all of our regions. In India, at the heart of the city of Delhi, Otis will install 12 Skyrise units at the iconic Unity the Amaryllis Versace. Designed by Versace Home, this luxury development is one of the tallest residential buildings in Delhi. We continue to perform well in the infrastructure segment, as evidenced by our next three major project highlights. In the United States, Otis is supporting the expansion of Terminal 3 West at San Francisco International Airport. As part of this project, Otis will install 15 new Gen 3 elevators and 13 link escalators while modernizing two elevators. SFO served more than 50 million passengers in 2023, and these upgrades will increase overall passenger capacity and international access. In Germany, we are installing eight escalators for our long-established customer, the city of Stuttgart. We'll dismantle the non-OTUS escalators that are currently in use and install our heavy traffic public escalators at four metro stations in the city center. In China, we've continued our more than 30-year relationship with the Shanghai Metro, booking several contracts in the quarter that total more than 475 units, including 311 escalators and moving walks for Line 23, 32 elevators and 115 escalators for the new Changming Line, and 19 elevators for an extension of Line 12. Turning to Q2 results on slide 5, Otis delivered net sales of $3.6 billion, with organic sales down 1%. Adjusted operating profit, excluding a $15 million foreign exchange headwind, was up $38 million, driven by the service segment. Adjusted EPS grew approximately 15%, or 14 cents in the quarter, driven by strong operational performance and improvement in our tax rate. Benefits from minority interest and a lower share count offset headwinds from foreign exchange translation and an increase in interest expense. With that, I'll turn it over to Anurag to walk through our results in more detail.